Good morning everyone and welcome to the CMS Energy 2020 Second Quarter Results. The earnings news release issued earlier today and the presentation used on this webcast are available on CMS Energy's website in the Investor Relations section. This call is being recorded. Just a reminder, there will be a rebroadcast of this conference call today beginning at 12:00 p.m. Eastern Time running through August 10th. 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. Sri Maddipati, Vice President of Treasury and Investor Relations.

Thank you, Rocco. Good morning everyone, and thank you for joining us today. With me are Patti Poppe, 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 risk 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. Now, I will turn the call over to Patti.

Thank you, Sri, and thanks for joining us today for our second quarter earnings call everyone it is great to be with you. This morning I will discuss our strong first half results and the actions we have taken to adapt to the challenges in the current year, while keeping an eye on delivering our long-term growth in 2021 and beyond. Rejji will add more details on our financial results, including impacts related to COVID-19 and offsets we are seeing from the CE Way among other items. And as always, we will close with Q&A. For the first half, we delivered adjusted earnings per share of $1.35, up 25% from the same period in 2019. Our first half results were primarily driven by best-in-class cost management, favorable sales mix, and timely regulatory recovery as we continue to respond to the ongoing and ever-changing circumstances presented by COVID-19. As we have demonstrated through our commitment to the triple bottom line and the CE Way, we can tackle unsurpassed extreme challenges, operationally and financially presented by this pandemic and its resulting economic impact. Given the better visibility we have on the pandemic and Michigan's economy reopening, we are pleased to reaffirm our adjusted guidance for the year of $2.64 to $2.68 with a bias to the midpoint. We continue to target long-term annual earnings and dividend per share growth of 6% to 8%. Again, with a bias to the midpoint. While ESG has been a more prominent topic recently, for us it is nothing new. Our long-term thesis is built and our commitment to the triple bottom line of people, planet, and profits underpinned by performance, which is our way of talking about and activating ESG in our decision-making processes. It starts with people, of course, our co-workers, our customers, and the communities that we serve. We continue to provide an essential service during these unpredictable times, while keeping our co-workers safe. Through smart work practices, including working-from-home, direct to job site reporting, social distancing in our work locations, and ensuring we have adequate testing and PPE. During this pandemic, the social awakening and the local flooding in Midland, Michigan. We have leveraged our foundation to support our customers and communities. Our ability to respond and deeply care for our co-workers and communities is made possible through the diverse team we have here at CMS Energy. We have maintained a strong commitment to diversity at CMS for many years. And this is reflected in the makeup of our Board and our Management team. But our work is far from complete, which is why I'm excited about our recent promotion of Angela Tompkins as our Vice President and Chief Diversity Officer. While all of us own the efforts to improve Diversity, Equity, and Inclusion at all levels, Angela's leadership will be vital for us now and in the future. Angela co-authored our DENI strategy in conjunction with the senior management team over the past several years. As a result of this focus, we were prepared for this time and the important conversations that are underway inside our company and nationwide. Our focus on the planet has not wavered. We have net-zero plans for both our gas and electric businesses, which are among the most aggressive in the industry, both in terms of magnitude and timing. While our efforts in the future are ambitious, including over six gigawatts of added solar over the next 20 years, I would like to remind folks, we have already made an enormous amount of progress with the closure of seven of our 12 coal plants, with the next two scheduled for closure in 2023. In addition to new renewable, we are replacing our retiring capacity with new and innovative solutions, such as our demand response program we ramped up this year, with our first-of-its-kind partnership with Google to offer 100,000 Nest thermostats free to our customers. We believe in a clean and lean energy future, and we plan to lead the way. All our efforts and success wouldn't be possible without the capital you provide. So that last piece for profit is always top of mind. As you can see in the numbers, and as we are highlighting for you this morning, our co-workers have been busy since we last updated you successfully identifying over $65 million of operating cost reductions since the pandemic began. In addition to a variety of year-over-year savings totaling $0.19 year-to-date, and our foot is on the gas. Our lean operating system provides the ability to create reductions like these in the current year and enable delivering in the years to come as the savings carry forward. And backed by popular demand, it is time for my story of the month. This one comes from our Jackson Generating Station where twice a year we replace couplings that help maintain lubrication on each of the six gas engines there. So that is 12 replacements over the course of the year. Now, while this is often routine work, the team at the plant didn't just follow the routine. They brought their 18 years of on-the-job experience to the table and recommended an alternative coupling, which had the same performance and life expectancy but at a fraction of the cost. The team took ownership with the CE Ways as they proposed this cost-saving idea. This simple but important change led to over $30,000 in annual savings. Now, some of you may be saying Patti, come on $30,000 is not a lot of money. But what you forget is that there are thousands of stories like this across our company. And when you add up nickels and dimes, you get dollars in size. So I would like to give a shout-out to my three coworkers who made this happen: Ted, Dave, and Bush thank you guys for taking full ownership of our Company's financial and operational targets, and delivering for all of our stakeholders. This is just one example of how our co-workers are feeling empowered to apply the CE Ways to their everyday work and ultimately improving performance throughout the whole company. The visual on Slide 6, my personal favorite serves as another reminder of our team's ability to adapt to deliver the financial results you have come to expect, regardless of the headwinds. 7% EPS growth every year is not an accident. We wrote the book on adapting to changing conditions and delivering results in the current year that enable next year's success. Consistency is our hallmark. And this year is no different. We continue to ride that roller coaster and it has been a wild ride so far this year so that you can count on the predictable EPS and dividend growth you have come to expect. Looking to regulatory matters, Commissioner Dan Scripps was recently named Chair of the Public Service Commission here in Michigan. He has taken over for Commissioner Talberg, who is being considered for a new role at the Ercot Board beginning in January 2021. We want to thank Tally for her leadership and look forward to continuing to work with her through the remainder of her time on the Commission. We congratulate Dan Scripps as he transitions into his new role. We will remind you that the Commission ordered utilities to defer uncollectible accounts and track those expenses above what is currently approved in rates, which speaks to our constructive regulatory environment here in Michigan. We are thankful to be able to work with the Commission to serve our customers in a caring way during this very uncertain time. We also have pending gas and electric rate cases, and the MPFC staff's position in both demonstrate great alignment with our capital investment plan and rate base growth. We expect an order in our gas case in October and on our electric case by the end of the year. Thanks to low-priced commodities, our cost-saving capability, and no big bets investment philosophy, we can both invest in safety, reliability, and resilience of our infrastructure and protect customers from price spikes and surprises through tough economic times like these. The needs of our system do not change because of a global pandemic, and our customers' expectations don't either. Our business model allows us to serve both. Now turning to enterprises, where I'm pleased to highlight the measured growth of our contracted renewables business. As you may have seen last week, we acquired a majority ownership of a 525 megawatt contracted wind project. Construction of the project is largely complete and has an expected commercial online date set for later this month. The project will offer utility-like returns and is largely committed to Facebook and McDonald's as customers. The bulk of the project is being financed with tax equity, and the remainder will be financed with cash-on-hand from our upsize hybrid offering and without the need to issue incremental equity beyond our planned $250 million this year. This project continues our track record of developing renewables for key corporate customers while minimizing risk and providing attractive returns to complement our existing portfolio of assets, including DIG.

