CMS Energy Raises Guidance on Strong Utility Performance and $24B Infrastructure Push

Date of Call: Feb 5, 2026

Financials Results

• EPS: 2025 adjusted EPS: $3.61 per share, up over 8% from 2024's actual results. 2026 EPS guidance raised by $0.03 to $3.83-$3.90, representing 6% to 8% growth off 2025 actuals.

Guidance:

• 2026 adjusted EPS guidance raised to $3.83-$3.90, representing 6% to 8% growth off 2025 actuals, with confidence toward the high end.
• Long-term EPS growth guidance reaffirmed at 6%-8% toward the high end.
• Targeting a dividend payout ratio of ~60% in 2026 and ~55% over the 5-year plan.
• $700M equity issuance expected at parent in 2026 to support capital plan.
• Utility customer investment plan increased to $24B over 5 years, supporting 10.5% rate base growth through 2030.
• Expect 3% weather-normalized load growth in 2026 from large economic development projects.

Business Commentary:

Earnings Growth and Guidance Increase:

• CMS Energy reported adjusted earnings per share of $3.61 for 2025, up over 8% from 2024's actual results.
• For 2026, the company raised its annual guidance by $0.03 to a range of $3.83 to $3.90, representing 6% to 8% growth off of 2025 actual results.
• The growth was driven by strong performance at the utility, constructive regulatory outcomes, and robust performance at NorthStar.

Investment in Infrastructure and Renewable Energy:

• CMS Energy unveiled a 5-year $24 billion utility customer investment plan, up $4 billion from the prior plan.
• The plan includes increased investments in electric generation, electric reliability, and natural gas delivery.
• The increase is attributed to the need to improve electric reliability, support growth in data centers, and comply with the state's renewable energy laws.

Affordability and Cost-Saving Initiatives:

• The company highlighted that its residential natural gas rate is 28% below the national average.
• CMS Energy reported over $100 million in savings in 2025 through the CE Way and expects to save customers approximately $1.2 billion through energy efficiency programs.
• These initiatives are part of a broader strategy to maintain customer affordability while making significant infrastructure investments.

Data Center and Large Load Tariff Developments:

• CMS Energy announced progress in discussions with data centers, including reaching commercial terms and near final terms in rate agreements.
• The company emphasized that its large load tariff protects existing customers and provides clarity for new data center developments.
• The tariff is strategic, aiming to support growth in Michigan while ensuring existing customers do not bear the cost of new investments.

Regulatory Environment and Rate Case Outcomes:

• The company highlighted a constructive regulatory environment in Michigan, with approvals for a large load tariff and a 20-year renewable energy plan.
• CMS Energy expressed confidence in its ongoing electric rate case, expecting a constructive outcome and a return on equity of 9.9% or better.
• The favorable regulatory outcomes are seen as crucial for the recovery of investments in the electric and gas systems.

Sentiment Analysis:

Overall Tone: Positive

• "I'm very proud of the team in 2025..." "I have confidence in our ongoing electric rate case..." "We exceeded our adjusted earnings per share guidance..." "Our 20-year renewable energy plan approved..." "We are raising our annual guidance by $0.03..." "I remain confident in our ability to manage the business and execute year in and year out..."

Q&A:

• Question from Julien Dumoulin-Smith (Jefferies LLC): How is the data center opportunity progressing in Michigan, and how does the timing align with your financial plan?
  Response: Progress is positive with more data centers joining the funnel; near final terms on a facilities agreement and rate contract for one data center, expected to be online as early as 2028, with load growth already factored into the 5-year plan.

• Question from Nicholas Campanella (Barclays Bank PLC): What is the feedback on the pending electric rate case PFD, and what is the confidence for a constructive outcome?
  Response: Not concerned; expect a constructive outcome with an ROE of 9.9% or better, supported by a strong track record and staff's constructive revenue deficiency, with commission comments indicating support for attractive returns.

• Question from David Arcaro (Morgan Stanley): How does the large load tariff protect existing customers from data center costs, and is there support from data centers?
  Response: Tariff ensures data centers pay for all costs, with near final rate agreement; pipeline has grown, indicating strong support and alignment with data center initiatives like Microsoft's.

• Question from Michael Sullivan (Wolfe Research): Are zoning issues an impediment for data centers in Michigan?
  Response: No, not an impediment; work with communities to navigate moratoriums, and examples like Mason, Michigan, show progress, with data center pipeline advancing.

• Question from Andrew Weisel (Scotiabank Global Banking and Markets): How should we think about future equity needs relative to the capital plan, and does the $24B CapEx include new opportunities?
  Response: Equity needs (~$3.75B over 5 years) correlate with incremental CapEx; plan is front-end loaded, with $4B increase from backlog but more opportunities remain; financial compensation mechanism converts some CapEx to PPAs.

