Welcome to the CMS Energy 2016 First Quarter Results and Outlook Call. The earnings news release issued earlier today and the presentation used in this webcast are available on the CMS Energy's website in the Investor Relations' section. [Operator Instructions]. At this time I would like to turn the call over to Mr. DV Rao, Vice President and Treasurer, Financial Planning, Investor Relations

Good morning everyone and thank you for joining us today. With me are John Russell, President and Chief Executive Officer; Patti Poppe, Senior Vice President of Distribution Operations, Engineering and Transmission and Incoming CEO and Tom Webb, 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 also posted in our website. Now let me turn the call over to John.

Thanks DV. Good morning everyone. Thanks for joining us on our first quarter earnings call. I will begin the presentation with a review of our first quarter and operating performances before turning the call over to Patti to discuss our capital investment plan and cost reduction initiatives. Then, Tom will provide the financial results and outlook and we will close with Q&A. First quarter earnings were $0.59 per share down $0.14 from a year ago. Weather was the primary factor. The mild weather that began last October continued through March resulting in the second warmest winter on record. On a weather normalized basis first quarter earnings were up $0.12 or 20% compared to last year and as you would expect we've already taken steps to mitigate the unfavorable weather impacts. That in time we will talk more about our plans later. But today we are reaffirming our full-year earnings guidance of a $1.99 to $2.02 a share. Earlier this month we retired seven coal plants totaling 950MW bringing our capacity mix to less than 25% coal, our regular and routine rate case strategy remains on track. Last week the commission approved a gas rate case settlement for $40 million, using the previously approved return on equity when required. We filed an electric rate case the 1st of March for $225 million and plan to self-implement later this year. We continue to operate with a constructive energy law, the framework allows for fair and timely regulatory treatment. If the law is updated we see this as being incrementally positive to our customers. With the recent coal plant closures we are proud of the fact that we have reduced the most coal capacity of any investor owned utility. The gas-fired Jackson generating station and new wind farms have been added to our…

Thank you, John and especially thank you for your leadership and your contribution to our company over your entire career. CMS Energy is definitely better than when you took the helm as CEO and President and if I do my math correctly we're talking about $8 billion better under your watch proof positive that you walk the talk and follow your motto to leave a better than you found it.

Thank you.

One of the reasons that we are all optimistic that we will continue to get better is our capital investment in our gas and electric utility. As we said over the next 10 years we plan to invest $17 billion and that is a 60% increase over what we invested in the prior years. Each project is screened to ensure that will in fact add customer value. The customer value takes a form of customer service, reducing costs, enhancing our productivity, enabling cleaner energy, all of these improvements drive customer value and in fact many of the investments provide improvements in several of these categories. For examples, our customers benefit with fewer and shorter outages when we make our investment in our electric infrastructure. That not only improves the customer experience but reduces costs. Our customers benefit when they can move into the college apartments hook up to consumers energy service online on their mobile phone and never speak to a customer service rep and because of our smart energy and smart meter investment we can remotely turn on their power. No truck role [ph] required . This not only improves the customer experience end to end but fundamentally reduces the structural cost to do so. Our Smart Energy program is a great example of a major capital investment that has ongoing benefits to customers on both the service and the cost side of the equation. Other cost savings are driven by proactively investing in replacement of legacy gas service lines so that we can prevent an unscheduled maintenance expense and customer disruption. Our gas compression upgrades and the use of field technology allow for a more productive workforce and less unplanned expense. And with our ongoing transition from coal to gas and our increasing renewable energy investments we demonstrate…

Thanks, Patti. Thank you everybody for joining us today on this very busy day. This is my 54th quarterly CMS earnings call and as usual no surprises. Our first quarter earnings are down $0.14 reflecting the cold winter last year and mild weather this year. On a weather normalized basis 2016 earnings are up $0.12 or 20%. Weather normalized all operations the gas utility electric utility, enterprises interest and other were at or all favorable to plan in 2015. You can see the unfavorable comparison of 2016 to 2015 weather on this waterfall chart. Our operations are performing well better than planned which offsets the weather in the first quarter of 2016. For the nine months ago if we experience just normal weather we will be $0.16 ahead of 2015 and that’s when milder conditions existed. Cost reductions already under way keep us right on track for 5% to 7% earnings-per-share growth. Here is how the earnings-per-share forecast curve looked last year. We were able to reinvest $38 million into the business for our customers because cost reductions were better than planned and the 2014-2015 winter was cold. Towards the end of year the warm winter of 2015-2016 began but we fully offset delivering our 13th year of consistent EPS growth at 7%. This slide adds our forecast of EPS growth for 2016, as mentioned adverse weather in 2016 has been offset fully. The winter of 2015 to 2016 was the second warmest ever not even this however dense our ability to deliver 5% to 7% growth without any customer compromises. For example, we were able to enhance cost reductions including normal changes that come with mild weather like lower uncollectible accounts because customer bills are actually lower. In late December with 2015 cash flow better than expected we made…

Thank you.

