Good morning, everyone, and welcome to the CMS Energy 2024 Third Quarter Results. The earnings news release issued earlier today and the presentation used in this webcast are available on CMS Energy's website in the Investor Relations section. This call is being recorded. After the presentation, we'll conduct a question-and-answer session. Instructions will be provided at that time. Just a reminder, there will be a rebroadcast of this conference call today beginning at 12:00 p.m. Eastern Time running through November 7. This presentation is also being webcast and is available on CMS Energy's website in the Investor Relations section. At this time, I would like to turn the call over to Mr. Jason Shore, Treasurer and Vice President of Investor Relations.

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

Thank you, Jason, and thank you, everyone, for joining us today. At CMS Energy, we deliver year-over-year for all stakeholders. We do that through our investment thesis. This is a simple but powerful model coupled with our disciplined execution that sets us apart in the industry and has delivered more than two decades of industry-leading financial performance. Typically, I walk through that investment thesis. But today, I want to offer three differentiators at CMS Energy providing confidence and visibility as we continue to strengthen and lengthen our 6% to 8% EPS growth. First, Michigan's clean energy law. This law is great for our customers, the planet, and our investors. It ensures we have the right legislation in place to move from coal to clean, providing certainty for the investments we need to make in renewable energy and it gives us the flexibility to either own the assets or utilize a power purchase agreement, doing what is best for our customers. Now, here's what's unique. Earning a financial compensation mechanism approximately 9% on a power purchase agreement; no other state that I'm aware of has this provision, and then add to it requirements for battery storage and an increased incentive on energy efficiency. There is a lot in this law, very little of which is in our five-year investment plan, providing a strong tailwind, and we believe we can do this important work affordably for our customers. The flexibility in the law that allows for ownership or power purchase agreements both within Michigan and outside of Michigan provides more options for customers and ensures we can utilize lower-cost energy. Furthermore, it provides us the ability to replace existing, outdated, and above-market power purchase agreements with new renewable assets, which keeps costs affordable for customers. Our 20-year renewable energy plan or REP that we'll file next month will detail our clean energy investments and plans to achieve the targets set by Michigan's clean energy law. This filing will show the renewable assets needed above and beyond our 2021 integrated resource plan as well as the additional renewable assets needed to meet increasing sales demand and growth in the state. As I shared before, Michigan's clean energy law is great for all stakeholders. It provides the flexibility we need to find the most cost-effective clean energy for our customers. The second item I want to highlight is our commitment to customer reliability. I'm very proud of the comprehensive plan we have laid out in our five-year $7 billion electric reliability roadmap. This plan details our actions to move to second quartile reliability performance or SAIDI by the end of the decade through targeted investments in our electric grid, needed investments for our customers because we have recorded some of Michigan's highest wind speeds over the last five years. We are seeing more frequent storm activity. This plan is deliberate and comprehensive and improves reliability in the short term and built-in long-term resiliency, and it does it proactively versus reactively. This plan means we will begin serious efforts to underground more of our distribution wires, better align with Midwest peers, and replace more than 20,000 poles with those designed for more extreme weather. It also means investing in grid technology for more automation and machine learning to speed up restoration in weather events. We're also one of the first utilities East of the Mississippi to file a comprehensive wildfire mitigation plan, which lays out the investments needed to prepare for climate change. These customer investments are based on Electric Power Research Institute, EPRI best practices and will bolster our distribution system to a level of performance our customers expect, particularly as the economy continues to electrify. And our plans have been supported. I am pleased with the recent outcomes from the Michigan Public Service Commission and the Liberty storm audit, which highlights the vastness of our system, the billions of dollars and decades needed to improve it, and the importance of these strategic investments. And our customary benefit when we improve the system proactively versus reactively, making these investments in the system now means we can do it at a 40% to 70% lower cost compared to when we do this work following an outage. Better service, lower customer cost; this is a great story. The third point I want to make today is the nice tailwind of economic development we are seeing in our service area. I'm excited and encouraged about the true renaissance underway in Michigan. The big story across the industry is sales growth brought by data centers. We're seeing the same and we're happy to talk more about data centers. Our story is different and in my opinion, better. In Michigan, we are seeing a manufacturing renaissance bolstered by onshoring, unique state attributes, and the Inflation Reduction Act and the CHIPS and Science Act. And we love manufacturing growth because it brings jobs, supply chains, commercial activity, housing starts, and residential growth where there is greater benefit for the state. We recently updated this slide to highlight several new and diversified examples. Corning is expanding and investing up to $900 million and bringing nearly 1,100 jobs to the state; this is the sort of growth we like to see—significant Michigan investment in job growth. Saab has expansion plans for an integration and assembly facility. Saab is new to the state but is adding to the nearly 4,000 businesses engaged in defense and aerospace work in Michigan. Two new examples among many that speak to the diversified manufacturing growth we are realizing—over 700 megawatts of signed contracts in 24 months and growing. Our economic development pipeline continues to look promising with over 6 gigawatts of load looking to either move to or expand in our state, 60% of which is manufacturing. As I mentioned earlier, our renewable energy plan will conservatively reflect our updated load growth forecast based on the strong economic development tailwind we are experiencing. We work hard every day to win our customers' business and we are honored when businesses see the value in investing in our state and our service territory. So let's take a look at the regulatory calendar for the year. As I shared last quarter, our financial-related regulatory outcomes are known for the year given the constructive March electric rate order in the approved gas rate case settlement. This positions us well as we navigate the last quarter of 2024. Gas rates were effective October 1 and we plan to file our next gas rate case in December of this year. In our current electric rate case, we saw a constructive starting position by staff. We saw support for further undergrounding, wildfire mitigation, and the continuation of the investment recovery mechanism. I do want to point out that the mechanism for storm recovery and the investments outlined in the electric rate case and in the Liberty storm audit are important for our customers. That probably goes without saying. However, it may require that we go to a fully adjudicated order to get the best outcome for our customers. Know that we are confident with where we are in the process, the quality of our filing, and the proactive nature of the investments we are making to improve reliability for our customers. If we go the full distance, we expect the order in March of 2025. Now, let's spend a moment on the results. For the first nine months, we reported adjusted earnings per share of $2.47, up $0.41 versus the same period in 2023, largely driven by the constructive outcomes in our electric and gas rate cases. Given our confidence in the year, we are reaffirming all our financial objectives, including this year's guidance range of $3.29 to $3.35 per share with continued confidence toward the high end. We are initiating our full-year guidance for 2025 at $3.52 to $3.58 per share, reflecting 6% to 8% growth off the midpoint of this year's range. And we are well-positioned, just like 2024, to be toward the high end of that range. It is important to remember that we always rebase guidance off our actuals on the Q4 call, compounding our growth. This brings you a higher quality of earnings and differentiates us from others in the sector. And like we've done in previous years, we'll provide a refresh of our five-year capital and financial plans on the Q4 call. With that, I'll hand the call over to Rejji.

