CMS Energy Stock

Good morning, everyone, and welcome to the CMS Energy 2026 Second Quarter Results. The earnings news release issued earlier today and the presentation used in this webcast are available on CMS Energy's website in the Investor Relations section. This call is being recorded. [Operator Instructions] Just a reminder that there will be a rebroadcast of this conference call today beginning at 12:00 p.m. Eastern Time, running through August 4. This presentation is also being webcast and is available on CMS Energy's website in the Investor Relations section.

At this time, I would like to turn the call over to Mr. Jason Shore, Treasurer and Vice President of Investor Relations.

Thank you, Abby. Good morning, everyone, and thank you for joining us today. With me are Garrick Rochow, President and Chief Executive Officer; and Sri Maddipati, Executive Vice President and Chief Financial Officer. This presentation contains forward-looking statements, which are subject to risks and uncertainties. Please refer to our SEC filings for more information regarding the risks and other factors that could cause our actual results to differ materially. This presentation also includes non-GAAP measures. Reconciliations of these measures to the most directly comparable GAAP measures are included in the appendix and posted on our website.

And now I'll turn the call over to Garrick.

Thank you, Jason, and thank you, everyone, for joining us today. Our investment thesis remains consistent, focused and durable. It is a simple but powerful business model built on more than 2 decades that consist performance, delivered execution, disciplined capital allocation and industry-leading results. With our long capital runway, top-tier regulatory environment, our commitment to affordable customer bills through the CE Way plus digital and other cost savings CMS Energy continues to deliver.

This proven model drives a premium total shareholder return, made up of 6% to 8% adjusted EPS growth compounded annually impaired with an approximately 3% dividend yield. For you, our investors, it means predictable earnings growth, a competitive dividend and long-term shareholder value. Today, I'm going to share with you our plans to further simplify and strengthen our model as we plan to exit nonutility renewables development and focus on what we do best.

Following a comprehensive strategic review of NorthStar, we are taking a deliberate step to simplify our business model and sharpen our focus on utility investment. We plan to exit nonutility renewable development while retaining a portfolio of Michigan-based assets, including Dearborn Industrial Generation or DIG, several small gas peakers in 4 commercial solar projects, all of which generate strong cash flow and support our long-term growth strategy.

Let me share a little more about how this plan benefits the company and our investors. First, we plan to reallocate capital away from NorthStar and exit nonutility renewables development. Our current 5-year plan has approximately $1.7 billion dedicated primarily to nonutility renewables. This shift of capital will reduce parent funding needs. Second, the retained assets will not require significant capital investment, and they generate strong cash flow, further optimizing parent financing and supporting our large utility capital investment plan.

Additionally, as we look to the future, proceeds from the sale of our non-Michigan assets and development projects will further reduce external funding needs at the parent, including equity. Collectively, these three items equate to a reduction of over $500 million of funding through 2030, optimizing parent financing. Beyond 2027, we expect NorthStar's earnings to be driven primarily by DIG and the peakers.

On a consolidated basis, this means nearly 100% of our earnings and future growth will be rate-based driven within the utility, supporting higher quality growth while simplifying in strengthening our overall business strategy and outlook. We are targeting the restructuring to be complete by the end of this year and anticipate providing an interim update on future earnings calls as we execute the repositioning of this business.

Now let's talk about our growth in Michigan. We continue to see momentum across multiple sectors of Michigan's economy. On the data center front, we have made meaningful progress and have taken an additional step reaching an agreement under our large load tariff. This includes both the extraordinary facilities agreement and the rate agreement. We have one of the most constructive frameworks in the country for data center growth. Our large low tariff interest new large load customers bear all costs to serve them, supports economic growth and protects existing customers.

In fact, our average residential electric customer could see approximately $7.50 per month of bill benefit with every gigawatt of new large load. Clear evidence of how disciplined growth supports customer affordability. The next step in the process is for the customer to receive local zoning approval and we will incorporate the low growth associated with the agreement into our Integrated Resource Plan, or IRP, which we'll file in September. I continue to be confident in the progress we see here in the future benefit realized for all our customers.

In addition to the large load growth we're seeing, year-to-date, we've also contracted roughly 135 megawatts of manufacturing and industrial load. This consistent momentum is a reflection of Michigan's economic growth, and why Michigan for the fourth year in a row was ranked #6 in CNBC's top states for business. We continue to see strong interest from technology, advanced manufacturing and supply chain companies looking to expand in Michigan. These opportunities create new jobs, strengthen our communities and continue to create long-term value for our customers and shareholders.

Looking at our regulatory calendar. In June, we filed our electric rate case requesting a $456 million revenue increase, a 10.25% ROE and a 51.75% equity ratio. We've also requested 2-year investment recovery mechanism, or IRM as we make needed customer investments to harden and strengthen our electric grid. In our gas business, in June, we revised our revenue request in our gas rate case to $232 million, well aligned with staff's position on our distribution spend.

We also increased our equity ratio to 51.75% to align with our electric rate case and reflect the need for a higher equity ratio to support affordability and efficient financing. These investments are outlined with clear and deliberate plans focused on continuing to deliver safe, reliable and affordable energy for our customers. As I previously highlighted, we have moved our IRP filing to September to reflect the recent data center agreement and ensure we are putting the best plan forward for Michigan.

Now on to the financials. For the first half, we reported adjusted earnings per share of $1.50 and are executing on our plan to deliver full year guidance. We are reaffirming our full year 2026 guidance of $3.83 to $3.90 per share with continued confidence toward the high end. We also have a clear line of sight on our 2027 guidance given the change in strategy at NorthStar and are introducing full year 2027 guidance of $4.08 to $4.17, which maintains growth within our long-term guidance range of 6% to 8% off of 2025 actuals.

This guidance reinforces and demonstrates our confidence in the continued growth and earnings power of our business post-NorthStar obstruction. Longer term, we continue to guide towards the high end of our adjusted EPS growth range of 6% to 8%.

With that, I'll hand the call over to Sri.

Thank you, Garrick, and good morning, everyone. I want to thank those of you who have reached out over the last few weeks with kind words of support as I've stepped into the CFO role. I've enjoyed getting to reconnect with many of you and look forward to seeing those I haven't over the remainder of the year. Today, I'll focus on three things: first half results the path to delivering our 2026 guidance and how our investment and financing plans support durable long-term growth.

I'll start on Slide 8, where we have the standard waterfall chart, which illustrates the key drivers of our financial performance through the first 6 months of 2026 and our year-to-go assumptions for meeting our expected guidance range. Through the first half of 2026, the company delivered adjusted net income of $464 million or $1.50 per share. The $0.23 year-over-year unfavorable variance is primarily due to benefits realized in the first half of 2025 from liability management that were already contemplated in our 2026 plan and do not impact our full year guidance.

Relative to our planned assumption so far this year, the primary headwind has been the impact of storms, which we identified actions to offset, including, but not limited to, the pending storm referral filed with the commission. From a top line perspective, an unfavorable weather comp from last year and slightly lower cooling and heating degree days in Q2 versus normal, resulted in an unfavorable variance of $0.08 for year-to-date results. New rates net of investment costs drove a positive $0.20 of earnings, which continue to move up year-to-date with the benefits of last year's gas rate order, new electric rates, which commenced in May and continued investments in renewable projects at the utility.

The $0.19 of unfavorable O&M variance was primarily driven by the previously mentioned storm activity. The $0.16 of unfavorable parent and other includes items planned in our full year guidance as well as positive sales trends year-to-date. For the remaining 6 months ago, we'll continue to plan for normal weather, the unfavorable variance of $0.18 reflects the absence of weather upside in 2025. July temperatures have been helpful, we don't count on weather upside as part of our planning.

However, it does mitigate potential headwinds or allow reinvestment to benefit customers and strengthen the plan for the future. As I mentioned, we continue to see ongoing benefits from the previously mentioned rate orders and renewable investments. We are also planning a constructive outcome in our pending gas case. In total, we see rates, net of investment costs driving $0.22 of positive earnings in the second half.

We expect a positive $0.25 of O&M driven earnings in part by constructive outcome in the pending storm deferral docket as well as normalized storm activity through the balance of the year. The last piece of the to-go portion of the walk results in a positive variance of $0.16 to $0.23 and has several components, including one, the absence of pull-aheads from last year that were funded by favorable weather in 2025; second, the continued performance of NorthStar, including DIG's higher contribution since last year's outage and new contracts this year; and third, a conservative assumption for non-weather sales, which, as I mentioned, are trending positively year-to-date. While Garrik has already affirmed our financial objectives, I'll reiterate my confidence in our ability to deliver on this year's EPS guidance, our 2027 guidance that we have initiated today and our long-term EPS growth.

Turning to Slide 9. The foundation of our long-term growth is the robust $24 billion utility investment plan, which drives 10.5% compounded rate base growth. Our decision to reposition NorthStar enables us to efficiently fund the current 5-year plan and over time, allocate incremental capital to the utility, providing high-quality durable earnings with strong long-term value. You'll note, we are highlighting a $2 billion capital opportunity for utility renewables related to the already approved renewable energy plan or REP. And an additional $1 billion of electric distribution reliability opportunity represented in the road map we've already filed with the commission.

These investments are opportunities in the back half of the plan as we continue to improve distribution reliability and meet Michigan's energy law requirements. As we have highlighted in the past, non-rate base earnings differentiate our model from a typical utility and have future growth potential. Energy efficiency incentives and the financial compensation mechanism for FCM on power purchase agreements are key parts of Michigan's legislative framework and benefit customers and investors.

While energy efficiency remains a component of our long-term plan, it's a relatively mature program. The SEM has the potential to drive additional opportunity through this decade and the next as we continue to procure electric supply resources that ensure reliability as well as meet the renewable energy, clean energy and battery storage requirements of Michigan's energy law.

Let's move to Slide 10, where I'll cover the company's funding needs and progress in 2026. We remain on track to complete our 2026 financing plan, including planned debt issuances at the utility, and the remainder of our common equity issuance under our established ATM program. While we don't typically update our long-term financing plans during the year, in the context of the NorthStar decision, I would like to provide direction as to when and how future financings will likely be impacted.

Our current 5-year plan assumes a total of $3.75 billion of new equity. This year, we plan to issue $700 million and have already completed nearly $500 million at attractive prices. This leaves approximately $3 billion over the remainder of the plan. As we redeploy cash from NorthStar, we would anticipate reducing at least $350 million of equity from the current plan. We'll provide an update on our financing plan during the Q4 call as part of our normal annual planning process.

Turning to Slide 10. I want to spend a moment describing what gives us confidence in our investment thesis and how it delivers customer value and maintains affordability. This slide depicts how growth and affordability reinforce one another and do so year in and year out, delivering 6% to 8% earnings growth for investors, while keeping customer build growth at below inflation. Our utility investments drive 10.5% rate base growth, and those investments help reduce customer costs and drive earnings growth. Long-term investments in electric supply and natural gas storage allow us to deliver significant cost savings as well as resiliency and reliability benefits to customers during the hottest day of the summer and the coldest days of the winter.

We have demonstrated the ability to manage operating costs through our lean operating system, the CE Way. This relentless focus on eliminating waste and driving efficiency through better process and automation enables us to deliver savings year after year, creating the headroom to make needed investments in distribution reliability and gas safety. Support for financially healthy utilities in both legislation and regulation means we can use our balance sheet to make long-term investments and leverage efficient financing to lower costs for our customers.

Finally, with 2% to 3% sales growth anticipated, and the ongoing customer benefits of energy efficiency, which is up to 2% on the electric side, we see lower customer bills as individual customer consumption is reduced and fixed costs are spread across increasing load. This proven and durable business model allows us to provide safe, reliable and affordable service to our customers and deliver consistent financial performance for you, our investors. While I'm new to my role, I'm not new to CMS.

The foundation of our business model is strong. And in the 12 years I've been with the company, the opportunities to serve our customers grow our state and drive long-term value for our investors have never been better. I'm confident in the strategy we are executing in the years and decades to come.

Now I'll turn it back to Garrick before we take your questions.

Thanks, Sri. At CMS Energy, we deliver 23 years now of consistent industry-leading performance regardless of circumstances, year in and year out. You can count on CMS Energy to deliver for all of its stakeholders.

With that, Abby, please open the lines for Q&A.

[Operator Instructions] And our first question comes from the line of Richard Sunderland with Truist Securities.

I guess starting with NorthStar, to throw out the first question of kind of why now, is this all with an eye to higher utility growth and are you thinking about other opportunities related or outside of that business any differently, whether it's big recontracting or the progress on the data center efforts -- just kind of want to get the big picture here. Can you speak a little bit more to the process and timing?

Yes. Let me just walk a little bit through from a process perspective, leading up to this, and then I'm sure Sri's going to want to jump in as well to the conversation here. You would expect as good fiduciaries of the business that we're always looking on a regular basis on our businesses, and we do that.

And we look at it from all stakeholder perspective, from customers all the way to investors. And from an investor standpoint, we're looking at how we deploy capital to bring the highest value back to our owners. And so the decision we're sharing here today does just that, right? We talked about reallocation of capital, the capital assets we're going to maintain with light capital investment and bring cash back to the parent, the disposition of assets. We walk through all that, and Sri will go into some additional details of that.

But I would also point out just the guidance we've provided as well, long term, 6% to 8% towards the high end. And we were deliberate about 2027 guidance because we're giving you the visibility but also sharing our confidence in the growth and earnings power of this business. And so what you should read through that is no rebate. That's what you should see in there.

And then just the bigger picture here. We talked about what other things we could do, we are simplifying. That is the key message, right? And we are improving the financials of our overall business, and we are focused on the utility. Nearly 100% of the earnings after '27 come right out of regulated utility. That is a high-quality earnings that high-quality growth. That's what our investors expect. But Sri, please.

Yes, Rich, I appreciate the question. I'll hit on Garrick's comment. We're focused on utility investment. We have a robust plan. I hit that in my prepared remarks at $24 billion. What this repositioning of NorthStar and restructuring does allows us to more efficiently finance that capital, both at the parent because we're reducing our financing needs. So that really strengthens and lengthens our plan. And then it improves our balance sheet flexibility as we continue to finance utility capital. So really, across the financing as well as the allocation of capital, we're strengthening the business and simplifying it.

And then turning towards the utility, it looks like great progress in terms of the agreement with the data center. Curious if you could speak a little bit more to what still has to go on the customer side, your thoughts on that in light of expected inclusion in your IRP filing and just, I guess, progress overall there relative to sort of expectation earlier in the year and how things currently stand on sort of final, final agreements.

As I shared in the Q1 call, we'd continue to provide updates on progress, and I'm pleased with the progress. We talked about the signature, both in the rate construct and a rate agreement as well as the extraordinary facilities agreement. All that kind of fits under this large load tariff, and I talked about the benefit of that in my prepared remarks, and what that means for not only economic growth and capital investment but ensures existing customers don't pay for that.

In fact, there's a benefit associated with that. And we're very clear to share the zoning is still underway. The customer is working through that. And we want to be respectful of the locals and they're doing their due diligence. I've also talked about that on calls in the past. So we're going to let that play out. But what gives me optimism is the customer is working through multiple locations in the state.

And that tariff because it's tariff, that contractual piece can apply anywhere in our service territory, which is great. And then we'll build that in September into our integrated resource plan that load growth. But Sri, would you like to add anything to that?

No. The only thing I'd add, Garrick, is that the capital plan that we have today doesn't reflect that load growth. So there continues to be upside opportunity that will be reflected in the IRP that we'll incorporate over time into ourplans.

And our next question comes from the line of Jeremy Tonet with JPMorgan.

I just wanted to dive in on the '27 guide. A little bit more if I could. Just wondering any preliminary thoughts at this point in time, obviously, depends on where full year fall for '26. But how you think you could land within the range there. And I imagine the renewable timing would also come into play here. But just any thoughts on how you think you could trend within that range?

Jeremy, it's Sri. Thanks for the question. I'll give you a couple of things. One, we're not biasing the range. We provided confidence in that range. It's really driven by the utility growth. That's the underlying assumptions to the plan. As you think about 2027, we've already incorporated the repositioning of NorthStar into that guidance. So we're confident with the assumptions we've made. Now as we execute over the course of '26 and into '27, we'll update our part of our normal planning process as we go through the course of this year and next.

Got it. And then I just wanted to maybe dive in a little bit more, you talked about cost efficiencies in NorthStar restructuring. Just wondering if you could talk a little bit more detail about what categories these can look like and what type of magnitude.

Yes. Jeremy, as we exit renewables development, there is costs associated with having that type of platform, both from an engineering and development perspective so we can get cost efficiencies from our business as we get that business and deploy capital elsewhere.

And our next question comes from the line of Nick Campanella with Barclays.

Thanks for all the information and the early look on '27. I guess just -- I'm just trying to frame NorthStar last year was about $0.30, and our understanding is about half of that is the renewables and there's some debt costs in there as well. So what is the offset besides lower parent financing or maybe that's just entirely it? And when I kind of think about the year to go, there is about $0.16 to $0.23 of benefit from parent financing, tax and other

And I'm just wondering like how much of that is kind of onetime in nature that we have to kind of take out of '27 and really just trying to understand is parent going to continue to see a year-over-year benefit net of all these drivers as we look towards '27?

Jeremy -- sorry, Nick, I'll break the question apart a little bit. As you think about '27 and beyond, we are retaining DIG and a handful of renewables assets. Those will continue to provide earnings into '27 and beyond. And then when you think about the incremental cash from those assets that are no longer being deployed into renewables development, they'll offset parent financing. So over time, the utility growth will be more efficiently financed so you'll see continuing benefit at the parent year-over-year.

Continued benefit year-over-year. Okay. And then maybe just an update on how you're thinking about the storm deferrals in the plan that you've outlined today, maybe based off precedent and what's currently pending in front of the commission and just your underlying assumptions there?

Yes. We are assuming a constructive order in that pending docket. But as I noted in my prepared remarks, that's not the limit to how we're going to consider plan or identifying offsets to storm costs over the course of the year. But we do have a good precedent for that from last year, and our performance continues to get better. So we expect a constructive outcome in that docket.

And our next question comes from the line of Julien Dumoulin-Smith with Jefferies.

