CMS ENERGY CORP SEC 10-K Report

CMS Energy Corp, a leading energy company operating primarily in Michigan, has released its 2024 10-K report, detailing its financial performance, business operations, strategic initiatives, and the challenges it faces. The report underscores the company's commitment to transitioning to clean energy while maintaining financial stability and operational efficiency.

Financial Highlights

CMS Energy Corp reported strong financial performance for 2024, with key metrics indicating stability and growth:

• Operating Revenue: $7,515 million, reflecting a slight increase from $7,462 million in 2023, indicating stable sales performance.
• Operating Income: $1,487 million, up from $1,235 million in 2023, demonstrating improved operational efficiency.
• Net Income Available to Common Stockholders: $993 million, an increase from $877 million in 2023, highlighting enhanced profitability.
• Basic Earnings Per Average Common Share: $3.34, compared to $3.01 in 2023, showing growth in earnings per share.
• Diluted Earnings Per Average Common Share: $3.33, up from $3.01 in 2023, indicating increased shareholder value.

Business Highlights

CMS Energy operates primarily in three business segments: electric utility, gas utility, and NorthStar Clean Energy. Key operational highlights for 2024 include:

• Electric Utility Operations: Consumers' electric utility operations generated $5.1 billion in operating revenue, serving 1.9 million electric customers in Michigan's Lower Peninsula.
• Gas Utility Operations: Consumers' gas utility operations generated $2.1 billion in operating revenue, serving 1.8 million gas customers.
• NorthStar Clean Energy Operations: NorthStar Clean Energy generated $316 million in operating revenue, focusing on domestic independent power production, including renewable generation and marketing.
• Electric Supply Mix: In 2024, Consumers' electric supply included 42% from natural gas-fueled units, 22% from coal-fueled units, and 29% from long-term PPAs and the MISO energy market.
• Renewable Energy Initiatives: Consumers plans to eliminate coal use in owned generation by 2025 and aims for 60% renewable energy by 2035 and 100% clean energy by 2040. The company is investing in solar and wind capacity and battery storage.
• Methane Reduction Plan: Consumers aims for net-zero methane emissions from its natural gas delivery system by 2030, with plans to reduce emissions by 80% from 2012 levels.
• Geographical Performance: Consumers serves Michigan's Lower Peninsula, providing electricity and/or natural gas to 6.8 million of Michigan's 10 million residents.
• Sales Units: In 2024, Consumers' electric deliveries were 37 billion kWh, and gas deliveries totaled 362 Bcf.
• New Production Launches: Consumers purchased the Covert Generating Station, a natural gas-fueled facility with 1,200 MW capacity, in May 2023 to support its clean energy transition.
• Future Outlook: Consumers plans to file updates to its Clean Energy Plan in 2026, focusing on renewable energy generation, energy storage, and demand response programs to meet the 2023 Energy Law requirements.

Strategic Initiatives

CMS Energy and Consumers are committed to a clean energy transformation, focusing on the retirement of coal-fueled generation and the expansion of renewable energy sources. Key strategic initiatives include:

• Adding up to 9,000 MW of solar energy and 2,800 MW of wind capacity, alongside battery storage to optimize these assets.
• Investing in infrastructure upgrades to enhance safety and reliability, with a five-year capital expenditure plan of $20 billion, primarily targeting electric distribution and gas infrastructure improvements.
• Implementing a robust capital management strategy, including the issuance of securitization bonds to finance the recovery of retired generating units. The company maintains solid investment-grade credit ratings, which help reduce funding costs.
• In 2024, CMS Energy issued $1.962 billion in debt and repurchased $11 million of its own shares. Dividends on common stock were increased, with $626 million paid in 2024.
• Future Outlook: CMS Energy and Consumers plan to continue their clean energy initiatives, aiming for 60% renewable energy by 2035 and 100% clean energy by 2040. They are also targeting net-zero methane emissions by 2030 and net-zero greenhouse gas emissions by 2050. The company expects to maintain an annual rate-base growth of over 8% through strategic investments and cost-control measures, ensuring sustainable customer prices.

Challenges and Risks

CMS Energy and Consumers face significant challenges in transitioning to clean energy, as outlined in their Clean Energy Plan. Key risks and challenges include:

• Investment/Financial Risks: Dependence on dividends from subsidiaries and high levels of indebtedness could limit financial flexibility and ability to meet debt obligations. Disruptions in capital markets could affect liquidity and access to financing.
• Industry/Regulatory Risks: Changes in Michigan's ROA program and potential deregulation could impact electric supply competition. The creation of municipal utilities and increased use of distributed energy resources could reduce electric sales. Regulatory decisions by MPSC and FERC could limit cost recovery and affect financial results.
• Environmental and Climate Risks: Compliance with environmental regulations could require significant capital expenditures. The company's plans to reduce greenhouse gas emissions and achieve net-zero targets depend on regulatory approvals and technological advancements.
• Operational Risks: The substantial capital investment program faces risks related to cost management, contractor performance, and supply chain disruptions. Unplanned outages and maintenance could lead to increased costs and operational challenges.
• Cybersecurity Risks: Increasing frequency and scope of cyber attacks pose a threat to information security and operational reliability.
• Future Outlook: Management highlights the importance of the Reliability Roadmap, which outlines a strategy to improve electric distribution reliability through significant capital investments. The plan's success depends on regulatory approvals and effective implementation. The company also emphasizes its commitment to the triple bottom line, balancing economic, social, and environmental goals.

SEC Filing: CMS ENERGY CORP [ CMS ] - 10-K - Feb. 11, 2025