As you are well aware, especially this year, conditions are always changing. Our entire team has demonstrated our ability to adapt for the good of the people we are privileged to serve. This agility has enabled us in the past and will enable us in the future to deliver consistent industry-leading performance year after year after year. With that, I will turn the call over to Rejji.

Thank you, Patti. And good morning, everyone. For the second quarter, we delivered adjusted net income of $139 million which translates to $0.49 per share. Our second quarter results were $0.16 above our Q2 2019 results largely due to cost performance, favorable weather, and rate relief net of investment-related costs utility. Our non-utility business performed as expected. As EnerBank had increased origination volume and enterprises had planned outages at its facilities. Our adjusted earnings for the quarter exclude select non-recurring items primarily related to severance and retention costs associated with the pending retirement of our coal facilities and expenses resulting from a voluntary co-worker separation program, both of which commenced in the fourth quarter of 2019. Year-to-date, we have delivered adjusted net income of $384 million or $1.35 per share, up 25% from the same period in 2019, as Patty noted. All-around we are tracking as planned and navigating the impacts of the pandemic by delivering on cost reduction initiatives and planning conservatively. As highlighted during our first-quarter call, we are closely monitoring our electric sales of the utility, which has historically been our most sensitive financial metric during economic downturns, particularly in the commercial industrial segments. At the end of April when we were in the initial stages of the pandemic, with extensive social distancing measures in place statewide, and most businesses closed, we experienced significant declines in our commercial and industrial normalized load while residential load increased as people stayed at home. I'm pleased to report that with a phased reopening of Michigan's economy over the past few months, C&I electric sales have begun to recover, particularly in the higher margin commercial segment. And what we are witnessing in Michigan is that while businesses reopen, they are maintaining high levels of mass teleworking, which drives power consumption at homes during business hours. So our residential sales have remained elevated, while commercial industrial sales are starting to return to their pre-pandemic levels. Our normalized load trends for the quarter reflect some of this, and we are even more encouraged by what we have observed in July, given the visibility afforded by our smart meter technology. The bar chart on the upper left-hand side of Slide 11 highlights our year-to-date normalized load trends, which show total electric sales down about 5% exclusive of one large low-margin customer. However, the aforementioned favorable sales mix has largely mitigated the year-to-date decline in normalized load. And I will remind you that every 1% change in residential sales equates to over $0.03 of EPS impact on a full-year basis. And our combined electric and gas customer contribution skews towards the residential segment. Our sales outlook for the full year reflects a sustained level of favorable mix in residential sales up around year-to-date levels and with conservative assumptions around the recovery of the commercial-industrial segments. Lastly, given that the coronavirus is not yet fully contained, the low end of our sales outlook range incorporates a stress scenario which assumes a second wave during the latter part of the year. Switching gears to EPS, you can see the key items impacting our financial performance relative to 2019 and our waterfall chart on Slide 12. If I could summarize in two words the key driver of our financial performance in the first half of 2020, it would be cost performance. As noted in the table on the left-hand side of the page, as Patty noted, we delivered $0.19 of positive variance versus 2019 by reducing operating and non-operating costs throughout the business, which more than offset the $0.07 of negative variance due to weather in the first half of the year, and the C&I sales degradation and emerging costs directly attributable to the pandemic. It is also worth noting that the levels of cost savings achieved in just the first half of the year exceed previously referenced historical levels of cost performance over the past 10 years. As we step into the second half of the year, as always, we plan for normal weather, which in this case implies $0.07 of negative variance versus the prior year. We are also assuming a constructive outcome in our pending gas case, which equates to $0.02 per share of pickup. Lastly, we are ever mindful of a potential resurgence of the virus in Michigan, and other common sources of risk to our business such as mild weather and storms. As such, we