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CMS Energy(CMS) - 2024 Q2 - Quarterly Report

Part I—Financial Information Item 1. Financial Statements This section presents the unaudited consolidated financial statements for CMS Energy Corporation and its subsidiary, Consumers Energy Company, for the quarterly period ended June 30, 2024 CMS Energy Consolidated Financial Statements (Unaudited) Presents the consolidated financial performance and position of CMS Energy Corporation, with net income increasing to $480 million for the six months ended June 30, 2024 CMS Energy Consolidated Statement of Income Highlights (Six Months Ended June 30) | Indicator | 2024 (In Millions) | 2023 (In Millions) | Change (In Millions) | | :--- | :--- | :--- | :--- | | Operating Revenue | $3,783 | $3,839 | $(56) | | Operating Income | $695 | $558 | $137 | | Net Income Available to Common Stockholders | $480 | $397 | $83 | | Diluted Earnings Per Share | $1.61 | $1.36 | $0.25 | CMS Energy Consolidated Balance Sheet Highlights (As of) | Indicator | June 30, 2024 (In Millions) | December 31, 2023 (In Millions) | | :--- | :--- | :--- | | Total Assets | $34,355 | $33,517 | | Total Liabilities | $25,814 | $25,392 | | Total Equity | $8,541 | $8,125 | Consumers Consolidated Financial Statements (Unaudited) Details the consolidated financial performance and position for Consumers Energy Company, with net income reaching $452 million for the six months ended June 30, 2024 Consumers Consolidated Statement of Income Highlights (Six Months Ended June 30) | Indicator | 2024 (In Millions) | 2023 (In Millions) | Change (In Millions) | | :--- | :--- | :--- | :--- | | Operating Revenue | $3,630 | $3,695 | $(65) | | Operating Income | $698 | $576 | $122 | | Net Income Available to Common Stockholder | $452 | $398 | $54 | Consumers Consolidated Balance Sheet Highlights (As of) | Indicator | June 30, 2024 (In Millions) | December 31, 2023 (In Millions) | | :--- | :--- | :--- | | Total Assets | $32,718 | $31,852 | | Total Liabilities | $21,825 | $21,052 | | Total Equity | $10,893 | $10,800 | Notes to the Unaudited Consolidated Financial Statements Provides detailed explanations of accounting policies and specific events affecting financial statements, including regulatory matters and contingencies - In March 2024, the MPSC authorized an annual electric rate increase of $92 million for Consumers, based on a 9.9% authorized return on equity, effective March 15, 2024273 - Consumers estimates its liability for known CERCLA sites to be between $3 million and $8 million, with a recorded liability of $3 million as of June 30, 2024277 - In April 2024, Consumers sold its unregulated Appliance Service Plan (ASP) business for $124 million, resulting in a $110 million gain. This gain will be shared with customers through rate offsets and bill credits as approved by the MPSC410428 - In April 2024, Consumers sold renewable energy tax credits generated in 2023 for $37 million and entered an agreement in June 2024 to sell 2024 credits for $51 million176578 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) Management's perspective on financial condition and operations, covering strategy, segment results, liquidity, and future outlook Executive Overview The company's strategy is guided by the 'Triple Bottom Line' of people, planet, and profit, with key initiatives like the Clean Energy Plan - The company's purpose is to achieve world-class performance delivering hometown service, measured by the 'triple bottom line' of people, planet, and profit96 - Consumers' Clean Energy Plan aims to end coal use by 2025, add nearly 8,000 MW of solar by 2040, and achieve net-zero carbon emissions from its electric business by 2040105109126 - The Reliability Roadmap outlines a five-year, $7 billion capital expenditure plan to improve the electric distribution system, an increase of $3 billion from the previous plan86101 - The 2023 Michigan Energy Law mandates a renewable energy standard of 50% by 2030 and 60% by 2035, and a clean energy standard of 100% by 2040104126 Results of Operations CMS Energy's net income increased to $480 million for the six months ended June 30, 2024, driven by rate increases and NorthStar Clean Energy earnings CMS Energy Net Income Change by Segment (Six Months Ended June 30, 2024 vs 2023) | Segment | 2024 Net Income (Millions) | 2023 Net Income (Millions) | Change (Millions) | | :--- | :--- | :--- | :--- | | Electric utility | $267 | $217 | $50 | | Gas utility | $184 | $177 | $7 | | NorthStar Clean Energy | $47 | $10 | $37 | | Corporate interest and other | $(18) | $(7) | $(11) | | Total | $480 | $397 | $83 | - Key drivers for the six-month net income increase were electric rate increases (+$103 million), gas rate increases (+$56 million), and higher NorthStar Clean Energy earnings (+$37 million). These were partially offset by higher interest charges (-$43 million) and higher income tax expense (-$30 million)122 Cash Position, Investing, and Financing Net cash from operating activities was $1.66 