Good morning, everyone, and welcome to the CMS Energy 2015 Third Quarter Results and Outlook Call. This call is being recorded. After the presentation, we will conduct a question-and-answer session. Instructions will be provided at that time. [Operator Instructions] Just a reminder, there will be a rebroadcast of this conference call today beginning at 12 PM Eastern Time, running through November 5th. The 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. D.V. Rao, Vice President and Treasurer, Financial Planning and Investor Relations. Please go ahead.

Good morning and thank you for joining us today. With me are John Russell, President and Chief Executive Officer; and Tom Web, Executive Vice President and Chief Financial Officer. Our earnings new release issued earlier today and the presentation used in this webcast are available on our website. This presentation contains forward-looking statements which are subject to risks and uncertainties. All forward-looking statements should be considered in the context of the risks and other factors detailed in our SEC filings. These factors could cause CMS Energy's and Consumers' results to differ materially. This presentation also includes non-GAAP. A reconciliation of each of these measures to the most directly comparable GAAP measure is included in the appendix and posted in the Investor section of our website. Now, let me turn the call over to John

Thank you, D.V., and good morning, everyone. Thanks for joining us on the call. I missed the last earnings calls due to emergency surgery. Now, I'm back and feeling good and I want to thank the management team for doing a great job while I was recovering. Now, let's get to business. I'll begin the call with an update on earnings, provide an operational and legislative update, and talk about some recent renewable energy developments and how those fit into the generation portfolio. And then I'll turn over to Tom, he will discuss in greater detail the quarter and additional upside. Adjusted earnings per share for the first nine months were $1.51. This is up $0.09 from last year, or 10% on a weather adjusted basis. Today we are raising the bottom-end of our 2015 adjusted earnings per share guidance by $0.01 to a new range of $1.87 to a $1.89. This is up 6% to 7% over last year. In addition, we are introducing 2016 adjusted earnings per share guidance of $1.97 to $2.01. This is up 5% to 7%, which supports our consistent and year-over-year predictable performance. Here is a view of our past performance and future expectations. Our past earnings performance has been consistent and predictable. We are confident in our plan to achieve the higher end of earnings growth. Further growth up side not in our plan include more renewables, new capacity and more investment in our gas system, already one of the largest in the United States with 1.7 million customers, 29,000 miles of distribution and transmission pipeline, and over 300 billion cubic feet of annual deliveries. Operationally, we continue to have strong performance both electric and gas residential customers' rate us in the first quartile for customer satisfaction. We continue to leverage our large…

Thanks, John. Welcome back. Thank you for joining our call today everyone. We appreciate your interest in our company and for spending time with us today. Our third quarter results of $0.53 a share reflect continued consistent progress up $0.16 from a year ago. All business units exceeded plan for strong quarter. For the first nine months, earnings at $1.51 a share were up $0.09. And on a weather normalized basis, earnings were up $0.13 or 10%. As you can see here, and as usual, strong performance positions us for delivering the high end of full year guidance. As shown in the dotted circle cost performance continues to be robust. This slide has become popular with many. Higher than planned cost reductions and favorable weather provide substantial room for O&M reinvestment. This is improves customer reliability, generates incremental productivity and accelerate planned major outage at DIG from 2015 to 2016. I just walked the DIG site and the outage is going very well. The celebration accomplishes two benefits. Accelerating the outage cost into 2015 when we have ample room to absorb it and freeing up capacity and what will be a tight market in 2016. In addition, you may recall that we will be increasing DIG's capacity by 38 megawatts to 748 megawatts. The impact of this reinvestment in 2015 makes it easier to achieve better reliability and profit next year. While we're on the subject to DIG, the Ferrari in garage, you can see that the engine has been purring. As capacity prices in Michigan have risen, we've been layering in profitable contracts. Over the next few years we could exceed our plan by as much as $20 million and as capacity prices reach the level of Kona as much as $40 million. For example, in 2017 about half…

Thank you very much, Mr. Webb. The question-and-answer session will be conducted electronically. [Operating Instruction] Our first question comes from Michael Weinstein with UBS. Please go ahead.

Hi, good morning.

Good morning.

On the legislation, what are the key debates that are currently being talked about in the legislature as those being negotiated, I guess firmed up for eventual presentation to the committees? Are there any major changes that are now being talked about or anything significant to be looking for?