Just wanted to come back on the announcement here this morning. Just with respect to the outlook, I wanted to ask, how accretive is this transaction the best you guesstimate here today? I mean, obviously, there's a number of different moving pieces here, but is there any way to kind of give us a number by 2030 and how to think about what the increment decrement is based on what you're announcing? I know that obviously, '27, '27, but as you look at the tail end of the outlook here, if you can comment to that and the relative accretion?

Julien, nice to hear, yes, appreciate the congrats. A couple of things. Our outlook, our long-term growth trajectory hasn't changed, 6% to 8%. Garrick reiterated that, I'll reiterate the same. And what really this plan does is it doesn't change our growth outlook. It changes the composition of growth. we're reallocating capital away from NorthStar. So more of the upside and more of the growth will come from the utility. And over time, we're financing that more efficiently by not allocating capital to renewable development at NorthStar. So you'll see us strengthen and lengthen our plan over time as we have more efficient financing at the parent.

Is there a way to think about what the contribution would have been, shall we say it this way, like when you think about the prior plan for 2030 and just what the assets would have contributed out in that time period, just that pre and post? Like what -- had it not been for this transaction, what the composition would have been out in the 2030 time period from those assets?

So Julien, we are exiting the renewable development piece of it. So those were generating largely development gains related to developing those assets. What we're retaining is DIG, and so the earnings from that and the cash from that are being retained. And what that's doing is offsetting parent drag over time. So as you're thinking about -- you're kind of modeling out to 2030, you're seeing more -- the outlook for the utility state is the same. We have 10 5.5% rate base growth there. But you're going to see less and less drag at the parent, which is offsetting any of the renewables development earnings over time.

Right. So it was a positive earnings contribution in the 2030 time frame previously the way [ in ] is what you're selling it and replacing it go forward.

Yes. And the way I think about it, Julien is 6% to 8%. We continue to have confidence in that growth. This is strengthening and lengthening the plan and is creating more durable earnings as we go out, not only through the plan but beyond the plan.

And our next question comes from the line of Shar Pourreza with Wells Fargo.

So Garrick, I know we've seen, obviously, Microsoft struggle a little bit with zoning in some of their sites in Michigan. I guess does the 20-year contract survive if zoning drags materially or fails outright? Is there kind of a drop dead date or a ramp in the agreement? And then obviously, you just mentioned that you're looking at -- they could be looking at multiple locations in the state. Could that be outside of your territory, maybe closer to Detroit?

Let me -- here's one of the wonderful things about our succession plan when you've got a financial expert assuming the role of CFO, who's also spent time in the operations, who has also not only dealt with power supply costs, but been in the conversations with the data centers. I'm going to ask him to respond to the question, just given his expertise.

There's a couple of pieces to this, Shar. It's more than one customer. It's more than one location. And so that's what's giving us confidence. Like Garrick said, our construct or large load, I think, is one of the best in the country. It protects customers, it drives affordability and it drives certainty from an investment and credit perspective over the long run. And so I think we are well positioned to continue to attract large loads, both in the near term and long term.

And what I would just add to that, and I said it in my prepared remarks or in response to the question, that tariff has -- it's a tariff, right? And so as that customer thinks about different locations in the state, that has the flexibility to move along with them in those other locations. And so that's really the beauty of it. Thanks for your question, Shar.

Got it. And then just lastly, on just the DIG recontracting, obviously, that's called out as upside. How should we be thinking about the timing of recontracting and the contracted merchant mix there?

Shar, some of that will layer in into the back half of this year and even into next year. And then you should think of that as we try not to leave a lot of merchant outstanding to provide predictable earnings. So think of that in the back half of the planned '29, 2030 and beyond.

And our next question comes from the line of Travis Miller with Morningstar.

Just back to NorthStar, just to be super clear here. What exactly is for sale if we just took the assets or renewable assets not in Michigan. So I'm looking at Ohio, Texas, et cetera. Is that was actually for sale and then contrasting that with what you would save in future development? Just trying to get an idea of how it's either earnings neutral or earnings accretive proceeds versus savings and capital over the next 3 to 5 years.

I'll walk through the assets a bit with you and then hand it over to Sri to finish the conversation. And so think of this as those out-of-state assets that are renewables. Some of them are constructed, some of our development assets. There's also a bit of assets in Michigan that are being dispositioned as well. And so we've been very clear to talk about what's in. And I'll just reiterate that Dearborn Industrial Generation, a couple of small gas speakers, go by the names of Kalamazoo and Livingston and four commercial solar projects in Michigan. That's what we're retaining as part of NorthStar. But Sri, please?

Yes. Travis, a couple of pieces and Garrick highlighted some of this in his prepared remarks. One, you have lower capital allocation to NorthStar. So that's the $1.7 billion of capital. That frees up capital efficiency apparent. So that's one piece. The second piece is the cash flow from DIG and the peakers and the retained mission assets that were otherwise going into development at NorthStar now fund and offset parent funding needs.

And then lastly, over time, we can sell the non-Michigan assets, and we've incorporated all of that into the $500 million plus of funding offset that we've disclosed here. So all three of those combined give about $500 million funding offset over time.

And our next question comes from the line of Michael Sullivan with Wolfe Research.

Another congrats to Sri. Welcome back. I just wanted to clarify on the utility CapEx opportunity. Is the $3 billion upside you spoke to in the plan and part of the long-term growth rate reaffirmation? And if not, how do you think about the financing there? So you talked about bringing down the equity needs, but then what happens with the equity needs? How do you fund like the incremental CapEx, if that was included today?

Michael, I appreciate the question. Thanks for the congrats. A couple of pieces there. No, it's not in the plan. Those are upside opportunities in the plan in the back half and beyond. And part of the benefits that we have from the repositioning of NorthStar is the strengthening and the increased flexibility of the balance sheet. And so we wouldn't necessarily take up the equity for that incremental capital. Now we'll incorporate that and update our financing plans over time as we incorporate that capital into the plan.

Okay. Understood. And then I'll take like another crack at some of the questions just on NorthStar, like what's still assumed or was previously assumed. Is it fair to say that when you talk about nearly 100% utility, it's predominantly just to get that $70 million a year pretax run rate is like the residual nonutility earnings in the plan now?

Yes, that's the right way to think about it.

Okay. And then last one, what specifically would enable starting to target the high end of '27? Is it just getting through more of the year? Or are there other levers or opportunities that you're looking to capture in the coming months that could help get you there?

Yes, Michael, I'll just remind you, it's early for 2027, we're comfortable with the assumptions we've got embedded as we execute over the course of '26 and get visibility on those assumptions. We'll incorporate that into our planning process. Like I said, we typically don't provide guidance this early, but given the change in NorthStar strategy, we wanted to make sure investors had visibility into how we were thinking about the business, but we'll update that as part of our planning process over the course of this year and into early next.

And our next question comes from the line of Sophie Karp with KeyBanc.

Congratulations on the first earnings call in the new roles. Could we talk a little bit about the economics of the remaining peakers and the solar, I guess, assets in Michigan? Are those also long-term contracted similar to DIG? Is there like upside from those? And kind of related to this, would you consider down the road an option to absorbing those into your rate base somehow?

Yes. Let me answer. When we think DIG and the peakers and the capacity position, those are contracted in a similar fashion. And then the retained solar assets are on long-term contract as well. While we're not assuming significant earnings past '27, they do generate cash flow that help the parent as well. In terms of rate base, I think that's too early. That's not going to be incorporated into this IRP. It obviously provides flexibility over time, but we're comfortable with the way those assets are contracted outside of the utility.

Got it. Got it. And then going to the -- back to the data center topic, how are you thinking about demonstrating, I guess, customer benefits from data centers from your contract? Is that just kind of like offsetting the rate cycle or maybe reducing future rate asks? Or is there a more explicit way to show it to people be a bill credit of some kind? I guess, what is the -- and if you could maybe talk through some kind of rule of thumb like for every gigawatt you sign, how much of the rate increase would be displaced, right, and need the rate increase would be displaced, something along those lines. Any color would be appreciated.

Appreciate the question, Sophie. In fact, we're doing this to that. As I referenced in my prepared remarks, for every new gigawatt of large load signed under the tariff here, that equates to roughly $7.50 of bill benefit for the average residential electric customer that's real savings with this growth as a result of our large low tariff and how that is structured.

And so we're being very open with the communities, with customers about that benefit. And part of that process, as that load comes on, as that load is generated, those savings flow back to customers through the rate case process. And so we're looking to do that to show that to show them the benefit. But right now, it's about making it visible for our customers in terms of just putting real dollars and cents to it.

The only thing I would add to Garrick's comments is as we -- under that tariff, we're spreading around larger of the fixed costs over a bigger base. And under the large tariff, those customers pay for the incremental resources they need. And I'll just point you to the slide that we had in our deck. It's just a proven and durable business model that reiterates itself. affordability and growth can reinforce each other.

[Operator Instructions] And our next question comes from the line of Andrew Weisel with Scotiabank.

First question is on the regulatory side, I think there was some comments about the IRP being pushed to September to -- related to the data center opportunity. Can you just maybe explain a little bit more, would that suggest that you'll be including generation related to that data center customer? And if so, would that most like baseload gas or something like that?

Well, I look forward to sharing more and more of our IRP as we approach the September time frame. We've done a lot of foreshadowing. We know from the renewable energy plan, there's 13 gigawatts of renewables that have been approved -- pre-approved that flow into the integrated resource plan. There's battery storage as required by state law, but in fact, to be able to ensure reliability, we have to add more battery storage across the system.

And -- we've been very clear, too, to foreshadow the importance of during certain hours of the day where there's not solar and the batteries are depleted, you need gas turbines, simple cycles and 1.5 gigawatts to replace. Really to ensure reliability during those hours, and it works to replace our current 3 and 4 facility which is an oil and gas-fired peakers, 1.2 gigawatts. And so it's almost a direct replacement for that as well.

So that's a big piece of it. That's there. And now we're also sharing that load growth is going to be incorporated into our integrated resource plan. But to be clear, we're not connecting gas with data centers. That's not something like gas equals data centers. There's a really nice solution that we can put in place. And we'll share more of that as we get into our IRP in the September time frame.

Okay. Sounds good. And then also on the regulatory front, the storm deferral, I understand you've got the docket underway but we also had another storm mid-summer. How do you think about the potential another round of that? Will you worry about overusing mechanism relative to traditional storm cost recovery? Or are you waiting to see how the first docket goes before making those decisions?

I'm going to like just talk about the big picture here for a moment and what gives us confidence from a storm deferral perspective here. Big picture, our reliability performance, our storm process is improving. We were once a fourth quartile company. Now we're selling in third quartile approach in second quartile in terms of performance.

In terms of restoration over the first 6 months of the year, 92% of our customers were restored in 24 hours or less across that. And so like we're seeing all the right indicators. We've got a reliability road map, which we file with the commission, which is reflective of the Liberty audit. The staff, the commission have been constructive in terms of the investments needed. We're making those investments.

Every time we make those investments, we see and we measure the benefit. And we're actually just getting rolling on 5 years of tree trimming, a 5-year cycle, which is new for us. So that benefit to the customers is going to continue to show up and improve. Now we had some storms in July. I'd love firm to be perfect. I'd love for every store. But a July 4 storm is tough. I was even out in the field, the entire day on the fourth and talk with customers, talking with our team.

There are some things we did really well, but there's also some wears where we need to improve. And so we incorporate that into the process. through our lessons learned and just continue on this path.

But again, pulling back up to that bigger picture, where we're headed, where we're going, that's what gives me confidence in the storm deal process and that mechanism that's been created. And then two, it's really reflective of our Q1 storm, which was an ice storm which performed much better than the previous ice storm as well. So it's all those things that give the confidence that give me confidence in the storm deferral.

Yes. And Andrew, I would just say we have confidence, one, because of the precedent from last year around a storm referral. And we have opportunity to wait through the course of the summer. Before we decide if there's a need for anything else. We're always managing headwinds and tailwinds over the course of the year, as I noted in my prepared remarks. So we have an opportunity if there's need for incremental to wait through the course of the summer and into the fall.

Okay. Great. That's very helpful. One last small one, if I could squeeze it in related to NorthStar. My understanding is correctly that the 2027 guidance assumes that some assets will be sold, and therefore, you've got $0.25 to $0.30 of guidance in 2026. You're not giving that level of detail, but would it be fair to assume that the '27 contribution from NorthStar would be less because you're assuming some assets will be sold, but not yet assuming cash proceeds lowering equity needs. Is that a fair way to think of it?

The way I would think about it, Andrew, is that we are retaining some of the assets and we have incorporated that into the '27 guide. You're right. We're not going to break down at this point, the different contributions, but we have incorporated the assumption that we would sell down some of the assets at NorthStar.

And our final question comes from the line of Anthony Crowdell with Mizuho.

Just one quick one. You're very clear on what you sold from NorthStar. You talked about the recontracting opportunities on DIG. Just curious, why not have DIG part of the sale process? Like you've kept it, you're clear that you're keeping it. Is it that you think it's a rate base opportunity going forward? Are you just using it as optionality in the portfolio maybe to offset equity needs in the future. Just curious on why keeping DIG and not just selling all of NorthStar?

Yes. Thanks for the question, Anthony. One, DIG is an asset for which generates significant cash flow, and it doesn't require significant incremental CapEx to get that cash flow. And so it really helps offset parent financing. You'd have to get significant value for that, and it's a core asset for us from a capacity and energy perspective, and we're comfortable and we know it well.

And that concludes our question-and-answer session. I would now like to turn the call back over to Mr. Garrick Rochow for closing remarks.

Thanks, Abby. I'd like to thank you for joining us today. Take care and stay safe.

And ladies and gentlemen, this concludes today's call, and we thank you for your participation. You may now disconnect.

Good morning, everyone, and welcome to the CMS Energy 2026 First Quarter Results. The earnings news release issued earlier today and the presentation used in this webcast are available on CMS Energy's website in the Investor Relations section. This call is being recorded. [Operator Instructions] Just a reminder, there will be a rebroadcast of this conference call today, beginning at 12:00 p.m. Eastern Time running through May 5. This presentation is also being webcast and is available on CMS Energy's website in the Investor Relations section.

At this time, I would like to turn the call over to Mr. Jason Shore, Treasurer and Vice President of Investor Relations.

Thank you, Rob. Good morning, everyone, and thank you for joining us today. With me are Garrick Rochow, President and Chief Executive Officer; and Rejji Hayes, Executive Vice President and Chief Financial Officer. This presentation contains forward-looking statements, which are subject to risks and uncertainties. Please refer to our SEC filings for more information regarding the risks and other factors that could cause our actual results to differ materially. This presentation also includes non-GAAP measures. Reconciliations of these measures to the most directly comparable GAAP measures are included in the appendix and posted on our website.

And now I'll turn the call over to Garrick.

Thank you, Jason, and thank you, everyone, for joining us today. Our investment thesis, which you see on Slide 3, continues to stand the test of time. Whether it's our long capital runway, Michigan's top-tier regulatory jurisdiction, our ability to keep bills affordable for customers or a strong economic growth across the state, this model works, and it works consistently.

It drives a premium total shareholder return, 6% to 8% adjusted EPS growth with annual compounding paired with approximately 3% dividend yield. It's a simple, durable formula and it's why CMS Energy continues to be a smart long-term investment. Delivering for more than 2 decades with consistent industry-leading performance.

Turning to Slide 4. You'll see the outcome of our most recent electric rate case. The commission proved over 65% of our ask and maintained our 9.9% ROE in the electric business. I continue to be pleased with our regulatory outcomes, and most importantly, the support for our customer investments. On the graph to the left, what stands out is a consistent record of support, constructive outcomes we've seen across our electric rate case filings over the last several years. These outcomes reflect deliberate customer-focused investments designed to deliver on Michigan's energy law and materially improve the reliability and resiliency of the electric grid.

It's the investments approved in this rate case and previous cases that directly support better service. That includes everything from critical capital investments across the grid to advance tree trimming on a 5-year cycle. Work that meaningfully reduces outages, restoration time and customer costs. The commission support reinforces that reliability and affordability can and should go hand in hand. That's good for our customers.

Our track record of consistent and constructive rate case outcomes is strong, and that is possible through a deliberate process, a constructive environment and focused work by the team. These strong outcomes aren't a one-off or by chance. They are the result of a very deliberate and disciplined regulatory strategy. It starts with Michigan's energy law in enabling legislation. From there, we build alignment, support and preapprovals through a coordinated set of filings, our integrated resource plan, renewable energy plan and 5-year electric distribution plan.

We also utilize proven regulatory mechanisms like the investment recovery mechanism that streamlined proceedings ensuring certainty of recovery and drive accountability. When you combine that framework with strong testimony and clear business cases, the result is exactly what you see here. Constructive outcomes in support needed -- that support needed customer investments while maintaining affordability.

Looking forward to our upcoming regulatory agenda. In April, we saw the MPSC staff position in our current gas rate case, recommending over 75% of our $240 million ask. Staff also supported nearly 95% of our gas infrastructure investments. These investments continue to ensure a safe and reliable natural gas system, while balancing affordability for our customers. Much like electric, we continue to receive constructive outcomes that benefit our customers. We've settled 4 of the last 5 cases and continue to see support for our filings. In our electric business, we plan to file our 20-year Integrated Resource Plan, or IRP, in June. Our IRP will include 1.5 gigawatts of new gas capacity to replace existing retiring capacity, ensuring we have the supply to meet our customer load well into the future.

We'll include 13 gigawatts of renewable and clean energy, much of which was already approved in our 20-year renewable energy plan. Our filing will also include a growth scenario. Highlighting the need for additional capacity to ensure we are prepared for the growing customer base in Michigan as we see data center and manufacturing interest in our service territory. A portion of these renewables and the additional gas capacity are in our current 5-year plan with more upside opportunity given additional storage and renewables to meet Michigan's energy law and customer load beyond the 5-year plan.

We've identified that for every 1 gigawatt of new large load, we could see capital opportunity of $2 billion to $5 billion. Again, those investments would be incremental to our current capital plan. I'm very proud of the team and the thoughtful work on these plans. The comprehensive analysis and modeling takes months and is done with a deep commitment to building a plan that is best for our customers and our state.

At CMS Energy, our customers are at the center of all we do, a promise to deliver safe, reliable and affordable energy. And while we are committed to the important and necessary investments in our electric and gas systems, we remain laser focused on customer affordability. Our track record is strong, customer savings driven through the CE Way and further optimized with digital automation, episodic cost savings, load growth and energy waste reduction as further examples. Our efforts here are meaningful and impactful. As a result, Michigan electric bills are the 14th lowest in the nation, well below the national average, and also below the Midwest average.