Thank you, Garrick, and good morning, everyone. On Slide 9, you'll see our standard waterfall chart, which illustrates the key drivers impacting our financial performance for the first nine months of 2024 and our year-to-go expectations. For clarification purposes, all of the variance analyses herein are in comparison to 2023, both on a year-to-date and a year-to-go basis. In summary, through the third quarter, we delivered adjusted net income of $736 million or $2.47 per share, which compares favorably to the first nine months of 2023, largely due to higher rate relief, net of investment costs, and solid performance at Northstar. From a weather perspective, the third quarter offered favorable weather versus the prior year to the tune of $0.10 per share, largely due to a warm September. The strong third-quarter weather for the electric business more than offset the mild weather experienced in the first half of the year, thus equating to $0.05 per share of positive variance year-to-date. As mentioned, rate relief net of investment costs, one of the key drivers of our year-to-date performance resulted in $0.18 per share of positive variance due to constructive outcomes achieved on our electric rate order received in March and the residual benefits of last year's gas rate case settlement. From a cost perspective, our year-to-date financial performance was largely driven by lower service restoration expense despite a sizable weather system that impacted our service territory in early August. Our favorable variance in this regard has been fueled in large part by cost efficiencies in our storm response efforts. In fact, even though our volume of outages has increased by approximately 10% in 2024 versus the comparable period last year, our restoration cost per interruption has decreased by over 10%, all while restoring customers at a faster rate than the prior year. These achievements and our storm response efforts are just another example of our lean operating system, the CE Way, driving daily productivity in the business. Quite simply, our workforce uses the tools of the lean operating system to deliver more value to customers with fewer resources every day. That is the essence of the CE Way, and this favorability in service restoration expense coupled with cost performance throughout the business provided $0.02 per share of positive variance versus the comparable period in 2023. Rounding out the first nine months of the year, you'll note the $0.16 per share of positive variance highlighted in the catch-all bucket in the middle of the chart; the primary sources of upside here were related to solid operational performance at Northstar and a tax-related benefit, among other factors. Looking ahead, as always, we plan for normal weather, which equates to $0.14 per share of positive variance for the remaining three months of the year, given the mild temperatures experienced in the last three months of 2023. From a regulatory perspective, we'll realize $0.09 per share of positive variance, largely driven by the aforementioned electric rate order received from the commission earlier this year and the constructive outcome achieved in our recently approved gas rate case settlement, which went into effect on October 1, as Garrick noted. On the cost side, we anticipate $0.15 per share of negative variance for the remaining three months of 2024; in large part due to additional funding support for select cost categories that have trended above budgeted levels for the majority of the year, such as insurance premium and IT-related expenses. Closing out the glide path for the remainder of the year, in the penultimate bar on the right-hand side, you'll note a significant negative variance, which largely consists of the absence of select one-time countermeasures from last year and conservative assumptions around non-utility performance among other items. In aggregate, these assumptions equate to $0.25 to $0.31 per share of negative variance. In summary, we remain well-positioned to deliver on our 2024 financial objectives to the benefit of customers and investors. As such, we are reaffirming our full-year guidance range of $3.29 per share to $3.35 per share with a continued bias toward the high end. Moving on to the balance sheet. On Slide 10, we highlight our recently reaffirmed credit ratings from S&P in August. We continue to target mid-teens FFO to debt on a consolidated basis over our planning period to preserve our solid investment-grade credit ratings as per long-standing guidance from the rating agencies. As always, we remain focused on maintaining a strong financial position, which coupled with a supportive regulatory construct and predictable operating cash flow generation supports our solid investment-grade ratings to the benefit of customers and investors. Moving on to our financing plan on Slide 11. I'm pleased to report that we've completed all of our planned financings for the year at levels favorable to plan and ahead of schedule, which leaves us with ample liquidity for the remainder of the year and beyond. I'll bring to your attention a relatively modest increase to our 2024 planned financings at the utility given the need to rebalance the rate-making capital structure in accordance with the recent regulatory outcomes and attractive pricing at issuance. It is also worth noting that we remain opportunistic should we see a cost-efficient opportunity to pull ahead some of our 2025 financing needs. As I've said before, our approach to our financing plan is similar to how we run the business. We plan conservatively and capitalize on opportunities as they arise. This approach has been tried and true year in and year out and has enabled us to deliver on our operational and financial objectives, irrespective of the circumstances to the benefit of our customers and investors, and this year is no different. And with that, I'll hand it back to Garrick for his final remarks before the Q&A session.