Yes, let's go through it. Right now I think they're mostly just small adjustments to the bill. There's some issues going on today about retail open access. When they return how many years they have to have capacity, whether it's three years, five years, so there's some issues there. And what's the determining factor for if there is a shortfall Michigan. On the integrated resource plan, I think you're going to see some debate about the difference between having the integrated resource plan and also having a renewable energy standard. So, right now these are kind of I would call adjustments to bring the bills together. We're the very end of this process, so I would expect that they happen, but most of its really revolving around the retail open access. And as the queue continue, there's a queue that we beyond the 10%. The customers come back, do they have the right to leave or do they stay throughout that entire time. So, that's what's going on today. I think an important piece to Tom and I both mentioned and we want everyone to understand, we're not planning for any changes in our plan for the next five years that this law will change. So, if it does change, these are things that can benefit us as Tom talked about in his section of the presentation.

Right. So, were you saying that right now the plan is for 5% to 7% growth? Is that something that could change upward if legislation passes that you guys will be talking about later?

Right now - again with giving you guidance 5% to 7%, we continue to hit the high end of that through the years. Right now you know what our process is and Tom showed it on one of his slides. We continue to go back and reinvest the positive weather, the cost savings for customers and their value. So, we're going to continue to do that. We see plenty of opportunities that way. On the other hand though as Tom mentioned, if the law passes and if all this stuff happens, yeah, there may be an opportunity in the future sometime to with a new plant or PPAs to do something that would cause even additional capital investment for us, which could drive some earnings growth.

That's great. Thank you very much.

Yeah. You're welcome.

Our next question comes from Daniel Eggers with Credit Suisse. Please go ahead.

Hey. Good morning, guys.

Good morning Daniel.

Good morning.

Dan you have cold?

Yeah, I do unfortunately. Great timing and earnings, unfortunately. So, anyway hopefully I'll be better by EEI. When you think about just trying to bridge the IRP and RPS together, what is it going to look like process-wise and there's going to be a process difference really from how you guys do planning and how you work with the commission if they are separate entities or if they are merged together.

If - I want to make sure I understand, Dan. The plan, it looks like it's going to, is an integrated resource plan. The process that is used today is the state which I give the governor a lot of credit for this. What he is doing is trying to develop the best plan possible for Michigan and he's coordinating a lot of departments to work on this at the front-end. So there's no surprises at the back in. What the legislation will do, we expect is to support the integrated resource plan. And what I mean by that is to hit the clean power plan target. If we need to reproduce more renewable energy, or more energy through renewable energy or have energy efficiency that will all be included in this plan. Now the good news about the law the way it is today, at least, not the law but the bills that are there is that, that would allow us to go forward and have our capital plans approved to meet the integrated resource plan and that's the assurance we want that as we go forward to meet the plan for the clean power plan which is a federal law that the state law and regulation supports us meeting that target. And I think as many of you know many of the laws - some of the regulations that the EPA has come up with has up an overturned at the last minute. We don't want that to affect our investments and whether it's the right choice. So the preapproval process is important to us.

It's like a big con.

Exactly, which is in the current law today.

Okay, got it. And then I guess just on the need for open access customers to procure capacity, do you have any feeling for the 3 or 5-year decision process, and would dig be a candidate to provide capacity to some of those customers or do you think that capacity will procured elsewhere before there a chance for the open access customers to get to it?

I think the three to five years that really is - what we want here Dan and we've been pushing in the legislation, we want to have it material that if somebody is going out to the market and if we have to supply them later, we have to have enough time to build that asset or secure that asset. So I think five years is right. If three years is what it comes down to that probably gives us sufficient time with more risk than the five-year component? And as far as DIG, I will turned it over to Tom because he keeps talking about that for already, so I will turned it over to him.

I still think it's an important as Mustang GT but whatever. The truth is, even today some of our capacity, not much, but some of our capacity actually goes to some of the AESs to serve retail open access customers. We don't have any bias for or against that, and if there is a change in the law it's probably going to be a gradual change anyhow people need support and we'll provide that. I would tell you the principle purpose though of DIG is to supply folks in Michigan, where it can and to back up the utilities there is needs there. So it has a nice dual purpose and it really is a good engine because for the first time today I kind of admitted that the $20 million for 2016 probably going to look more like $35 million for 2017. It's almost impossible at this point with the contracts that we have not to have that happen. So it is a nice opportunity.

Got it. Thank you guys.

Thank you. Hope you feel better.

Our next question comes from Ali Agha with SunTrust. Please go ahead.

Good morning.

Good morning.

First question Tom or John, you know the investment in the company mechanism that is part of your filing of the rate cases, is that still on the table realistically given the ALJ and staff keep coming back and opposing it? What's your sense right now on the commission's views on that metrics?

