Q2 2021 CMS Energy Corp Earnings Call

Guidance range.

Rajeev will walk through the details of the quarter and I will share with the strong results mean for 2021 Ernie and.

And we look to say I'm very pleased.

And important in June.

Sales of interbank at 3 times book value.

Moving from non core.

Core business with a strong focus on regulated utility growth.

The sale of the bank provides for greater financial flexibility, eliminating planned equity issuance from 2022 to 2024.

And.

And Rajiv will share how we.

And to reduce our equity issuance need for 2020, 1 and todays remarks.

Furthermore, with the filing of our integrated resource plan, you can see the path for more than $1 billion into the utility and.

Again without equity issuance.

Not only is there visibility.

We've got investment that certainty and the timeline for review.

I'm excited about this IRB.

A remarkable plant.

Many of set net zero goal.

We have industry, leading net zero goals and this IRB provides the path.

<unk> and important proof point and our commitment.

And we are leading the clean energy transformation.

It starts with our investment thesis.

Simple, but intentional approach.

The test of time and continues to be our approach going forward. It.

It is grounded.

And as and our balance commitment to all our stakeholders and enables us to continue to deliver on our financial objectives.

With the sale of banner Bank and.

And the plan to exit coal by 2025 on.

And investment thesis gets even simpler.

Now it's also cleaner.

And it leaner.

We continue to mature and strengthened our lunar operating system, the CE way, which delivers value by reducing costs and improving quality and shrink affordability for our customers.

And our thesis is further strengthened by Michigan's reported regulatory construct.

And all of this supports our long term adjusted EPS growth of 6% to 8% when combined with our dividend provides a premium total shareholder return of 9% to 11%.

All of this remains solidly grounded and our commitment to the triple bottom line of people planet.

And profit.

And as I mentioned, our integrated resource plan provides the proof points to our investment thesis, our net zero commitments and highlights our commitment to the triple bottom line by accelerating our de carbonization effort.

Making us more and above first utilities in the nation.

And to exit coal.

We're increasing our renewable build out adding about 8 gigawatts of solar by 2040.

2 gigawatt for the previous plan.

Furthermore, this plant and ensures reliability are.

A critical attribute as we placed more and.

Intermittent resources on the grid.

The purchase of over 2 gigawatts of existing natural gas generation allows us to exit coal and dramatically reduces our carbon footprint.

Existing natural gas generation is key.

And like we've done historically.

And with the purchases of our Zeeland and Jackson generating stations and this is a sweet spot for us where.

While we reduce permitting construction and startup risks.

And is also thoughtful and that is not a 40 to 50 year commitment that you would get with the new asset which we.

Believe is an important as we transition to net zero carbon.

And.

Yes, and other and our plant is affordable for our customers.

It will generate $650 million of savings Sn.

Essentially paying for our transition to clean energy.

And this is truly a remarkable plant.

It is carefully considered and data driven and <unk>.

Annualized hundreds of scenarios with different sensitivities.

And our plan was thoughtfully developed with extensive stakeholder engagement.

I couldnt be more proud of this plan and.

And especially the team that put it.

Together, we've done our homework and I am confident he is the best plan for our customers, our coworkers and great state of Michigan and of course you.

Our investors and hit the Triple bottom line.

The integrated resource plan is a key element of Michigan's strong regulatory.

<unk>.

Which is known across the industry as 1 of the best.

And as a result of legislation designed to ensure timely recovery of and necessary investments to advance safe and reliable energy and our state.

Michigan's forward looking test years.

Comps for 3 year pre approval structure of the IRB process gives visibility on our future growth and.

And that enables us and the commission to align on long term generation planning.

And provide greater certainty as we invest and our clean energy transformation.

We anticipate.

And initial order for the IP from the Commission and April and our final order and June of next year.

The visibility provided by Michigan's regulatory construct enables us to grow our capital plan to make the needed investments on our system.

On slide 6 you can see that our 5 year capital plan has grown every year.

Our current 5 year plan, which will update on our year and call and.

Includes $13.2 billion of needed customer investment.

It does not contain the upside and are IRL.

The <unk> provides a clear line of sight to the timing and composition of and incremental 1.