are planning conservatively by continuing to deliver on our cost reduction initiatives to establish sufficient contingency should any of the aforementioned risks arise. You can see on the table on the right-hand side of the page, the potential EPS impacts of the forecasted sales range I referenced on the prior slide, which, as noted, incorporates a potential second wave in Michigan, as well as additional expenses related to the pandemic, which we estimate at $0.09 per share in aggregate. To offset these potential costs and risks, we are on track to deliver another $0.10 per share of cost savings, which is further supported by an additional $0.10 per share of weather-related tailwinds that we have observed in our July electric sales. This slide path provides good financial flexibility heading into the final five months of the year to mitigate risks that emerge in 2020 while beginning to de-risk 2021 and beyond through operational cost pull ahead and other means to the benefit of customers and investors. Now on the capital, our customer investment plan remains on track for the year as we have continued to make progress on our numerous electric and gas supply and infrastructure projects while keeping our co-workers safe by adhering to CDC guidelines. We are often asked whether we have seen disruptions in our supply chain for renewable projects and I'm pleased to report that we remain on-track on all fronts. In fact, our Gratiot and Hillsdale wind farm projects, which will collectively supply over 300 megawatts and help us meet Michigan's 15% renewable standard by 2021, are on course for commercial operation in 2020. Generally, we continue to make progress towards the 1100-megawatts of new solar supply through build transfer agreements and contracted solutions by 2024. As a reminder, this represents the first tranche of the 6000-megawatt program that Patti noted as approved in our integrated resource plan in June of last year. Longer term, our current plan calls for approximately $12.25 billion of customer investments over the next five years, supporting rate-based growth of 7% over that period. This capital plan reflects the continued monetization of our electric and gas infrastructure as well as increased investments to de-carbonize our electric generation assets. We will also remind you that our five-year customer investment plan is not limited by the needs of our system, but instead by balance sheet constraints, workforce capacity, and customer affordability. To elaborate on the point around customer affordability, as we work toward delivering on cost reduction initiatives in 2020, our bias remains toward projects that deliver sustainable savings to create long-term headroom in customer bills. As you will note on Slide 14, our $5.5 billion cost structure offers ample opportunities to reduce costs through the exploration of high-price PPAs, the retirement of our full fleet capital enabled savings as we modernize our electric and gas distribution systems, and the continued maturation of the CE Way. The long-term headroom created in our electric and gas bills by these efforts will support our substantial customer investment needs of the utility to the benefit of customers and investors. You can see the long-term effects of our historical cost reduction efforts in the chart on the right-hand side of the slide, which illustrates how we have managed to keep customer bills low on an absolute basis and relative to other household staples in Michigan while investing over $17 billion of capital over that timeframe. As I have said in the past, paying $5 to $6 per day for clean, safe, and reliable electricity and natural gas is an extraordinary value proposition, due in no small part to our cost discipline and triple bottom line mindset. Switching gears to our financing plan, we are quite active in the second quarter, opportunistically tapping the market to complete the vast majority of our planned financings for the year. From an equity financing perspective, we announced our Q4 call, our plan to issue up to $250 million of equity, all of which is priced under existing equity for contracts. We exercised $100 million of that capacity late March with the remaining $150 million tranche still outstanding. We also filed a perspective supplement during the quarter for $500 million to refresh our ATM program, which is intended to cover our equity needs over the next three years. All of our financings have been executed at terms favorable to our plan, which offer entry year savings and help de-risk the future. We have also maintained a healthy bias toward liquidity management, with over $3 billion of net liquidity available in the event capital markets become choppy again. As we look ahead, we will continue to maintain flexibility and capitalize on accommodative market conditions when they emerge. And with that, I will pass it back to Patti for some closing remarks before we open up the lines for Q&A.

