Q3 2024 Earnings Summary
| Metric | Period | Previous Guidance | Current Guidance | Change |
|---|---|---|---|---|
EPS | FY 2024 | $3.29 to $3.35 | $3.29 to $3.35 | no change |
EPS | FY 2025 | no prior guidance | $3.52 to $3.58 | no prior guidance |
| Topic | Previous Mentions | Current Period | Trend |
|---|---|---|---|
Increasing electric load demand from data centers and manufacturing | Q2 2024: Data center demand trending higher (230 MW signed in Q1), pipeline growth continues. Q1 2024: 230 MW data center expansion and manufacturing projects (Gotion, Hemlock, Ford) expected. Q4 2023: Focus on manufacturing & data centers for broader economic benefits. | Emphasized strong growth (6 GW pipeline, ~60% manufacturing); working closely with data centers and filing ex-parte to align rates. Confident in existing capacity to meet demand. | Continued focus with growing detail |
NorthStar (DIG) capacity price increases | Q2 2024: Performance on plan, capacity markets above plan. Q1 2024: No specific price increase mentioned, but 30%-35% open margin in 2026-2028 at attractive reverse inquiries. Q4 2023: Elevated capacity pricing in out years, contributing to incremental earnings. | Robust capacity pricing ($5-$6/kW-mo), helping support 6%-8% EPS growth. Strategy to layer bilateral contracts to de-risk earnings. | Stable to strengthening prices |
Regulatory environment, rate case uncertainties, performance-based ratemaking | Q2 2024: Constructive environment, PBR in early stages with metrics under development. Q1 2024: Next electric rate case mid-2024; PBR on reliability progress. Q4 2023: Supportive environment, confidence in rate case outcomes, PBR evolving. | Potential fully adjudicated order in March 2025. Storm recovery mechanism disputed by staff. PBR focused on reliability. | Continued emphasis; tension on storm costs |
Storm-related operational challenges, cost recovery mechanism disputes, and audit reviews | Q2 2024: Heavy storm activity, $0.03 EPS headwind, improved restoration approach. Q1 2024: Wind speeds/high storm activity, implementing a $7B reliability road map. Q4 2023: Offset ~$300M storm costs, catastrophic ice storm, ongoing storm review audit. | Outages up ~10%, restoration costs down ~10%. Proposing a storm restoration tracker with 50% cost-sharing above the embedded rate. Liberty Storm Audit supports proactive investments. | Ongoing challenges; new tracker proposed |
Higher insurance premiums and IT costs | Q2 2024: No mention. Q1 2024: No mention. Q4 2023: No mention. | Mentioned for the first time as a key cost driver (~$0.15/sh variance), covered by contingency. | Newly introduced this quarter |
Significant capital investment in renewables and infrastructure driven by new Michigan energy laws | Q2 2024: Renewables plan filing in Nov 2024, IRP in 2026. Q1 2024: Clean energy law, aiming 60% renewables by 2035. Q4 2023: ~5-year $17B plan, 40% allocated for clean energy. | Filing a 20-year Renewable Energy Plan in Nov 2024, with possibly higher CapEx needs (9% compensation on PPAs). Expected approvals in late 2025 or 2026. | Increasing clarity on major spend |
Potential delays and timing risks in realizing renewable energy plan benefits | Q2 2024: 10-month review after Nov 2024 filing, no direct mention of delays. Q1 2024: 300-day review pushes REP impact to 2026. Q4 2023: Siting/permitting delays in solar, but legislation offers flexibility. | Approvals likely not until late 2025; many benefits flow in 2026 or beyond. | Ongoing caution on timing |
Better-than-expected non-weather sales growth across residential and commercial | Q2 2024: Above-plan non-weather sales, with commercial up over 1% and residential up 1%. Q1 2024: Residential up ~0.5% after adjustment, commercial up ~2.5%. Q4 2023: No mention. | No mention in Q3 2024. | Positive earlier in 2024, not repeated |
Concerns over capital spending execution (shortfalls in solar investments) | Q2 2024: No mention. Q1 2024: No mention. Q4 2023: ~$400M CapEx shortfall due to solar siting/permitting delays, pushing spend into future. | No mention in Q3 2024. | Previously noted, not revisited |
Credit metrics and potential rating considerations | Q2 2024: No mention. Q1 2024: Moody’s & Fitch reaffirmed, managing for solid IG. Q4 2023: Mid-teens FFO-to-debt, some equity issuance planned, not pursuing upgrade to 17% FFO-to-debt. | Focused on preserving strong IG ratings (S&P reaffirmed in August). Target mid-teens FFO-to-debt. | Stable with reaffirmations |
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Increasing Load Growth
Q: Is load growth increasing, and how will it impact plans?
A: Management expects significant upward pressure on load growth beyond the current 0.5% estimate due to new data centers and manufacturing developments. This increase will be reflected in upcoming renewable energy and integrated resource plans, providing opportunities for additional capital investments. , , , -
Capital Expenditure and Equity Needs
Q: Will higher CapEx require more equity financing?
A: With capital plans expected to rise, management anticipates equity needs of up to $350 million per year starting next year. Strong cash flow and tax credit monetization may reduce equity requirements, funding approximately 35–40% of utility CapEx with equity. They foresee upward pressure on the $17 billion five-year capital plan but will pace investments to align with regulatory approvals and customer demand. , -
Storm Recovery Mechanism
Q: Will the proposed storm recovery mechanism be approved?
A: The company proposed a storm restoration tracker to share costs with customers, but staff is not supportive. Management anticipates the commission will need to weigh in, possibly requiring a full order, which may impact the current rate case settlement. They view staff's position as a starting point but seek approval to ensure better service through necessary investments. , , -
Data Center and Manufacturing Demand
Q: Can you accommodate large new data center loads?
A: Yes, CMS Energy can support significant load increases from data centers and manufacturing. They have existing capacity and infrastructure, enabling them to meet timelines for customers like Switch, which is expanding by 230 MW by 2026, and Corning, ramping up to 90–95 MW. They work closely with customers to align ramp-up schedules and ensure reliable service. , , -
DIG Performance and Capacity Contracts
Q: What's the outlook for DIG's capacity revenues?
A: The Dearborn Industrial Generation (DIG) continues to perform well, securing bilateral capacity contracts at prices above plan. They see strong capacity market conditions, with reverse inquiries at levels of $5 to $6 per kilowatt-month, significantly higher than historical prices of $3 to $3.50. This robust opportunity is expected to persist due to reduced supply and increased demand in Zone 7. , -
Energy Storage Plans and IRA Impact
Q: How will energy storage targets be affected by tax changes?
A: Energy storage plans will unfold in the 2026 integrated resource plan. Management considers a potential repeal of the IRA a low probability event and believes it would not significantly alter their long-term storage investments, though costs might rise without tax credits. They remain committed to complying with state laws mandating storage deployment. -
Cost Overruns and Expense Management
Q: What's causing cost swings in the financials?
A: Higher-than-budgeted costs in insurance and IT led to funding adjustments. Management is addressing these through contingencies from countermeasures like operational efficiencies and favorable weather impacts, ensuring these are current costs and not pulled forward from future budgets. ,