It is still on the table. And for example, in smaller portions it is already being done in Michigan for utilities, but not the big picture. So not the question you are asking for covering all of your capital. So I think some people see this as a wonderful opportunity to actually have better more thorough regulation looking at the total business around CapEx rather than just a narrow slice of one year. So there are folks who think it's a really good thing and, of course, we would be happy with it. And there are folks who think you should not look at that far. Here's what I believe is going to happen. More and more there has been interest and people of asked us more about it in the decision-making process. So we are moving in that direction. If we move into the integrated resource planning process, it may even dump the whole idea because it may give you the confidence you need for capital investment over several years so that you kind of got that support you need. It's a little different, but it's kind of the same answer. So one way or another I think we are all going to be looking further out at the business together so better decisions are made for customers.

Let me just add to that. I absolutely agree with what Tom said. And look at our gas business, I mean as big as our gas business is and the fact that our prices - customer prices are down 60%, I mean, this is a good opportunity to put the infrastructure in place now without putting a real burden on our customers because their costs are really coming down rather than going up. So that's what we're trying to see in the gas case that we are testing to.

Okay. And then secondly, on a weather adjusted basis, system deliveries have been negative last two quarters and negative year-to-date. Can you just kind of elaborate like what is the trend going on there in terms of that negative trend there?

The Residential and Commercial segments have been flat at best. So up a little bit one month, down a little bit the next month, sort of flat to down. Industrial has done pretty well and continues underneath to do very well. But in this year we got when customer who had an outage that they are coming back very slowly from. We don't make a lot of money on this customer because it's a very good rate, but it is still important to us for as business. So is there coming back up, we're probably going to see most of that benefit show up next year than some of it this year as we had hoped and anticipated. So the outlook that I'm giving you probably still pretty good where we talk about Industrial at 2% a little bit better, and this is not of energy efficiencies. When you look out to 2016 and we are going to tell you flat to down on Residential and Commercial because candidly they are not picking up like they do out of the typical recovery after a session. So we're going to plan on half a point of growth. We're probably a little conservative. But we will see how that plays out. We would rather be there and not be hurt much in our self-funding plans on rates by counting on too much from sales. But good observation. We have been flat, Residential/Commercial and Industrial which typically would've been up more than you are seeing now is one heavy user who is just coming back from their outage, much slower than they had anticipated.

Got it. And last question. The ongoing cost reduction programs that you have going up for the next few years as well, how do you think about that in terms of the headroom that creates and doesn't try to quantify that in terms of the headroom that creates for rate based investment without customer rate impact. In other words, a $1 saving in O&M, what would that equate to in terms of extra CapEx spending without customer rate impacts?

So an easy way to see that is slide 17 and the one that says O&M cost performance, and you can see there the dollars and how they are really happening in the next few years where from 2014 to 2018 we will take out about $100 million net, there's a lot of ups in there as well. But net down $100 million and that's worth 10%. So you can do that math and bring it down little bit and think $10 million is about 1%, if that helps a little bit. So then when you think about our self-funding model, we're looking for about two points of cost reductions, so 2%. And that, mixed with the other things we have over the next five years keeps us in a position where we could grow as high as 7% and our customer rates would still be at or below inflation which we're guessing at roughly 2%. So that gives you some of the math that you can work with. I hope that helps.

Yes. Okay. Thanks. Thanks a lot.

Thank you.

Our next question comes from Andrew Weisel with Macquarie Capital. Please go ahead.

Hey. Good morning, guys. John, sorry to hear about surgery, having gone through on myself recently. I sympathize and definitely hope you get well quickly.

Thank you. I'm feeling good. Good to be back.

First question, just to elaborate on the O&M conversation you were just having. These other ideas, slide 18, roughly 50 million to 80 million of additional cost savings, can you give us a sense of timing as to when you would make some decisions on those and when the benefits might start to show up ?

