Good morning, everyone, and welcome to the CMS 2021 Year-end Results. The earnings 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. Just a reminder, there will be a rebroadcast of this conference call beginning today at 12:00 P.M. Eastern Time and will be viewed February 2022. 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. Sri Maddipati, President and Vice President of Finance and Investor Relations. Please go ahead, sir.

Thank you, Rocco. 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. Now I'll turn the call over to Garrick.

Thank you, Sri, and thank you, everyone, for joining us today. I'm pleased to report that the team continued to deliver strong performance in 2021, demonstrating consistent results across the triple bottom line for our coworkers, customers, communities, and you, our investors. Allow me to take a few minutes to share the big wins this team accomplished in 2021. It is a point of pride that CMS was named the number one utility in the U.S. by Forbes for women and for workplace diversity. It starts with our coworkers and we know that companies that value and practice diversity, equity and inclusion deliver stronger performance. Our commitment to people, our coworkers and customers was high all year. For our coworkers, we delivered the 11th straight year of first quartile employee engagement. For our customers, we delivered first quartile customer experience, unlocking several programs which support our most vulnerable and prepare all for a cleaner future with EVs and renewable energy generation. This year's highlights include the expansion of our Voluntary Green Pricing program, which allows for an incremental 1,000 megawatts of owned renewables and our PowerMIFleet EV program to meet the demand of Michigan businesses, governments, and schools as they electrify their fleet. And just this week, we announced along with General Motors, the plan to power three existing auto plants with 100% clean energy through our Voluntary Green Pricing program. And I know – Yes. Yes, I know all of you want to hear about our IRP. Our clean energy plan, also known as our IRP, places us in a solid leadership position on the transformation to clean energy. It has us out of coal by 2025, which achieves 60% carbon emissions reduction. I am pleased with the progress we are seeing in the regulatory process. I look forward to landing the IRP in 2022. I also want to share the progress we have made with our gas system. Our commitment to be Net Zero methane by 2030 is industry-leading. We are making our gas system safer and cleaner by replacing older mains and services with modern materials. This year, we reduced methane emissions by more than 445 metric tons and executed on our best year ever for main replacement. This stands to reduce methane extends beyond our system with exciting new programs, which will make a positive impact on the planet. We recently announced a plan to build and own our first renewable natural gas facility with a Michigan dairy farm, which is included in our pending gas rate case. This facility would be a regulated asset and the emissions reduction will remove the equivalent of 4,000 gasoline-fueled vehicles from the road annually. Clearly, we are on our way to a safe and clean gas system. Finally, I want to talk a little bit about Michigan, our home state, our service territory. In both our gas and electric business, we are seeing new service connections up over 2020 and 2019 above pre-pandemic levels. In fact, we have not seen this level of new electric service connections in the last 10 years. We also attracted 105 megawatts of new industrial loads to our service territory, which brings with it 4,000 new jobs and more than $1 billion of investment. And we are expecting even more new load growth in the state. The work we did at the end of the year on two important growth mechanisms further enhances Michigan's competitive position. We filed an economic development rate in November, which was quickly approved by the Michigan Public Service Commission in December. We also worked closely with the legislature, business groups, and the Governor's office on a package of economic development incentive bills that passed with bipartisan support signed by our Governor in December. With these improvements, I expect further announcements this year on several new projects. For you, our investors, I'm pleased to share we delivered our financial targets with another year of 7% adjusted EPS growth. We continued our long track record of managing costs and keeping prices affordable through the CE Way; $55 million of cost savings were realized in 2021. When I step back and reflect on 2021, it is this strong execution and results that you and we expect, and it meets our commitment to the triple bottom line, positioning our business for sustainable long-term growth. Strong execution leads to strong results and 2021 marks another year of premium growth. We delivered adjusted earnings per share of $2.65 in 2021 at the high end of our guidance range and up 7% from 2020. And in January, the Board approved an annual dividend increase to $1.84 per share. In addition to raising our annual dividend in 2022, I'm pleased to share that we are raising our 2022 adjusted full-year guidance of $2.85 to $2.89 from $2.85 to $2.87 per share. I am confident in our plan for 2022 and our long-standing ability to manage the work and deliver industry-leading growth. Longer-term, we remain committed to growing adjusted EPS on the high end of our 6% to 8% growth range. Looking forward, we continue to see long-term dividend growth of 6% to 8% with a targeted payout ratio of about 60% over time. And finally, I'm pleased to share that we have rolled forward our five-year utility customer investment plan, increasing our prior plan by over $1 billion to $14.3 billion through 2026. On Slide 5, we've highlighted our new five-year $14.3 billion customer investment plan. This translates to 7% annual rate base growth and supports the two key focus areas of our strategy, making our electric and gas systems safer and more reliable and paving the way with a clean energy future with Net Zero carbon and methane emissions. You will note that about 40% of our investment mix is aimed at renewable generation, grid modernization, and main and service replacement on our gas system that support the clean energy transformation. Furthermore, we continue to increase our investments in what our customers count on us for every single day, safe and reliable electric and natural gas systems. You will also see that we continue to plan conservatively and have ample upside in projects not factored in this plan, such as our IRP and Voluntary Green Pricing programs. We remain focused on the regulatory process as we make investments on behalf of our customers. In December, we received an order in our electric rate case. It offered several opportunities for us to improve our case process, and we are hard at work as we prepare for our next phase. This order did support our plan by maintaining our existing 9.9% ROE, increasing our regulatory equity ratio by 34 basis points and approving $54 million in revenue requirement exclusive of $27 million of lower depreciation approved prior to the order. We expect to file our next electric rate case early this year and anticipate an initial order in our IRP in April, and a final order in our gas rate case is expected by October.