Billions of opportunity.

And as I shared on a previous slide for regulatory construct provides timely approval of future capital expenditures.

I really like this path forward.

And beyond the IP, there is plenty of opportunity for our 5 year capital for them to grow given the customer investment opportunities, we have and our 10 year plan on.

Our backlog of needed investments is as vast as our system with serve nearly 7 million people and all 68 counties.

Of Michigan's lower peninsula, we.

We see industry meeting growth continuing well into the future.

And where does that for us today.

As I stated and my opening remarks, we've had a strong quarter and a great first half of the year the.

The bake sale and now the IRL filing provide important context for our future growth and positioning of the business.

Let me share my confidence.

For 2021, we are focused on delivering adjusted earnings from continuing operations of $2 and 61 and.

To $2.65 per share and we expect to deliver towards the high end of that range.

For 2022, and we are reaffirming are adjusted for your guidance of $2.85 to $2.87 per share.

Given the strong performance, we're seeing this year.

The reduced financing needs next year.

And and continued investments and utility there is upward momentum.

As we move forward.

Now many of you have asked about the dividend.

We are reaffirming again, no change to the 1 dollar and 74% dividend for 2021 and.

As we move forward, we are committed to growing the dividend in line with earnings with a target payout ratio of about 60%.

And while we are not going to provide 2022 dividend and guidance on this call.

I want to be very clear.

We are committed to grow into dividend in 2022.

It's what you expect is why you owners and it's a big part of our value.

I'll offer this or target payout ratio does not need to be achieved immediately and.

And will happen naturally as we grow Ernie.

Finally.

I want to touch on our long term growth rate, which is 6% to 8%. This has not changed.

Is driven by the capital investment needs of our systems.

Our customers affordability and the need for a healthy balance sheet to fund those investments.

Historically, we've grown up 7%, but as we redeploy the proceeds from the bank.

We will deliver for the high and through 2025.

I'll also remind you that we tend to rebase higher off of actual and have is historically either met or exceeded our guidance.

All in on.

Strong quarter positioned well for 2021 with upward momentum.

And with enter bank and the Irve. It all comes together nicely position for the long term.

With that I'll.

I'll turn the call over to Reggie discussed the details or quarterly and year to date early.

Reggie.

Thank you Garrick and good morning, everyone and.

For a walk through the details of our financial results for the quarter, you'll note that throughout on materials. We have reported the financial performance of interbank as discontinued operation.

Thereby we're moving it as a reportable segments and adjusting our quarterly and year to date results in accordance with generally accepted accounting principles.

And while we're on Air Bank I'll share that the sale process continues to progress nicely as the merger application was filed and June with the various federal and state regulators will be evaluated and transaction for approval.

And we continue to expect the transaction to close and the fourth quarter of this year.

Moving on to continuing operations for the second quarter, we delivered adjusted net income of $158 million for 55 per share, which excludes <unk> for <unk> for.

For comparative purposes, or second quarter, adjusted EPS from continuing operations with non above our second quarter of 2020 results and.

Exclusive of and our banks EPS contribution last year.

The key drivers of our financial performance for the quarter for rate relief net of investment related expenses were covering commercial and industrial sales and unusual strong tax planning.

And where to date will delivered adjusted net income from continuing operations and $472 million and 1 dollar and 64 cents per share, which excludes 19 per share from interbank and is up 37 per share vs. The first half of 2020, and assuming a comparable adjustments and discontinued operations all.

In for tracking well ahead of plan on all of our key financial metrics debate, which offers great financial flexibility for the second half of the year.

The water for the waterfall chart on slide 9 and provides more detail on key where to day drivers on our financial performance vs..2020. As a reminder, this work excludes the financial performance of interbank.

For the first half of 2021 wait relief has been the primary driver of our positive year over year variance to the tune and 36 cents per share.

Given the constructive regulatory outcomes achieved and the second half of 2020 for electric and gas businesses as a reminder on.

The figures are stated net of investment related costs, such as depreciation and amortization property taxes and funding costs at the utility.