In our bill growth, you see on the left side of the slide, among the lowest in the country. On the right side of the slide, looking forward, customer bills, electric and gas, below the energy CPI, while investing over $24 billion over our 5-year plan period. I am pleased with our progress, but we're not done yet. We're sharply focused on continuing to bring down costs for our customers we're delivering for those most in need.

Additionally, affordability is supported by growth, and Michigan continues to make headlines and top rankings nationwide as we see new or expanding load materializing in the state and supporting 2% to 3% annual sales growth. This growth allows us to spread fixed costs over a larger customer base and improve affordability for all customers. We have significant interest in our service territory with contracts for roughly 100 megawatts of new load signed last year, and we've exceeded that in just Q1 of this year. Approximately 110 megawatts of signed contracts year-to-date.

This is all on top of the approximately 450 megawatts connected to last year. As I've shared in many investor meetings, Michigan has more engineers per capita than any other state. We are the second most diverse state in agriculture. We have many aerospace and defense businesses in a rich automotive heritage. Our service territory is growing with manufacturing and industrial processing, bringing with large investments, jobs, supply chains and commercial and residential growth.

One of our larger recently signed contracts is with Michigan Potash & Salt Company, a strategic and critical mineral manufacturer in the only established and sustainable potash reserve in the U.S. expanding in our service territory, bringing with it roughly 130 jobs and over $1.3 billion of investment in Michigan. I love seeing growth like this and the value that brings to Michigan, our customers, communities and investors. There is also a diversity in this growth, which is important in the context of data centers which I'll cover on the next slide.

Moving on to our growth pipeline. You see that win here on Slide 8 with Michigan potash move through the funnel to a signed contract. There were also several other smaller customer expansions, not shown on the slide that make up roughly 110 megawatts year-to-date. In addition to strong manufacturing and industrial processing, Michigan continues to attract data center interest, and I'm pleased with the progress we have made over the last quarter.

Our announced data center continues to close in on final contract after reaching commercial terms on the extraordinary facilities agreement and now commercial terms on the rate contract. And as I mentioned in our year-end call, another data center has continued to progress in advanced contract negotiations. I'm also pleased with the community engagement and the forward progress experience at a local zoning level. Keep in mind, these data centers are not yet reflected in our 5-year customer investment plan and associated additional investments will not be subsidized by existing customers. In fact, each gigawatt of new data center load that materializes in our service territory will reduce our average customer rate by 2% annually over a 5-year period.

Now on to the financials for the quarter. In the first quarter, we reported adjusted earnings per share of $1.13. We remain confident in this year's guidance and long-term outlook and are reaffirming all our financial objectives. Our full year guidance remains at $3.83 to $3.90 per share, with continued confidence toward the high end. Longer term, we continue to guide toward the high end of our adjusted EPS growth range of 6% to 8%.

With that, I'll hand the call over to Rejji.

Thank you, Garrick, and good morning, everyone. On Slide 10, you'll see our standard waterfall chart, which illustrates the key drivers impacting our financial performance for the quarter and our year-to-go expectations. For clarification purposes, all of the variance analysis herein are in comparison to 2025, both on the first quarter and a 9 months to go basis.

In summary, for the first quarter of 2026, we delivered adjusted net income of $346 million or $1.13 per share, which compares favorably to the comparable period in 2025, largely due to NorthStar outperforming a relatively soft comp in the first quarter of last year, coupled with higher rate relief net of investments at the utility. These sources of positive variance were partially offset by a significant ice storm in our electric service territory in March.

From a top line perspective, at the utility, heating degree days in Michigan ended up at relatively normal volumes for the quarter as a relatively warm March and February offset in a typically cold January. The impact of normal weather drove $0.01 per share favorable variance versus the first quarter of 2025. Rate relief, net of investment-related expenses resulted in $0.11 per share of positive variance due to the residual benefits of last year's constructive electric and gas rate orders as well as earnings associated with ongoing renewable projects at the utility.

Moving on to cost trends. As noted, we experienced an uptick in storm activity during the quarter, including a sizable ice storm in March, which was bigger than last year's storm. As such, we saw $0.05 per share of negative variance for this cost category which includes some positive offsets associated with our electric supply business. In our catch-all category represented by the final bucket in the actual section of the chart, you'll note a positive variance of $0.04 per share, largely driven by the impact of achieving key milestones for ongoing renewable projects at NorthStar and the reversal of last year's outage at DIG. Partially offset by higher parent financing costs, namely a higher average share count.

Looking ahead, we plan for normal weather, as always, which equates to $0.23 per share of negative variance for the remaining 9 months of the year, driven by the absence of favorable temperatures experienced in 2025, primarily in our electric business. From a regulatory perspective, we're assuming $0.24 per share of positive variance, which is largely driven by the constructive electric rate order received from the commission in March, ongoing benefits of renewable projects at the utility and the assumption of a constructive outcome in our pending gas rate case.

On the cost side, we anticipate lower overall O&M expense equating to $0.04 per share of positive variance at the utility for the remainder of the year, largely driven by expected cost performance through the CE Way and other cost reduction initiatives underway.

Lastly, in the penultimate bar on the right-hand side, you'll see an estimated range of $0.06 to $0.13 per share of positive variance, which incorporates continued solid performance at NorthStar, partially offset by planned parent financing costs, including the effects of equity dilution.

Before moving on, I'll just note that our track record of delivering on our financial objectives over the last 2 decades, irrespective of the circumstances speaks for itself. That said, we'll always do the worrying and remain confident in our ability to deliver on our financial and operational objectives this year to the benefit of all stakeholders.

Slide 11 offers an update to our funding needs in 2026 of the utility and the parent. As a reminder, the convertible debt that was opportunistically issued last November address a good portion of our financing needs at the parent for the year, while offering significant financial flexibility on our remaining needs. From an equity needs perspective, given the trading performance of our stock during the first quarter versus our plan assumptions, we executed equity forward contracts totaling approximately $495 million significantly derisking our planned needs for the year.

As you can see in the table on the slide, we settled approximately $142 million of set equity contracts during the quarter. And as per our guidance, we'll share -- we'll plan to issue an aggregate amount of approximately $700 million over the course of the year. Finally, we'll look to complete the balance of our financing plan at the utility over the remainder of the year. And as always, we'll be opportunistic and look to capitalize on strong market conditions.

Moving on to credit quality. I'm pleased to report that both Moody's and Fitch reaffirmed our credit ratings in March as indicated at the bottom of the table on Slide 12. That said, it is worth noting that Moody's did move the utility to a negative outlook, largely due to the size of our 5-year capital investment plan relative to timing of cost recovery, particularly for large projects with protracted construction cycles. Needless to say, we are evaluating a variety of countermeasures to address Moody's concerns. As always, we'll continue to target solid investment-grade credit ratings and will manage our key credit metrics accordingly as we balance the needs of the business.

And with that, I'll hand it back to Garrick for his final remarks before the Q&A session.

Thanks, Rejji. At CMS Energy, we deliver 23 years now of consistent industry-leading performance regardless of circumstances year in and year out. You can count on CMS Energy to deliver for all of its stakeholders.

With that, Rob, please open the lines for Q&A.

[Operator Instructions] And our first question comes from the line of Richard Sutherland from Truist.

There's been a lot of attention on data centers, and I guess there's a lot to dig into here, but you talked about confidence in what you're seeing. I'm curious about the opportunities as it stands now relative to last quarter. And in particular, if you see both of these data centers come through, what is the potential to defer delay your electric rate case filing cadence on the back of that? Anything you can speak to there versus load ramp would be helpful.

I am very pleased with the progress. And let me even take a step back. If I start with the pipeline. As we've shared historically, it's roughly about 9 gigawatts. There are customers that are falling out of the pipeline and going through like we saw with Michigan Potash and having successful contracts. There's new companies coming in. And so the pipeline is strong and actually much larger than 9 gigawatts.

Those are the ones that are more qualified, you might say, in the process. And so as I shared in the Q4 call, and I just continue to be pleased with the progress of the data centers, the hyperscalers that are in our service territory and looking at different locations, multiple locations to locate those data centers. And as I shared, like we've made great progress with the contractual piece with those companies. pleased with that, pleased with the work the team is doing, and we're working through the zoning process here in Michigan.

And again, I've seen those data center companies, they're out, they're meeting with the local planning commissions. They're meeting with the communities. We're standing side-by-side with them to be able to address those issues. So a lot of positive progress.

In the context of -- I hear you're referring to this kind of stay out here and referring to the DTE approach to this. I haven't seen their filing yet. So I can't speak to the specifics of that and what they proposed, just what's been in the media. I will say this, we -- in November, we put a tariff in place, a really great tariff. It's been able to set the standard, really one of the best in the country.

It's been able to -- these hyperscalers have quickly adapted to it, so they know what the hurdle rate looks like or the hurdle mark looks like. I'm very pleased with it. It speaks to how we protect existing customers, how we protect the business. It really provides a path for benefits to flow back to customers, which is, I think, critically important. But it's also important to put this in the context, we are investing the significant capital runway like there's a lot of opportunities to invest in this business. We've talked about. Those weren't just excel exercises.

Those is like real stuff that's underway. We're investing heavily in the electric grid to improve reliability and resiliency, so it's better for our customers because I hate when a customer is without power and the cost and the impact of that. And I appreciate the commissioner's comments on how affordability and reliability can go hand in hand. They're not opposed. We have this IRP, 20-year IRP for the supply needs of the state. We have to meet the Michigan's energy law and the renewables, but we also have to think about those times when the sun is not shining or the wind is not blowing. Batteries make up a part of that, but we've got to introduce natural gas to replace some of our existing peaking.

That's an important piece of investment right now. And then there's importance of the safety of the gas system. And so I can go on for hours about this, and I know you don't want me to do that, but like that's why we're in on annual rate cases. But the biggest thing and the most important thing is affordability for our customers right now. And we've talked about that through the CE way. We've talked about that through episodic cost savings. But a big piece of this is growth, and that's how I tie it back to data centers.

And so whether that's internal focus or what we're doing externally, know this that we're focused on the root cause. We've got these important investments. We believe we can go in for annual rate cases and keep them close to the rate of inflation for our customers. But one thing that's important about annual rate cases is we pass along savings to our customers every single time.

And that's what we're focused on. The stats are, we're the 14th lowest electric bill out there. That's still not good enough because affordability is defined by our customers, and there are some customers that are out there that are struggling, and we need to help them. And that's what we're focused on, affordability for our customers. Thanks for your question. Long answer, but there's a lot there.

Certainly a lot there, and I appreciate the comprehensive response. I also wanted to switch gears. There have been some media reports out there around North Star. Maybe just to zoom out broadly across your portfolio. If you were to consider any transactions around the portfolio, do you have any sort of guiding lights around how you think about the qualitative versus quantitative aspects of a deal and in particular, accretion dilution, the prospects of, say, near-term dilution versus breakeven over the long term? Anything there would be helpful.

Well, just to be clear about this, we have a long-standing company policy. We don't comment on M&A period. What I've shared about NorthStar in the past, just consistent with other investor meetings or earnings calls, look at the thermal assets, right, Dearborn Industrial Generation, energy and capacity prices are increasing. We strike bilateral contracts. We layer them over time. They've been better than planned. And we've shown that in some of the slides before on some of that opportunity.

In terms of the renewables, we've used this baseball analogy. We hit singles and doubles. We're not aiming for home runs. And so these are solid projects. We do one or two of them a year, maybe in a busy year, we might do three. Utility-like returns are better with a contracted offtaker, long-term contracts. We've safe harbor the assets out in the '28, '29 time frame. We look to recycle capital. That whole NorthStar mix is about 5% of our earnings mix. The rest of its utility.

Your next question comes from the line of Shar Pourreza from Wells Fargo.

This is Marcella on for Shar. Maybe building on the data center topic, what kind of specific color can you give us on what's going on with Game Township and the Microsoft data center? Anything on like the status there and how we should be thinking about public pushback?

My mom used to say good things come to those that wait. And my mom was right. And I've talked about the contract in my prepared remarks, talked about the contract pieces, and I shared with you, I'm pleased with the zoning piece. I think it's important for the investment community to understand Michigan's like units of government, local units of government. There are 2,800 forms of local units of government in Michigan. About 96% of the state is covered by some kind of township.

And in those townships, and we know this because we work with them all the time, there are planning commissions or planning boards and they work through zoning, but they also work and looking at the site layout and other plans. And then there's a township board. And so there are several steps in that approval process. And I've been pleased because not only the data centers have been meeting with the township officials and the planning officials, we've been meeting with them, and we've seen good progress. But also know that they have to -- they're doing good due diligence, right?

They're elected officials, and they're doing the right things, and they have to dig into what's the impact from a property tax perspective. How does this meet the zoning requirements? What does this mean for agriculture, industrial land? What does it mean for water? So they're going through and making sure they're doing good due diligence. And so I appreciate the process I'm familiar with the process because we go through it when we're doing big projects, whether it's a gas pipeline or whether it's a solar project. And so again, I feel good about where we're headed. My mom was right, good things come to those that wait, and we're working through that process and pleased with where it's headed.

That's super helpful. And then maybe following up on Richard's question on case cadence. Are there any specific triggers that you'd point to or working towards that would increase the time between cases?

We've -- in terms of settlement, we stayed out of cases before. That's not abnormal for us unusual for us. I certainly would consider that as something in the future. But I'd go back to my comments, like large capital runway and the ability to pass a forward savings back to our customers. At the heart of it, this isn't about skipping cases and pushing a bow wave. It's about bringing affordability to our customers. That's where we're focused on.

Your next question comes from the line of James Ward from Jefferies.

Garrick, given the Games Township tabling on April 15, can you reaffirm the as early as 2028 online date for your final stages prospect? Or has that time line maybe softened a bit?

The project time lines are the same. 2028 is the time line within the contracts. The ramp up early electrons, you might say, and then they ramp up over 2029, '30, those time frames are the same.

Terrific. Second, just without naming the customer, is the prospect you've reached commercial agreement with the same one tied to the gains process or a different site in your territory?

There are two -- at least two hyperscalers that we are in advanced negotiation with, and I've shared that one we're finalizing the contract with, and there are many more in the pipeline. And so I really cannot disclose that at this time.

All good. And last question for me. Just off of feedback we've gotten last week, given some of the news out there and keeping in mind your comments earlier about company policy and so on, I ask something broader and higher level. With where IPP multiples are trading and the DIG recontracting out past -- like out to past 2030, has anything shifted in how you're thinking about NorthStar strategically? Or is DIG still something that you see being a part of CMS well into the next decade?

I shared that in my response to Rich, consistent with how we've talked about in previous investor meetings and earnings call, I walked through the thermal units. There's really no change in how I talked about that and same with the renewables.

Your next question comes from the line of Nick Campanella from Barclays.

So look, there's two opportunities. We don't know who the commercial agreement specifically with. I understand from the prepared and responding to Rich's question, you're still working through the permit there. But I'm just trying to understand like more granularity on what is needed for the permit and then just your expectation to have that done by summer? Or is this going to go through the entire year-end to the end of this year?

So it varies depending on the location. And I'm not trying to dodge your question. It's just that there are multiple townships. And these hyperscalers are pursuing investment in multiple properties in multiple areas of the state. So I can't say it's like a blanket here's where we're at in the process.

But again, there's steps. There's -- the first step is with the planning commission and they see does it meet the zoning requirements of the state, and there have to be a change if there has to be a change. And then they've got to do a site layout and that has to be approved by the Planning Board or Planning Commission and eventually it goes to the township. And so it varies in those places.

And I would say the hyperscalers are looking at multiple locations and are in multiple places in that process and have advanced, frankly, within that process. I would also say they're active in the communities. They're meeting with local officials, they're meeting with communities and doing all the right things, which gives me a lot of optimism about the progress that's underway.

But it would be -- like we've been in this process like we know this process. And when they pause and they get more -- do more due diligence, when they listen to the constituents, that goes back and forth. It wouldn't be appropriate for me to jump ahead of that process and try to predict the date. They needed to work, let those elected officials do their important work. And you'll be one of the first ones to know, Nick, when we make the announcements.

I appreciate that. And then just maybe because you've executed on bulk of 2026 equity needs, I know that there's still a little bit outstanding, but how are you kind of thinking about being proactive to derisk '27 and '28? And I just know the shaking of the CapEx, there might be, to my understanding, a little bit more front-end equity in this 5-year plan, if you could talk to that.

Yes. Nick, it's Rejji. I appreciate the question. Yes. So just to get everyone re-grounded on the 5-year equity need that we walked through on the fourth quarter call. So we talked about in our prepared remarks, the fact that we're planning for $700 million this year, that is still the plan. And then on average, thereafter for the next 4 years, it will be $750 million, but it's far from linear. That's just a simple average.

And as you rightly noted, it is a bit more front-end loaded. So we do expect the majority of the equity needs to be issued in the first 3 years of this plan, really commensurate with the capital plan. And so we are a big proponents of the equity forward product, which we've used to good effect in this first quarter, as I noted, we've already price just under $0.5 billion to take that risk off the table. We did settle a small portion in the first quarter. And that will be the bias going forward.

And so as I've said on many occasions, I do believe we are undervalued quite a bit. And -- but that said, there is valuation and then there's what's in our plan. And so we did see the stock trading at levels that were south of our plan over the course of the quarter. And so we were -- sorry, we did see the stock trading at levels that were -- sorry, above our plan or above the assumptions in our plan over the course of the quarter, and so we were opportunistic there.

And so if we do see the stock continue to trade at levels that are better, not just in our plan assumptions this year, but also in subsequent years, we may look to execute on equity forwards for -- to derisk '27 and beyond. But first and foremost, we're going to prioritize our needs in '26, excuse me, address those, and then we'll see where we're at by the second half of the year. Is that helpful?

Yes, that's helpful. I appreciate that color. And then if I could squeeze one more in. I'm just reflecting a little bit on past efforts in this management team on portfolio rotation. I know that when you did the EnerBank sale, you were able to kind of overcome the impact of the near-term numbers through the last IRP process and ultimately still do the high end of that 6% to 8% forecast. Strategically, is there appetite to do something like that again? Or do you guys continue to have just very clear line of sight to the growth rate at the high end, '26, '27 and '28?