Thank you, Garrick, and good morning, everyone. As Garrick highlighted, we delivered strong financial performance in 2021 with adjusted net income of $767 million or $2.65 per share, up 7% year-over-year of our 2020 results. I'll note that our adjusted EPS excludes select nonrecurring items, most notably the financial performance of EnerBank, the gain on the sale and related transaction costs, all of which are disclosed in the reconciliation schedule in the appendix of this presentation and posted on our website. The key drivers of our full year financial performance in 2021 were rate relief, net of investments, coupled with strong volumetric sales in our electric business. These sources of positive variance were partially offset by increased operating and maintenance expenses in support of key customer initiatives related to safety, reliability, decarbonization, and higher service restoration costs from storm activity. To this last point on storms, we saw a record level of storms across Michigan in 2021, particularly in the final five months of the year, including December, and we still managed to deliver at the high end of our EPS guidance range. Our ability to withstand such headwinds, quite literally in the case of 2021, and deliver the financial results you've come to expect highlights our track record of planning conservatively, managing the work, and relying on the perennial will of our dedicated coworkers. We deliver on the triple bottom line irrespective of the conditions. Moving beyond EPS, on Slide 8, you'll note that we met or exceeded the vast majority of our key financial objectives for the year. It is worth noting that even with the aforementioned headwinds, we still managed to deliver over $1.8 billion of operating cash flow, which exceeded our plan by over $80 million due to strong working capital management. The only financial target missed in 2021 was related to our customer investment plan at the utility, which was budgeted for roughly $2.5 billion and we ended the year just shy of that at $2.3 billion, primarily due to the timing of select renewable projects, which were largely pushed into 2022 and 2023. To close the books on 2021, we successfully completed our financing plan ahead of schedule, as noted during our third quarter earnings call, issuing no equity during the year, given the EnerBank sales while maintaining solid investment-grade credit metrics. Moving to our 2022 guidance, on Slide 9, we are raising our 2022 adjusted earnings guidance to $2.85 to $2.89 per share from $2.85 to $2.87 per share, which implies premium annual growth of our 2021 results, as Garrick highlighted. As you can see in the segment details, our EPS growth will primarily be driven by the utility as it has in the past several years. And we also anticipate a return to normal operations in enterprises whose financial performance in 2021 was largely impacted by an extended outage at DIG late in the fourth quarter. To elaborate on the glide path to achieve our 2022 adjusted EPS guidance range, as you'll note on the waterfall chart on Slide 10, we'll plan for normal weather, which in this case amounts to $0.01 per share of positive year-over-year variance. Additionally, we anticipate $0.05 of EPS pickup attributable to rate relief net of investment costs, largely driven by our recent electric rate order and the expectation of a constructive outcome in our pending gas case later this year. As a reminder, we also continue to see the residual effects of tax benefits from our 2020 gas rate settlement. As we look at our cost structure in 2022, you'll note approximately $0.21 per share of positive variance attributable to continued cost savings from productivity driven by the CE Way and other cost reduction initiatives as well as a return to more normalized levels of service restoration expense. As noted earlier, we're also assuming a resumption of normalized operating conditions in enterprises in the ultimate bar on the right-hand side of the chart, coupled with usual conservative assumptions around weather-normalized sales. As always, we'll adapt to changing conditions and circumstances throughout the year to mitigate risk and increase the likelihood of meeting our operational and financial objectives. Moving to Slide 11, which denotes our near and long-term financial objectives. In addition to the adjusted earnings and dividend per share target that Garrick noted earlier, 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. To that end, given the attractive valuation achieved in the EnerBank sale and our successful closing of the transaction in the fourth quarter, we do not anticipate issuing any equity through 2024, despite the increase in our five-year customer investment plan to $14.3 billion. Beyond 2024, we expect to issue up to $250 million of equity per year in 2025 and 2026. As for 2022 financings, our needs are limited to debt issuances at the utility and the settlement of existing equity forward contracts, the details of which you can find in the appendix of our presentation. Our model is served and will continue to serve all stakeholders well. Our customers receive safe, reliable, and clean energy at affordable prices, while our coworkers remain engaged, well-trained, and empowered in our purpose-driven organization. And our investors benefit from consistent industry-leading financial performance. We're often asked whether we can sustain our consistent industry-leading growth in the long term, given widespread concerns about inflation, supply chain and natural gas prices, among other risks. And our answer remains the same, irrespective of the circumstances, we view it as our job to do the worrying for you. Sustainable and agile cost management has been one of the key pillars of our success over the past several years. And as you can see in the breakout of our cost structure on Slide 12, there remain ample opportunities to reduce costs across the business. As you'll note on the right-hand side of the slide, we estimate over $200 million of episodic cost savings opportunities through coal facility retirements and the expiration of high-priced power purchase agreements, or PPAs. In fact, our PPA with the Palisades Nuclear facility will expire in April of this year, which will provide approximately $90 million of savings to our customers. These cost savings are above and beyond what we'll aim to achieve annually largely through the CE Way, our lean operating system, which, as Garrick noted earlier, was a key driver in our achievement of $55 million in cost savings in 2021 and $100 million worth in 2020. Given our track record of reducing costs, we're highly confident that we'll be able to execute our capital plan, delivering substantial value for customers and investors. To conclude my remarks, on Slide 13, we have refreshed our sensitivity analysis on key variables for your modeling assumptions. As you'll note, with reasonable planning assumptions and our track record of risk mitigation, the probability of large variances from our plan are minimum. And with that, I'll hand it back to Garrick for his final remarks before Q&A.