Sure. If you look at them in the categories that we laid them out, the two way communications as we called it, which is more mobility, that's something that's going in place now. But you've got to have your systems well-coordinated to make that work. So I will give you an idea around that. Smart meters in over the next year and two will have most of our smart meters in and with that will come some mobility plus. So that sort of a timeframe where you might see that kind of thing happen. On the grid modernization, I had push that out little bit further, because that's better data, better line sensors, but smart meters, so I would go out several years before I would think of that as an opportunity. So you've got one couple of years from now, another one maybe five years from now and then go down to work management. Now that's one where we will actually get improvements every month, every quarter, every year, and it will start slow. It is this simple. I always tell people when you are changing your process, try this yourself. If you drive a car and you back out of the driveway and you try to back out and turn the opposite direction of what you normally do. It is very hard to do. I guarantee if you try to do that over the course of one week you're going to be wrong at least a couple of times during that week. So it takes a lot of discipline, a lot of work and then a lot of practice to make these things happen. Plus, we need some better systems for our work management and that's going to take us some time to put in place. So I'd say you will see gradual bits of that come in over next year. Small amounts and the in a little bit more the next year and during the life of five years I think you will see a lot of that begin to happen. So I would call that one over five years. I would call technology or line loss past five years and communication something over the five-year period. And keep in mind, some of these will end up blending right in to our plans. They will actually be some of the cost reductions we're talking about, but a lot of these will be incremental and that is a nice place to be.

Okay. Thanks a lot for that detail. Next question is the five-year plan, obviously 5% to 7% growth. In the past your slide decks have showed there is upside opportunity of 6% to 8%. Is that something by year end if the Michigan Energy Law goes the way that you are hoping and ROA returns, you might make that change sooner rather than later? I know it's a question you get pretty often in a bunch of different ways, but trying to get a sense of how soon that 6% to 8% might become a target whether it be early in the new year or not until we have a better sense of the nuclear contract or however you can help frame up the timing.

Let me start and then Tom you may want to pile on this one a little bit. Let me just go back and say again we're very comfortable with our 5% to 7% growth rate. And what has helped us is we really balance the financial performance for investors with the customer value that they get. So, what we're constantly doing is looking at the financial, the operational, and the customer side of this business. We think today for the next several years, there's more opportunity to invest and I'm talking not only capital, but O&M back into customer value and back into operations. Just as Tom talked about in the previous question, here's the truck rolls and some of the things we need to improve on. That's where I think for the next few years we really need to continue to invest and continue to grow at 5% to 7%, which is higher than our peers. What would cause this to change; I think as Tom said in the slide that up there right now, you can see if the law goes into effect, and Tom made a good point I want to emphasize, if the law goes into effect as we expect and there are shortages of capacity in Michigan, which we expected the future, customers will return to us. But it's not going to happen overnight and it's going to take time. So, we will roll that in as we go forward. But if you look at that in the future, if the customer's satisfaction continues to be first quartile and if the operations continue to be best-in-class then there may be a few catalysts that Tom talked about in the out years that would drive us to that. And you saw there, the PPAs are long-term. The retail open access is shorter term than the PPA, need to replace those. That's where I think you ought to think about for us. I mean our plan is pretty good that we have here today and there's upsides which we wanted to show you, but right now we don't want to commit to those yet because there is more work to do in the base business that we have.

So, I'll just add the real purpose of this slide we show where it says we self-fund a lot of the growth for our customers and their rate is when we are talking about the upside opportunity, we're trying to demonstrate short-term if ROA customers came back and longer-term when we might need to replace those PPAs and we could build gas plants or put in wind farms cheaper than the PPAs. Those are opportunities that we can put in place. And by the way there were - those things I just said as much as $3 billion. But those are opportunities we could do without hurting the self-funding part, without causing our customers to have bills going up any higher. So, that's really the illustration there. Conversations about where we might go beyond five to seven I think are something for the future, but we want you to know we wouldn't go there if we couldn't take care of our customers at the same time.

Okay. Then lastly on the long-term load growth, you talked about planning for 0.5%. Is that based on the current Michigan Energy Law? Or is that embedding an anticipation of higher energy efficiency when this law gets revamped between now and year end?

Well, it could be both. But, what we assume and our numbers now is that we would have about a 1% energy efficiency deduct from the economic growth. And when I say it could be both, the other thing that's not in our numbers is a heavy hand on economic development where we're beginning to see a lot of progress now. So, economic development brings in more customers, spreads that base, there could be room for energy efficiency to go up and be even higher and still get these numbers that were talking about. So I think we've got you in the right ballpark whatever happens.

Got it. Thank you very much.

You are welcome. Thank you.

Our next question comes from Paul Ridzon with KeyBanc. Please go ahead.

Is that foot still the next resource and what's the permanent process there look like now?

Yes it is. [indiscernible] is existing site that we have. It has gas infrastructure, it has electric infrastructure in place. We currently have a permit that I think extends through this year into next year. So we have an active permit to build on that site that's been approved by the DEQ. I do not expect to move forward with that would pretty much put the project on hold until we see what happens with legislation, but yes it's a great site, it's ready. The community will accept it. We've got some older peekers on the site right today and we could move forward if we need to.

Can you give a little more detail of what part of energy legislation is the commonality around?