Thanks, Rejji. Our team is committed to delivering for customers and you, our investors. The capital you provide is critical; our long-term track record of managing that capital speaks to that commitment. We remain good stewards of our balance sheet with prudent planning and already this year we have executed financings at attractive rates that enable us to fund our capital programs. We continue to rely on the CE Way and lean into our lean operating system we have in place. And as a result, we improve both our cost structure and our customer experience each and every day. Michigan continues to remain a top-tier regulatory jurisdiction with forward-looking test years and ten-month rate cases; we are fortunate to have such a constructive regulatory framework in statute. Our system remains in great need of replacements and upgrades that won't go away as a result of the current pandemic. We are fortunate that our plans have embedded structural cost reductions in the form of retiring coal plants and PPAs retiring. None of this comes at a price to our planet, and our home state of Michigan. Our net zero carbon and methane plans remain as important today as the day we established them. Our model holds together well and that is why the thesis remains strong. And that is why we can rely on our triple bottom line to get us through this ongoing pandemic, just as it has in the past and will do in the future. With that Rocco, will you please open the lines for Q&A?

Thank you very much, Patti. The question-and-answer session will be conducted electronically. Our first question today comes from James Thalacker with BMO Capital Markets. Please go ahead.

Good morning, guys. How are you?

Great. Good morning to you.

Hey, James.

Just real quick follow-up. Maybe this one is for you, Rejji. Clearly July has been hot and you have actually had the benefit of the mix with revenue continuing to be very, very strong, commercials kind of trending on the lower end of where your forecast was. But industrial is kind of on the higher end. As you think about sort of the full-year, it seems like those things have kind of bounced out and kind of kept in check, as you have pushed cost savings through but, Rejji mentioned kind of sort of maybe we see a double dip on COVID as we go into the back half of the year. How are you thinking about those sales forecasts, as we think about the second half, in case we do have sort of a resurgence in the virus?

Yes, James, good question. So, we did take that into account. And so I will point you to Slide 11, where we show the downside range embedded in our full-year forecast in the lower left-hand corner of the page. And so you can see we are taking into account a potential second dip and a stress scenario, and so that shows commercial backing up to around 12% on a full-year basis, which obviously means that the latter two quarters will be quite bad. And then you can see industrial at 18%, again on the low end. And that excludes one large low margin customer, which would even make that number a little lower. And so we are taking that into account. And I will also point you to the next slide, Slide 12, we estimate what that margin impact will be at $0.07 of EPS dilution. We are also mindful of the potential emerging costs that may come around if there is a second dip. And so we are taking into account quarantine-related expenses, potential sequestration-related costs, and we think that is probably another $0.02. And so all in, we think there is about $0.09 of EPS-related dilution in the event there is a double dip. And so when we look at July sales based on our smart meter data coupled with our cost savings that we feel very good about achieving over the second half of the year, we feel like we have sufficient cushion to stomach that downside case. Now obviously, it is a pandemic and this is unprecedented, but we feel good about the road ahead just based on our current calibrations.

Okay, great. Thanks for pointing that out. I appreciate it. Congratulations on a great quarter.

Thanks.

Our next question today comes from Jonathan Arnold with Vertical Research Partners. Please go ahead.

Good morning, guys.

Good morning, Jonathan.

Hey.

Rejji, could I just ask you, if you can give us a little bit more of a sense of the sort of trajectory that you have seen on the sales in different classes? You are obviously showing us here today. We have the second quarter and the release, and then you made some comments about July, sort of trending better, I think, before we talk about the weather, but just a feel for kind of how you maybe the sort of latter part of this period is looking relative to the Q2 average?

Yes, sure. I would say it has been a very nice progression. If you think about the months in Q2, obviously April, I would say represented the bottoming out. And so as we highlighted in our Q1 call where we had pretty good visibility on April, we were down about 20% to 25%. And then as we progressed into May and June, we saw a very nice progression as the state reopened. And so first you had the industrial sector start to come back around mid-May, and then non-essential retail shortly thereafter. And so, with the gradual reopening of the state, we are now seeing C&I levels really come in. And so to give you a data point, for June for commercial, we were about 9% down, and we were basically 20% to 25% down in April. So, there has been a nice recovery and the July trends at this point, it is early days, and so I really try not to overreact to smart meter data, but we are looking at about 90% to 95% of pre-pandemic levels for our commercial industrial sales. And so there has been a very nice, gradual recovery month-over-month, over the course of Q2 and now into July. So we are cautiously optimistic. And you can see that reflected in the full-year forecast. But needless to say, we plan conservatively. And so in the event, there is a double dip, twin peak, whatever you want to call it, we are going to make sure we have enough cost savings and other sources of contingency to mitigate that risk. Is that helpful, Jonathan?