Thanks, Nick. No comments on M&A, and we're providing guidance on the call.

Your next question comes from the line of Jeremy Tonet from JPMorgan.

This is actually [ Aidan Kelly ] on Jeremy. I just want to hone in on the political backdrop in the state. How are you thinking about affordability going into the elections? And I guess, what is the level of understanding from the candidates over the possibility that utilities could lower rates with new data center load? And just any kind of thoughts there would be great.

There's an important slide in our deck, and it's one of my favorite. It's just this consistent growth over 23 years, multiple different CEOs, different governors, Republicans, Democrats, different commissions, different legislators or policymakers and we've delivered. And the sweet spot of that or the secret sauce to that is really been an honest broker and focused on what's best for Michigan and what's best for our customers and listening to policymakers and politicians to say, what do they really want to get done and how we can be a solution provider.

I was with a governor candidate last night, and that's what we're talking about, how can we be a solution provider? What's important to you? How do we work together? That's the honest broker piece. And you stay in that -- and it's hard to stay in that space, right? You want to think about the business or the financials, but staying grounded in our customers is where you get that honest broker, where they get the trust and respect to have the conversations. So there's a lot going on.

It's an election year. We're a purple state. That's important to know. It's a purple state. And so we're used to a lot of back and forth, particularly as people try to jockey for votes. But you know what, I sleep well at night. And it's not because I'm arrogant or because I know how this is going to play out. It's because we have a good team.

And if you go back to being an honest broker and being focused on the customers, you build trust and you can find solutions in that. And like I shared earlier in my comments and prepared remarks, when you're focused on affordability, even though you're at the 14th lowest state, you can present the data to the people running for governor or the policymakers, and that's great.

But the reality, affordability is defined by the end user. My affordability is different than Rejji's. It's different than one of our low to moderate income customers. And so we got to keep working on that, right? And some of that's internal. You know the tools we use there and some of it's external. And I talked about in our last call, I walk around with 2 pages of ideas for policymakers. Some of them are adopted.

Some of them might actually be bills that are being tossed around, right? But we meet with all these governors, governor candidates, [ senatorial ] candidates. So we know them and we provided a slide in the deck on that. But we don't just approach it from an energy perspective, like we're a business leader.

We talk about what's going on in the economy. And I will tell you, every one of these candidates is about how to grow Michigan. We talk about data centers. The three leading candidates are supportive of data centers in a thoughtful way, right, in a comprehensive way. And we talked about how that can shape affordability for customers. They're concerned about education.

We have -- help have those conversations because we're concerned about education. And I go on and on here. We get to energy, right? And when I look at their platforms, every one of the platforms for the governor, we can work with all three of the leading candidates. Again, be an honest broker, focus on the customer, listen to what they're trying to get done. Their approach looks different. Some want to focus on low to moderate income, some want to focus on the business environment. We can do both, right, and really provide good solutions for our customers to help from an affordability perspective.

Yes. All I would add, [ Aidan ], to Garrick's very good remarks. First and foremost, I aspire to have his point of view on affordability at some point, just given the example he offered up when it comes to just personal finances. But that's thing one.

Thing two, just to reemphasize and remind you all of the flywheel and the algorithm when it comes to our financial planning process. As we've talked about before, and I think Garrick alluded to this very well, is that affordability remains one of the key governors in our financial planning process. And so for 20-plus years now, really almost 25 years, we do not take a plan, financial plan that is to our board, let alone to the street unless it passes the lab test from an affordability perspective, unless it passes our hurdle rates from a balance sheet perspective and then also can we get the work done.

And when it comes to affordability, the dimensions are quite broad. It's first, we certainly look at the compound annual growth of our rates over the planning period. But then we also benchmark it versus the region versus the country. And then we also take into account both rates and bills. So it's a really broad lens through which we look at affordability, again, to make sure that the plan not just delivers for the investors, but also for customers and all stakeholders.

And so I do think it's really important to recognize that while we've grown the rate base historically high single digits, now low double-digit to our forecast, we are still self-funding 2/3 to 3 quarters of that rate growth with, as Garrick noted, CE Way episodic cost reductions, energy waste reduction over time we hope it will be sales growth as well as we continue to execute on this economic development pipeline. And that's how -- even though you're growing the rate base high single digit, low double digit, you're keeping the bills and rates in at low single-digit levels.

And by doing that year in and year out and having the discipline of incorporating that into your planning process, that's how you perpetuate this success irrespective of who's running the state. So just wanted to just add an additional financial length to that. And it's not luck, it's not an accident. It's really hard work, and that's why you see the data points we have on Slide 6.

Yes. Makes sense. I appreciate the insight there. And I just have one separate question on CapEx upside. Could you just remind us what the underlying assumptions are in the like 1 gigawatt equals $2 billion to $5 billion of CapEx, maybe just anything that drives the low and high end of these ranges?

Yes, [ Aidan ], Happy to do that. So for the low end of that sensitivity, which is around $2 billion, what you have in there is an assumption of storage resources as well as our current estimates for what a simple-cycle combustion turbine would cost. There's also a little bit of infrastructure costs, so substation work, the wires. So all that's incorporated into the loan to $2 billion.

As you get to the higher end of that range, we'll see a couple of things. So first, likely a change in resource. And so going from simple cycle to, again, if the cup run it over and we start to see a highly successful conversion of that economic development backlog, we would potentially look at combined cycle gas. And so that's what starts to get you towards that upper range. It probably warrants additional infrastructure in terms of substation work and wires.

Again, this is if you start to see additional economic development opportunities come to fruition. And then it's also important to note that we do have to comply with the clean energy law requirements, which are predicated on sales. And so that's what all adds to the high end of that equation. So that's really what drives that range.

Your next question is from the line of Michael Sullivan from Wolfe Research.

I wanted to just ask on this DC customer pipeline that you've got. You've talked to kind of the incremental CapEx upside that's not in the plan. But as we just think about your earnings trajectory? Is this something that can contribute in the next 5 years if you're able to bring these over the finish line?

Yes, Michael, I appreciate the question. I would say it really is a function of the load ramp. I do believe that the reality is that most of the opportunities in our backlog that we're looking at today, particularly those that are sort of in that advanced to final stages.

The load ramps really start to materialize as Garrick noted for sort of most likely opportunity in the '28 time frame and some of the more are some that are slightly lower in probability of conversion or kind of '29, '30 and the material ramp is really in the next gate. And so the supply needs will increase commensurately with that load ramp. And so while we certainly would see additional capital investment opportunities come likely in the next 5-year plan that we roll out, I think it's a little early to suggest whether or not it would put upward growth in our EPS growth.

That said, job one is to convert these opportunities, and so we're focused on that right now. But if we start to see some success in converting on this backlog, it should drive or will drive additional capital investment opportunities and again, given the load ramp, we'll see what happens over the next 5 to 10 years. But I think it's premature to say whether it would immediately increase the EPS growth at this point.

Totally fair. And then looking ahead to the IRP filing that you have coming up here in a couple of weeks, I think you mentioned something about a growth scenario, highlighting the need for additional capacity. And maybe tying that into kind of all these beating around the bush questions around NorthStar. Is there any world where can be used as a solution? I know it's been tried in the past, but any sense of a change in appetite there to use that asset to meet additional demand growth?

Well, you carried it Mike, going back to our last integrated resource plan, we attempted to bring that into the utility. And it was just from an affiliate transaction perspective, just too big of a hurdle to go through. And so we don't see proposing that in this next integrated resource plan to bring that into the utility. If I would step back and look broader at this IRP, as I shared, I'm pleased with the team's work there, 5 gigawatts of net natural gas to replace existing, and then also, when you think about the reliability or resource adequacy of the grid, got the renewables, the batteries are times and periods of the day and of the year, where you need natural gas to peak.

And Karn 3 and 4, which is some old oil-fired and gas-fired peaking units, this really works to replace those almost megawatt for megawatt from a capacity perspective. And then you know the renewable story, much of it's approved in the IRP. And then remember, this REP, I should say. And then as part of this IRP, we're looking out 20-plus years. So it will give some color and context too, for other investments that are beyond the 5-year capital plan out in the 10-year window as well.

Remember, in this IRP, we have to do multiple scenarios. One of those is a growth scenario. Just given the interest, both manufacturing, industrial processing, data centers. That's an important scenario to develop in this process. which would mean more batteries, more renewables and potentially other assets. Those line up well with the contracts that we're working through. And so those should come together through that IRP process as we move forward.

Your next question comes from the line of Travis Miller from Morningstar.

You answered most of my questions, but just one, overall one high level. Legislation state, legislation update. What are your thoughts there? Does anything get done with the election year? Any impact on your cadence of regulatory filings, rate case or other?

Most of the focus here, particularly after coming off of the spring break and the recess here is going to be focused on the state budget. And so that's been bit contentious just given the nature of our purple state. It was contentious last year. Fortunately, it will be probably that way this year as well and that drug out for most of the year.

So I don't know if we're going to see a whole lot of policy movement or policy change -- but if we do, know that we're engaged with it, goes back to my earlier comment, team is fully engaged, focused on finding the right solution for customers. In some cases, there's some great ideas out there in bills that can help from a customer affordability perspective. And so we'd like to see some of those progress with the right mechanisms in place, but we'll see. We'll see what there's enough time and space left in this next session as well as the following session in the fall.

Okay. And no change in your rate case cadence in terms of electric filing in the spring and gas filing in the fall, typically?

No. We're going to file -- we'll file our electric rate case in June. And so that will give you a highlight for that. And then the gas case, we had staff position in April. The PFD will come out in August time frame, and then it's September -- yes, September, October-ish for the final order. And then it will be -- that's roughly when you'll see the gas order if we go to full distance.

Your next question comes from the line of Andrew Weisel from Scotiabank.

First, a question on the demand side. If I heard you right, you signed 110 megawatts of new load this year versus 100 megawatts signed last year and 450 megawatts connected last year. My question is of the 110 new, when do you expect that to connect and ramp up? And do you think of that as being supportive of the 2% to 3%? Or maybe does that take you to the high end or over it?

It varies. There are different customers in there that make that up. Some of them are expansions that are underway. Some will play out over these 5 years. In terms of Michigan Potash, we got permission to talk about the jobs and the investment. But we're not talking about the time line yet on that. And so that will occur over time, and we're able to share more of those specific details.

But what we've communicated in our 5-year plan is 2% to 3% low growth. And we just -- we keep giving these concrete examples and how that's materializing and so it gives us a lot of confidence in delivering that for our shareholders and for our customers.

Okay. Sounds like better confidence, better visibility sort of thing.

Great.

Is that right?

It keeps us on plan Andrew, for the avoidance of doubt.

Great. Next question is you mentioned Moody's has the utility on negative outlook. I think in the prepared, you used the word that you're considering countermeasures. Can you maybe elaborate what are some options you might be considering if you're willing to get into that? And how much of a need do you feel to be proactive?

Andrew, I appreciate the question. This is Rejji. And so yes, this is something that's a little unique because it's at the OpCo. If this were a parent company, outlook. There are a variety of tools in your toolkit where we could revisit financing strategy. We could look at opportunities on the working capital side.

And again, you just have more arrows in your quiver because it's at the OpCo and you're really constrained in terms of your rate making capital structure. We're going to have to evaluate a variety of different solutions and likely have to educate the commission and other stakeholders on what we would have to do over the next 12 to 18 months to avoid Moody's taking further action.

And so not prepared to elaborate at this moment on what those alternatives are. I think they're fairly intuitive when you think about the opportunity at the regulated utility, and it really has to do with the rate making capital structure. But as well as potentially cost of capital and things of that nature. But we're exploring a variety of qualitative and quantitative measures. And again, we'll look to have conversations over time with key stakeholders.

Okay. That makes sense. One last one, if I may, and I can tell, Garrick, I'm giving the sense you don't want to talk about it much. So I'll ask the NorthStar question in a different way. Without speculating or digging too deep, maybe just a little bit of pun intended, would you consider splitting the business into pieces? Or would you even be able to? Obviously, DIG has a nice growth outlook versus the renewables development business has maybe more finite growth given the tax credits being phased out after the next few years. Could you or would you split that business up?

Andrew, I love your persistence here. Way to go on that. Like we have to know this. Yes, absolutely. So no comment on M&A.

Your next question comes from the line of Sophie Karp from KeyBanc.

So most of my questions have been answered, but I wanted to ask you this. So you've highlighted increase in diversity within your development pipeline. And is it fair to think about this as maybe deemphasizing data centers in that pipeline a little bit here? How should we think about the role of data center customers in that mix? Does it suggest any change in attractiveness of your service territory maybe for hyperscalers? And any comment on that would be helpful.

Thanks, Sophie. No, it's not a deemphasis at all. I love Michigan. And what I'd like to see is that we're growing in a variety of different ways. Those stats that I gave in my prepared remarks, more engineers per capita. Literally, we have attracted businesses in Michigan just for that reason alone.

If you go back, rich automotive heritage in the World War II time frame, we became the arsenal democracy making planes and stuff and that defense industry is stuck, right? We had Saab. We announced this a year or 2 ago, and they're in the construction process right now, building defense and other means here. And so there's some onshoring components of it as well.

Second most state diverse state in agriculture. We've seen a lot more food processing. We're going to have more announcements on food processing coming up because they're just materializing in the state. And so there's a really diverse growth in the state, and I think that's important to acknowledge, right?

Data centers, we're in there. We're making great progress. As I shared, that's one part of our growth story, and I love the diversification of it. I think that's the unique peaks that we talk about that you don't hear others speak about as much, which gives me a lot of confidence in our future and the growth profile that we're seeing.

So all I would add to Garrick's comments is just the reason why, again, we do talk about the full portfolio versus just data centers, and we certainly acknowledge that data centers are the shiny object in this environment. But it is important to note that about 15% of that 9 gigawatt backlog is represented by non-data center opportunities. So when you do that math, that's over a gigawatt -- and so that's quite impactful.

And we've talked in the past about the positive spillover effects and externalities that non-data center opportunities bring. And so you get supply chain, you get sustainable job growth. And we've talked about activity once you get that residential or population growth. And those are higher-margin customer classes than industrial. And so certainly like and love all of our economic development opportunities, but we certainly also want to make it clear that when you get the non-data center opportunities, like large manufacturing companies and so on, you just get a lot of externalities.

And so we just want to make sure that, that's not lost on the investment community. Because again, we recognize the shiny object, but there's just a lot of good momentum in the state of Michigan and its diverse opportunities as well to Garrick's comments.

Your next question comes from the line of Anthony Crowdell from Mizuho.

Just quickly. I think the equity issue plan steps up from $500 million in '25 to $750 million, I think, on average, you said earlier, Rejji, over the '26 '30 time period. Does the incremental large load conversion above your base case reduce the need for equity? Or does the increase in large load conversion accelerate the capital intensity and therefore, the higher...

Anthony, I appreciate the question. Yes, I think the way I would think about it is, as we talked about, because our customer investment plan does not include these large load prospects, it would likely put upward pressure on our capital plan if we converted one or two of these larger opportunities. And so we talked about the sensitivity every gigawatt, gets you somewhere between $2 billion to $5 billion of incremental CapEx and that would put upward pressure on the CapEx and thus put upward pressure on the financing needs, equity, debt and all things in between.

So there will likely be additional equity investment opportunities. And I think the good news around that is it would be to fund growth and capital investment opportunities and rate base growth as a result of that. And so yes, there would be upward pressure on equity but not so much because of the conversion of the large customers, but because of the capital that goes with those large load customers. Does that help?

Perfect. That's all I had in Garrick, you're right. Mom is always right, yes.

And we have reached the end of our question-and-answer session. I will now turn the call back over to Mr. Garrick Rochow for closing remarks.

Thanks, Rob. I'd like to thank you for joining us today. I look forward to seeing you at the American Gas Association Financial Forum. Take care and stay safe.

This concludes today's conference. We thank everyone for your participation.

Good morning, everyone, and welcome to the CMS Energy 2025 Year-end Results. The earnings news release issued earlier today and the presentation used in this webcast are available on CMS Energy's website in the Investor Relations section. This call is being recorded. [Operator Instructions] Just as a reminder there will be a [indiscernible] of this conference call today, beginning at 12:00 p.m. Eastern Time running 3 February trials. This presentation is also being webcast and is available on CMS Energy's website in the Investor Relations section.

At this time, I would like to turn the call over to Mr. Jason Shore, Treasurer and Vice President of Investor Relations.

Thank you, Adam. Good morning, everyone, and thank you for joining us today. With me are Garrick Rochow, President and Chief Executive Officer; and Rejji Hayes, Executive Vice President and Chief Financial Officer.

This presentation contains forward-looking statements, which are subject to risks and uncertainties. Please refer to our SEC filings for more information regarding the risks and other factors that could cause our actual results to differ materially.

This presentation also includes non-GAAP measures. Reconciliations of these measures to the most directly comparable GAAP measures are included in the appendix and posted on our website. And now I'll turn the call over to Garrick.

Thank you, Jason, and good morning, everyone. Before we get into the financial results, I'm very proud of the team in 2025, as you see from the slide, and I want to highlight a few of the big wins the CMS Energy team delivered in 2025. First, I'm very pleased with our large load tariff, which was approved in November. Supply of energy for data centers is a national story in the rush to serve is on the mind of utility leaders, and I'm very proud of the tariff. The team worked so hard on this year because it's strategic and thoughtful. It protects our customers and supports growth in the state. This tariff provides certainty for our data centers as we bring new load onto the system and it ensures existing customers don't pay a single cent for the investments. And in some cases, they will see tangible benefits as this new load supports more affordable rates as we grow Michigan.

Next, we received approval for our 20-year renewable energy plan, another area the team worked hard on to put the right plan together that meets the requirements in our state's energy law. More importantly, this approval highlights the constructive regulatory environment in Michigan and provides visibility and certainty for our long-term investments in solar and wind, providing roughly $14 billion of customer investment opportunity over the next decade.

On this last one, we have a saying around here, victory loves preparation, and I want to talk about our gas business. It's been a cold start to the winter. And as always, we have been prepared to serve our customers. That doesn't happen by luck or accident, that is a deliberate commitment of our team who work every day to buy gas at the lowest price, store it in some of the largest storage fields in the nation and deliver it safely and reliably to our customers. We're reducing the price of gas when it is needed most by our customers. This is affordability in action. This reflects our ongoing work to replace this important storage and delivery infrastructure investing over $1 billion in the year, so we are there when our customers expect us.