Thank you, Rejji. Our simple investment thesis has withstood the test of time and continues to be our approach going forward. It is grounded in a balanced commitment to all our stakeholders and enables us to continue to deliver on our financial objectives. As we've highlighted today, we have achieved another year of strong performance in 2021, executing on our commitment to the triple bottom line and are pleased with our strong results. I'm confident we're in a great position to continue our momentum throughout 2022 and beyond. We look forward to updating you as we head into another exciting year. With that, Rocco, please open the lines for Q&A.

Our first question today comes from Shar Pourreza with Guggenheim Partners. Please proceed.

Good morning. Good stuff this morning. A couple of questions here if I may, first, Garrick, you're guiding to the top end of 6% to 8%, which was kind of a change in language post-transformation, and now you kind of break out more details the upside potential for non-IRP CapEx. Just to confirm, is this upside included in the updated language around the growth rate? Maybe another way to ask is if you're already at the top end you have $4 billion to $5 billion of incremental spending items within sort of outside of the IRP. How do we think about this growth rate in the context of the upside spending opportunities you're highlighting this morning?

Yes, great question, Shar. And let me offer this just real clarity and offer a little bit of context. And so we're pleased with 2021 and delivering the high end of guidance. And as I shared previously, we've got a lot of momentum coming into 2022, and our raise in guidance should offer much confidence to the investment community on our strength here in 2022 and our confidence in the delivery in 2022. I'll remind you that our 6% to 8%, again, towards the high end of that range, that's off a 2022 base. So that's our projection going forward. We plan conservatively. And so again, you see a lot of upside in that capital plan, the IRP, the VGP type work. And so again, we'll weave those in as those materialize, we don't want to presume excess in those. That's why we are playing conservatively. But again, we expect to be the high end of that 2022 base. And so that's the nature of our growth pattern going forward. And I don't know, Rejji, do you want to offer some additional comments there as well?

Good morning Shar, thanks for the question. The only thing I would add to Garrick's comment is just to be – or I guess, for the avoidance of doubt is that the guidance toward the high-end of 6% to 8% of the 2022 base, that just assumes the capital plan we rolled there today of $14.3 billion of that five-year period, and the assumption of no equity through 2024. And so these other opportunities on the outside looking at the end of the year accounted for the IRP, the bond segment pricing program of AGP, those would give us a more confidence in delivering on that plan. So again delivery towards the high-end of 2022 is just based on the $14.3 billion of capital and the assumption of no equity through 2024. Those are the key drivers.

Got it. And then just to follow up. The rate base growth for 2026 is now 7%. It's a little bit of a slight change from prior year's language of “greater than 7%”, it's subtle. Is there sort of a lot of large numbers taking effect here just as we're thinking about modeling?

Yes. You certainly do have that because we're compounding off of a higher base, but it's a solid 7%, Shar. So I wouldn’t read too much into it.

Perfect. And then just lastly for me, in terms of the disclosure for 2025 through 2026 on the equity side, obviously, you're restoring back the historical $250 million per year. I'm sure, Rejji, you're thinking about this, but do you see sort of any opportunities to maybe mitigate, find some optimization on the financing side, given that you're predominantly 100% regulated, maybe a way to flex the balance sheet and credit metrics? Is there a way you can offset this?