Thank you, Rejji. CMS Energy has over two decades of consistent industry-leading financial performance. We remain confident in our strong outlook this year and beyond as we continue to execute on our simple investment thesis and make the necessary and important investments in our system while maintaining customer affordability. With that, Harry, please open the lines for Q&A.

Thanks very much, Garrick. Our first question is from the line of Shar Pourreza with Guggenheim Partners. Please go ahead. Your line is now open.

Hey guys, good morning. Garrick, on the data center demand, obviously, everyone is mentioning it to kind of the degree, Michigan has obviously started to emerge as a favorable data center environment with some of the hyperscalers doing some land acquisitions there, Grand Rapids to be exact. Do you have sort of existing grid capacity to onboard kind of the new customers with that kind of an interconnection lag? What are you seeing on the ground? And do you need sort of a new tariff structure to move ahead? We've seen some interesting proposals coming out of Ohio, a lot of back and forth there. So a big question, but how do you think about those?

Michigan, particularly Grand Rapids, is an excellent location for data centers and investments due to its favorable conditions. The temperate climate, robust fiber infrastructure, and our electric capacity enable us to effectively meet the needs of data centers and other manufacturing clients as they scale up their operations. This makes Michigan an attractive option for establishing data centers and has also led to significant growth in manufacturing. The state's clean energy initiatives provide a clear path for increasing renewable energy, which appeals to data centers. However, I want to emphasize the importance of manufacturing growth, which presents many opportunities that will contribute to our renewable energy plans. Regarding the tariff, we have already submitted a filing to transition data centers to our GPD rate, which better reflects the costs of service. We are also collaborating with the commission to explore whether a new rate structure for data centers is necessary to ensure that residential customers are not subsidizing these operations.

Got it. Any timing on that, Garrick?

We would expect that we continue to make progress. I mean, like I said, the ex-parte filing has already been approved. And so we're in a good position there from a cost of service perspective. We'll continue to work with the commission. I would expect that to take place over the next six months to a year.

Okay. Perfect. And then just lastly, in terms of your takeaways from the storm and resiliency audits this year. Is your commitment to cutting outages supported by the current distribution plan? Or would you look to update the DSP to incorporate some recommendations from the audit? Or does it just inform you better to move the $1.5 billion incremental CapEx you're identified into the base plan? Thanks.

The completed audit, which we refer to as the Liberty audit due to the company that conducted it, has proven to be balanced and supportive. This can be observed in how it aligns with the necessary work, including capital investments and tree trimming, essential for improving reliability and service. As mentioned in my prepared remarks, we can achieve better service at a lower cost by taking proactive measures rather than reactive ones. We have a comprehensive five-year capital plan amounting to $7 billion, which is very deliberate and focused. We will incorporate the findings from the Liberty audit into this plan. To clarify, the $7 billion plan includes $5.5 billion already allocated into the capital plan, offering us an opportunity to integrate more capital with the support of the Public Service Commission staff and the commission.