The way it really for wedded upside and 2021 has and partially offset by the plane and increases and our operating and maintenance expenses on key initiatives around safety reliability customer experience and be carbonization. As a reminder, these expenses align with our recent road orders and equate to 6 cents per share.

Of negative variance vs 2020, and is also worth noting that this calculation also includes cost savings wise to date, largely due to our waste elimination efforts through the sheet and way, which are ahead of plan.

We also benefited and the first half of 2021 from favorable weather relative to 2020, and the amount of 6 per share and recovering commercial and industrial sales, which coupled with solid tax planning provided a penny per share a positive variance and aggregate.

As we look ahead to the second half of the year, we feel quite good about the glide path to delivering towards the high end of our EPS guidance range is Derek noted as always we plan for normal weather, which in this case translates to per share a negative variance and given the absence of the favorable weather experienced and the second half of 2020, we will.

Continue to benefit from the residual impact of rate relief.

Which equates to 12 per share pick up and I'll remind you is not subject to any further Ntsc action. We also continue to execute on our operational and customer related projects, which we estimate and we'll have an essential impact of 21 per share of negative balance vs. The comparable period and 2020 given.

Copetas Reinvestments and the second half of the year.

And we've also seen the usual conservatism and our utility non and whether sales assumptions and are non utility segment performance, which is a reminder, now and squeeze and our bank.

All and we are pleased with our strong start to the year and are well positioned for the latter part of 2021.

Turning to our financing plans for the year I'm pleased to highlight our recent successful issuance of $230 million a preferred stock at an annual rate of for 2% on our lowest rate ever achieved for prefer offerings of its kind net.

And this transaction satisfies the vast majority of funding needs at CMS energy, our parent company for the year and given the high level of equity content described to the <unk>.

Describe for the security by the road and agencies, we've reduced our planned equity issuance needs for the year to up to $100 million from up to $250 million as a reminder, over half of the $100 million of revised equity issuance needs for the year are already contracted via equity for it.

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And is also worth noting that given the terms and conditions on the interbank merger agreement and the events Interbank continues to outperform a financial plan prior to the closing of the transaction and we would have a favorable purchase price adjustment related to the increased and book equity value and closing, which could further reduce up announcing needs for 2020.

And 1 and provide additional financial flexibility and 2022.

Closing out the financing plan I'll also highlight that we recently expanded our long term credit facilities by 1 year to 2020 for both of the parent and the utility.

Lastly, I would be remiss, if I didn't mention that later today will file or 10-Q.

Which would be the last 10-Q zone by Glenn Barba, Our Chief Accounting Officer for me.

Most of you know from his days, leading our I R team Glenn announced his retirement earlier this year after serving admirably for nearly 25 years at CMS, which included him signing over 75 quarterly SEC filings during his tenure.

And.

Thank you for your wonderful service to CMS, we certainly left it better than we found it and we wish you the very best and this next chapter and your life and with that I'll turn the call back to Garrick person and.

Including remarks for fully opening up for Q&A.

Thanks, Reggie and and thank you Glenn and your service.

And we have highlighted today.

We've had a great first half of the year.

And we're pleased to have delivered such strong results for.

For position and well to continue that momentum and neck and half of the year as we focus on finalizing the sale of the bank.

And moving through the Irve process.

And I am proud and lead this late teen and.

And wait to see our success as we move forward together.

This is an exciting time at CMS energy.

And with that Rocco.

Can you open the lines for Q&A.

Yes, Sir bye cash.

Question, Please cash strong and 1 on the touchdown.

And their users vs appliances.

And it just a quick question and Keith.

And would draw your question discuss bargain.

For those first question comes for Jeremy.

Alright.

Hi, good morning.

And Jerry how are you warning.

Good thanks.

Just want to start it mentioned growing earnings high end of the 6% to 8% range.

And kind of as it proceeds get redeployed here over time.

If you could we could take it and whatever it.

A little bit more if there's any more color you can provide and how to think about that timing here. It seems like a lot of opportunity with the IP.

How should we think about the high and I mean, basically I'm trying to think what.

Glidepath could we see where the earnings trajectory could overlap I guess free enter bank.

At that point.

Jerry I thought you said and keywords opportunity and 1 where that added to those are 2 words, I guess I would add to that is upward momentum and so off of 2022.

