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Text: Reconciliations of these measures to the most directly comparable GAAP measures are included in the appendix and posted on our website.
We appreciate your interest in CMS Energy.
Over the past five months, I have been on the -- the virtual road and have had the opportunity to meet with many of you to share our investment thesis, which delivers for all our stakeholders.
This thesis is grounded in our commitment to the triple bottom line of people, planet and profit and enable the excellence you have come to expect from CMS Energy.
Many of you have asked what will change under my leadership.
And I want to reemphasize, we've changed leadership not the simple proven investment thesis we delivered year in and year out.
Looking forward, we're committed to leading the clean energy transformation with our net zero carbon and methane emissions plans, which are supported by our clean energy investments in our current progressive integrated resource plan.
Furthermore, we are recognized as top tier for ESG performance earning top ratings among our peers.
We continue to mature our industry-leading lean operating system the CE Way eliminating waste and improving our performance.
I love this system.
Over the past several years, we have used it across the business to drive efficiencies, improve employee engagement and deliver sustainable cost performance.
I've seen it, I've worked it, and we have plenty of gas that are left.
Today we are crafting the next horizon what I call CE Way 2.0, which layers in greater use of automation and analytics and begins to position CMS Energy, as a leader in digital.
Another key differentiator of CMS Energy is Michigan's Top-tier regulatory construct that has 10-month forward looking rate cases in constructive ROEs.
This all leads to our adjusted earnings per share growth of 6% to 8% and combined with our dividend provides a premium total shareholder return of 9% to 11%.
At CMS Energy, we wake up every day to get after it, deliver for our customers in all conditions, rain, snow, sleet wind.
And for you, our investors, we never quit.
This year is no different.
Now, let's get into the numbers.
In the first quarter, we delivered $1.21 of adjusted earnings per share.
This is up significantly, $0.35 from last year, primarily from incremental revenue to fund needed customer investments and sustained cost performance.
As a reminder, our full year dividend is $1.74, up 7% from last year.
We are reaffirming our 2021 guidance for the year of $2.83 to $2.87 of adjusted earnings per share and our long term earnings and dividend per share growth of 6% to 8% with the bias to the midpoint.
At CMS Energy was committed to our promises to our co-workers, the communities we serve, and our planet, as we are to delivering our financial commitments.
During my discussions with many of you, the topic of ESG often comes up.
I'm proud of our leadership in this space.
We continue to enhance our commitments and our efforts are being recognized with top tier ratings.
We remain a AA rated company by MSCI and have ranked top quartile for global utilities by Sustainalytics since 2013.
This is a deep commitment that began well before it was a trend.
Our commitment -- our commitments to net zero methane emissions by 2030 and net zero carbon emissions by 2040 are among the most aggressive in the industry.
As our industry approach is a cleaner energy future, and we retire our legacy generating units, it is critical that we honor the contributions and service of our co-workers, as well as address the economic impact on those communities.
Now, I began my career on the generation side of our business.
I have walked the halls, climbed the stairs of every one of our generating plants, shaking hands, drink coffee with the men and women, who work every day to provide energy for our customers.
And I'm proud of the honorable and equitable way, we have cared for both our co-workers and our communities, as we retire these units from service.
We've built a playbook for success.
It began with the retirement of our seven coal plants in 2016.
That work will continue with the retirement of Karn 1 and 2 in 2023.
Our leadership and track record in this space is something I'm proud of and we'll continue, as we look to the future.
This ensures ensure success for all stakeholders, including our investors.
Our main focus is on the E of ESG.
We have a strong record of delivering across all three.
In my 20 years of service, I believe our culture has never been stronger.
Every single day, our co-worker show up with a heart of service for our customers, our communities, and ultimately you, our investors.
Our culture anchored by our values is thriving across our company and it's why we're recognized for top quartile safety performance, industry leading employee engagement, Forbes Best Employer for Women, Best for Vets by Military Times and Best Places to Work for LGBTQ Equality in the Corporate Equality Index.
And earlier this month, we were ranked by Forbes, as the number one utility in the country, as Best Employers for Diversity.
Our leadership, commitment and top tier ESG performance should provide you with the confidence that our long track record will continue to deliver value for customers and investors.
Turning to recent updates.
I want to highlight our continued growth in renewables with several exciting announcements.
We are pleased to announce the recent commission approval of our Heartland Wind project in March, which will be online in December of next year.