Fantastic. Thank you, guys so much. Remember, Garrick, Guns N' Roses next time. Thanks. Appreciate it.

AC/DC. AC/DC.

Our next question today is from the line of Jeremy Tonet with JPMorgan. Please go ahead. Your line is now open.

Thank you for taking my questions here. Just wanted to start off, if you could walk us through a bit more, I guess, on DIG, given everything that we're seeing on the generation side needs overall capacity needs. Just with contracts rolling off and how you think about, I guess, the trajectory there going forward?

NorthStar business, and I'll get to the big piece, continues to perform well. But frankly, I'd expect that. It's a small piece of the earnings mix. But they need to perform, and we expect them to perform, and that's exactly what they're doing, both from an operational and a financial perspective. And of course, DIG is an important part of that mix or Dearborn Industrial Generation. And we continue to see strength both in the capacity markets and the energy markets, and we are securing those bilateral contracts throughout time, and they continue to be above our plan and our expectations. And so it's a great story, and we continue to be a tailwind in our overall expectations around 6% to 8% EPS growth.

Jeremy, this is Rejji. I just want to add a financial perspective to Garrick's comments. We've experienced a solid 25% to 30% open margin in the later years of our plan. We will share an update in our Q4 call regarding our pricing for capacity contracts in the bilateral market. As we enter a new year with our next five-year plan, we anticipate even greater open margins. We continue to observe reverse inquiries significantly exceeding our historical capacity price realizations. Typically, we've been around $3 to $3.50 per kilowatt month, but we're now seeing reverse inquiries in the $5 and $6 range. We don't expect this trend to change anytime soon.

And one thing I'll remind you, Jeremy, too, it's not linear as well. We do have outages to maintain the system out there. So that's an important piece to remember, particularly as we go through the long-term plan.

Right. That makes sense. I don't want to get too far ahead of myself there. But maybe just thinking about growth in general, we're seeing some of your peers talk about higher sales forecast and even some kind of lifting the expected long-term EPS CAGR expectation. And just wondering how you guys think about this given the incremental opportunities you see in front of you. I'm expecting strengthening and lengthening but just wanted to double-check there.

Let me share some thoughts, and I'm sure Rejji will want to contribute as well. We have identified those differentiators and tailwinds to provide visibility and build confidence. We are confident in our ability to maintain a 6% to 8% EPS growth. However, I want to make it clear that our investors expect us to deliver consistently, year after year. For 21 years, we have demonstrated leading financial performance in our industry time and again. Compounding off actual results offers a better quality of earnings, which is what our investors expect from us, and what we strive to deliver. By sharing insights on those tailwinds, you can see the momentum we have and how we can reaffirm our commitment to meeting our investors' expectations annually. Rejji, I’m sure you have some thoughts to add on this as well.

Jeremy, all I would add to Garrick's comments is that when you think about the components of what will drive long-term growth, Garrick walked through in great detail in his prepared remarks, the opportunities on the capital side, whether it's through the capital investments and/or earning on PPAs in the context of the new energy law, and that's going to be decades of financial opportunity, investment in PPAs again, the opportunities to improve the reliability and resiliency of our electric distribution, infrastructure—that's decades of spend and investment opportunity to the benefit of customers and investors. And then in the gas business, which we didn't talk about as much on this call, but there's still a significant level of investment to be made to continue to harden that system, reduce future methane emissions, and continue to keep it safe in the lab, particularly with pending regs coming out from FEMSA. And so a lot of investment opportunity and when the upward pressure that you alluded to on the demand side, that will create the headroom among other benefits to facilitate and enable that investment to come to fruition. And so we see a really nice glide path to deliver on that differentiated 6% to 8% growth for many years, compounding off of actuals. And so we're not going to get ahead of our Q4 disclosure, and that's when we update our five-year plan, but we still feel very good about our ability to strengthen and lengthen that growth to Garrick's comments.

Got it. That makes sense. That’s helpful. Thank you.

Our next question today will be from the line of Ross Fowler with Bank of America. Please go ahead. Your line is now open.

Good morning, Garrick. Good morning, Rejji. How are you?

Good morning, Ross.

Congratulations on a strong quarter, which is what we've come to expect from CMS. I have a couple of questions regarding your 2.5 gigawatts storage target in the state. How might that change if the battery tax credit shifts? Will the cost be affected, or is there robust support for this at the state level compared to potential changes at the federal level after next week? How do you view that investment going forward?