That is great. Thank you for that. And then just on - there was a number mentioned $65 million on cost saving. And I heard it was Patti's prepared remarks that was incremental to what you delivered in the first half, but could you just tie that $65 back to what you are showing on Slide 12 for example. Where is that?

Yes, Jonathan that is embedded in $0.19 year-to-date savings. But part of the $65 million will carry through and be realized as the year progresses. So there really is sort of apples and oranges. But let me be clear about a couple of things. $65 million is definitely not the finish line. And again, as you have noted, it doesn't reflect all of the year-over-year savings year-to-date. The team's identified $65 million in operational cost reductions so far this year. And so when we add in other year-over-year additional non-operational savings, that is again, what Rejji's point about $0.19 year-to-date. But again, that is not the full-year number. And it is a little bit apples and oranges. But one of the things to remind you is that, our best ever performance was $0.15 for a full-year. We talked about that in Q1. And so you can see why we are so proud of this team. And why I'm glad that we started preparing for this year four years ago when we launched the CE Ways. You can't make a friend when you need one. And it takes time. And so I'm grateful that we are launching a cost savings program this year. We are relying on our friends, the CE Ways, and she is delivering record levels this year right on time. So, I would be happy to give some additional color to that. But just like the story of the month, that literally is happening all over the company. It has been four years in the making so proud of the team.

Thank you very much.

And our next question today comes from Julien Dumoulin-Smith with Bank of America. Please go ahead.

Hey, good morning team. Congratulations on continued success as you say on CE Ways. But if I can perhaps start with the last question left off? Can you talk about how much contingency you have left in your program? Obviously, I imagine and even prepared for a second quarter results, the way that the July weather has trended already has shifted to meet and your overall expectations for contingency even relative to the $0.10 that you were after the back half of the year. So can you talk about how this even positions you in the 2021 based on what even you are disclosing here if that is a fair way to ask the question as well.

Yes, it is a great question, Julian, because we are thinking about it all the time. Rejji talked about the $0.10. And so that is sort of in our pocket in the event of greater risk as the year progresses, but we are always redeploying cost savings back into the business. So, it is never a question of what is sustainable for us or whether we are constantly finding those savings. We are constantly eliminating waste and then redeploy those savings as needed. What is cool about these smaller savings and the way we do it is it gives us optionality. We will improve the number of miles trimmed, for example, per dollar or reduce the cost per visit service replaced. But then if we can trim more trees or replace more services we will, whether that is in the current year, because we have got favorability or in the future year because in fact, we pull ahead work. So, we have got $0.19 year-over-year cost savings or about $75 million, which again, that is not an accident. We are in the process of planning for 2021. But the key is like every year, we maintain a significant amount of flexibility to manage our business to meet both the commitments to customers and to you, our investors and great analysts like Julian, you know we ride this roller coaster so that no one else has to. Everyone else, all of you get to talk on those consistent, predictable outcomes because we are making those choices year-in and year-out. So, now when we look at what we have achieved year-to-date and expect for the rest of the year, quite a bit of that can carry over into next year. But again, we always fine-tune and in a particular year we align the plan to what is in rates. So, we are just continuing to conclude our rate cases which we will be able to align with our approved plans and then our cost savings can be deployed as required. Is that helpful?

Absolutely, thank you. If I can pivot a little bit more to the strategic question here, obviously, you guys are getting deeper into the contracted wind signed outside of rate base. Can you speak a little bit more to how you see that business evolving in capital commitments within that, and maybe if I can ask it this way. How do you think about that as a percent of the total growth over time? Is it six to eight or just really kind of supplementary complimentary however you want to think it or frame it, curious, just given how large this initial investment is on the platform?

Great question, Julian. I will start and then I will let Reggie add some more additional details. The key criteria for us as we look at these opportunities, they are always opportunistic, given the market conditions, given the demands, we need to make sure that three things are true. Number one, that they are customer driven. We aren't doing one-off auctions to acquire assets. We are not way back in the development phases of projects. We are working with customers to have a repeatable business. And so for the example of Aviator, it wasn't an option. We knew the developer and these customers have a desire to grow their renewable energy and we are in a great position to further those needs. It is a key component of the planet part of our triple bottom line. Number two, they have to have utility-like or better returns; our utility business has a lot of demands for capital, it has a lot of opportunity for growth. So, a project like Aviator has to compete with other utility projects. Given that the bulk of our growth for the company is driven by the utility, these projects have to be really good for them to get a yes from us here. Number three, they need to not add risk to the consolidated business. So, this project, for example, has two high-quality creditworthy off-takers. You saw in the press release McDonald's and Facebook; the term of the PPAs are greater than 10 years. So, that is a good example of an opportunistic project that came to us because we have got a reputation for being able to close the deal and operate it well. And when it meets that criteria, then we continue looking at it. And so when we think about the long-term growth of the company to your question about the role it plays in six to eight, the enterprises business plays about 5% of our earnings now. We don't expect to have non-regulated growth beyond that 10% of our total company portfolio. So, the bulk of our growth is utilities. That is our bread and butter. That is what we focus the bulk of our time on. But where enterprises can grow with the utility doing what we do well, which is operate renewable projects and we serve customers well, then it is a nice compliment to the - and a portion of that 6% to 8%.