We'll see. I mean, the current base case for modeling purposes should be $250 million per year in 2025 and 2026. But what you'll see in the appendix chart is we are assuming about over $10.5 billion of operating cash flow generation over the next five years. And so if we see upside to that, well, that certainly gives us more financial flexibility. We've also really done a nice job executing very attractive, I'll say, equity-like securities that get credit worthy equity-like status, such as the hybrids we've been doing from time-to-time. We had a perpetual preferred last year. They got nice equity credit. And we'll see if there are opportunities there. But the current working assumption should be that $250 million per year in those averages in 2025 and 2026.

Okay. Perfect. Congrats on the execution. It's really good. Thanks.

Thank you.

And our next question today comes from Jeremy Tonet with JPMorgan. Please go ahead.

Hi, good morning.

Good morning. How are you, Jeremy?

Good, thanks. It seems very clear from the slides there's various CapEx upside that we could see. But just wondering if you could dive in a little bit more for the timing on when these items could make their way into the plan and what we should be watching for there?

I assume you're talking about the incremental items and just to clarify your question?

Yes, the incremental CapEx opportunity.

Certainly. So as you know, we're in the midst of an integrated resource plan, and we don't want to presume, although we're confident in that plan. We don't want to presume the Covert facility and the DIG facility will move into the utility; there are certainly a lot of pretty good indicators around that. But nonetheless, we want to make sure that that's where it lands. And we'll see a final order in the IRP by June of this year. And so again, assuming success there, we would anticipate the Covert facility in 2023 and then the DIG facilities out in 2025 from an incremental opportunity. Our VGP, again, that's subscription-based, based on customers. We saw some positive traction in that; we announced this week with General Motors. But again, that construction would be – as those fill out and those are subscribed, that construction period would be in 2024 to 2027. And so that's the nature of – as that materializes, it would show up in that range.

Got it. That's helpful. And if these come to fruition, would this impact, I guess, the funding plan on the equity side?

Jeremy, this is Rejji. For now, again, we feel good about the funding plan. And we had said before, in the event the IRP gets approved, we don't believe we need to materially change our equity issuance needs. Now, the VGP plus the IRP, if we have those high-class problems, we would potentially have to recalibrate. But to be clear, that would only be outside of 2024. And so you think about the timing of the capital investments, Covert would potentially be before 2024. And again, we feel good about not needing to issue equity even in that scenario before 2024. Where we may need to recalibrate, if we get the IRP and good momentum on the VGP. Those outer years 2025 and beyond, we may have to take a second look there. But for now, again, we feel very good about the work assumptions of this plan.

Got it. That's very helpful. And just a quick last one, if I could. With regards to the electric rate case here, the outcome might have been a bit lighter than expected. And just wondering if you could comment a bit more, I guess, on the go-forward expectations in Michigan as far as the regulatory construct there as well as the specific drivers in 2022 that you're using to employ to kind of offset some of that softness.

Rejji and I will take team this. Let me be very clear. I feel good about the regulatory construct here in Michigan. And when I look at this rate case, there are two things to take away from it. One, there's an investor read-through on a strong and constructive ROE, 9.9%. That has been constructive, especially when compared with other jurisdictions. It's good solid equity thickness. In fact, our regulatory equity ratio grew by 34 basis points. That just, again, speaks to the nature of this commission and this regulatory construct. And again, all based in legislation, so don't forget that piece of it as well. The other piece of opportunity is clear in the order. And as a utility, we need to improve our business cases particularly in a forward-looking test year and the additional investments we want to make on behalf of our customer. We need to do a better job of showing the benefits as well as the cost when compared to historical. That's on us. We own that, and you can expect to see it in our next electric rate case. So let me hand it over to Rejji to walk through a little bit of why we have such confidence in 2022.

Jeremy, so as you think about the offset with the order or from the order, clearly, it really highlights the benefits of having a forward test year. And so where we had disallowances in that forward test year, we obviously can revise our capital and spend programs. And so that's a clear offset from some of the disallowances we saw. And then a couple of things related to 2021 and then in this test year so that gives us great confidence. And so as you may recall, we had plans to issue equity in 2021. And obviously, given the timing of the EnerBank sale, we didn't have to issue any equity that year. And so we've got some momentum from a share count perspective. That's helpful. I continue to feel quite good about weather-normalized load. We saw a really nice recovery from commercial and industrial sales over the course of 2021, and we anticipate seeing some of that in 2022 as well, particularly given the leading indicators that we've seen with respect to new service requests, which Garrick offered in his prepared remarks, and we continue to see upside from our residential customers given the sort of teleworking phenomenon that we think should stick to some extent. And then cost performance. Every year, I continue to be surprised to the upside by what the organization can deliver. So last year, our plan was about $45 million, and we delivered $55 million there. And then in 2020, I can assure you we didn't plan for $100 million in savings in the organization went and got it. And so those are all the drivers that we think will offset some of the downs that we saw in the electric rate order.

Got it. That’s very helpful. Thank you.

Thank you.

