CMS Energy Corporation — Q1 2024 Form 10-Q
Reporting period: Three months ended March 31, 2024. This combined filing covers CMS Energy and its wholly owned utility subsidiary, Consumers Energy. CMS Energy also owns NorthStar Clean Energy. Financial statements are unaudited; results are seasonal and may not indicate full-year performance.
Financial performance
| Metric | Q1 2024 | Q1 2023 |
|---|---|---|
| CMS Energy operating revenue | $2.176 billion | $2.284 billion |
| Operating income | $412 million | $314 million |
| Net income available to common stockholders | $285 million | $202 million |
| Diluted EPS | $0.96 | $0.69 |
| Net cash from operating activities | $956 million | $1.040 billion |
| Capital expenditures | $613 million | $617 million |
- Operating margin increased to approximately 18.9% from 13.7%, as operating income rose despite lower reported revenue.
- Revenue declined mainly because gas costs passed through to customers were lower. Gas utility revenue was $965 million versus $1.119 billion; electric utility revenue increased to $1.132 billion from $1.091 billion.
- Earnings improved across the electric utility ($97 million versus $70 million), gas utility ($169 million versus $154 million), and NorthStar Clean Energy ($31 million versus $7 million). A $22 million pretax gain on extinguishment of debt contributed to corporate results.
- Higher rate revenue and lower electric service-restoration costs supported earnings. Higher interest charges and income-tax expense partly offset the improvement.
- Operating cash flow fell by $84 million, primarily reflecting an unfavorable working-capital movement, including lower customer collections and lower gas prices. Net cash used in investing was $637 million; financing provided $294 million.
- At March 31, CMS Energy reported $861 million of cash and cash equivalents, including $59 million restricted. Balance-sheet debt included $14.973 billion of long-term debt and $772 million of current debt and finance leases. CMS Energy had $521 million available under its principal revolving facility; Consumers had $1.3 billion available across its facilities. No commercial paper was outstanding.
Material changes and developments
- The MPSC authorized a $92 million annual electric rate increase, including a $9 million surcharge, effective March 15, 2024. The authorized return on equity is 9.9%; the company had sought a higher increase.
- Consumers’ December 2023 gas-rate filing seeks a $136 million annual increase before a proposed $14 million home-products credit, or $122 million net. A final order is expected before or in October 2024.
- Consumers completed the purchase of the 1,200-MW Covert natural-gas generating station in May 2023. Its Clean Energy Plan calls for ending coal generation in 2025 and adding renewable generation and storage.
- CMS Energy settled remaining forward equity sale contracts in January 2024, issuing shares for $266 million net proceeds. It reported no sales under its separate $1 billion equity offering program.
Outlook, risks and unusual items
- Management expects weather-normalized electric and gas deliveries to remain relatively stable over the next five years, with modest demand growth offset by energy-efficiency programs. Consumers expects annual rate-base growth of more than 7%, subject to regulatory approvals.
- Consumers plans $17.0 billion of capital expenditures through 2028, including $13.6 billion over five years for electric distribution and gas infrastructure and $3.4 billion for clean generation. The plan depends on financing and regulatory cost recovery.
- Michigan’s 2023 Energy Law raises renewable-energy requirements to 50% by 2030 and 60% by 2035, and establishes clean-energy and storage standards. Consumers must update its renewable plan by November 2024 and its Clean Energy Plan by 2027.
- Consumers’ sale of its appliance service-plan business closed in April 2024, after quarter-end. It received $124 million and expects an approximately $55 million pretax gain in Q2, subject to customary adjustments; it has asked to share half the gain, net of transaction costs, with customers.
- Key uncertainties include rate-case outcomes and timely recovery of investment; severe weather and system reliability; interest rates, financing access and credit ratings; energy prices and supply; environmental rules and remediation; and litigation. The filing identifies ongoing disputes involving the Ludington overhaul and J.H. Campbell unit retirement, among other matters. A meter-related settlement, subject to MPSC approval, provides for a $1 million penalty and at least $3 million in customer refunds.
- Consumers estimates $240 million of environmental compliance capital spending for 2024–2028, with recovery in rates not assured. Management reports no material change in previously disclosed risk factors or market-risk disclosures; both registrants reported effective disclosure controls and no material quarterly change to internal controls.
Important facts for investors to verify
- Whether the approved electric rates and pending gas-rate case deliver the expected revenue and timely recovery of planned investment.
- How working-capital trends, customer collections and cash generation develop alongside the capital program and debt requirements.
- Whether the approximately $55 million appliance-sale gain is realized as estimated and how customer sharing affects the final amount.
- Progress, costs and regulatory approvals for coal retirements, renewable projects, storage and the statutory clean-energy targets.
- Developments in the Ludington and J.H. Campbell litigation, environmental obligations, and the meter-settlement approval.