Yes, Julian, the only thing I would add to Patti's good comments. Patti mentioned in her prepared remarks that there was a slug of tax equity. And that was not an insignificant slug. And so, if you look just on the surface and see 525 megawatts and then apply what you think is the standard cost per kilowatt, you can think the investment is quite sizable, but again, there is a pretty material slug of tax equity. And we are also a joint owner of the common equity for lack of a better characterization. And so, this really is not all that significant an investment from our perspective. In fact, it is quite comparable to the size investment we did for Northwest Ohio a year and a half ago. And so, we are being, as Patti noted, opportunistic. We are trying to hit singles and doubles here. We are not swinging for fences. And so, we will approach this as the type of business where again it can be, I think here where it is complimentary or supplement our portfolio, but again, we are not triples in homerun here.

Thank you. Our next question comes from Andrew Weisel with Scotiabank. Please go ahead.

Good morning Andrew.

Thanks. Good morning everyone. I wanted to ask a little bit more about the financing year-to-date in Page 15. It looks like you are well ahead of the initial plan. And a lot of that seems like it was done since the 1Q call. So wasn't purely reaction to your uncertainties around COVID I'm sure. Can you just walk us through why you were so aggressive with the debt, what your plans are for those term loans and how you think about the liquidity at over $3 billion?

Yes. So, Andrew, I will take the last part of your question first. I mean, at the end of the day, we do not intend to have a bunch of lazy capital sitting on our balance sheet. And so we fully expect the $3 billion to come down quite a bit by the end of the year. But again, as I mentioned in my prepared remarks, we are biasing towards liquidity management because the virus is not contained. And so in the event there is increased or continued volatility in the capital markets, we want to just make sure we have sufficient liquidity. Now, as you think about the components on page 15, you can see from a first mortgage bond perspective at the OPCO, we are well in excess of what we hadn't planned at $1.2 billion. But I will just note that there are a couple of maturities that we are addressing that will make those numbers look a bit more normalized. And so we have a term loan that you can see that we have yet to repay again in the interest of just erring on the side of extra liquidity, particularly given the relatively low cost. And so that is a $300 million term loan. We also pulled forward a maturity at the OPCO in 2022 that had a five handle and a very nice bit of positive carry in that trade. And so you take the two of those together that year-to-date, first mortgage bond issue to-date looks much more normalized relative to what we have in plan. And again, thinking about that same logic at the HoldCo. We did the hybrid, which is a lot higher than what we anticipated. But that is again, we have some flexibility in prepaying a term loan before it comes due or as it comes due. So I wouldn't overreact. We have just been opportunistic and really, again, erring on the side of liquidity. But again, by the end of the year, I would be surprised if we were at that level of excess liquidity again by year-end, particularly given the capital needs we have at the utility.

Okay, great, that is helpful. Next, just to be very clear, on page 12, the waterfall for the six months ago. That risk and opportunity box, obviously you are showing somewhere between $0.02 and $0.09 of negatives versus $0.20 of positives. That I believe the minus $0.07 to minus $0.03 you have for cost savings usage and other. Am I reading this right that you are basically saying that negative is kind of what you are expecting from COVID, but you have $0.10 of additional cost offset and $0.10 of July, whether that should help you out. And if that is the case, if nothing else changes, would you be able to reinvest those $0.20 by year-end?

Yes, so the quick answer is we feel quite good about the contingency that we have expect to have accumulated over the - particularly when you take July weather. So, you have effectively some excess contingency based on the numbers we are seeing. What I will note is that just for full clarity is that cost savings as you can see - there is a lot more than just the items we have enumerated in that table. And so it is a hodgepodge of things. But we just highlighted here what we think is most noteworthy. And again, we have taken into account in this math in the table, a stress scenario which obviously is in our base case, what we are seeing even in the event that we start to see margin erosion for commercial and industrial like we on Page 11 - we still think that couples with cost that both could come again, if you have a second wave, we feel like we have generated and will generate enough cost savings, as well as with the July weather where we have sufficient contingency. But, Patti, if you would like to add to that, by all means.