At CMS Energy, we wake up every day committed to serve and deliver value for all our stakeholders, and 2025 marks our 23rd year of industry-leading performance.

As we prepare for these calls, we do a lot of work on slides, and we all have our favorites. And this next one is mine. It highlights the team's commitment to excellence and what we are able to achieve, and it shows results, proof points of the great regulatory construct in Michigan. I know you hear from Rejji and me all the time when we're on the road, our long history of constructive outcomes multiple years, multiple cases and then add the unique mechanisms like incentives on energy waste reduction and on PPAS, all of which is built into the energy law. It's an outstanding construct. And more importantly, we have been successful getting top-tier outcomes to support our long track record of performance and this year was no different. Two rate orders, electric and gas, both approved with constructive outcomes, delivering big wins for our customers, supporting critically important work to improve electric reliability and ensure gas safety across our system.

Our 20-year renewable energy plan approved, over $14 billion of customer investment opportunity to achieve the state's energy law by 2040, visibility and certainty for the recovery of our investments. We also delivered on the first ever storm deferral mechanism approved in June. Our large low tariff was approved in November, priming the pump for growth. Like I said, my favorite slide. These important outcomes provide visibility and certainty for necessary customer investments in our electric and gas systems, and this track record of constructive outcomes continues to highlight what the CMS Energy team is able to achieve and further reaffirms Michigan's top-tier regulatory environment.

When I look forward, I have confidence in our ongoing electric rate case. Given the reactions to our recent proposal for decision, I would remind the investment community that this is simply a step in the process and it is not reflective or consistent with our strong track record of performance. The MPSC staff, professionals have spent significant time with the testimony and merits of this case. Staff position is constructive, and I would argue much closer to the expected rate case outcome.

I would also note that the Commissioner's previous public comments from the bench support the need for an improved electric grid in constructive ROEs. This case is built on the fundamentals of our reliability road map, the MPSC Commission Liberty distribution audit and the necessary customer investments to support electrical reliability while maintaining affordability. I expect a constructive outcome for our customers and investors. I also expect the ROE to be 9.9% or better.

In our recently filed gas rate case, I'm confident in the investments to ensure the gas system is safe, reliable and clean, and the value to customers of our proposed full gas decoupling. As I shared a moment ago, our gas price is on the decline, and our residential natural gas rate is 28% below the national average, striking the right balance between investment in the system and affordability for our customers.

Now on to the financials. For 2025, we exceeded our adjusted earnings per share guidance and delivered $3.61 per share. This is up over 8% from 2024's actual results and delivers that compounding of earnings you have come to expect from CMS Energy. Throughout 2025, we continue to see strong performance at the utility, largely driven by constructive regulatory outcomes and robust performance at North Star driving full year results. This performance allowed us the opportunity to exceed or beat guidance at year-end, deliver better service for our customers and derisk the business for the coming year.

For 2026, we are raising our annual guidance by $0.03 to $3.83 to $3.90, which represents 6% to 8% growth off of 2025 actual results, and we continue to guide toward the high end. Our practice of rebasing higher off of actuals is a differentiator in this sector. and provides a higher quality of earnings for our investors, and we deliver year in and year out, easy, straightforward math, compounding growth and bringing greater value, how we've done it for years.

We are also reaffirming our long-term guidance range of 6% to 8% toward the high end. And as part of our total shareholder return, we'll continue to grow the dividend as we have for over 20 years, targeting a dividend payout ratio of approximately 55% over time.

Finally, we remain confident in our ability to manage the business and execute year in and year out regardless of circumstances, 23 years now, consistent industry-leading performance.

On Slide 6, we've highlighted our 5-year $24 billion utility customer investment plan, up $4 billion from our prior plan. These investments are necessary to deliver better customer service through improved reliability, both in distribution and supply. I want to take a moment to connect the dots on why I'm excited and confident in our ability to execute on this plan. First, we've increased our electric generation investment by approximately $2.5 billion over the previous plan. Most of this customer investment is already approved in the renewable energy plan with the visibility and certainty I mentioned earlier.

Another customer investment that I communicated on previous calls is the addition of natural gas generation in battery storage. Our integrated resource plan that we'll file in mid-2026, will detail additional capacity needed to replace retired plants and support existing and future growth. This customer investment opportunity is not contingent on new data centers, but growth already or soon to be connected to our system. And now we are well on our way in planning and preparation to deliver this capacity in this 5-year window.

Second, we continue to roll more of our electric reliability road map into our 5-year plan to strengthen our electric distribution system, which has increased by approximately $1.2 billion over the previous plan. This work and these investments are well aligned with the Michigan Public Service Commission and the results of the Liberty distribution audit. We've also seen constructive support of our investment recovery mechanism in the rate case process.

Finally, our gas investments also increased in this plan in the amount of approximately $400 million. This aligns with our 10-year natural gas delivery plan as a result of greater demand across the gas transmission system for power generation and industrial growth.

So when I step back and objectively look at our 5-year customer investment plan, there is visibility and certainty around the investments. We have an efficient workforce to get the work done. The work provides significant value to our customers, and I have confidence we can do it affordably. This plan supports 10.5% rate base growth through 2030.

In addition to our robust customer investment plan, we have meaningful growth drivers outside traditional rate base, which are unique to Michigan and CMS Energy and are sometimes overlooked. The financial compensation mechanism, which allows us to earn on PPAs grows over the 5-year period, offering nearly $50 million of incentives by the end of the decade. And there's approximately $65 million per year of incentives through our energy efficiency programs, enhanced by the 2023 energy law. We also expect incremental earnings from our nonutility business, North Star Clean Energy, as we continue to see attractive pricing from capacity and energy sold at Dearborn Industrial Generation, or DIG.

Now we make all these investments with a strong focus on customer affordability. We have a proven track record of driving customer savings through the CE Way and digital automation, episodic cost saving opportunities, low growth energy waste reduction. This creates capital headroom, which maintains affordability as we make important and needed investments in our system. To offer a few examples, in 2025, we had another great year leveraging the CE Way to deliver work more efficiently over $100 million in savings. In 2025, our energy waste reduction program will save our customers approximately $1.2 billion, reducing our customers' bills because when you use less, you pay less. Our efforts here are making an impact. Today, our customers' utility bills remain roughly 3% of their total expenses or what is often referred to as share of wallet. This is down 150 basis points from a decade ago, while we've invested significantly in our system to the tune of roughly $24 billion.

I'm also pleased to share that our recent electric bill increases are among the lowest in the country. We are committed to keeping our residential bills below the national average, Midwest average to and plan to be over the 5-year plan period. This is an important commitment. Every penny we spend on our infrastructure investments is done with customer affordability at the center.

As I've said before, Michigan is growing, and I continue to be positive and confident about the progress of the data center we announced on the Q2 call. The large low tariff was an important milestone to provide clarity for the data centers and to protect our existing customers. I'm pleased to share that there has been great progress with the data centers that are considering locating in our service area.

Regarding the data center reference on the Q2 call, and depicted on the slide, we've reached commercial terms on the extraordinary facilities agreement, which is similar to an ESA or electric service agreement. We're also at near final terms in our rate agreement. Our agreements have a path to serve their peak demand, and we know both the timing and incremental supply resources that are needed to serve this load. We also know the expected ramp time line. That time line would have their data center online as early as 2028. Keep in mind, the data center is not yet reflected in our 5-year customer investment plan.

In addition, we are in advanced talks with the second data center that has been public about their expansion in Michigan and specifically in our service area. While we can't give more details at this point, I can say we are working with them on their needs. We are looking forward to serving this prospective customer.

Our pipeline for growth is exciting and robust in Michigan and in our service area. We are well equipped and prepared to serve data center and manufacturing customers. On that high note, let me hand the call over to Rejji to offer additional details.

Thank you, Garrick, and good morning, everyone. To elaborate on the strength of our financial performance in 2025, on Slide 9, you'll note that we met or exceeded all of our key financial objectives for the year, most notably our adjusted earnings per share. To avoid being repetitive, I'll just note that we successfully invested $3.8 billion, largely in line with our original guidance to make our electric and gas systems safer, more reliable and cleaner on behalf of our 3 million customers at the utility. We managed to do this while funding the business in a cost-efficient manner, largely through operating cash flow, well-priced bond and equity financings and tax credit transfers. This prudent funding strategy enabled us to maintain our solid investment-grade credit metrics and associated ratings as affirmed by each of the rating agencies over the course of the year, most recently by S&P for our parent company, CMS Energy in December.

Moving on to our 2026 EPS guidance on Slide 10, you'll note the rebasing of the range higher off of our 2025 adjusted EPS actuals as per our historical practice. More specifically, our 2026 adjusted EPS guidance range has increased by $0.03 per share on both ends of the range to $3.83 to $3.90 per share. Our increased 2026 EPS guidance implies 6% to 8% growth with continued confidence toward the high end of the range, as Garrick, which is effectively 7% to 8% given our historical performance.

As you can see in the segment details, our EPS will primarily be driven by the utility, providing $4.28 to $4.33 of adjusted earnings as we plan for normal weather, constructive regulatory outcomes and earn returns at or near authorized levels. At North Star, we're assuming an EPS contribution of $0.25 to $0.30, which incorporates normalized operations at DIG, benefiting from an increasingly favorable mix of capacity contracts and the completion of select renewable projects.

Lastly, our financing assumptions remain conservative at the parent segment with expected equity issuances of approximately $700 million to support the increased capital plan at the utility. Our guidance in the parent segment also includes a full year of interest expense from last year's successful convertible debt offering in the fourth quarter and assumes the absence of liability management transactions.

To elaborate on the glide path to achieve our 2026 adjusted EPS guidance range, you'll see the usual waterfall chart on Slide 11. For clarification purposes, all of the variance analysis herein are measured on a full year basis and are relative to 2025.

From left to right, we plan for normal weather, which, in this case, amounts to $0.22 per share of negative variance given the absence of favorable temperatures experienced in 2025, largely in our electric business. Additionally, we anticipate $0.37 per share of pickup attributable to rate relief driven by the residual benefits of last year's gas and electric rate cases and the expectation of constructive outcomes in our pending electric and gas rate cases.

Outside of the general rate cases, we also expect to see earnings contributions from our investments in renewable generation assets in accordance with our recently approved renewable energy plan. As always, our rate relief figures are stated net of investment-related costs, such as depreciation, property taxes and utility interest expense.

As we turn to the cost structure in 2026, you'll note $0.12 per share of positive variance due to the anticipation of continued productivity driven by the CE Way and more normalized storm activity in our service territory. It is also worth noting that our projected operating expenses reflect the benefits of operational pull aheads executed in 2025. And as always, we will adjust our cost assumptions in accordance with rate case outcomes given the financial flexibility inherent in the forward-looking test year.

Lastly, in the penultimate bar on the right-hand side, you'll note a modest variance, which largely consists of growth at North Star per my earlier comments. This bucket also includes the roll-off of 2025 liability management transactions and the usual conservative assumptions around parent financing costs and taxes, among other items. In aggregate, these assumptions equate to a variance of negative $0.05 to positive $0.02 per share. As always, we'll adapt to changing conditions throughout the year to capitalize on opportunities and mitigate risks to deliver on our operational and financial objectives to the benefit of customers and investors.

On Slide 12, we have a summary of our near and long-term financial objectives. As Garrick noted, from a dividend policy perspective, we're targeting a payout ratio of approximately 60% in 2026 and roughly 55% over the course of our 5-year plan. Given the elevated cost of capital environment and the breadth and depth of customer investment opportunities before us, we continue to believe that it is prudent to retain more earnings to fund growth.

From a balance sheet perspective, we continue to target solid investment-grade credit ratings, and we'll continue to manage our key credit metrics accordingly as we balance the needs of the business. As such, we intend to continue our at-the-market or ATM equity issuance program in the amount of approximately $700 million in 2026, as mentioned earlier.

Over the course of the 5-year plan, our aggregate equity needs will be consistent with our historical ratio of $0.40 of equity for every dollar of incremental CapEx, and equates to an average of approximately $750 million per year given the substantial increase in our 5-year customer investment plan. And while we do have some capacity remaining with our existing ATM program, you can expect us to file a new prospectus supplement to reflect our updated needs later this year.

Lastly, we also expect select large multiyear economic development projects to begin ramping up in 2026, yielding approximately 3% weather-normalized load growth for the year with run rate assumptions of 2% to 3% in the outer years of our plan.

Slide 13 offers more specificity on the funding needs in 2026 at the utility and the parent. At the utility, we're planning to issue a little over $1.7 billion in aggregate. And at the parent, you'll note that our debt financing needs were pulled ahead in November of 2025, which leaves the aforementioned equity issuance needs of roughly $700 million. Needless to say, we'll remain opportunistic throughout the year, and we'll continue to monitor the market for attractive issuance windows.

On Slide 14, we have refreshed our sensitivity analysis on key variables for your planning assumptions. As you'll note, with reasonable planning assumptions and our track record of risk mitigation, the probability of large variances from our plan is minimized. Our model has served and will continue to serve all stakeholders well. Our customers receive safe, reliable and clean energy at affordable prices, our diverse and battle-tested workforce remains committed to our purpose-driven organization and our investors benefit from consistent industry-leading financial performance.

And with that, I'll hand it back to Garrick for his final remarks before the Q&A session.

Thanks, Rejji. At CMS Energy, we deliver. 23 years now of consistent industry-leading performance regardless of changing circumstances, year in and year out. You can count on CMS Energy to deliver for all of its stakeholders. With that, Adam, please open the lines for Q&A.

[Operator Instructions] Our first question comes from Julien Dumoulin-Smith from Jefferies.

As always, appreciate your infectious energy you convey on these calls. If I can kick it off here as it pertains to the data center opportunity you guys alluded to here, obviously, you're in advanced tax as you characterize it here. Can you give us a little bit more of a sense as to where we stand on data centers in Michigan? Obviously, there's been a lot of discussion in the state, more broadly, maybe not necessarily specifically as to the second site here. But how are you thinking about that opportunity? And how would you set expectations on the time line?

Obviously, you can't give too many details, but at least from a financial update and frankly, in terms of a roll forward of your overall plan, you've put a lot of progress in here with the 10.5% rate base CAGR. Just want to see how you would marry up any kind of timing on a second data center here against your wider financial plan here, ultimately...

Yes, Julien. Look, I'm very pleased with the progress from a data center perspective. And you look at that entire funnel, and that funnel has actually grown. We've had, just in the last month, another 2 data centers join the group in there. again, they're kind of at the top of the funnel, so they haven't worked their way through. Even in broader economic development, there's 2 large manufacturing customers that are also in that funnel, too, that are relatively new in thing. And so like Michigan's economic development story looks very, very strong from my perspective. And then they're continuing to move through that funnel, and we've blown a couple of them out in my prepared remarks. And so like, again, referencing the one we announced in Q2 with a tentative agreement, that's continued to move forward. The first piece is getting that data center tariff in place. That really paves the way, right, for these. They know the terms, they know the conditions. And so getting the facilities -- extraordinary facilities agreement in place was a big win. And again, that's comparable to a service agreement or electric service agreement in other utilities.

And then this rate construct or rate contract is at near final. And that's necessary to go through the regulatory process of approving the contract, right? And so I feel good about that. That should be a short process because we've done all these pre-approvals, right? And so again, that's a good glide path. And we continue to work with these customers on finalizing zoning. And so everything is headed in the right direction here, which gives me a lot of confidence about our ability to secure, well, a couple of data centers potentially. But like certainly, what I'm focused is on one, it's where we're closest with the contract terms and conditions. Is that helpful, Julien?

Yes, absolutely. And then maybe secondly, I mean you guys just gave a big update on the plan here. I just love to nitpick a little bit around it in as much as it really puts a lot of latitude within the [indiscernible] here. So would love to think about or walk through a little bit what's in and what's out of the plan and how you would think about the pieces here? Because you got a 10.5% against the 6% to 8%, obviously, you guys are talking about a certain degree of dilution against that. But separately, you talked about a $50 million pretax FCM. You talked about some $65 million of energy incentives or energy efficiency incentives. You talk about North Star DIG recontracting, like if you take the rate base plus some of these other items, how do you feel about the 6% to 8%? And what's in and what's not encompassed in the formal plan today? I'm cognizant of much of the data center discussion we just had is not explicitly.

Yes. Just to confirm that the data center piece is not, and that would be incremental investments. And again, we know what that time line looks like and those resources and how to accommodate those to deliver for the customers. But Rejji will walk you through a little bit of the math here in the 6% to 8%.

Yes, Julien, we thought we'd get that question within the first 3 or so questions, so you did meet the over under on that, so well done. Yes. And so I think you've got the components right, where you've got 10.5% rate base CAGR over this 5-year window. And then if you add North Star opportunities as well as the FCM, both of which have grown versus the prior vintage, that adds about another point on top of that 10.5%. And then there's some other puts and takes that we can certainly spend some time on off-line. And so that gives you, I would say, a low double-digit CAGR with North Star, FCM plus rate base growth.

What bridges you down to the guide of 6% to 8% with the confidence toward the high end, which, as I said in my prepared remarks, this call, let's call it 7% to 8%, let's realistically call it, 7.5% to 8%, what bridges you down to that is just the funding cost because we are issuing more equity in this plan versus the prior vintage. We've quantified that as about 3.5% just given our market cap today and again, the quantum of equity. And so you're going from a low double-digit CAGR of growth netted down by that equity that again is around 3.5%.

The other driver of sort of downward pressure on that growth is just the fact that we've got about $1.7 billion of parent refinancings over the course of this 5-year plan. And it's important to remember that unlike the prior sort of 15 years or the first 15 years of this century, money is no longer free. And so unfortunately, we'll be refinancing those parent bonds at issuance levels higher than initially they were funded that. And so there's a little bit of a negative arbitrage. We are not alone in this. The entire sector will be impacted by that. But needless to say, it's important to remember that, at the parent company, those financing costs are nonrecoverable. And so it's a combination of the equity needs and just parent refinancings that will drive us back down to that 7.5% to 8%.