6% to 8% order and deliver it toward the high end of that through 2025, and then when I think about the <unk>.

Obviously 2 big.

Tranches, let's say colver and 2023.

And the acquisition of that facility and also the enterprise facility down 2025, those are incremental to the plan to the capital plan and those strengthened and length and that growth.

For that time period, and so again, I feel confident and our ability to deliver on that and I think this is a great plan with upward momentum as we look at that time period and.

2022% 2025.

Got it at.

That's very helpful. Thanks for that and then I know work early and the IOP process here, but just wondering if you could expand a bit more I guess on early stakeholder feedback and and just your thoughts at this point.

Jeremy and I wish you could see my face and I've got a big grin on my face and smiling.

There are.

I would love to have a case loose and there's no pushback and there are no innovators that happened with every case and as you all know, but here's where his wise CVI ERP, there's a whim and here.

And this and whites Robar complaint there is a win for everyone of the intervenors, our stakeholders when I think about the environmental community, 60% reduction and <unk>, well above and beyond the requirements of the parents of the core of the 2 degree and the more 5 degrees and there well above and beyond what biden proposals for 2030, so big win.

For the environmental community and they're a big 1 for our customers affordability $650 million of savings that's a great opportunity relied earlier, maybe better state and resiliency of the electric grid. This for more reliable plan and our previous IRB.

And more homework to ensure that we don't have a texas like situation as we look forward to the future with intermittent resource I feel really great about that and then for our investors.

For a billion dollars and incremental investment and the.

The ability to treat these assets and number securitization is voluntary the ability to treat these assets the existing assets and the book value.

And the regulatory asset process I feel really good for us a win and here for everyone and and there's a win for everyone and the opportunity to.

Reach settlement and even if it's not settlement to go the whole distance I feel really good about that and just 1 last reminder, on this 2018 IOP and.

A number of intervenors engaged with that we settled that case.

21, ISP number of intervenors in that case and with that pattern of wins and I just walked through.

There is a great way that we can reach and a great outcome of our IOP feel good about Jeremy.

Gotcha, that's really helpful and promising just a small 1 if I could just want to reconcile I think the equity and.

$100 million for the balance of the year I think for them to slide and.

And a good chunk that already locked and but.

But we are there any comments as possible Steven left and not just wanted to make sure I have that straight as far as what the equity thoughts for for the balance of the year.

Yeah, I'm low ledgy grab that 1 yes. Good morning, Jeremy a good question, so where we sit today, we're comfortable setting up to 100 because of the preferred stock issuance and remember we've got a little north of $50 million of that already locked in for for US will continue to evaluate.

Opportunities over the course of this year and if we can reduce that we may do that but for now we're comfortable sending up to $100 million.

Got it that's very helpful. I'll stop there thanks. Thank.

Thank you thanks, and our next question on our next question for that comes from and concern with Goldman Sachs.

Okay.

Thank you.

First question is following up on Jeremy's question on the earnings growth trajectory I, just want to clarify for by and you're saying for the 2022 guidance range or.

Growth is going to be towards the upper I guess and for 6% to 8% range through 2025 and that regardless of whether the I R. T.

And related Capex opportunities and work on.

Is that how a for additional.

And and answer so thanks for your question and it's great to hear from you and and that's exactly what we say to 6 day, we expect to deliver towards the high and and the Irve Corp, and those enterprises asset strengthened and length on that path. So absolutely with regard cat.

Got it and then just.

So picking the Ips Sky you then for consistent that achieving that's on percent range and like clockwork for a for a long time.

Yes.

Going to that upper and.

Again, and exploring the <unk>, what kind of gives you confidence that and and maybe that could work for longer term runway at that type of growth rate.

Well I would actually start with with with this year and 2021. This momentum that we have right now carriers and the 2022, hopefully you heard that and our comments from the 285 for 2.8 to 7 and we'll continue to revisit that that on.

On a quarterly calls again that carries and this plan and remember what we do and.

And we read based off of actual so we deliver either meet or exceed guidance and then that's the point, where we re based off of and so is that compounding effect that you've seen time and time again and so that's an important piece of it but also we think about the entire triple bottom line and so I think the Great example, desire.