The commonality?

What aspects of it does everybody agree with?

I think generally everybody agrees with start with retail open access. We have to do something about it because there's an unfair subsidy. What we do about it, is a debate. Is it 10% with the Q? Is it full regulation which we're moving away from full regulation more to keeping the 10% with probably a one-way door? So if you return you'll stay with utility. The integrated resource plan is a bit of a debate because what the governor is trying to do is, put in a plan that meets the EPA clean power plan that also is best for Michigan. While at the same time, I think some of the Democrats in the House and Senate want to have a standard in there that they can count on to that, that will be part of the law regardless of what happens with the integrated resource plan so that's a debate right now. The commonality, I think we talked about this in the past from a regulatory standpoint, self-implementation will go away but we will advance the timing of rate cases from 12 months to 10 months and if they are not been in 10 months you go into full implementation. It doesn't - it really is.

Could I just add a little bit?

Yes.

I would just say, you've got two bills one in the house and one in the Senate that it moves closer together.

Definitely.

And there is a lot of similarity in those bills, but there are some people who really don't like certain parts and so of course now is the time people are pushing real hard. So there are individuals who are pushing real hard on different points in different ways that, but I would say the momentum is in those two bills which is pretty good. So I would say there's a lot more commonality at this point, even with a lot of arguments going on from the few people to move ahead with the pretty good law. I think, Paul that we're confident we will be done by the end of year because there isn't - I mean we've had the hearings, the hearings are completed. We are very close and I think they are very close. If they weren't I don't think we would have rated this as successful by the end of the year. Here we are almost in November that in two months the thing is going to get done.

The wonderful thing about that is the 2008 energy laws pretty good.

Yeah.

And we are in quite a great position if nothing changed but this is a wonderful opportunity to address the EPA rules and to address renewables and to address our way and to address a little bit better regulation. And so there's a lot of opportunity in there for our customers and we are thrilled about it. And I'm going to pile on just one more time, Paul is that, you also have two leaders there three with the governor, but these two leaders have spent a lot of time with Senator Nofs and Representative Nesbitt to get this thing right so that they could be aligned. They have spent a lot of time, a lot of committee hearings and they've been talking about for quite a while. So when they bring it together they want to make sure that the debate is limited.

Where is decoupling?

It is in the bills, whether it makes it or not, we will see. But it is in the bills. On the gas, it exists today.

So the way it is structured in there is optionality. It so it so that if utility wanted to ask the public service commission for decoupling, then they could do that. It gives the commission the authority to do that with the clarity that wasn't there for both gas and electric last time. And then the commission and the utilities get a chance to decide if they want to put it to use when they get out there in future rate cases.

And any update on Palisades? There's been some noise around introducing nuclear plants. Any threats there in the near-term?

No, we don't see any issues there. I think the filings and the things they are doing with FERC to move along and keep the plant and running successfully appeared to be all going well. You know, our only issue candidly is that at the end of the contract with us we would like to make sure for our customers that it is more economical. If it turns out that building a gas plant is a lot cheaper for our customers then we are going to have to negotiate hard to extend the contract or go with what's best for them. But everything we know and you should ask them rather than us, they appear to be doing a good job.

Then lastly, Tom, you said you prefund two years in advance, is it just interest rate hedges or can you elaborate on the process?

No, we're so chicken, we are unbelievable. We have just because we got frightened in 2002 we never let go of this idea that we just want to be conservative when it comes to the financial side of the business. So for the parent, we actually reach out for two years and we don't necessarily take the debt out, but we raise the debt so the cash is in place. We don't do it with arbitrage or hedging or anything like that. We literally raise the cash. You are going to say what kind of conservative people are you? But we are. So we raise it. We put that in put in place and when economics are right actually call the debt and take it out, we do that. So we have the resources ready to go for two years out in time. And it's just that simple. There's no magic to it.

And typically what is that level that you are carrying extraneous?

Do you mean how much cash? You know, what, this is really easy to do because we give you our maturity schedule on the parent and utility, just look at that and look forward and you can see either that there is nothing left for the next two years or whenever the debt is look at cash line and you will see it is bigger than that. So you can watch that all the time. As we move through time depending on the size of the maturities.

Thank you.

Thank you very much.

We like being chicken, by the way.

We like it to.

Good.

There are no further questions at this time.

All right. Well, let me close things out. First of all, I want to thank everybody for joining us today on the call this morning. We are pleased with the quarter, and we look for to future success both this year and next year. We look forward to seeing you at EEI. So with that we will close it out and thank you for joining us.

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