Thank you for being a good friend.

Thank you.

So let's take questions.

[Operator Instructions]. And your first question comes from the line of Paul Ridzon from KeyBanc. Your line is now open.

I just had a quick question with the legislation having been introduced into the Senate, is there any read through that maybe some common ground has been found with the Chamber of Commerce and the schools?

The fact that it's been introduced I think it's a positive. I think you know there's been discussion going on with the schools and the chamber about supporting this bill or the ones from the house. The bills that came out for everybody to know their bill is introduced. I just set the groundwork the bills were introduced, two of them substitute bills in the Senate, Energy Committee yesterday and they refocused on the things we talked about before. Senator [indiscernible] had to do with retail open access, 10% cap stays but the suppliers need to have firm forward capacity in Michigan and any further new ROA customer would have to pay a capacity charge. So we think that even though it would be nice to get to a fully regulated entity that seems to be reasonable. Part of that was integrated resource plan which is good for preapproved generation cost and regulatory there are some changes there which is good for I think everybody including us. The chamber needs to decide what they want to do with these. At the end of the day as I said earlier it's an unfair system in Michigan that we had today were 300 customers of our 1.8 million customers benefit and our 99.98% of the customers pay 3% to 4% more on the cost to subsidize these other customers. So I think what [indiscernible] is doing is the right thing but let's get the senate bill out, get it through the senate and try to get as much support as we possibly can. As far as the schools are concerned the same thing, few schools take choice, most of them don't. At the end of the day they pay more, at chamber few of their customers take choice, most of them don't, they pay more. So I hope both of those organizations will be on the right side of this.

Your next question comes from the line of Paul Patterson from Glenrock Associates. Your line is open.

I also just wanted to sort of touch base on the legislation. When you have a bunch of people who are subsidized often they can be pretty effective in blocking things and the legislation hasn't been going as quickly as you might have expected earlier. And I'm just wondering any sense about that? I mean you did sort of address it with Paul Ridzon just now but I mean how do you guys feel about it's chances of passing I guess at this point?

You raise a great point about those that haven't want to continue it and again if I was subsidized I would want to continue it to, so that has been the battle. The issue is that it's just not fair to our customers. And as we shut down seven coal plants and there was other plant closed in Michigan you see the results of the MISO auction that Tom talked about, it's beginning to show that we may have capacity tightening up and if we do that means that new supply along with energy efficiency needs to be combined and moved forward. Well in the most capital intensive industry in the world with the most volatile product in the world it's hard to make investments unless you have uncertainty and that’s what the law I think the law is trying to provide and I think that’s what Senator [indiscernible] primary view is reliability and certainty going forward. Can a handicap weather is going to get through it or not? I think it will get through the senate, I'm pretty confident about that. My opinion is it's get more of a challenge in the house and that’s something that we have seen before. So I don’t really want to handicap it right now, if we get it I think it would be an upside but I do want to emphasize that we’re not counting on any law changes to our 10 plan, not our five year plan but our 10 year plan and as Patti has taken over, she is growing the business to 6% to 8%, her and Tom, I think that’s great and none of is dependent on the law changes. So if the law does change it's good for our customers and there maybe some upside to us but that really is the intent that we are focused on is what's fair for our customers and I think some of the issues that many of you will be talking about in the next few minutes in Ohio is a good indication of what should not happen here in Michigan.

And then just on the pension, what's the full-year impact I mean just the impact going forward on this $0.05 and what have you? I'm sorry to be so slow on it but I wasn’t particularly clear.

So the $0.05 is the positive impact from the change in how we calculate the interest on pension and healthcare cost. So I don't want that to sound like it's just a first quarter paper thing, that’s the full-year impact. You still have other impacts and things like remember the discount rate still moves up and down so that could change things next year, it could give you little good news, little bit of bad news. The $0.05 for that change is the full-year effect. In the future we will remeasure that each year in January but what we think we have done is taken volatility out of that particular calculation but you still could have -- I'm going to go to the big side of penny or maybe two up or down but less than what we’ve looked at in the past.

And then just on sales growth, weather adjusted, leap year adjusted, what was it for the quarter?