billion for the first six months of 2024, with investing activities decreasing due to a prior year acquisition CMS Energy Cash Flow Summary (Six Months Ended June 30) | Cash Flow Activity | 2024 (In Millions) | 2023 (In Millions) | | :--- | :--- | :--- | | Net cash provided by operating activities | $1,663 | $1,705 | | Net cash used in investing activities | $(1,246) | $(2,079) | | Net cash provided by financing activities | $124 | $598 | - The decrease in cash used for investing activities was mainly due to the absence of the $810 million purchase of the Covert Generating Station in 2023152 Capital Resources and Liquidity The company maintains sufficient liquidity through operating cash flows and capital markets access, with substantial available credit facilities - At June 30, 2024, available liquidity under revolving credit facilities was $521 million for CMS Energy, $1.3 billion for Consumers, and $45 million for NorthStar Clean Energy178 Debt to Capital Covenant Compliance (as of June 30, 2024) | Entity | Covenant Limit | Actual Ratio | | :--- | :--- | :--- | | CMS Energy, parent only | < 0.70 to 1.0 | 0.57 to 1.0 | | NorthStar Clean Energy | < 0.50 to 1.0 | 0.13 to 1.0 | | Consumers | < 0.65 to 1.0 | 0.50 to 1.0 | Outlook The company's outlook is shaped by its Clean Energy Plan, regulatory proceedings, and environmental regulations, including coal unit retirements and solar deployment - The Clean Energy Plan includes retiring the J.H. Campbell coal units (1,407 MW) in 2025 and adding nearly 8,000 MW of solar generation by 2040185 - In May 2024, Consumers filed for a $325 million electric rate increase to recover costs for distribution system reliability and clean energy investments157462 - In July 2024, the MPSC approved a settlement for a $35 million annual gas rate increase, effective October 1, 2024139373 - Consumers is managing environmental compliance, including new EPA rules on Coal Combustion Residuals (CCRs) and greenhouse gas emissions, with expected capital expenditures of $240 million from 2024-2028 for environmental compliance238464 Item 3. Quantitative and Qualitative Disclosures About Market Risk This section confirms no material changes to the company's market risk exposures as previously disclosed in the 2023 Annual Report on Form 10-K - There have been no material changes to market risk as previously disclosed in the 2023 Form 10-K503 Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were effective as of June 30, 2024, with no material changes in internal control over financial reporting during the quarter - Based on an evaluation as of the end of the reporting period, the CEOs and CFOs of both CMS Energy and Consumers concluded that their respective disclosure controls and procedures are effective413430 - No changes in internal control over financial reporting occurred during the last fiscal quarter that have materially affected, or are reasonably likely to materially affect, the internal controls414429 Part II—Other Information Item 1. Legal Proceedings This section refers to the Notes to the Unaudited Consolidated Financial Statements for information on material legal proceedings, including regulatory matters and contingencies - Information regarding material legal proceedings is provided in Part I, Item 1, Notes to the Unaudited Consolidated Financial Statements, specifically Note 1 (Regulatory Matters) and Note 2 (Contingencies and Commitments)431 Item 1A. Risk Factors This section states that there have been no material changes to the risk factors previously disclosed in the company's 2023 Annual Report on Form 10-K - There have been no material changes to the Risk Factors as previously disclosed in the 2023 Form 10-K432504 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section details the company's repurchases of equity securities, primarily for tax withholding obligations on vested stock awards during the quarter ended June 30, 2024 Issuer Repurchases of Equity Securities (Q2 2024) | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | April 2024 | 81 | $59.98 | | May 2024 | 320 | $61.32 | | June 2024 | 0 | N/A | | Total | 401 | $61.05 | - All repurchased shares were to satisfy minimum statutory income tax withholding obligations for vested shares under the Performance Incentive Stock Plan505 Item 3. Defaults Upon Senior Securities The company reported no defaults upon senior securities during the period - None417434 Item 4. Mine Safety Disclosures This section is not applicable to the company - Not applicable435 Item 5. Other Information The company reported no other information required to be disclosed in this item - None416477 Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including required CEO and CFO certifications and Inline XBRL documents - Exhibits include CEO and CFO certifications pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act for both CMS Energy and Consumers437 - Inline XBRL Instance, Schema, Calculation, Definition, Labels, and Presentation Linkbase documents are included as exhibits437