And ladies and gentlemen, our next question comes from Insoo Kim with Goldman Sachs. Please go ahead.

Yes. Thank you. My first question, you guys dealt with a lot of storms, especially in 2021. And I think in the last rate case, there were also just conversations about potential spending capital opportunities versus just using the expensing to – for restoration and whatnot. Did the more string of storms more recently identify any additional needs on the capital side that you think could be added to your go-forward plans?

Thanks, Insoo, and good morning. I want to be real clear with everyone here. We're at the largest electric reliability capital spend that we've had in our company's history, and it's actually 40% over 2020. So we're at a good pace in terms of electric reliability. But clearly, as we demonstrated in this electric rate case, there is more to do across our vast system. And so we'll be making requests in this upcoming electric rate case with, of course, better business justification to be able to support that. Clearly, when you look at our system and the amount of storms we had this year, there is room for improvement, and we're well aligned with this commission and this staff to do just that.

Got it. Second question is just going back to the demand comments you guys made. For 2022, if I understand correctly, you're thinking more of a modest flat to modest growth and year-over-year growth. Is that correct? And then two, just you've talked about the positive signals. Is there any particular segment or industries that you're seeing that out of?

Yes, Insoo, this is Rejji. So yes, I think your working assumption for blended weather-normalized load on the electric side is about right. So call it just slightly up, flat to about 0.5 point. But again, we continue to be encouraged with what we're seeing on the residential side. So last year, we had – we assumed a pretty aggressive return to work, and we ultimately saw our residential down about 2.5%, a little over that versus 2020. Our plan was much more bearish. And so we saw a surprise to the upside versus plan there. Commercial, we've already seen commercial over the course of 2021, up about 3.3%. So effectively back at this point to pre-pandemic levels when you take energy waste reduction into account. And industrial, I'd say admittedly, it's still coming back, and that's why we feel good about 2022. And so when you think about our working assumptions for 2022, we're still assuming a decline for residential versus 2021, about somewhere between 1% to 2%. Commercial basically flat to slightly up. And then industrial, we still expect to see pretty good growth there around 5%. So that's what, on a blended basis gets you to around a point – I'm sorry, excuse me, flat to slightly up about 0.5 point all in. And then the positive signal to new service requests, to point to a specific sector, I think, would be challenging because we're pretty diversified in our service territory. But clearly, we're seeing good news in auto. Now again, auto represents a couple of percent of our gross margins. So not a great deal of exposure there. But across most sectors, we expect to continue to see Michigan trend well. And as Garrick noted in his prepared remarks, we're seeing some very attractive economic development opportunities on the industrial side. We're not in a position right now to disclose those sectors, but we see a number of, I'll say, a combination of old and new economy sectors, looking at Michigan as a place to land. And so we feel very good about the road ahead economically in Michigan.

That’s a good color. Thank you guys.

Ladies and gentlemen, our next question today comes from Michael Sullivan at Wolfe Research. Please go ahead.

Hey, everyone. Good morning.

Good morning, Michael.

Hey, Garrick, just first wanted to ask on the level of conviction and ability to potentially settle the IRP in the next couple of weeks or months here?

Yes. So I'm just going to break this down really, really clearly. I feel good about taking it a little distance. I want to make sure that's very clear. And the way I'm just – I'm sharing my thinking about this is there's $650 million of savings for our customers. That's on the table. There's a 60% reduction in carbon by 2025 over 2005 baseline levels. And there's an opportunity for a more resilient supply system. Those are the factors of this. And so there's good – there's a win – I've said this before, there's a win here for everyone. And so we feel very strong about taking the full length and get what we need for our customers as well as for our investors. But bottom line, whether it's an electric case, gas case, or an IRP, we're going to look at an opportunity to settle. And right now, we're in a sweet spot where there's an opportunity to do that. And when there's a win in there for everyone, there's an opportunity for a partial settlement or a full settlement. And so we'll look at that and we'll work with the parties to see if something can materialize there. But just like there's an opportunity there, all those wins allow us to take the full distance as well. So I feel confident either way that we'll get what we need for our customers to plan it and for our shareholders. Is that helpful, Michael?

Yes, super helpful. Thank you. And my other question was, Rejji, I think you mentioned one of the main drivers for the lower than planned CapEx last year with some slippage on renewables projects. Can you just give a little more detail on that?

Yes, Michael. Good morning. Yes. So we had some renewable projects that we had to push out a little bit. I think the issues around supply chain are pretty well publicized across not just the country but the planet. And so we saw some of that with respect to our projects. We still expect to get the projects executed over time, but we did have to push them out a little bit. So that was really the primary driver. And I'd say across some projects, there were some idiosyncratic issues that came up, but it was largely related to supply chain matters.