And the last thing I'll note is just, even if you do that math out, and you say, "Okay, well, there's a little bit of cushion that kind of gets me to about 8.5%. " remember, we compound off of actuals every year. As Garrick in his prepared remarks, we think that's a higher quality of earnings, and you do have to build in some contingency to be able to do that year in and year out like we've done for the past 23 years. And then of course, as we've talked about before, we do not have a full decoupling yet on gas or -- and certainly not on electric, and we have storm activity. And so you have to build in some cushion as well for weather risk. And so for all those reasons, we feel good about the guide today, and that's how you bridge from that high teens or -- sorry, not high teens, but low double-digit CAGR down to the 6% to 8% and really call it 7.5% to 8%. Is that helpful?

Let me -- maybe I'd just add some -- yes, I want to add a little more clarity even on to Rejji's good remarks. And reflect here on 2025, constructive regulatory outcomes, outperformance at North Star, that allowed us to reinvest back in the business. Rejji talked about from a pull-ahead perspective. better customer service. We're able to do that this year, additional tree trimming work on the gas system. We also derisked future years. And then there was upside that we were able to pass on to our investors. And then we have the confidence to, again, compound off that and add $0.03 to our guide. And so like this should speak to the strength of our plan and our confidence in the plan. And so again, don't underestimate this compounding piece state to the high end in this compounding of growth.

The next question comes from Nick Campanella from Barclays.

Thanks for the answer on the rate base to earnings walk. That was very helpful. Maybe just a large component of the plan is also just the authorized returns. And I hear the comments about expecting something closer to a [ 99 ], but just the PSD, I would say, is just quite concerning from seeing an [ 8% ] and change ROE significantly below the national average, not really representative of the cost of capital environment that you guys kind of spoke to and to prepare. So just maybe kind of talk a little bit about what the feedback from stakeholders have been since this has come out? And how you're kind of viewing the decision tree into March here and just overall confidence for a constructed outcome?

Look, I'm not concerned about the ALJ PFD at all, just to be super clear. This team, the CMS Energy team has delivered, and we've got a track record of performance. And credit goes to the team and a very constructive regulatory environment. And as I shared, just to be clear, we expect a constructive outcome, and I expect an ROE of 9.9% or better, not close to 9.9%, 9.9% or better in the context of this case. And let's just take that 8.2% , like it's an outlier. It's not well supported. It doesn't match the environment, like it's going to be discounted in this case. But I will point to this, take the revenue deficiency that the ALJ offer, $168 million, apply a prevailing ROE of 9.9%, it's like the number goes to [ 314 ], right? That's actually in the ballpark where staff is at. It's actually get a lot closer, and so that speaks to the merits of the case, like there's good justification for the capital investment. There's good justification for what we need to do in O&M and tree trimming and storm-restoration and the like, and then turn to staff position, right?

Like I said in my prepared remarks, professionals, amazing public servants who are dedicated to understanding this industry. And there's a lot of stuff that goes on outside of the cases. High REPs and reliable road maps. We're building the case like we're building outside the case for the next case. And then you go into the case. And this team, the CMS Energy team, does an amazing job and have improved our testimony and justification and business cases for these investments. And the revenue efficiency for staff is very constructive as well, right? It's [ 317 ], I guess an ask of [ 423 ].

And so like there is a clear path to a constructive outcome. In terms of ROEs, we've heard it from the bench, from the Chair that access has been driven out, and I believe, supported by testimony, again, clear testimony supports these ROEs that this commission sees the importance of attractive and tracking capital to Michigan, and that's important for all stakeholders, including our customers. So that gives me great confidence that we'll be able to achieve a successful outcome in this rate case as well as an ROE of 9.9% or better.

All right. Appreciate that. And then just on the IRP, can you maybe kind of talk about how the 1 to 2 gigawatts in final stages kind of impacts the capacity need? And just -- or maybe just level set without this, what is kind of the outlook for the capacity need out to the early 2030s?

And then a follow-on is just, when you would wrap in the 1 to 2 gigs, do you see it as truly incremental to the 10.5% CAGR that you outlined today, just given the large low tariff should protect customers from a rate standpoint and this should purely translate to additional rate base growth?

Just to be clear on this, the data centers are not in the plan. So any growth from the data centers that are in that funnel are not included in the customer investment plan. Just to be clear about that. And so when I think about this integrated resource plan, and I've shared this in some of the calls, we've got a renewable energy law, a clean energy law. And so -- and much of that has already been approved in the renewable energy plan. So you're going to see that within this IRP. But there's a gap in capacity. You can put all this clean energy in, but you need to fill the gaps when funds not shining and the wind is not blowing. You just have to do that and you're going to do that with batteries and you're going to do that with natural gas. That's going to have to be part of the mix.

And so then when we look forward, we also know this, right? We've got load growth in the state. Again, separate from those -- that funnel, 450 megawatts of connected load last year, that was on our slide last quarter, right? Those have already been connected. It's 3% load growth just next year alone, and we forecast 2% to 3% over the 5-year plan. And so we've got to be able to deliver on that, right? And then you look forward, and you've got some retirements. We've got [indiscernible] 3 and 4. That's oil-fired [indiscernible]. They're going to retire in 2031. And right? That's roughly a gigawatt of capacity. And so those capacity needs that we're foreshadowing here have to play out in this next IRP and are built into this $24 billion customer investment plan.

Yes, Nick, this is Rejji. I would add to Garrick's good comments is that, and I think we've shared this sensitivity in the past. But generally, every gigawatt of additional load we bring onto the system, we'll need anywhere from, call it, $2.5 billion to about ,$5 billion, $5-plus billion, and that is a combination of the distribution-related resources needed to interconnect the load opportunity as well as additional supply. And I think this point that Garrick has raised is critical our differentiation versus perhaps some of our peers. This CapEx backlog that we're laying out for you today, this 5-year plan, the $24 billion not predicated on us landing these large load opportunities. So that creates incremental CapEx. And to directly ask answer one of the parts of your question, the rate base CAGR would in fact go up if we landed one of these opportunities and had to build out more capacity to accommodate its needs. So obviously, a lot of opportunity on the outside looking in and look forward to giving you updates later in the year.

The next question comes from Shar Pourreza from Wells Fargo.

This is Marcelo Petrin on for Shar. So you highlight build growth compared to the national average and to share of wallet as well as potential savings with the 1 gigawatt data center addition, and we've seen rates be a really big topic in codetorial election, so ester Nike Sherlan, New Jersey and Lisa week with Josh Sekiro in Pennsylvania. How are you thinking about affordability going into the election year initiative?

Marcella, it is a great question. And the good thing is this isn't our first rodeo. We've been doing the affordability and the cost savings for a long, long time. But this issue, as you pointed out, is not a Michigan issue, it's a broader national issue. And frankly, when you got a K-shaped economy, like this President is going to have some challenges in this midterm election. And so when you look at across the nation, and particularly look at energy costs, it's most pronounced in PJM. And reminder, we are not PJM were MISO. In PJM, all those costs are flowing through to the customer. All those supply and energy and capacity dynamics are flowing right to the customer, 50% of the bill. And it's happening with deregulated utilities, right? All that flows through and impacts the residential customer.

The good thing about us, again, we're not PJM, we are MISO, and also, we're a regulated utility, and we own generation. So we're able to hedge that cost. And I showed on my first slide, just this year alone, in 2025, we saved our customers $250 million by self-generating with our own units that at a good heat rate versus buying from the market and an exposure to the volatility market, $250 million. And if you go back a year ago, it was over $200 million. If you go back 3 years ago, it was approaching $200 million. It's a -- if you go to a Q4 calls in the slide deck, you'll see all that information. So that's why I say it's not our first rodeo. We do the same thing in our gas business. We buy gas in the summer. We have the largest natural gas storage fields in the world, and we deliver that low-cost gas in the winter, keep our gas supply costs low.

This affordability is not new to us. I talked about it in my prepared remarks. $100 million of savings through CE Way, $450 million over the last 5 years, $1.2 billion of customer measures from energy efficiency perspective, right? I can go on and on about the things we do. And here's some data, and you can look at the Detroit News on this, Richard Zuma, old Michigan residents, Michigan voters, and they asked about this question on cost of living. And 80%, that's a huge number to pull, 80% of Michigan residents said that issue with cost of living was groceries, groceries. It wasn't energy, like it's a different fact pattern here in Michigan.

And so we continue to focus on it, and that's why we're able to talk about being below the Midwest average and the national average because we deliver.

Now you brought up the important piece of this affordability and the election. And just to be clear, we've got 10 people running for governor. It's a crowded field, right? And everyone is trying to find their little lane, and they talk about different extremes, extreme politics, like dead catting, there's all kinds of ways to describe all this stuff. But again, you got to look at the polling numbers here. And the other important piece is, so who's pooling. And so we know that, we work with them. That's an important piece. But also remember, another piece on this, there's plenty of information that shows the rate freezes in Michigan are legal. Go back to Act 3 of 1939, go to Public Act 191 of 1982. Go back to case law of Michigan Michigan in the Michigan Supreme Corp. So again, we've got a good fact pattern affordability. We've got good case law and good precedent, but that's not all we do. Well, we go meet with these candidates is googling to [indiscernible] candidates, and I pull out 2 pieces of paper, double sided, 2 piece of paper. And I present them with 10 policy things, policy and legislative things that they can do to improve affordability.

And I will tell you, ours like some of them and [indiscernible] like some of them, but you know what that changes the conversation. Now I'm with them. Now I'm a partner. Now we're able to provide solutions to continue to take this great affordability equation we have and make it even better here in our capital in Lansing, Michigan. And so like here's part of our success, 23 years of consistent financial performance. That doesn't have by my luch or accident, right? It's good because we've got good energy law. That's a big piece of it. But also, our job is to be solution providers, to work with everybody on either side of the aisle. And when you can call them and be a solution provider, man, that's how you get good outcomes. And that's why this works -- this investment thesis works and why we're able to do what we do. Great question, Marcella.

Next question comes from David Arcaro from Morgan Stanley.

A bit of a follow-on to that thread and a really -- really appreciate the comments, Garrick. I was wondering if you could touch on the data center piece of things on the large load tariff side. And I guess 1 effort that we've seen, maybe getting more common data centers paying their full share of all costs. We saw Microsoft present that initiative on their side. But I was wondering maybe talk about the large load tariff, and are there ways -- I mean there are some costs that are more challenging to allocate, whether it's the full generation cost or whether it's the full transmission cost, how can you -- how do you plan to insulate customers from large loads of the strategy that you'd take beyond the large load tariffs that you've got there?

It's a great tariff to protect customers. We're out in the public talking about this and clearing up some of the misinformation that's out there that this is not going to raise residential rates at all. And in fact, there's a benefit associated with these data centers. And so as I talked about, we're in near final terms with the rate construct. It has to be very clear about how they're going to pay for those facts, how they're going to pay for the capacity and the energy. And it's how transmission and distribution, how it's all on their nickel. And so it's great when companies like Microsoft come out and say, "Hey, we're going to protect the residential customer." It aligns exactly what this tariff -- aligns greatly with the tariff. And so -- and we're going to have to get approval from the Michigan Public Service Commission on these contracts, right? And so it's very clear what the rules of the road are, and I'm pleased to say we're making great progress on that.

I won't get into specifics of how much supply and when. But no, like I said, it can be online as soon to 2028. And again, as that contracts get finalized, as the zoning is finalized, we'll be sure to share that with the investment community and others.

Okay. Great. That's helpful. And not sure if you specifically mentioned, but has there been support from data centers on the large load tariff, just in terms of continued interest in coming to Michigan able to work under the new provisions under that tariff?

Yes. Yes. In fact, like I shared in some of my earlier responses, that data center pipeline has advanced, and it's even grown in size. And so again, both positive indicators in support for this data center tariff in Michigan's growth.

The next question comes from Michael Sullivan from Wolfe Research.

I wanted to pick up on the last couple of questions just around data centers coming to your territory, particularly on the zoning front. There's a lot of articles out there locally and even nationally, too. Just how much of an impediment has that been, if at all? And how much should we think about that as just like a gating factor to get these things over the finish line?

I don't see that as impediment at all. And just to be clear, I know the Wall Street Journal had an article on this and referenced how Michigan -- how it's not in our service territory. But your question is still very important and very valve. Look, we've been doing business in the state for 140 years. It goes back to the foot Brothers. And we know those communities that are more pro-investment and we know the ones that are higher. And we know this because we're building out solar, we're building out wind, we do pipeline work. And so, in part, we help steer these data centers into those areas where it's more accommodating the growth. But also the Wall Street journal, I think where they had it wrong was the moratorium does not mean stopped. In fact, it's a short process. like these are 30, 60, 90, some are 180-day moratoriums, but there's still progress being made. And I would suggest it's good do process because these township officials, these community officials are collecting information from their constituents, they're doing research, and we just saw this in Mason, Michigan, right, in our service territory. They had a moratorium in place. It was a 90 days. They actually came out sooner than the 90-day period and came out with a new zoning ordinances that allowed for data centers.

And so again, when I say finalized and zoning, we work through those things alongside with the hyperscalers, with the developers to achieve success. And again, I don't see that as a hold up or an impediment in Michigan.

Okay. That's really helpful. I appreciate the color. And then just shifting back to kind of the pending rate case and regulatory strategy. What are your thoughts on just being able to get back to more frequent settlements to maybe just take volatility out of the process associated with ALJ's like an we just got? And then also like potential to space out cases a little bit more, just given I think there's been commentary from the commission in the past and now whether or not rate freeze is legal, illegal materializes, but anything that can like alleviate pressure on frequency? And then also, yes, just parties putting things forth and being able to settle more preemptively?

As I've shared before, I continue to be open towards settlement and settlement discussions, and we'll continue to explore those. Again, the merits of the case and just the fact pattern in Michigan, when we go the full distance, as we did last year in 2025 with our cases and get very constructive outcomes. And so I'm happy to go to that route. And I don't think it's reflective at all about the environment in Michigan. Again, because at the end of the day, we're getting successful and constructive outcomes from this commission.

In terms of spacing out, I think a really important data point that I referenced on the call, and we have this information. And I think actually Wolfe has presented this in a different format, too, is that Michigan and particularly CMS and the other large utility like our rate increases are some of the lowest in the country, right? And so can we space them out? Sure. But like let's do the math and like what's going on in these other states, frankly. And so we've got a really good story. And when we go on an annual rate cases, we're able to pass savings back to our customers. We're able to make sure that those increases are more in line with inflation or better than inflation. And so smaller little bites at the apple is really a great approach.

Now I'm always open with the right construct, if there's a way to to expand those out and go longer, but we have to have the right construct in Michigan to be able to do that. There's some talks, early talks in that direction, but nothing that is serious at this point, Michael.

The next question comes from Jeremy Tonet from JPMorgan.

Thanks for all the good color today. Just was curious with the upcoming state of the state here, we've seen in other states utilities kind of featured in some of the commentary here. And wondering if you had any expectations or any thoughts to share here given what we've seen in other states?

Let me offer this. Again, I'll start with a big headline, 23 years of consistent financial performance. We had that one slide in there. And regardless of the weather, regardless of the CEO, regardless of the governor, again, Rs are Ds regardless of the legislature, regardless of the commission, like we deliver. And I have overused this term probably, but not by luck or accident, right? It's energy law, right? And a lot of that is already set. And it's typically bipartisan when it's done, but that sets a lot of the parameters. And again, when it comes to the commissioners are on staggered terms, there's 6-year terms, you can only have 2 from 1 party. And so that sets a lot of the parameters in Michigan. That's the great thing about Michigan. But remember, as one of the largest investors in the state, the [indiscernible] candidates know that. As one of the largest property tax payers in the state, the [indiscernible] candidate know that. As one of the largest job providers and union job providers, the [indiscernible] candidates know that, right? And so we have a way of working with these candidates to find solutions and it goes back to my other comment. When I come in and I can bring a [indiscernible] candidate 2 pages, front and back of good policy solutions, what happens in that discussion, right? All of them -- I'm in their boat, right? I'm in there helping them be successful. And now when they're out with constituents, they can point to say, here's the 3 things. Here's the 6 things. Here's the 10 things we can do in Michigan to help make bills even more affordable. And remember, we're starting from a really good starting spot. And so I mean that's a dynamic that plays out, and that's how it allows us to be successful time and time again. So hopefully, that scratches the itch of your question there, Jeremy.

The next question comes from Andrew Weisel from Scotiabank.

You covered a lot of the main topics, so I've just got 2 sort of more nuanced ones. First on equity. Obviously, as you kind of previewed a tick up from $500 million last year to $700 million this year to an average of $750 million in the long-term plan, how should we think about that going forward? Should it be consistent, should it be ramping up to [indiscernible] CapEx profile? Or would it be more front-end loaded given the lag of cash recovery for generation relative to distribution? And does that assume additional use of hybrids or JSNs? Or would hybrids potentially reduce the equity needs?

Andrew, it's Rejji. I appreciate the question. I'm getting to a point of age-wise when I get multipart questions, I may have to circle back. So if I missed something, just let me know. But with respect to equity, I think you've -- the premise of your question is right. I mean, they tend to increase with CapEx needs. And so this plan is $4 billion higher with $24 billion of CapEx on the utility than the prior vintage of $20 billion. And so [indiscernible] with that historical sort of ratio of $0.40 of equity for every $1 of incremental CapEx is plan has about $1.5 billion or so of greater equity needs than the prior vintage specifically. Prior vintage was $2.2 billion in aggregate, this one is about $3.75 billion. So again, that historical relationship still highs and that allows us to maintain that kind of mid-teens credit metric levels on a consolidated basis, which is where we like to be.

With respect to junior subordinated notes, we do have a little bit of those in the plan over a 5-year period. I'd say just over $1.5 billion. It's a market that we've just seen quite pleasantly -- we've just seen an increase in breadth and depth of liquidity in that market, and we've seen really strong execution, most notably over the last 36 months or so. So we have baked in a little bit of that in the plan, not in this year, but later on, say, more '27, '28. So we do have, again, a little over $1.5 billion of junior subs in the plan, just given the strong execution we've seen historically.

And then with respect to the shaping of the equity needs, I would say it's, again, fairly commensurate with the capital needs, and the capital needs are somewhat front-end loaded if you look at the details on the CapEx plan we have in the appendix in the deck for today. And so we anticipate issuing a good portion of that in the first 3 years of the plan and then it levels out, really kind of really drops off in the latter 2 years. Now we will be opportunistic as always. And if we see our stock trading at levels that are not offensive, and I would submit they are offensive where they are today, we'll be opportunistic. But the plan for this year is to dribble out that $700 million. And over time, again, if we see the stock trading at levels that we think are more reasonable, we may be a little bit more aggressive than that. So let me pause there and see if that's helpful.