Well, I will just get to the latter half of your question, Andrew. We expect that we will be able to redeploy funds this year, for the benefit of customers, and we are always planning for next year. So, we just want to make sure that we always and we have great capability to deploy those funds as required and pull ahead expenses. And so we have got ample time between now and year end to make those adjustments. And we have had some success with some regulatory treatment near year-end where we can push forward some programs and some benefits for customers into future years. And so we really think that there is a good opportunity for us to leverage any favorability that we would have this year to serve customers and investors.

Good positioned to be and I'm sure your trees will be well trimmed by year-end?

Our customers love that and so do we.

Great. One last one if I can on the rate cases, your neighbors in Michigan recently settled their natural gas case and deferred the electric case by a year. I know that no two utilities or rate cases are the same. But do you see potential for something similar for your rate cases? Are there certain factors that may preclude taking actions like this?

You know it is a creative option leveraging those deferred income taxes and so certainly would be open to considering it. We will keep looking at it. We have got good alignment with the staff on both our electric and our gas cases they are both in flight as we speak. And so we would look at it. But I will remind you that we don't object to annual filings for two reasons. Number one, it allows us to flex the Capital Planning, all of our rate cases are forward-looking. And so as the needs of the system change, as conditions emerge and because we don't have a big bet capital plan, we can modify our plan on a manual basis to best reflect the greatest needs for customers. And so that is important to us. But I would also say that our rate cases are also opportunities to pass on cost savings to customers. And so when we think about the last seven years, for example, we have invested $15 billion of capital, and our electric bills are down 5% and our gas bills are down 30%. I mean, that is the math that backs up our business model that says we can invest capital, particularly capital that saves customers money in the transition to cleaner energy and the reduction of these large PPAs coming forward. Skipping rate cases actually prevents us from passing along savings to customers. So we certainly are taking a look at the deferred income tax and perhaps delaying a case, but it isn't necessary for us to protect the affordability for our customers.

Great. Thank you so much.

Yes. Thank you.

And our next question comes from Shahriar Pourreza with Guggenheim Partners. Please go ahead.

Good morning Shar.

Hi, good morning. It is actually here for Shar. Congrats on a great quarter.

Thank you.

A lot of questions have been already answered. And it has been very comprehensive. But just going back to the Aviator project. Just wanted to kind of get some thoughts on kind of given that the decoration was prompted kind of relatively outside of plan I guess. Does that imply returns above utility ROE? And part of this acquisition said within the current CapEx plan?

Yes, I appreciate the question. As Patti mentioned, we assess all these projects when considering capital allocation across the company due to the competitive internal environment. We ensure that the returns are at least comparable to those of the utility or even better. We are confident in the economic profile of this project. Additionally, as Patti pointed out, we want to avoid attributing excessive terminal value to these projects and ensure there is reliable creditworthy potential, which this project meets. We do not equate utility capital investments with these types of projects in the $2.25 billion mentioned in our Q4 2019 call. We remain on track to achieve that, and this is an opportunistic move that does not alter our financing plan, as Patti indicated. We see this as a solid opportunity; it’s not a home run but more like a single or double, aligning with our approach to evaluating and undertaking similar projects in the future.

Thank you. Our next question comes from Michael Weinstein with Credit Suisse. Please go ahead.

Hi, guys.

Hi Mike.

Hey Mike.

A lot of my questions were answered. But wanted to get on Slide 21. Just the NOLs and credits that are increasing over time that because you have more renewable projects that you are expecting to bring in over time, or is that just from the existing project portfolio?

Yes, it is more on the form. I mean, we have always had a good balance of NOLs and credits. But we do see a little bit of accretion in that balance because of some of the renewables we expect. So that is larger, but that is Michael.

So I mean, that would imply that you are probably not going to have much of a tax appetite and you would probably have to continue using tax equity as you invest in these renewables.

Yes, where we sit at this point, we don't expect to be really a meaningful federal taxpayer until around 2024. And so our sense is that tax equity will likely be this financing vehicle for some time.

And is it possible, could you give us a sense of the cost that you are seeing for it out there? Where is the cost of capital?

Yes, I will say it is attractive. as you know obviously, it is not as cheap as a debt - plain or common debt financing. But also, it is not as expensive as traditional common equity. And so it is in between and we think the rates that we have negotiated for this particular transaction are quite competitive.

And so, I mean you are not seeing for instance, a decline in investor appetite due to the lower tax rates?

No. like I said, this is a pretty meaningful slug of tax equity that has been in this project and for other projects that we evaluate from time to time. We haven't seen any contraction in the market for tax equity, but we will see. I mean, obviously, if there is another bit of volatility in the market, because there is a double dip or twin peak, whatever you want to call it, now market may back up for now, it has been quite accommodative.

Okay. And one last question. I mean, with the increase in NOLs that you have - in tax credits are in that on Slide 21. How many more projects do you think that sort of implies by 2024?