Mike, can I just jump in on this one as well? I've been involved in large power plants and operations for 25-plus years. I don't think there's been a year in those 25 where I haven't seen projects move from year to year. Major projects in terms of outages, in terms of construction timelines differ. And so it's pretty typical in our industry to have a little give and take. And so this supply chain challenge that's in front of us will dissipate over time, I have no doubt about that. But remember this, we're retiring coal. And so you have to fill that capacity somehow. So these projects aren't going away. It's just a matter of when we plant them in what year. And so again, this is pretty typical for the work we do year after year, this give and take. And so I'm not worried, not concerned, and this too will pass.

Great. Thanks a lot.

And our next question today comes from Andrew Weisel with Scotiabank. Please go ahead.

Thank you. Good morning, everyone. My first question on the new CapEx plan, I see that excludes the $1 billion from the voluntary renewables program. My question is, you've been using that $1 billion number for a little while now; shouldn't that be higher given the new customers you signed up? And I understand understanding might be in kind of the later years of the plan. But should that number be a bigger one?

So the $1 billion equates to 1,000 megawatts of renewables. And so the way this works is customers have subscribed to that, and we have a certain number of subscriptions; we build out that. And so the 1,000 megawatt equates to the $1 billion. And so does that help, Andrew?

And remind me for how many megawatts are you up to sign that now?

We've got – this program started at 120 megawatts. That is fully subscribed, and we're now in the second phase of subscribing the 1,000 megawatts.

Okay. Got it. So you still got a little ways to get to that $1 billion. Okay. Great. My next question is, if I compare the old CapEx plan to the new one, it seems – I understand there's a roll forward, but it seems like your electric spending is down by about $0.5 billion and gas spending is up by about $1 billion. Is that a conscious shift in strategy? Or is that just the output of a bottoms-up budget building process?

It's really a bottoms-up piece. And just let me offer a little bit in the gas. Back in November of 2020, we got a large pipeline project approved through an Act 9, which is the equivalent of a certificate of necessity that is folded into this plan. And so as you might imagine, the replacing 56 miles of large transmission pipe, the project is around five – I think it's $550 million in that range. And so that's a big factor that as you build that bottoms-up approach, it shows up in the gas and in this vintage of capital in the five-year plan.

Okay. Great. That's helpful. Then just one last one, if I could squeeze it in. On the relative growth between the earnings and the dividend, you're targeting the high end of 6% to 8% for earnings. And I know your targeted dividend payout ratio is 60% versus about 64% in 2022. You just announced a 5.7% dividend increase. Is that a pace that we should expect for the next couple of years until you get to that 50% ratio?

Andrew, yes, this is Rejji. So yes, I think conceptually, you're right in that you're going to see a decoupling at least in the short term between the earnings growth and the dividend per share growth. And so that's what we're showing with this recent increase in the dividend because we did mention on the heels of the EnerBank sale that we'll glide path down to a low 60s percent payout ratio. Right now, we're kind of mid-60s, and we'll glide path down over time. So you'll see a little decoupling between the earnings growth, which will be a little bit stronger than dividend per share growth, but we still think both are healthy and combined offer very attractive total shareholder return proposition.

Definitely. 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.

Good morning, Julien.

Well done. So perhaps just coming back to a couple of things. The economic development tariffs, just to come to that first here, how do you think about that impacting 2022? Just you mentioned pretty strong industrial load. Obviously, the economic development tariffs kind of impact shift those impacts and load sensitivity to earnings sensitivity. Can you talk a little bit about what that could do? I imagine it's not too material, but curious.

Yes. So let me offer a little more color on these economics. There's two pieces. We were very successful toward the end of the year and establish an economic development rate. We filed that in November. And as I said, almost record approval here with the commission and the Public Service Commission and staff, which we see as a really good indicator here in Michigan and the opportunity to encourage job growth in jobs here in Michigan. So it's an economic development rate, which is very competitive out there, and it's designed for energy-intensive customers. The next piece is we work to achieve economic set of bills that offered incentives, to make Michigan competitive. That was offered through, again, bipartisan support through the legislature signed by the Governor, that was close to $1 billion, $1.5 billion of incentives here in the state. And so GM made their big announcement, nearly $7 billion of investment in Michigan, 4,000 new jobs. That is a direct result of that work. And so we feel good about the initial valley here. But as Rejji said, there's – and I shared in my prepared remarks, there are more that are considering Michigan, and so we see a lot of upside from an industrial and jobs growth perspective and ultimately, the spillover benefits. But Rejji, I don't know if you want to add any additional context to that at all?

No, I think you laid it out well, Garrick.

All right. So we'll see what happens this year. Perhaps if I could pivot on Campbell, just super quick, if I can. Campbell retirement, as you've alluded to several times already, a retirement, the 2025 time frame, that's come up a lot in the IRP and represents a substantive portion of the O&M savings. I think it's an order of magnitude, $60 million. Do you offset for this retirement? And again, as you think about it, if it is pushed back, for instance, in an IRP settlement? Or again, how you would think about that fitting into your plan to the extent to which that moves out, if you will?