Let me outline the two approaches we are considering for supply type assets. The first is the renewable energy plan, which we will submit around November 15. This plan will detail the renewable energy assets we require, building on our 2021 integrated resource plan. There will be two phases of additional renewable energy aimed at achieving the 50% standard for renewable assets by 2030 and 60% by 2035. This is phase one. Furthermore, we will identify additional renewable assets driven by economic development and demand growth we are experiencing, which is a positive factor. The plan will include some mention of storage, but we will delve deeper into storage in our 2026 integrated resource plan. This plan will assess the capacity mix and the reliability of supply while considering any additional tax incentives that may arise. I expect that the system will require considerable storage, potentially exceeding what is outlined in the legislation, but this process provides a clear pathway forward given the certainty of the new laws. I hope this information is useful.

Yes, Ross.

Yes, Garrick, thank you. Sorry, Rejji. Go ahead.

Yes. Ross, sorry. I've been a little slower than drawn a couple of my comments. So pardon me. The only thing I would just add and it sounded like you're alluding to when you talked about next week, a potential repeal of the IRA and the implications of that on tax credits. Is that the thrust of the second part of your question? Or did I miss it?

Yes. Where can we contextualize that in relation to the state incentives that are driving this?

Yes. So I dare not wager or speculate as to the outcome on next week. I think that's a fool's errand and I think it's too difficult to call. But I do think it still remains a low probability that you see a repeal of the IRA. Because the reality is, one, you need a pretty sizable red wave to just repeal the legislation. But even if you did want to hypothesize that that could take place, I think there's also a reality that the number of red states have benefited significantly from the legislation getting passed. I heard a stat the other day from one of the CEOs in our state who suggested about 75% of the benefits of the IRA have accrued to red states. And so I think, again, even if you saw Red Wave significant enough to, which I still think is a fairly remote probability to repeal the legislation, I still think there'll probably be a real significant discussion off-line about whether it would make sense from an economic perspective to go and undo all those benefits accruing really nationally, but again, more concentrated towards red states. So I still think it's a low probability event. And that said, and if it did happen, again, even if you wanted to take sort of that really remote probability come into fruition, we still have to comply with the law to Garrick's comments, albeit it might be at a higher cost. But again, we still have to comply with the law in Michigan.

Yes. Perfect. Makes sense. Rejji, you just seem more coffee this morning. So grab a cup of coffee.

Will do, yes.

The next question I had, just kind of back to Jeremy's question a little bit on NorthStar and capacity auctions. I mean, MISO has sort of adopted a lot of the PJM changes around the VRR curve. So certainly, it seems like that will also go higher in next year's capacity auction; at least that would mirror what happened at PJM. So do you sort of hold off on some closing down some of these open positions further out on capacity until you see what that auction clears out, so you have a better idea? Like I'm just trying to figure out the timing of how you work that through.

Our process has been with DIG to just layer these in over time. That's really a de-risking mechanism for us. And certainly, there are times where we might strike at a price point that's a little lower than the future, but there are times where it's going to strike at a price point that's a little higher than the future. And so we've had that approach. It really de-risks and becomes a predictable source of earnings by taking these bilateral contracts or just kind of layering them in over time.

Basically sense ties into this. Thanks, guys, another solid quarter.

Thank you.

The next question today is from the line of Julien Dumoulin-Smith with Jefferies. Please go ahead. Your line is now open.

Hey, good morning, team. Guys, thank you so very much for the time. Appreciate it. Good to see you all. Keep that coffee going.

Keep it going.

So if you're considering the significant changes in the cost numbers that were shown in the waterfall slide, you mentioned a decrease of $0.15 last quarter, which was an increase of 9. In your initial comments, you referred to insurance and IT. Could you elaborate on what is happening? Is there an early recognition affecting the timing within the year? Additionally, is there a wildfire-related impact on insurance? I'm trying to grasp the major factors at play here.

Yes, Julien, it's Rejji. I appreciate the question, and let me provide a little bit more color on that. And so we have a number of cost-related line items that we track throughout the year. We obviously have expectations going into the year and budgeted levels for across every cost category. And through the course of the year, some of those line items track ahead of budget and not in a good way, so higher than budget. And so we countermeasure that largely through the CE Way and other cost reduction initiatives. And in some cases, as we get to Q4, and we don't think we'll have sufficient countermeasures to offset that. There are times will just sort of fund those cost categories at levels that we anticipate at the end of the year. And so sorry, I said differently, we have a level of countermeasures as well as Q3 weather help that have given us enough contingency to fund those cost categories to levels that we anticipate than being at the end of the year. And so we're just funding those costs. Insurance was one example. We had IT-related costs that were trending a little ahead of budget. Another one is we also have some regulatory assets that are or liabilities that are amortizing that are at higher levels in the prior year associated with our EV programs and others. And so it's a hodgepodge of cats and dogs that were just trending ahead of budgeted levels. And so that's really what we're funding there. And that's why you see that big increase in the Q4 year-to-go expectations versus where we were in our Q2 call. Is that helpful?