This project adds 201 megawatts of new capacity, as a part of our renewable portfolio standard earning a 10.7% return.
I'm also pleased to share that we received approval for the first tranche of our current Integrated Resource Plan, which adds nearly 300 megawatts of new solar through two projects that we expect to come online in 2022.
We are evaluating the second tranche of our current IRP, another 300 megawatts of solar expected to come online in 2023.
And the third tranche 500 megawatts of solar expected to come online in 2024 for a total of 1,100 megawatts.
We're on track to file our next Integrated Resource Plan in June.
It has been a popular topic in -- in our meetings with many of you, while we're still finalizing the details, the focus of our upcoming IRP will be to accelerate the decarbonization of our fleet, ensure reliability and affordability and add renewable and demand side resources in a way that makes sense for our customers and investors, while maintaining a healthy balance sheet.
I'm excited for this next IRP.
It serves as yet another proof point that we are leading the clean energy transformation.
As part of our clean energy transformation -- part of our clean energy transformation includes retirement of our remaining coal fleet.
On Slide 7, you will see our plan to decarbonize is both visible and data driven.
The meaningful reduction of carbon emissions in our plan will drive our ability to achieve net zero carbon emissions by 2040.
Over the past few months, I've been asked quite a bit about the future of our gas business.
As I've shared with many of you our gas business and system is critical to providing affordable and reliable heating here in Michigan.
But it doesn't mean, we're -- we're sitting on our tails here.
In fact, we are actively working to decarbonize our gas system.
Now this aligns very well with the recent announcement from the Biden administration.
Our first step is to reduce fugitive methane emissions, which is well under way, as we accelerate the replacement of vintage mains and services both plants approved by the commission will decrease our missions and achieve our net zero methane goal.
Our decarbonization plans also leverage energy efficiency to reduce carbon usage and put renewable natural gas on our system, which will help decarbonize most difficult sectors, such as agriculture.
By replacing vintage mains and services with plastic piping, we will be positioned to deliver hydrogen or other clean molecules to our customers in the future.
As we would grow our renewable portfolio and decarbonize our generation fleet and gas delivery system, we remain committed to delivering against the triple bottom line of people, planet and profit.
It demonstrates our consistent industry leading performance for nearly two decades.
As much as things change, one thing stays consistent, year in and year out we have and we'll continue to deliver.
2020 proved this, 2021 will be no different marking 19 years of consistent, predictable financial performance.
As Garrick highlighted, we're pleased to report our first quarter results for 2021.
In summary, we delivered adjusted net income of $348 million or $1.21 per share.
For comparative purposes, our first quarter adjusted earnings per share was $0.35 above our Q1, 2020 results, largely driven by rate relief, net of investment-related expenses, better weather and sustained cost performance from our 2020 efforts at the utility.
Our enterprises and parent and other segments were slightly down as planned due to the absence of a one-time cost reduction item in 2020 and higher funded -- funding related costs respectively.
This modest negative variance was more than offset by strong origination growth at EnerBank, which exceeded its Q1, 2020 earnings per share contribution by $0.06 in 2021 as planned and is tracking toward the high end of our guidance for the year of $0.22 per share.
The waterfall chart on Slide 10 provides more detail on the key year-to-date drivers of our financial performance versus 2020 and highlights our latest estimates for the major year-to-go drivers to meet our 2021 earnings per share guidance range.
To elaborate on the year-to-date performance, while weather in the first quarter of 2020 has been below normal to-date, which has led to lower volumetric gas sales, it has been better than the historically warm winter weather experienced in the first quarter of 2020.
And the absence of that weather has led to $0.08 per share of positive variance period-over-period.
From a rates perspective, given the constructive regulatory outcomes achieved in the second half of 2020 for our electric and gas businesses, we're seeing $0.26 per share of positive variance.
As a reminder, our rate relief estimates are stated net of investment related costs, such as depreciation and amortization, property taxes and funding costs.
It is also worth noting that our 2021 financials reflect the accelerated amortization of deferred taxes, as part of our 2020 gas rate order settlement.
On the cost side as noted during our fourth quarter earnings call, we budgeted substantial increases in our operating and maintenance expenses in 2021 versus the prior year to fund key initiatives around safety, reliability, customer experience and decarbonization and in alignment with our recent rate orders.