Well, in my earlier comments, just to be really clear, $650 million of savings in total requires the retirement of Campbell one, two, and three. And the start of my career at that plant, you can't do a partial there. It just doesn't work. And so you need the whole thing. One, for the savings piece for our customers, but you can't do a partial retirement. So that's critically important in this equation in this IRP. The second piece is, when you retire a plant like that, you need to backfill in terms of capacity, in terms of energy. And the lowest cost option on that, we proved their modeling is to Covert and through the DIG facilities. And so again, this is why it all comes together quite nicely. And so it's very clear what's necessary to do this type of savings for our customers, to improve the supply side from a resiliency perspective, and then also to have a 60% reduction in carbon. So that's how we're approaching it. Again, a lot of benefits, a lot of wins for everyone, and we think we can achieve that – not that I think. We know we can achieve that here in 2022.

Right. And just even further to clarify that, your core base plan, it doesn't reflect Campbell per se. The IRP, should we say, upside as we talked about from a capital perspective, and making that affordable is predicated on Campbell, right, just to segment that apart?

Yes. We need Campbell. We need all of Campbell to retire. And again, that's not built into our plans. Now our five-year plan at all, not the savings, not the capital upside. It's not in the plan. So just to be clear there.

Excellent, guys. I wish you the best of luck with what happened in Michigan, I am curious.

Thanks, Julien.

And our next question today comes from Nick Campanella of Credit Suisse. Please go ahead.

Hey, good morning, everyone.

Good morning.

Hey. So most of my questions have been answered, but I just wanted to go back to the electric rate case quick, absolutely acknowledge, really healthy ROE and equity ratio. The commission did seem to push back on capital costs, specifically with that one solar project, I guess, at least for this order. Can you confirm you're moving forward with that project still? How should we think about subsequent approvals in your clean energy generation capital plan? Understanding it's obviously imperative for the company's decarbonization goals, but the commission does seem to be taking a slower approach to at least your initial set of projects here. Thanks.

I don't agree with that conclusion that they're taking a slower approach. The language is really clear in the ex parte order and in the electric rate case demonstrates support for green energy. And in fact, that washing project, and it's clear that it's been supported and from a construction standpoint and a regulatory recovery standpoint. Now Rejji will walk through a little bit of the financial piece and how we'll progress with that project here over the course of 2022 and 2023.

Yes, Nick. So again, to Garrick's point, we feel very confident that it was really a deferred decision by the commission because they did approve the contract in November before the electric rate order, and the only reason it wasn't approved in the orders, just given the timing of which it was introduced into the case. We do expect to get a constructive outcome in a subsequent filing. And so as a result of that, to Garrick's point, we'll continue to execute on the project. And because of the high probability of approval, we'll recognize AFUDC equity and debt accounting on this project. And so there will be no P&L drag if you will, and just a little bit of deferred cash flow or lag on the cash flow side. And so we fully expect to move forward on the project and again, expect a constructive outcome in a subsequent case. Is that helpful?

Yes. That's very clear. I appreciate the time today. Thank you.

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

Good morning, guys.

Good morning, Jonathan.

Just a quick question, again, on the five-year plan, thanks for the clarity on what's driving the step-up in the gas side that was clearer. I'm just curious, though, on the electric distribution line. It seemed to take a pretty meaningful step down in 2022. And we're sort of – I think that will explain most of the delta. Can you square that, Garrick, with your comments about customer growth and new connections and the like and maybe sort of – maybe the rate case is partly the answer but just curious.

Yes, specifically for new growth, both electric connections and we have a deferral mechanism on there. And so we can allocate the appropriate amount of capital for growth. And then see recovery in a subsequent case. And so that’s – perhaps we have had at least the last couple of rate cases that allow us to – it’s in three areas, both in new business at the relocations and demand capital. And so that's been very helpful in allowing us to expand our electric capital in year as a result of changes in the environment like great business growth. And so that's an important piece. The other piece that I would just, again, point back to, our electric reliability spend is robust. It's the largest we've had here across our company, 40% over 2020. But I would offer this, there's better and more important work we need to do in this next electric rate case. We have more capital that we want to invest on behalf of our customers and electric reliability to offer benefits and improve our performance there. And we'll work to engage that into the – to build that out in the next case. And I know Rejji would also offer some comments as well.

Jonathan, the only thing I'd add, you noted that there was a slight dip in the front end of the five-year plan on the distribution spend. So you can see it a little off trend. We tend to and have historically been at about $1 billion per year spend rate for all the reliability work that we know needs to get done in our service territory. The dip in 2022 is attributable to just aligning the spend plan in 2022 with the rate order. We had about around $100 million or so or thereabouts of disallowance in the rate order. And so obviously with the forward test year, we can toggle our plans accordingly. And so that's really what's driving some of that decline in 2022, which is a little off trend.

Okay, great. That's perfect. Thanks, guys.

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

Good morning, thank you.