So our sales on the quarter were flat but here is what's interesting. When you look at the weather normalized sales, we actually are showing in our reports which you can look at attached to the release that residential and commercial are down about 2%. I will tell you I actually don’t believe that, I don’t think we have weather adjusted year-to-year correctly. Last year the first quarter was very cold and we said our residential and commercial sales were like 2% up. Now we are comparing to that where it was really mild and we’re saying 2% down. What we saw in the second quarter last year was that sort of reversed, it just said oops, your weather calculations aren't too good. I think we probably see that in this year. I hate to dismiss data but I just don't believe that follow-off in residential and commercial will continue but I do believe if you look forward think of those as kind of flat. We are not seeing great growth there. It's the industrial side that is interesting, our industrial side was up 5% and if you take one customer out we were actually up 9% in the first quarter. So there is a lot of good news in there. The food business was up about 4% and plastic sector up about 4%, transportation up about 7%, packaging up about 10% and here's something that I really like to see several of our companies in the building sector were up a lot. Cement side was about 17% so there is a lot going on where we can see the uplift through industrial, but keep in mind we are conservative beast, we’re still telling you that for the year as we go out we're looking for about 1% growth overall but I will admit the bulk of that will be on the industrial side.

Your next question comes from Julien Dumoulin-Smith - UBS. Your line is now open.

So perhaps just a quick question on that [indiscernible] there, can you comment a little bit on what you are saying in the future? Obviously we have seen some improvement in that pricing and obviously it doesn't move the needle too much. How do you think about layering in your expectation going forward whether that’s status quo or backward ratio [ph] or what have you? And then also your existing contracts and ultimately the earnings profile of our multiyear period? I will leave it there.

Let me take those in a couple of pieces. First of all we gave you a little bit of good showing that for 2017 the layering and that’s a good way to think about how these capacity contracts are being put in, a little bit more good news layered in, a little bit more good news layered in with contracts. We are not trying to grab what we think is a peak or rush to anything. We will miss the peak and we will miss the trough but the layering strategy should give us some good news. So I would say the $35 million number is pretty good for 2017 for the chart we showed you, we still have about 25% of our energy and our capacity available so there is some more upticks that could come from that. Now go to the future. As you look at further in time we have anywhere starting in 2018 out through time and near time 50% to 90% of capacity and still 25% of energy because we have got some nice long term contracts in place on energy. I don't want to predict how much of the $20 million to $40 million upside will happen except to say because we layer in, I don't think you should expect the full $40 million. That would be getting to the replacement cost. But on the other hand, I'm not so negative as to say it will only grow by another $20 million. So I think what we're trying to do is give you the zone somewhere in between there that we honestly believe will be achieved depending on the prices and the bilateral demand and what we are able to do as a business.

And to be explicit about your going forward expectations on where these auction results go out, what do you think of these reforms in terms of impacts on pricing?

Nice and complicated is what they are. So what we are going to see going forward as MISO is going to be changing the seasonal auctions, they are going to be and changing to multiyear auctions and I wouldn't even fathom a guess about what that will really mean but what we can look at is the data that just occurred. That $2.19 per kilowatt month if you laid the bids down right along the demand line and you all can see this it's all public record, you can see that it stays pretty close in there. So with a modest change of what was happening in the market on the demand side that could had easily have been $3 plus. So what that does to people that are interested in reducing their volatility, they come to businesses like the Tesla, the Ferrari or dig [ph] whatever we want to call it, they will come there looking for ways to take out volatility and pay a little higher price than the auction, those the one-year auctions at least to protect themselves from an exposure. So I do see a little upside from that based on that and the bigger picture is, it's telling you a little bit about what John talked to. That capacity situation for Zone 7 is just not all that solid. So as changes occur in demand or in the supply side I think that you see a market that could tighten up quite a bit and it is very hard to predict but a year from now I just suspect it will probably be a tighter market on capacity. Now that’s just a personal opinion. So I will leave it at that.

And actually that teases pretty well into the next question. I was curious as you think about your portfolio of PPAs including some of the higher-priced PPAs, is there any ability to potentially step in a little bit earlier to try to come to some resolution on bringing down those cost for consumers by extracting yourself from some of those obligations? Specifically Palisade [ph] is what I am thinking.

I am shocked. So there is a lot of speculation going on that subject but all I can tell you that’s the sort of thing that we just don't want to comment on. So I just like to leave that open to see what happens. It's very important that the owners control that and so we don't want to do any speculation. I hope you will appreciate that.

And I'm showing there are no further questions at this time.

All right. Let me close it out. First of all thank you for joining us today. As Tom said I know it is a very busy reporting day and this will be a quick call. Also I want to thank all of you that are on the line right now for all of your help, support and I will miss all of you as my tenure and as CEO and Patti will head up and Tom will head up the next call without me. So my thanks to all of you. It has been a great run and the company is in great hands moving forward. So thank you.

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