Yes, I wouldn't say it is that, I wouldn't say our financial planning is that prescriptive. Again, we intend to be opportunistic on these types of projects. And so we are assuming, I think, a modest level of additional project flow and that is where you see again a modest bit of credit accretion. So again, we are not swinging for the fences here and assuming that there is going to be material increase in our NOLs or our credit specifically because of projects like this.

Got you. Alright, thanks a lot, Rejji. Thanks a lot, Patti.

Thanks, Michael.

And our question comes from Jeremy Tonet with JP Morgan. Please go ahead.

Hi. Good morning.

Hey. Jeremy.

Yes. Good morning. Just one question for me here. With the bank side, just wanted to see if you could provide a little bit more color on how things shaped up the second quarter relative to your expectations there and just general thoughts and trends to the balance of the year on the bank side would be helpful?

Sure. I think the quick answer is the bank is on track. And so we have got it to $0.18 to $0.20 for the full year and they are on course to deliver that. Now, you will see for the quarter, and for the period-over-period comp, they were behind by about a penny that was per plan, because they started the year quite well. And obviously we have implemented the new accounting standard current expected credit losses and so that has a material impact on the provision for loan losses. And so when you comp it to 2019 you may see in the third quarter a little bit of leakage quarter-over-quarter. But we are fully on track; we have continued to see very good origination volume across most of the projects that we provide financing for and I think June was a historical month of loan approvals and loan originations. And so we are trending on plan and really haven't seen much backup, but for I would say April for a little period of time.

That is very helpful. Thank you for taking my question.

Thank you.

Thanks, Jeremy.

And our next question comes from Travis Miller with Morningstar. Please go ahead.

Good morning, everyone.

Hey Travis.

Not to be labor this here, but going back to Slide 12 again, and just want to triple check, I'm understanding. So the $0.19 you have saved so far this year, and then going over to the right side of the $0.10. Are those the same number such that when you talk about redeploying operating costs or anything other - any other savings that the $0.19 done for the muted $0.10 for the full-year, or is there something else going on I’m not understanding?

Yes, so just to be clear, Travis, so in the first half of the year, that $0.19, remember that is a comp relative to 2019. And so you have a few things flowing through that from non-operating savings, you can see some flex and work optimization. The $0.10 that you see on the right-hand side that aligns with the 65 million that Patti noted or released a good portion of it that we have identified and realized to date, and so that is what you see in the year to go is really the vast majority of the $65 million of operating cost savings that we have delivered through the CE Way. So, the lean operating system, supply chain, a little bit of work mix that was favorable as we take own resources over to capital projects, particularly during the shoulder months, and we were quite effective at that. And so that $0.10 is largely the $65 million again that Patti noted in her prepared remarks.

Okay. Very good. And is there a scenario where if you continue to have the favorable weather, then you could actually have that number come down such that you pull ahead or cost than you might have incurred in 2021 or 2022, as you have in the past years?

Yes, that is great. That is right, Travis. We definitely pull ahead those savings, and when we can prepare for 2021. And so to get really specific, $0.19 plus the $0.10, that is all opportunity. And so when you look at our Slide 6, which is what I sometimes refer to as the swish-swish slide, it is the roller coaster slide. We will, as the year materializes, have options about how to deploy those savings, whether they are to the benefit of this year or to the benefit of 2021 and 2022. So we are definitely in forward planning right now for next year on how best to de-risk 2021 with the upside that we have identified through these cost savings.

Okay, great. I appreciate. That is all I had.

Yes, thanks.

Thank you.

And our next question comes from Durgesh Chopra with Evercore ISI. Please go ahead.

Hey guys. Good morning. A lot of discussion. I just have one question. Going back to these O&M savings. How should we think about how are they handled in your ongoing rate cases? Are there - so Patti you mentioned 2021. So as we think about 2021, should we assume that this will be reflected in your rate plans? In other words, some of this or most of this goes back to the customers, how you sort of deal with that in your ongoing rate cases?

Yes. Because we have forward-looking ratemaking we always align our rates in our O&M. So, internally when our rate cases approved, then we align the spending to match it. And so when we have favorability or we have cost savings that are in addition to what is in a rate case in year, then in that current year we may have a short-term benefit of that. But that is why we will take those short-term benefits and reinvest them, for example, trim more trees or do more maintenance or pull ahead some expenses from next year. But we are always because of that forward-looking test year, we really are able to align our spending and our rate outcomes.

Understood. I appreciate it guys. Great quarter. Thank you.

Thank you.

Thank you.

And ladies and gentlemen, this includes the question and answer session. I would like to turn the call back over to Patti Poppe for final remarks.

Thank you, Rocco. Great to be with everyone today. Thanks so much for tuning in. And please be safe and be well. I hope you and your families are able to come together and be healthy during this very challenging time. We do look forward to seeing you face-to-face someday; we can't wait and we miss you all. Thanks so much for tuning in.

Thank you. This concludes today's conference call. And thank you everyone for their participation. Have a great day.