Yes. So basically said differently, you would have been holding off on funding some of it into 2025; you realize that you have the ability to do so, so you pull them back forward.

Yes, I wouldn't call them a pull ahead. To be clear, these are not expectations of costs that we'll have in 2025 that we're trying to de-risk. These are costs that we are incurring right now and the actuals we have seen in the first nine months of the year in excess of what we've budgeted. And so we're applying some of the contingency that we've accumulated through countermeasures, NorthStar outperformance, and just good old-fashioned, good weather in September and applying that contingency to just fund those cost estimates for the end of the year. So these are just 2024 funding and just basically updating our forecast to reflect the economic reality we're seeing across those cost categories.

Wonderful. Thank you guys very much. Good job there.

Thank you.

Our next question is from the line of Travis Miller with Morningstar. Please go ahead. Your line is now open.

Hi. You've mentioned this a couple of times regarding the REP, but are you anticipating an increase in sales growth? As you navigate this process, how much visibility do you have regarding sales growth from data centers and the 24/7 manufacturing loads? Will this be reflected in the REP, or should we expect to see it in the IRP?

The short answer is yes, but let me elaborate. In our renewable energy plan, we'll begin with the foundation provided by the 2021 integrated resource plan, which calls for 8 gigawatts of solar. We have already implemented some renewable projects as part of that plan. However, the 2021 IRP did not achieve 50% renewable energy by 2030 or 60% by 2035, so additional renewables will need to be constructed or obtained through power purchase agreements. This is our first tranche. The second tranche is driven by anticipated sales growth due to economic development, which we project over a 20-year period. We have a clear view of this and need certainty as well. We are confident in these initiatives, and we have signed contracts in place. This is not just a pipeline or theoretical numbers; it's a real indication of what's happening in the state. So, to answer the question directly, we do have visibility on this, which will also necessitate further renewable assets or purchase power agreements to satisfy this demand. I expect a combination of solar and wind to fulfill this need. We will share more details on this at the upcoming EEI meeting as we file that information. Now, regarding the IRP, keep in mind that the renewable energy plan focuses solely on energy. Capacity and reliability of supply must also be addressed, along with the potential for additional sales growth, which will also be reflected in the integrated resource plan. We see these as two opportunities where we can benefit from owning assets and making investments to provide clean energy for our customers or through power purchase agreements with financial compensation mechanisms.

Hey Travis, this is Rejji. All I would add is that if you look at Slide 6 in our presentation today, you can see on the left-hand side of the page, and Garrick spoke to some of this in his prepared remarks, there's a raft of opportunities we've seen from an economic development perspective. And I think we've got eight or so listed on the page. Only two of those are in our current five-year plan, Goshen and Ford. The rest of these are additive to our plan. So that offers some breadcrumbs as to the additional opportunities we're seeing. And I will tell you that some of the opportunities that are pretty high in probability that we're still not quite in the plan yet are likely going to be coming to fruition in the coming months. And so there's a lot of opportunity that we've already seen since we rolled out last year's five-year plan. And so at this point, that's well stale. And so again, you'll see that update in our REP. You'll also see it in the five-year plan that we roll out in Q4 next year in addition to the IRP, as Garrick noted. So you get some visibility on Slide 6 today. And again, we're looking forward to talking about more opportunities in the coming months.

Okay. That's great. I appreciate all that detail. And then one more for me on different subjects. The Liberty audit; would you anticipate on the regulatory side, the potential for putting in regulators to put in some kind of performance mechanism or some kind of metrics to meet before you get approval for the additional CapEx or operating costs?

I expect that we'll incorporate the findings from the Liberty audit into our five-year reliability plan, which will enhance the plan and create opportunities for additional capital investments aimed at improving reliability for our customers by providing better service and lower costs. This will be part of our strategy. I also foresee that there will be increased tree trimming and maintenance activities included in the plan as a result of the Liberty audit. Additionally, the commission has implemented performance-based ratemaking focused on reliability work, which I believe will also be included in our efforts. I don't think this will delay our important investments, which we are currently making and already seeing improvements in reliability. We just need to keep up this essential work.

Our next question is from the line of Michael Sullivan with Wolfe Research. Please go ahead. Your line is open.

Hey everyone, good morning. I think it's been asked a couple of times now, but just to clarify our expectations for load growth and what to anticipate in the REP. My understanding is that you have typically mentioned an energy efficiency of less than 2% and that your baseline projection is relatively flat at this point. While it seems like there's enthusiasm for new load growth, will what is reflected in the REP be quite conservative and not represent a significant change? Is that an accurate understanding?