Hi, Travis.

Back to the IRP. Just thinking about timing post-IRP, would you get a decision soon enough or have concrete plans soon enough to weave anything from the IRP into the presumed electric rate case that filing this year?

Our electric – we're going to file our electric rate case here in April timeframe. And so that's our plan right now. And so we don't anticipate – the initial order could come out very earliest in April and then a final order in June. And so I don't anticipate that'll be woven into this electric rate case.

Okay. What is your thought on timing of maybe specific projects or capital at least generally from the IRP, a year out, six months out from the decision? What's your thought there?

Our intent here is to, so again, I don't want to presume approval. I think that would be, I don't get in front of the commission on that. But again, confidence in of a final order by June, and let's play this out – Covert, DIG into the utility. We'd looked to update our plans, our five-year plans, and the kind of the normal cycle to reflect those changes.

Okay. Perfect. And then real quick on the enterprise side, any update to the strategy there?

Enterprises continues to be an important part of our business, although it was really a small part of our business. And just as a reminder for everyone on the call, it's about 4% of our earnings mix. So again, small and then as big in other facilities move into the utility that enterprise group grows as even smaller. Right now, it's focused on renewables and customer relationships. And so let me offer a little bit more context around that. For example, a company like General Motors or one of the companies that Enterprise works with. They have a long-term commitment to sustainability across their global footprint. And so they provide a creditworthy party, and we have a long contract period. We help them find renewable assets throughout the U.S. And so that's the role we play. We see utility-like returns or better in that space. And again, we're not out in the auctions. We're not out being squeezed from a margin perspective. It's specifically designed at customer relationships and helping them meet their sustainability targets. And so it's narrow, it's thoughtful. It's a small part of our business but important for our strategic customers.

Great. Thanks so much. That’s all I have.

Thank you.

And our next question comes from Anthony Crowdell with Mizuho. Please go ahead.

Hey, good morning. Hopefully, just two quick ones. And I don't know if I'm reading too deep into this, but I think of the 2021 actual at 265, the range you gave for 2022 of 185 to 189. The midpoint there is not actually towards the high end of 6%, it's actually above the high end and this is before any of the additional capital team that you're actually not even trending towards the high end, you're above the high end. Is this just smaller numbers and moving a decimal place here or there? Or is there more to read through to this?

Well, here's the good news, Anthony. You said 185 to 189, it's 285.

285. Apologies. It's a long morning. Apologies.

No problem. So again, we're happy with where we landed this year, and we've got a lot of momentum coming into the year. And for some of the reasons that Rejji articulated earlier, but you may want to jump in again on this one. But bottom line, we've offered guidance there. We feel we've expanded and raised that guidance and feel good about – really good and confident about landing there. And as I shared earlier, likely in the midpoint range, a lot of year left, but in the midpoint of that range we offer today. And so again – and then after this and really into 2022, that is the base here, we'll grow at that 6% to 8% towards the high side. Anything else to offer on that Rejji?

No, I think you have the key point, Garrick, which is the 6% to 8% guidance, Anthony, and that sort of confidence toward the high end, that is off of the 2022 base. And so I think 2023 and beyond, 2022 is a fairly atypical year. Again, given the sale of the bank, and that's why you see a little bit higher growth in the range of 285 to 289 off of the 2021 actuals of 265. It implies like 7.5% to 9%, but we don't foresee ourselves growing at that clip going forward. So it's just an atypical year as we reduce the dilution from the EnerBank sale and redeploy the capital.

What has to happen for you guys to hit the 6%? Like why even to 6% there? It seems that you guys are really fully loaded 7% to 8%. I'm just curious what's the scenario where you come in to the 6% like why not remove it, I guess, is my question?

Well, I mean, even though the range may seem wide on a percentage basis, it's about 4% to 5% on average, Anthony. And so we think that, that's plenty conservative to give us a little room to land the plane. So we feel good about the guidance range, which, again, I think is one of the tightest in the sector.

Great. And just last for me. I think you said DIG, the plant was – had an extended outage in 2021. Just what was the issue? And is that plant back in service?

Yes. The quick answer is back in service. There was a supply line of gas that was feeding into the plant that needed some additional construction work. And having been in the gas business for a long time, we know once that type of work is done, lasts about 70 years or so. So we feel good about the fact that, that was nonrecurring and we'll be back at normal operations going forward for the foreseeable future. But just to be clear, it wasn't our gas line; it was from a third party, but that's now fixed, and we're off and running.

Great. Thank you for taking my questions.

Thank you.

Ladies and gentlemen, this concludes our question-and-answer session. I'd like to turn the conference back over to Garrick Rochow for any closing remarks.

Thank you, Rocco, and I want to thank everyone for joining us today for our fourth-quarter earnings call. Take care and stay safe.

Thank you, sir. This concludes today's conference call. We thank you all for attending today's presentation. Have a wonderful day. Thank you.