It is. And your memory is still intact. You got all of those. Next one, you previously talked about a $20 billion CapEx plan with $25 billion of incremental opportunities. Now you're guiding to $24 billion. Should we think of that as pulling from the opportunities bucket into the formal plan? Or is this more like an incremental $4 billion that you've identified and you still have similar opportunities bucket beyond the new outlook?

Yes. So great question. And I would say, in terms of that $25 billion of backlog we've been talking about, that's outside of the prior plan looking in, yes, we certainly dipped into that with the $4 billion incremental. But I would say it's not a perfectly symmetric equation because the reality is we have additional CapEx needs as we're preparing this new integrated resource plan that will likely drive additional CapEx needs. As Garrick and I noted earlier, our plan does not presuppose us realizing some of these large data center opportunities from a customer investment perspective. And so that would add to that backlog as well. And then I would also just note in this plan, obviously, with the growth of financial compensation mechanism related earnings, we are taking some of that CapEx opportunity and converting it into PPAs. And so we have dipped into that well, but I would say from where we sit, the well is quite infinite when it comes to CapEx backlog at the utility, and it just grows every year because there's a lot to do on both the distribution side and the supply side in electric and gas is quite a bit to do as well.

The next question comes from Anthony Crowdell from Mizuho.

Rejji, really happy that CMS is still serving caffeinated coffee in the employee kitchen. Just one loose end. You're currently asking for decoupling in your gas case. Just curious if you plan on -- I know I'm digging forward, you're currently in an electric case now. Thinking to your next electric case, you asked for decoupling or given the load that you're showing a big increase in industrial load in 2025 if you're less inclined to [indiscernible] given the strong loan growth?

Anthony, I appreciate the question. And as always, we show up to these calls well caffeinated. So I'm glad you noticed. Yes, our intent is to just focus on revenue decoupling in the gas business. We have looked historically at the trends in terms of sales for our electric business and just don't see the need to look to do that for the electric business. So the intent right now is the gas -- just for the gas business. That's what's embedded in this pending case that we filed in mid-December and really no appetite at the moment to look at that from an electric perspective.

Go ahead, Rejji.

Anthony, the only other thing I would note is that it is actually not permitted to utilize decoupling and the electric business that is actually a part of the legislation that's been passed.

Final question today comes from Bill Appicelli from UBS.

I just had a question around the the 3% residential bill inflation, maybe you just unpack a bit when we think about 10.5% rate base growth. So how much are you managing with the CE Way? And then do you have anything else on the affordability side that can help, right? So I think in the past, you've talked about some higher-priced PPA contracts that roll off. Maybe you could just speak to other tools that are there to manage the affordability?

Yes, Bill, thanks for the question. And I think you've hit some of the key items that drive that downward pressure on bills and rates every year. And so we've been at this, as Garrick noted earlier, for multiple decades now where we really try to self-fund a lot of that rate base growth. And for, I'd say, 2 decades, it's been episodic cost reduction, good decisions, and we certainly are assuming that that we do have high-priced PPAs that will be rolling off over time. At some point, we'll be out of coal, and so that will drive cost savings as well. And those are a bit more episodic, but the CE Way just continues to offer more and more savings each year. And I'll remind everyone that we instituted it only about a decade ago, so we think we're just scratching the surface. And I remember going back to 2018, 2019, we delivered probably just under $10 million of operating expense reduction from the CEA. And we were high fifing because we were in year [indiscernible] 1 or 2 of Institute in the CE Way. And as Garrick noted just this past year, we did another year of $100 million of savings. So a lot of opportunity there. But what we're really excited about again to -- in terms of levers or opportunities to just self-fund our growth is just converting on this attractive economic development backlog. That, to me, is really the third leg of the affordability stool.

We know that we are very strong in delivering on the cost performance side. But if we can also convert, not even all, but just a portion of this economic development backlog, you can see that it just drives great downward pressure on bills and rates and funds a lot of these needed customer investments that we have across our electric business. And that's where we provided that sensitivity. In one of the slides Garrick spoke to, we basically have shown that with 1 gigawatt of conversion on this economic development backlog associated with the large load tariff, that drives about 2 points of reduction in that bill CAGR. So again, a lot of arrows in our quiver, and we look forward to continuing to executing on all of those to create that downward pressure to fund the CapEx plan.

Great. That's very helpful. And I guess 1 housekeeping item. It looks like the D&A in '28, '29 is about $100 million lower than the prior guide you had given. Is there anything driving that? Or despite the fact that the CapEx is higher, so any color there?

Yes. My sense is it's mix. That's usually what it is because you do have different depreciation rates depending on the assets. The distribution assets tend to be longer lived than the generation assets. And so it's got to be mixed, but the IR team will certainly follow up with you after the call to unpack that some more, Bill.

This concludes today's Q&A session. So I'll hand the call back to Mr. Garrick Rochow for any closing comments.

Thanks, Adam. I'd like to thank you for joining us today. I look forward to seeing you on the conference circuit. Take care and stay safe.

This concludes today's call. Thank you very much for your attendance. You may now disconnect your lines.

Good morning, everyone, and welcome to the CMS Energy 2025 Third Quarter Results. The earnings news release issued earlier today and the presentation used in this webcast are available on CMS Energy's website in the Investor Relations section. This call is being recorded. [Operator Instructions] Just a reminder that there will be a rebroadcast of this conference call today, beginning at 12:00 p.m. Eastern Time running through to November [indiscernible]. This presentation is also being webcast and is available on CMS Energy's website in the Investor Relations section.

At this time, I'd like to turn the call over to Mr. Jason Shore, Treasurer and Vice President of Investor Relations.

Thank you, Alex. Good morning, everyone, and thank you for joining us today. With me are Garrick Rochow, President and Chief Executive Officer; and Rejji Hayes, Executive Vice President and Chief Financial Officer. This presentation contains forward-looking statements, which are subject to risks and uncertainties. Please refer to our SEC filings for more information regarding the risks and other factors that could cause our actual results to differ materially. This presentation also includes non-GAAP measures. Reconciliations of these measures to the most directly comparable GAAP measures are included in the appendix and posted on our website.

And now I'll turn the call over to Garrick.

Thank you, Jason, and thank you, everyone, for joining us today. A strong quarter at CMS Energy from an operational, regulatory and financial perspective. I am very pleased with the results and continue to see us well positioned for the full year and in the long term. Our consistent industry-leading performance is rooted in our investment thesis that delivers for customers, coworkers and investors.

Speaking of strong performance and consistency, throughout the quarter, we delivered key regulatory outcomes, which highlight the positive and constructive regulatory environment in Michigan. We received the final order in our renewable energy plan that approved an additional 8 gigawatts of solar in 2.8 gigawatts of wind through 2035 and insurers will meet Michigan's clean energy law. A portion of these investments will be woven into our next 5-year plan.

This order also provides further certainty and confidence for our long-term customer investments. And as a reminder, this renewable energy plan is a key input into our integrated resource plan that we'll file mid-2026. We also received a constructive order in our gas rate case, approving approximately 75% of the final [ ask ] and 95% of the infrastructure investments for work like domain in vintage service replacements, which are critical to ensuring a safe affordable and cleaner natural gas system. Share scripts comments from that meeting continue to support thoughtful and deliberate adjustments in ROE and suggested we have reached the floor for ROEs and in his words, driven out any excess.

Recently, on the electric side, staff filed their position in our pending rate case supporting approximately 75% of our revised and approximately 90% of our capital ask. This case includes investments supporting reliability and resiliency, which benefits our customers and are well aligned with our reliability road map and MPSC direction.

Again, one of many proof points in our supportive regulatory environment in a strong starting position for a constructive outcome. As shared in previous quarterly calls, we continue to see strong economic growth in Michigan. As I highlighted in the Q2 call, we have an agreement with the data center and continue to see growth with manufacturing as well as a robust pipeline. Year-to-date, we have connected approximately 450 megawatts of the planned 900 megawatts of industrial growth in our 5-year plan. I'm also pleased to share that we've been successful adding another approximately 100 megawatts of signed contracts year-to-date. This growth is coming from new projects, the expansion from existing customers in the areas of food processing, aerospace and defense and advanced manufacturing. These products bring jobs and supply chains, home starts and commercial opportunities to the state and create further visibility to our 2% to 3% forecasted annual sales growth over the next 5 years.

On the slide, we're showing our economic growth pipeline. You'll know we continue to move projects into and along the pipeline, bolstering our confidence and additional growth from data centers and other diverse industries. As I mentioned on our Q2 call, we have an agreement with a data center with up to 1 gigawatt of load planning to come to our service territory beginning in early 2030 and ramping up from there. You'll see that project in the final stage of our process at near final terms and conditions. I expect further progress, specifically contract signature as the large load tariff is finalized in November when we expect an order from the MPSC.

You'll also see other large data centers in the final and advanced stages of development, which speaks to the robust nature of our pipeline. I continue to be confident and excited about the growth coming to our service territory. The data center and manufacturing pipeline is robust and advancing, and we are well equipped to serve and meet their needs as they advance.

On the left side of the next slide, you see our current 5-year $20 billion customer investment plan. On the right side, you see the robust and [ verse ] additional investment opportunities we have going forward. Over $25 billion of additional customer investments supported by our Electric Reliability Roadmap, renewable energy plan and integrated resource plan. As a result of more load growth, we're focused on resource adequacy and the clean energy law which means more renewables, battery storage and natural gas generation to meet growing demand. And as I shared earlier, our recently approved renewable energy plan provides visibility and certainty on our plan for future investments.

Our integrated resource plan that we'll file in mid-2026, will also detail additional capacity needed to replace retired plants and support existing and future growth we are realizing. As we see that full plan come together, we anticipate needing more battery storage and gas capacity. And as a side note, you can expect further growth from capital-light mechanisms, like financial compensation mechanism on PPAs and our energy waste reduction program.

On our distribution system, we see a significant need for investment in pole replacement, undergrounding and system hardening as we work to significantly improve customer reliability and resiliency. And again, well aligned with our reliability road map and MPSC direction. As I shared before, a robust and growing capital plan, which will continue to provide investment opportunities to serve customers and deliver value for investors.

Now this long runway of customer investments must be balanced with affordability. We have demonstrated our excellence in reducing cost, and we do this better than most through the CE Way, digital and automation, [indiscernible] cost-saving opportunities, low growth and energy waste reduction. This is a significant advantage for us to maintain affordability as we make immediate investments in our system. Today, our customers' utility bill remains roughly 3% of their total expenses or what is often referred to as share of wallet. This is down 150 basis points from a decade ago, while investing significantly in our system to the tune of $20 billion. Our residential bills are solidly below the national average and continue to be over the 5-year plan period as we continue to make thoughtful customer investments across the system.

Affordability is an area where we will continue to focus and deliver cost savings for customers. keeping customer rates at or below inflation and bills below the national average. I am proud of the work we have done to develop excellence in this area. We have built strong cost management muscle across the company and it continues to benefit customers today and well into the future.

As I shared in my opening, a strong quarter. For the first 9 months, we reported adjusted earnings per share of $2.66, up $0.19 versus the same period in 2024 and largely driven by the constructive outcomes in our electric and gas rate cases and a return to more normal weather. Given our confidence in the year, we're raising the bottom end of this year's guidance range to $3.56 to $3.60 per share from $3.54 to $3.60 per share with continued confidence toward the high end. We are initiating our full year guidance for 2026 at $3.80 to $3.87 per share reflecting 6% to 8% growth off the midpoint of this year's revised range, and we are well positioned to be toward the high end of that range. It is important to remember we always rebase guidance off our actuals on the Q4 call, compounding our growth. And like we've done in previous years, we'll provide a refresh of our 5-year capital and financial plans on the Q4 call.

With that, I'll hand the call over to Rejji.

Thank you, Garrick, and good morning, everyone. On Slide 9, you'll see our standard waterfall chart, which illustrates the key drivers impacting our financial performance for the first 9 months of 2025 and our year-to-go expectations. For clarification purposes, all of the variance analysis herein are in comparison to 2024, both on a year-to-date and a year-to-go basis.

In summary, for the third quarter, we delivered adjusted net income of $797 million or $2.66 per share, which compares favorably to the first 9 months of 2024, largely due to higher rate relief, net of investment costs and favorable weather-related sales. With respect to the latter, we experienced a warm summer in Michigan, which in part drove the $0.37 per share positive variance on a year-to-date basis. Rate relief, net of investment costs resulted in $0.28 per share, a positive variance due to constructive outcomes achieved in our electric rate order received in March and the residual benefits of last year's gas rate case settlement.

From a cost perspective, you'll notice in the third bar on the left-hand side of the chart, $0.04 per share of negative variance versus the comparable period in 2024. Our year-to-date cost performance was largely driven by increased vegetation management expense due to higher spending levels approved in our March electric rate order and in accordance with our electric reliability road map.

Before we leave the cost bucket, I'd be remiss if I didn't mention that given our strong financial performance to date, we put several operational pull-aheads in motion across the business over the course of the quarter. These discretionary measures provided additional funding for gas system projects, electric reliability and programs catered to our most vulnerable customers. A portion of these costs were incurred during the quarter, while the balance will flow through our forecasted year ago operating expenses delivering incremental value for customers while derisking our financial plan and the prior year to the benefit of investors.

Rounding out the first 9 months of the year, you'll note that $0.42 per share of negative variance highlighted in the catch-all bucket in the middle of the chart. The primary drivers of the negative variance were related to the planned outage of our Dearborn Industrial Generation or DIG facility early in the year, and the timing of select renewable projects at North Star, which I'll note remain on track, coupled with higher parent financing costs. Looking ahead, as always, we plan for normal weather, which equates to $0.15 per share of positive variance for the remaining 3 months of the year, given the roll-off of mild temperatures experienced in the last 3 months of 2024.

From a regulatory perspective, we'll realize $0.03 per share of positive variance, driven in large part by the constructive outcome achieved in our gas rate order in September, which will go into effect on November 1. On the cost side, we anticipate $0.06 per share of negative variance for the remaining 3 months of 2025 due to our ongoing vegetation management efforts as well as the aforementioned supplemental spending on operational and customer initiatives at the utility. Closing out the glide path for the remainder of the year and the penultimate bar on the right-hand side, you'll note an estimated range of $0.05 to $0.09 per share of negative variance, which largely consists of the absence of select onetime countermeasures from last year, partially offset by nonutility performance fueled by achievement of key economic milestones on select renewable projects, among other items.

As Garrick highlighted, we are well positioned to deliver on our financial objectives for the year and are establishing a solid foundation for 2026 through prudent contingency deployment as we head into the final 2 months of the year.

Moving on to the balance sheet on Slide 10. I'll note our recently reaffirmed credit ratings at the utility from S&P in September, and we anticipate a reaffirmation of the parent's credit ratings in the coming weeks. From a financial planning perspective, we continue to target mid-teens FFO to debt on a consolidated basis to preserve our solid investment-grade credit ratings as per long-standing guidance from the rating agencies. As always, we remain focused on maintaining a strong financial position, which, coupled with a supportive rate construct and predictable cash flow generation minimizes our funding costs to the benefit of our customers and investors.

Slide 11 offers an update to our funding needs in 2025 at the utility and at the parent. I am pleased to report that we have completed virtually all of our planned financings for 2025 the latest tranche of which was our settlement of approximately $500 million of forward equity contracts at share price levels favorable to our plan. Given the attractive market conditions, we'll continue to evaluate potential pull-ahead opportunities for some of our 2026 financing needs the parent. As I've said before, our approach to our financing plan is similar to how we run the business. We plan conservatively and capitalize on opportunities as they arise. This approach has been striving through year in and year out and has enabled us to deliver on our operational and financial objectives, irrespective of the circumstances to the benefit of our customers and investors, and this year is no different.

And with that, I'll hand it back to Garrick for his final remarks before the Q&A session.

Thanks, Rejji. At CMS Energy, we deliver a strong first 9 months of the year and well positioned for the full year. Our strong pipeline of new and expanding low bolsters our confidence in our growth and provides us with opportunity to invest in infrastructure across both our gas and electric businesses to serve customers with safe, affordable, reliable and clean energy. It is an exciting time in this industry and CMS Energy is well positioned.

With that, Alex, please open the lines for Q&A.

[Operator Instructions] Our first question for today comes from Julien Dumoulin-Smith of Jefferies.

Nicely done, continued progress here. If I can, can you elaborate a little bit on just what the timing is on the large load tariff. Just again, I suspect that this is more mundane and process than anything else. But just elaborate there. And then more importantly, can you speak to the opportunity that sits behind this, right? Clearly, this is something of a gating item just to deal with process. What are those conversations looking like to the extent to which that something were to manifest itself here in the next couple of months?

There are -- Julien, it's great to hear from you. There are 3 large data centers in the final stages. That's up to 2 gigawatts of opportunity there. We talked in Q2 about 1 of those, and you can see that at the bottom of that pipeline or at the bottom of that funnel. And we're really at final terms and conditions. It's important to get this gating item done, the tariff, the large load tariff. We expect that November 7, and that will be important. That obviously looks through the terms -- other terms and conditions, the length of the contract and minimum demand and those types of things. And so I would expect that, that 1 at the bottom on front of the 1 we talked about in Q2, we'll move through that funnel, and move through that pipeline in short order after that tariffs in place.

The other 2 large ones, I would also expect to move forward within that pipeline. Just to give you some clarity on those projects, they have land, they have zoning. We've worked through the red lines and some of the basic terms and conditions continue to see good progress there. And they're also -- it's also important this gating item on the tariff. And so I would expect them to move forward further in the pipeline. So hopefully, that helps, Julien. It's an exciting pipeline. It's an exciting time in this industry.

Absolutely. So it sounds like you could potentially see developments on all 3 here shortly after that were resolved here on November 7 or again, focus first on the initial contract shortly thereafter. And then in coming months on the others?

We like the direction of all 3. And certainly, there's 1 further in the funnel like we shared at the Q2 call. And so again, plenty of opportunities for data centers here. But I'd also point to the funnel has semiconductors that has manufacturing and we continue to land those as well. And those bring with it, as we've talked in the past, a number of benefits. And so really robust pipeline of opportunity here in Michigan and across our service territory.