Michael, good morning. It's Rejji. Thanks for the question. To clarify, our current five-year plan that we introduced in the fourth quarter of this year projected about 0.5% electric load growth on a five-year compound annual growth rate basis. This figure includes energy waste reduction. If you were to consider that without energy efficiency, it would represent approximately 2.5% growth, with the net figure remaining at 0.5%. We anticipate significant upward pressure on that growth rate from the renewable energy plan filing that we will announce in the coming weeks. Additionally, we will have another opportunity to revise this in the integrated resource plan filing about a year later. In the meantime, we will provide more details about the load growth assumptions included in our five-year plan presented last quarter. You should expect noticeable upward pressure. Although we plan conservatively, we aim to reflect the actual conditions we are observing since this will play a role in our rate proceedings. Consequently, you will see upward pressure on those load growth assumptions. Regarding Garrick's comments, we strive to incorporate data centers and industrial companies into our plan when they are near to being finalized or are actively moving forward. We do not speculate based on momentum that has not materialized. Our approach remains conservative in that context. The key takeaway is that you can expect upward adjustments to our historical growth estimates in the upcoming revisions.

Okay. So significant upward pressure, but conservative. I got it. And then just shifting over to the electric case, I also just kind of wanted to level set there. So it sounds like you are going to probably adjudicate this mainly because of the storm mechanism because this is kind of a first go-around for that? And what specifically are you asking for? And where is staff on that with respect to the storm specifically?

Rejji will review the numbers shortly. I want to begin by highlighting the staff's role as a positive starting point. As I mentioned earlier, there are several aspects supporting our SaaS position. However, we have identified some distribution investments for our customers that remain untapped. Our aim is to enhance reliability and provide better service, which we can achieve through our five-year plan at a lower cost by addressing issues proactively instead of reactively. In addition to the storm recovery mechanism you mentioned, which is also acknowledged in the Liberty audit, we are prioritizing those distribution investments to improve customer service. We are advocating for our customers to make the necessary investments. This could potentially lead us to an adjudicated order. However, I want to emphasize that I am open to settlements, provided they go beyond the current position of the staff. Rejji, please update Mike on the cost perspective.

Yes, Michael, regarding the storm restoration tracker we are proposing in our pending rate case, if I recall correctly, DTA is suggesting a similar structure. Our approach involves taking the five-year average of service restoration expenses and implementing a mechanism for true-ups, where there is a 50% share between investors and customers. For instance, if our rate includes $130 million for service restoration expenses but we actually incur $150 million in a year, shareholders would absorb $10 million of that difference. Consequently, $10 million would impact our profit and loss, while another $10 million would be recorded as a regulatory asset for recovery at a later time. This means customers would ultimately fund that part. Conversely, should expenses decrease, an equivalent regulatory liability would be assumed. This framework aims to align incentives between investors and customers, while also mitigating the volatility we have experienced in our profit and loss statements over the past several years, as the service restoration expenses reflected in rates have been significantly lower than actual costs for an extended period. This sums up the concept, and I can discuss it in more detail offline if necessary.

And just to offer some numbers, our staff is at $170 million at a 9.5% ROE, 49.9% equity ratio, and our rebuttal position, we're at $277 million at 10.25% ROE, 50.75% equity ratio. So a little bit of cost of capital difference there as well. But I wanted to just make sure, Michael, you had the revised position of the company.

Okay. That's great color. Just real quick, staff on the storm specifically though, are they outright against it or they're just looking for a different structure than what you just…

They're not supportive of it, but again, not supportive, but we expected that. Just like the investment recovery mechanism, it had to go to the commission. And we anticipate some mechanisms like this will require the commission to weigh in on. And so it's not a surprise we're to ask that. And again, if we're going to go after that, it's going to go likely to a full order.

Okay. Thanks for helping me through all that. I appreciate it.

You’re welcome. Have a great day, Mike.

Our next question is from the line of Andrew Weisel with Scotiabank. Please go ahead. Your line is open.

I was also going to ask about the settlement. I appreciate the detail you've provided. If a deal were to be made, what would the timeline look like, or is it dependent on where that occurs?

Yes, we are currently in that timeframe. This is a crucial opportunity for us, and I remain open to settlement, as I've mentioned in previous calls. If we can find a solution that benefits our customers and all stakeholders, that's an ideal situation. However, there are a few aspects in this case that might compel us to proceed to a full order, and I want to ensure everyone on the call is informed about that.