• Question from William Appicelli (UBS Investment Bank): What tools are available to manage residential bill growth given the 10.5% rate base growth?
  Response: CE Way savings ($100M in 2025), high-priced PPA roll-offs, and converting economic development backlog (e.g., a gigawatt reduces bill CAGR by ~2 points) provide downward pressure on bills to fund growth.

Contradiction Point 1

Timeline and Inclusion of Data Center Projects in the 5-Year Plan

It directly impacts expectations regarding the strategic integration and financial contribution of data center projects, potentially influencing growth forecasts and investor expectations.

Could you elaborate on the data center opportunity in Michigan and the timeline for a potential second data center, and how these align with your financial plan, particularly the 10.5% rate base CAGR? - Julien Dumoulin-Smith (Jefferies LLC)

2025Q4: The data center is not included in the 5-year plan, so landing it would represent incremental growth. - [Rejji Hayes](CFO)

How quickly can the $25+ billion in potential new capital be accessed and integrated into the plan? - Jeremy Tonet (JPMorgan Chase & Co)

2025Q3: The Q4 call will provide more detail. The next 5-year plan will include... 3) **Battery storage and natural gas capacity** to replace retiring facilities and support load growth... - [Garrick Rochow](CEO)

Contradiction Point 2

Status and Impact of the Large Load Tariff

It affects the clarity and certainty of regulatory approval for key projects, impacting the timeline and feasibility of data center development.

How does the large load tariff for data centers insulate customers from costs, and are there other strategies to ensure fair payment? - David Arcaro (Morgan Stanley)

2025Q4: The company is in near-final terms on the rate construct, which will be filed and need PSC approval. - [Garrick Rochow](CEO)

What is the timing for the large load tariff, the current status of discussions, and potential opportunities if implemented in the next few months? - Julien Dumoulin-Smith (Jefferies LLC)

2025Q3: The gating **'large load tariff' is expected to be finalized by the MPSC on November 7, 2025**. Once this is in place, the data center project... should move quickly toward contract signature. - [Garrick Rochow](CEO)

Contradiction Point 3

Impact of New Load on Rate Base CAGR and Capital Plan

It changes the narrative on whether new opportunities are integral to growth targets or additional, affecting the perceived reliability of financial projections.

How will the planned 1-2 GW data center load affect capacity outlook and the 10.5% CAGR? - Nicholas Campanella (Barclays Bank PLC)

2025Q4: The current $24B plan is **not** contingent on landing these large load opportunities. If such opportunities are realized, they would represent **incremental** CapEx... - [Rejji Hayes](CFO)

Is there any overlap of the $25+ billion upside opportunity prior to 2029? - Shahriar Pourreza (Wells Fargo Securities, LLC)

2025Q3: The next 5-year plan will incorporate elements from each of the three components of the $25+ billion... - [Garrick Rochow](CEO) & [Rejji Hayes](CFO)

Contradiction Point 4

Equity Issuance Plans Beyond Covert Financing

It creates uncertainty about the company's capital structure strategy and its commitment to equity financing, which is crucial for assessing financial risk and planning.

Will equity needs for the $700M 2026 issuance and long-term plan be consistent, ramping up, or front-end loaded, and does this assume increased use of hybrids or junior subordinated debt? - Andrew Weisel (Scotiabank Global Banking and Markets)

2025Q4: The plan includes a bit over $1.5B in junior subordinated notes (JSNs) over the 5 years... The company is opportunistic and may be more aggressive if the stock price is attractive. - [Rejji Hayes](CFO)

When will the decision on Covert financing be made, and are there still no plans for general equity beyond Covert financing? - Andrew Weisel (Scotiabank)

Earnings Call Transcript: Beyond Covert, the company reaffirms no plans to issue equity until 2025, consistent with its 5-year capital plan. - [Rejji Hayes](CFO)

Contradiction Point 5

Capital Expenditure Plan Dynamics

It alters the understanding of the relationship between the base capital plan and the potential backlog, impacting perceptions of plan flexibility and future growth capacity.

Is the $4B increase in the CapEx plan drawn from the previously mentioned $25B backlog of opportunities, or is the $25B backlog still intact? - Andrew Weisel (Scotiabank Global Banking and Markets)

2025Q4: The $4B increase does come from the $25B backlog 'looking in,' but it's not a symmetric equation. - [Rejji Hayes](CFO)

How does the new 1-GW data center load affect the $5B IRP-related CapEx, when will sales outlook exceed 2-3%, and what's the current status and likelihood of settling the gas rate case? - Nicholas Joseph Campanella (Barclays Bank PLC, Research Division)

2025Q2: The $5 billion figure is based on the current 2-3% sales growth forecast, plant retirements, and a large PPA expiration. - [Garrick J. Rochow](CEO)