And maybe a little bit more of a strategic question, if I can clarify this. I mean obviously, having this level of confidence potentially gives you more latitude within the plan than, the 5 years. When and how do you think about being able to leverage that and reflect it in the plan? And what I'm getting at is, potentially, maybe there's some upside even within the 6 or above the 6 to 8, or would you be thinking more about, again, doing something that would be more offensive in as much as you guys transacted on [ EnerBank ] earlier to improve the overall quality of your earnings. Could you do something similar to that again?

We've got a -- if I just step back and look at our capital plans for just a minute, 5 years, right now, $20 billion, and we got $25 billion plus knocking at the door, just wanting to get into that plan. And all these data centers would be incremental. So you can imagine that $25 billion growing. And so that's a great opportunity as we land these data centers, incremental to the plan from a capital perspective, incremental from a sales perspective as well.

We're delivering like CMS Energy, we deliver, and that is this context of for '22, going on 23 years, -- we've delivered industry-leading financial performance. Where others have been at 4% to 6% and 5% to 7%, I'm glad they're finally catching up with us. We've been at 6% to 8%. We've been at the high end of that, and we're compounding of -- that's pretty like compounding of actuals, you see it in other industries. That's pretty unique in this industry, and we do that. That's a higher quality of earnings, and we get our investors to see that. So we really play the long game here. We have confidence in that in our guidance. But of course, we're competitive. We always look at our capital plan. We always look at affordability. We look at the ability to achieve that capital plan. There's a lot of things that go into that. And certainly, you'll hear more about that capital plan and further data center advancements in our Q4 call.

Our next question comes from Jeremy Tonet of JPMorgan.

Just wondering if I could pick up with that $20 billion of CapEx knocking on the door. Just wondering how quickly could the door be opened here over what type of time line do you think that could be folded in given all these opportunities?

Well, first of all, it's $25-plus billion knock at the door, so it's even better than the $20 billion. And so you'll have like building a little suspense here for the Q4 call. You'll see that in the Q4 call. And here's what I anticipate. You're going to see more in electric reliability. We're already foreshadowing that in our current electric rate case. That's important to improve service for all our customers. We're committed to that. We've shared that lined up with the Liberty Auto report. It's lined up with the MPSC direction and our Reliability Roadmap. You'll see more in that plan in the electric distribution space.

We have approved renewable energy plan. It is an additional 8 gigawatts of solar and 2.8 gigawatts of wind that's been approved through 2035. And you can imagine, we're going to want to take advantage of tax credits in the safe harboring. So that's going to be -- that 5-year plan is going to be healthy with those type of investments. And so that will be evident in Q4. And then we'll file our integrated resource plan in '26, mid-'26. Of course, that will play out over the next 10 months, so an order in '27. But you kind of start stacking that plan to be able to do the capacity build the capacity that you need. So I would anticipate battery storage and as well as natural gas capacity will start to filter into that 5-year plan. So really across all 3. So hopefully, that's helpful, Jeremy.

Got it. And just want to pick up, I guess gas plant, as you mentioned there, the potential for that, would that be simple or combined? Or any other thoughts there, especially with regards to turbine slots?

We continue to work through that. I want to be really clear about this. When we look at what we need in this next integrated resource plan, it's both battery capacity and natural gas capacity and that's for retiring facilities as well as existing load growth. And so the more we add in terms of data centers, that will continue to grow. And we're evaluating what that mix looks like from a simple cycle and combined cycle perspective. But you can expect, like we always do, that we're well planned, well prepared, and we're moving along in that direction.

Our next question comes from Shar Pourreza.

Oh my, Shar. You're back. You're back Shar.

Thanks for having me back. I appreciate it. Thanks, Garrick. Appreciate it. I just sort of just a follow-up on the prior 2 questions. I guess, the $25 billion you have there, does any of that $25 billion plus of upside, does any of that kind of overlap before the '29 time frame?

Yes. The short answer to that is yes. You'll see in our next 5-year plan, you're going to see some of that $25 billion move into the next 5 years.

Shar, just if I could add to Garrick's comments. All I would add is I'd be surprised actually in this next vintage a 5-year plan that we'll roll out in our fourth quarter call early next year. I'd be surprised if we're not dipping into each of those 3 components of that $25 billion. We're going to be in a steady march of reliability and resiliency related work. And so that's part of that $10 billion bucket of electric distribution. We will continue to chip away at the renewable energy targets embedded in the clean energy law and we have an upcoming milestone of 50% renewables by 2030. And so we will definitely be dipping into that 8 gigawatts of solar that Garrick noted 2.8 gigawatts of wind that will certainly be incorporated into the plan.

And then with respect to RFP-related opportunities that $5 billion bucket. Remember, as I'm sure you know, the harvesting period for building out, whether it's simple cycle or combined cycle, you really have to do a lot of work upfront. And so we've already done the siding work. We are in the interconnection queue, but you do have to start spending money to really get on the front end of the gas turbine procurement. And so there will be dollars associated there with embedded in this next plan. So it's a long-winded way of saying, we'll be dipping into each of those buckets. And that will -- and those related costs and investments will be incorporated in this next, what I'll call a '26 through 2035 year plan.

Got it. And then just Rejji, maybe just help me bridge I guess, because you're getting a lot of questions around the CAGR this morning and it's just the way the math works, given the base plan already grows at the higher end. I guess what is the offsetting factor on this CapEx being put into the plan potentially before '29, and it doesn't move the trajectory or accretive to this trajectory. I guess what are the offsetting factors we should be thinking about?

Yes, it's a great question. So let me just start with just, as you know, how we build the plan. We always talk about the governors of our capital and our financial plan. And so we have to obviously [indiscernible] the affordability bar and make sure that our rates are growing commensurate with inflation. And so there's a lot of hard work that goes into that. And so we'll lean heavily into the CE Way as we always do. As Garrick noted in his prepared remarks, we've got a lot of continued opportunity in terms of episodic cost reductions and we also think that the third leg of the affordability stool is now these economic development opportunities, which we will certainly convert on over this 5-year period. And so look forward to having good news on that in the coming months and quarters. And so that's how we'll manage the deliver on the affordability side to, again, peas that governor.

From a balance sheet perspective, we'll fund the plan as cost efficient as possible. So we've really done a nice job reducing or minimizing equity needs to fund the growth. And so we try to fund the plan as efficiently as possible from a balance sheet perspective. And then we're going to be really focused on workforce planning and productivity to make sure that while we're executing the capital plan, we're doing it in a thoughtful way in terms of staffing and things of that nature. And so that just speaks to the confidence of our ability to weave in more capital investment into the plan. And I know the spirit of your question is, well, when will that lead to a higher growth CAGR? And I think the offsets we have to be mindful of is, first and foremost, as Garrick noted in his prepared remarks, we do compound off of actuals. And so we do take that quite seriously and delivering every year, when we say 6 to 8 towards the high end, which for all intents and purposes, is 7% to 8%. We plan to do that every year.

So '26, then '27, then '28. Think of it 7% to 8% for all intents and purposes toward that high end. And so we do have to take into account just the difficulty in achieving that. And so that is where we add in a little conservatism. The other reality is when you think about the nature of a rate construct, were not decoupled. We don't have any type of service restoration deferral mechanism, even though we effectively got 1 put in place this year. And so -- we do have to bake in a little bit of margin or contingency just given the uncertainty around weather, and that's both from a margin perspective. As well as storm activity, which seems to intensify year-over-year. And so that has to be taken into account when we think about the offsets that would potentially prohibit us from growing at a higher clip.

That said, if I go down [indiscernible] lane, remember, we were 1 of the first utilities to go to 6 to 8 in 2016 when it was a 5 to 7 world. So we're not afraid to grow at a higher clip if we can sustain it, but it has to be sustainable over a 5-year period. And so we have to be mindful of that. And again, we have to take into account some of those natural offsets that impact our business that I just enumerated. Is that helpful?

Our next question comes from Andrew Weisel of Scotiabank.

First, I just want to clarify something. The IRP-related spending opportunity of $5 billion. Am I right, that won't be included in the February update for CapEx, right? I think that's what you said in the past, given the timing of the regulatory approval, but the way you're talking about it this morning, I'm a little unsure. Is that still how you're thinking about it?

There has to be just like -- as Rejji enumerated, like when you look at the -- what it takes to put a turbine in the ground and when you look at some of these longer-term, term items like that in terms of EPC contracts as well as MISO, you have to be investing right now to be able to deliver over that 5 years. And so I see a portion of that filtering into this 5-year plan on the IRP particularly in the tail end of it, too, as you look to put some of this important equipment online.

Okay. Great. Good to hear, and that's helpful. Next question on the economic growth. Just still -- you have 450 megawatts out of the 900 megawatts in the plan. That certainly seems conservative. Maybe I'll leave that as a comment. My question is how much excess capacity do you currently have that load with a couple of gigawatts potentially coming soon, how much slack do you have in the system versus how much would you need to match megawatt per megawatt.

That's connected load. So that's not to be delivered on the way, and so that's connected. And so we have the capacity to serve that today. And then there's a bit of excess capacity. And I'll just remind everyone, we continue to build out as a result of the clean energy law additional capacity. So we're upwards of a gigawatt of renewables we're building this year. It will be a similar pattern next year. We're -- there's a number of battery storage projects that are underway as well, both self-build as well as purchase or power purchase agreements. And so a number of those things are already in a way, so that capacity profile is expanding as we speak.

Okay. Very good. Then lastly, if I can, a question on Campbell. I know you haven't made any final decisions, but there have been some conversations about the plan potentially continuing to run maybe as long as the duration of President Trump's administration. So can you just kind of explain what kind of shape is the plan in, what kind of maintenance might be required if it were to run through 2028. And how does the accounting work for the economics? I believe you're booking all the costs on the balance sheet, but maybe just kind of walk us through from a MISO perspective, from a tariff perspective, how does all that work in terms of cash and earnings impacts for investors and for customers.

Yes, Andrew, great question. I'll start and then certainly hand it over to Rejji too. And so I first want to start from a people perspective. And that team out there has been absolutely amazing. As you might imagine, think about this from your -- you're thinking about retirement in the plant and your next role, wherever it might be in the company, some going to retirement. And we just had a very flexible workforce that is committed to the success of that plant and following through with this order to the Department of Energy. So I can't say enough about our people and how they've responded really -- we're really in a great space from a people perspective. And so we continue to see orders from the Department of Energy through the Federal Power Act, we expect those to continue for the long term, and we're prepared to continue to operate the plant and comply with those orders.

And I want to remind everybody that what we proposed was that those costs be shared because the benefits go to MISO and not just to our customers, they go to MISO. And the FERC supported that. And so those costs as well as the offsetting revenue are spread across 9 MISO states, the North and Central region, the MISO appropriately. And that order from the Department of Energy has laid out a clear path to cost recovery. And we're heading down that path and have great confidence in our ability to recover. And so that's the nature of it. We'll continue to invest in the plant thoughtfully. Those costs would be incurred and we recover those through that process. But let me hand it over to Rejji to talk a little more about this.

Yes. Thank you, Garrick, and thank you, Andrew, for the question. Yes. So we're currently treating all the costs associated with operating the Campbell units as a regulatory asset. And so operating and maintenance expense, there have been minimal capital investment. But if we did incur capital investments, that would all flow through regulatory asset line item, which we've established. And then as it pertains to -- and that would amortize over time, as we get recovery. And so it's important to note too, from a customer bill perspective, first and foremost, once we have started to receive recovery of the investments and of the spend from MISO North and central customers based on the construct we outlined with FERC, which they approved our 202 complaint, we would refund Michigan customers for their share that they've already contributed.

And so I think it's important to note that we are trying our best to make sure that Michigan customers are held harmless as we continue to operate the plants to the benefit of the region as Garrick noted. And so again, regulatory asset treatment that would amortize down as we get recovery on the spend, and we would be basically refunding Michigan customers who have already paid for some of those investments and some of that spend. And that refund of Michigan customers would be funded by MISO North and Central customers. Is that helpful?

Our next question comes from Travis Miller of Morningstar.

So now that you have that REP in hand, I was wondering if you could characterize some of how you're thinking about the timing and the mix between the self-build and the PPA. So -- can you walk me through -- obviously, you've got that $10 billion number out there, but what does that mean in terms of what you plan to build timing and then PPA mix?

We're very pleased with the outcome from that renewable energy plan. As I stated, additional 8 gigawatts of solar, 2.8 gigawatts of wind. And just given the safe harboring provisions, we're going to want more of that in the first 5 years, right? That makes sense from a cost to our customers' perspective. And we've got those we've got those assets with those projects laid out, so we have safe harbor really out to 2029. And so that will be the plan. And it will be competitively bid. And we've been doing that for a long time. And more often than not, we win the competitive bid because of the projects we're putting together and our familiarity with Michigan. And so there's going to be a good portion of self-build in that mix.

But remember, I'm not opposed to a PPA either. Because I really view that as a capital light way of earnings, right? We're going to earn roughly 9%. It's capital light. It's a derisked process. I'll let a developer build an asset, build wind, build solar, it will be a mix, and we'll take the offtake of that. And so again, that's going to -- that's kind of how we see it playing out going forward. And so when I say we're building about 1 gigawatt now, and gigawatt next year we'll be building. It will be a mix of self-build as well as developers.

Yes. And Travis, this is Rejji. I would add to just give you some of the underlying assumptions that support the $10 billion that we have in that sort of CapEx or customer investment opportunity section of the slide. We're assuming just for analytical purposes, about 50-50 owned versus PPA. So that $10 billion assumes 50% -- of the solar opportunity. So think about that 8 gigawatts. So we're assuming half of that we would own. And for the wind, the 2.8 gigawatts, it's a greater assumption than 50%. I'd say it's closer to 100%, but I don't want to split hairs here. And so that's the working assumption.

So clearly, if we end up owning more of that solar opportunity, there could be upward pressure in that $10 billion estimate. If we end up PPA more through a competitive bid structure, then there could be some downward pressure on that. But as Garrick noted, there's just great financial flexibility inherent in the law, and it's nice to have the opportunity to earn in a CapEx-like fashion, and that gives us more balance sheet capacity to deploy potentially to the IRP opportunity, the $5 billion on the page and/or the $10 billion of distribution-related investment opportunities.

Okay. Perfect. Well, you see you answered my follow-up -- you answered my follow-up question. So I appreciate that. I'll throw one more other follow-up question, different subject, but the manufacturing growth of new customers you're seeing there and the new pipeline customers. Can you characterize that, not just the industry, but are these expansion of existing -- are these brand-new customers coming from somewhere else? Are they onshoring, restarting, however you want to say that.

Yes, it's all of the above. It's all of the above. And I mentioned like here's a little surprising fact about Michigan. There are over 4,000 businesses in the aerospace and defense industry in Michigan. And so that's an example of where we're seeing new customers and existing customers grow in Michigan and just manufacturing. We're seeing advanced manufacturing, and we're seeing a lot of food processing. One of the unique facts about Michigan is the second most diverse state when it comes to an agriculture perspective. And there's been a general trend with food processing to move closer to the field, to move closer to the farms. And so we're seeing everything from dairy products to some big goods that are continuing to grow in the state, which is a nice business for Michigan and really is a nice path to jobs, supply chains, home starts and the like.

Our next question comes from Michael Sullivan of Wolfe Research.

Circling back on the data center or a large loan customer pipeline, can we just get more of a feel for the time line of the ramp for some of these. I think you had said on the last call the 1 gigawatt was like a '29, '30 type time frame, but maybe the rest of that final stage bucket, what sort of ramp time line are we looking at?

You're correct in what we shared on the -- the Q2 one, the 1 that's at the bottom of the funnel at the end of the pipeline there, late 2029, early 2030 for the I would call it first electrons and then ramp up thereafter. I will share with you the other 2 that I referenced there a little earlier in the process in the 5-year window, and we're able to deliver on those from a supply perspective, from an infrastructure perspective as well. So that gives you -- hopefully gives you enough look into the pipeline in final stages, Michael.

Okay. Very helpful. And then, Rejji, I know you get asked this all the time, but just how to think about how much incremental equity comes with each dollar of incremental CapEx as you get ready to refresh all that? And is there anything in the load tariff that's pending here that maybe helps with some of that in terms of cash recovery.

Yes, Michael, thanks for the question. And as always, Yes. So I would say that the historical sensitivity between CapEx and common equity is still, I think, a good working assumption. And so for those who are unfamiliar with it, for every dollar of CapEx that's incremental to our plan, I assume about $0.40 of common equity would need to be issued. We always try to put downward pressure on that, and we've been quite effective, obviously, over the last couple of years after the enactment of the inflation Reduction Act, we've been monetizing tax credits, which has been a helpful vehicle for financing. We also just given the nature of our rate construct and a forward-looking test year, we have very strong cash flow generation. And so tend to not need quite as much equity for CapEx. And with these other mechanisms, and I think it just is always worth repeating that we are 9% on PPAs, and that's codified and statute, that also offers an opportunity to put downward pressure on equity needs.

But again, the rule of thumb for now should be for every $1 of CapEx. We'll probably have to raise about $0.40 or so of equity. And hybrids offering opportunities. While I'd be remiss if I didn't mention that. We don't usually incorporate that into our plan, but it does create an opportunity. And so those are the ways in which we could put downward pressure on that sensitivity. But again, in the absence of any new information, just assume for now $0.40 of equity for every dollar of CapEx.

With respect to the data center tariff, while certainly, we have been very focused on making sure that we are minimizing stranded asset risk for an incumbent customers and making sure we have the right protections in place and there's a little bit more margin given that it's a general primary demand rate versus our most aggressive economic development rates. So you get a little more margin for that. I don't think there's really at the moment, any working assumptions you should have, where we see significant cash flow generation that would reduce our equity needs if there's additional CapEx.

Now who knows over time based on discussions with select data centers. There may be things that we can incorporate into a potential agreement with the data center. But for now, I would assume, again, most of the provisions in the data center tariff are focused on protecting our incoming customers. Is that helpful, Michael?

We can only have no further questions. So I'll turn the call back over to Mr. Garrick Rochow for any further remarks.

Thanks, Alex. I'd like to thank you for joining us today. I look forward to seeing you at EEI. Take care. Stay safe.

This concludes today's conference. We thank everyone for your participation. You may now disconnect.