Yes. Understood. New tools are often a policy question. So I understand that completely. The other question I wanted to ask about the CapEx update. I understand we'll have to be patient on the numbers. But the two things I wanted to ask about. Number one, just qualitatively, it sounds like there's going to be a lot of things going into that. There's always a business as usual update, but you've got spending around the REP. You got spending around the Liberty reliability audit, you've got the electric reliability roadmap with stuff going in there, plus you've got sort of a step change in demand growth from data centers and manufacturing; what I'm getting at is, should this be a meaningfully bigger increase than what we've seen in recent years? And if so, how should we think about financing that? You previously talked about up to a $350 million per year of equity in 2025 and beyond. I'm guessing there might be an upside bias to that given all the pieces that I just mentioned. How should we think about a rule of thumb about incremental equity needs per incremental dollar of CapEx? Thank you.

Rejji and I'll tag team this one, but I want to remind you that many of the tailwinds that we described in this call come as a result of the approval of the renewable energy plan or approval of the IRP. And so although we'll file it in November of this year, fast-forward 10 months. So it's going to be in late Q3 of 2025 before we see where the commission is at with that. And so I wouldn't expect some of that good work to show up until our Q4 call at the end of 2025, early part of 2026. And then you'd have the same cycle for the IRP, which would start in 2026 and then play out in 2027. So I see these as tranches that go over time over the five years. Clearly, there's some tailwinds here, but they show up at different points in time. But I'll turn it over to Rejji to offer some additional color.

Yes, I believe that's correct, Andrew. The parameters we've discussed and the preparation of our capital plan, affordability balance sheet, and operational feasibility are key factors. We need to assess if we can complete the work, and those factors are still very important. However, the fourth factor right now is the pacing in relation to Garrick's comment. The time it takes for the commission to review the REP and for new load opportunities to develop is significant. While we have signed contracts and interconnected those opportunities, establishing a manufacturing facility or data center requires time. Therefore, the pacing will definitely influence when we can capitalize on these additional opportunities and see the corresponding load develop, which will ultimately fund our capital investments. This is the fourth key factor currently. Nonetheless, there will likely be upward pressure on the $17 billion five-year CapEx figure we’ve shared. There will be a delay before we see a noticeable increase, but I remain confident about the underlying earnings and rate base growth from the next vintage. Regarding equity, as you are aware, we've indicated no equity issuance in 2024 and then potentially up to $350 million starting next year. This is a solid estimate for our current $17 billion capital plan, and I will share some considerations regarding additional capital and its potential impact on our equity requirements. Generally, for every dollar spent on CapEx at the utility, we typically provide around $0.35 to $0.40 in common equity, which has been consistent for some time. However, in the past couple of years, we've noticed a decrease in our equity requirement sensitivity, primarily due to a few factors. Firstly, we continue to generate significant cash flow in the business because of Michigan’s forward-looking test year and rate structure. For instance, our previous five-year plan with $15.5 billion in capital generated about $12.5 billion in operating cash flow collectively over that timeframe. This current plan of $17 billion is expected to generate $13.2 billion in cumulative cash flow, reflecting nearly a billion-dollar increase from vintage to vintage. Secondly, the ability to leverage tax credits from the IRA has significantly contributed to our liquidity and serves as an additional source of equity, effectively supporting our capital plan. We completed our first tranche this year with around $90 million in dispositions, and the outcomes exceeded our expectations regarding price discounts. I foresee us undertaking more of these transactions in the future. Lastly, we maintain a conservative approach to our plans. For the debt we intend to issue at the holding company, our assumption is that it will be straight debt with no equity credit. However, we have previously issued subordinated notes or hybrids that receive a higher equity credit rating from Moody's, and we're currently at 50%. If pricing for those securities improves over time, it will allow us to reduce our equity needs further while scaling up our five-year capital plan.

Okay. That's extremely helpful details there. Thank you very much. So just to be clear on the CapEx numbers, though, so we should not expect numbers related to the REP or IRP, but we should expect upside to CapEx related to reliability and the demand and economic development. Is that maybe a fair way to put it?

Yes. You certainly won't see the full magnitude of opportunities associated with the REP. And the other reason I'm qualifying the comment a little bit, Andrew, is that you start to earn on PPAs effective mid-this year, and so we'll assume additional PPAs going forward. And so we'll start to see that opportunity associated with the renewable energy plan scale every year because we're doing PPAs for renewables every year. We'll probably start to layer in some of the capital investment opportunities in outer years of the plan. And so you'll see some of that weaved in and you'll definitely see your comment reliability and resiliency. But again, the lumpier opportunities associated with the energy law, you won't see until really starting in the 2026 vintage of our five-year plan.

Okay. Appreciate your clarifying. I guess, maybe I needed some coffee this morning as well or some early Halloween candy perhaps. Thank you guys.

We have no further questions in the queue at this time. So I would now like to hand the call back over to Mr. Garrick Rochow for any closing remarks.

Thanks, Harry. And I'd like to thank you for joining us today. I look forward to seeing you at EEI. Take care, and stay safe.

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