As you can see, we're $0.02 per share above our spend rate in the first quarter of 2020 as planned, and I'm pleased to report that we're seeing sustained cost performance from 2020, as well as increased productivity in 2021, largely attributable to the CE Way.
That said, we do expect to see the bulk of the planned O&M increases to materialize later in the year.
The balance of our year-to-date performance is driven by the aforementioned drivers at our non-utility segment and non-weather sales, which though slightly down at about 1% below the first quarter 2020 continue to exhibit favorable mix with the higher margin residential class, up 2% versus Q1 of 2020.
And I'll remind you that our total electric sales exclude one large low margin customer.
As we look ahead to the remaining nine months of 2021, we are cautiously optimistic about the glide path illustrated on this slide to achieve our full year earnings per share guidance.
As always, we plan for normal weather, which in this case translates to $0.12 per share of negative variance given the above normal weather experienced in the second and third quarters of 2020.
The residual impact of the aforementioned rate relief, which equates to $0.22 per share of pickup and is not subject to any further MPSC actions.
And the continued execution of our operational and customer-related projects, which we estimate as an incremental $0.18 per share of spend versus the comparable period in 2020.
We have also seen the usual conservatism in our utility, non-weather sales and our non-utility segments.
All in, we are pleased with our strong start to the year and are well positioned for the remaining three quarters of 2021.
And needless to say, we will be prepared to flex costs up or down, as the fact pattern evolves over the course of the year.
As we look out over the long term, we are in the early stages of executing our $13.2 billion five-year customer investment plan at the utility, which is highlighted on slide 11 and will provide significant benefits for our customers, the communities we serve and our investors.
As a reminder, we have budgeted over $2.5 billion of investments in 2021.
The vast majority of which is earmarked for safety, reliability and clean energy projects.
We are on track thus far, and recently filed an electric rate case in March that enumerate our customer investment priorities for the 2022 test year, which are summarized on the right hand side of the page among other key details related to the filing.
We expect an order from the commission by the end of the year.
Despite the substantial customer investments that we intend to make on our electric and gas system over the next several years, as you know we take great pride in taking out costs in a sustainable way to maintain affordable bills for our customers, and we have the track record to prove it.
The left hand side of slide 12 summarizes the key components of our cost structure, which we have successfully managed over the past several years, while investing significant capital on behalf of customers.
In fact from 2017 to 2019, we reduced utility bills, as a percentage of customer wallet by 1%, while investing roughly $19 billion of capital in the utility over that timeframe.
As we look ahead, we have several highly actionable event driven cost reduction opportunities, which will provide substantial savings in the years to come.
The planned expiration of our Palisades power purchase agreement and the recently approved amendment to our MCV PPA will collectively generate roughly $150 million of power supply cost recovery savings.
And as you'll note, our initial estimates for the potential savings for the MCV contract amendment of approximately $50 million proved conservative with the revised estimate of over $60 million in savings, per the commission's order in March.
Also the planned retirements of our five remaining coal unit should provide another $90 million of savings in aggregate, exclusive of any potential fuel cost savings, which will create meaningful headroom and bills for future customer investments.
Lastly, I'd be remiss if I didn't mention our annual O&M productivity delivered through the CE Way, which last year generated roughly $45 million of savings and serves as a critical tool to our long term and intra-year financial planning.
To that end, many of you've asked about proposed changes in corporate tax policy and its potential impact to our plan.
Though at this point, the final details remain unclear, trust that we are evaluating the potential effects and we'll leverage the CE Way and other cost reduction opportunities, including potential offsetting tax credits that are also being proposed, as part of the legislation to minimize the impact to customers, while executing our capital plan.
As we've said before, it is our job to do the warring for you, and we are uniquely positioned over the next several years to manage any potential headwinds.
With our unparalleled track record on cost management, driven by our highly engaged workforce coupled with a robust customer investment backlog and top tier regulatory construct, we are confident that we can deliver on our ambitious, operational, customer and financial objectives for the foreseeable future.
And with that we'll move to Q&A.
Mr. Racho, please open the lines.

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compname announces first quarter earnings results of $1.21 per share, reaffirms 2021 guidance.
q1 adjusted earnings per share $1.21.
q1 earnings per share $1.21.
compname says reaffirmed its guidance for 2021 adjusted earnings of $2.83 - $2.87 per share.

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