A billion, 3 and and and it saves our customers $650 million, that's at CE Ray mindset come on to play, making these investments attacking the cost stack.

Sure a waltz.

3% was 4% went to 3% sure wall. So we balance all of those things the affordability the balance sheet.

And and make this come together again, I feel really confident about our glidepath forward and Reggie you might have some comments on that as well and.

The only thing I would add to garrett's who'd comments as as you think longer term, we noted and the IP that we intend to do about 8 gigawatts of solar Newbuild and that's about 2 gigawatts higher than the prior plan and so that creates additional capital investment opportunities. We're assuming it's a similar construct where it's a 50% owned and 50% can't.

Practice, however, if we continue to be more and more cost competitive.

Could create additional upside to own more of that opportunity over time, a couple that with the fact that we've talked about the $3 billion to $4 billion of upside opportunities and our 10 year capital plan, a portion of which we think will be and our next 5 year plan, but they're still be balance after that and so as we continue to take cost whether it's through the CE way or some of these episodic opportunities like people.

Re pricing and so on and will that creates more headroom to bring and that additional capital. So we feel very good about the long term glidepath for capital growth, which drives right base growth and then earnings.

On the surface definitely helpful. Just 1 more if I could go back to that plan.

Plan I think a lot of.

The questions that people have is whether the.

And which basically swaps out call for at least and the interim cast and the portfolio.

And how that will be received by the various stakeholders I appreciate your comments on.

Working with the various stakeholders as well as the commission on what type of plan, but how.

How confident are you and and and this plan being the best 1 and if are some.

My guest room for negotiation.

By the end up being the best plan for the commission and what are some of the alternative for that.

Potentially also work.

Well this is the best plan for Michigan.

And other things with that Ah first IOP taught us is that we learned a lot from that and and and and this is a I would just say great plan remarkable plan for all the reasons I mentioned, a few minutes ago and so there was a room and here for everyone and when there's a whim.

There is an opportunity to reach settlement or go the whole distance and so.

Again, I would just reference 2018 for a very successful with a number of interviews and being able to get to a settlement, but mostly with great losses regulatory construct we're working with these intervenors and the process and if there's an opportunity to settle for those and outcome that is good for all we will do that and and and.

And so for early on into and again I'm very optimistic and we are great plan and on unless you want to add to that and say the only thing I would add to that is that trust that we evaluated the number of different permutations as instructed pretty IRB construct and so we certainly looked at whether we can transition.

Renewable power more rapidly or fully and.

And as a substitute for that sort of retirement and the economics just don't get you. There plus you also introduced significant for liability and resilience trends given the lack of really long term storage solutions and so we certainly evaluated it but as Garrick noted we deem this plan where it sits today is the best plan for Michigan and also with the gas.

Cities, and obviously for going the O&M and capital. We know we would have on our coal facilities and take that and the account with the fuel.

Arbitrage get from gas vs Cole and just less purchase it for you know controllable dispatch. It just brings substantial cost savings to customers, which would not be all for it if we want to a full renewable solution and Lou of and.

And and move and we'll have gas is the bridge fuel. So we feel like this is the most economic opportunity for all stakeholders and I'm going to add to that and somebody.

Just crystal clear on this mentally affordability piece with the day of natural gas plants are required for resiliency and the state you can get here from from there. That's just bottom line and so it's that crystal clear and that's why I haven't the high degree of confidence.

And for a color. Thank you so much.

And our next question today and comes from Anthony Corrado miserable.

And hey, good morning, Gary.

So much.

Just just 1.

And once that question on.

On the dividend.

We've laid out at night planned for earnings growth rates, and you're pretty confident and Matt.

Hi, and bye.

What what you could channels on providing that type of detail on on the dividend growth rate.

Well, you said pretty confident I would change that would really confident and so.

The low passion that on your question.

But on equally confident and our dividend peace and and what you heard for me.

Confidence and dividend.

Dividend growth for 2022, we recognize the importance of it and we haven't built into our financial plan.

And I really want to hand, it over and Reggie here because of those and important piece that's associated with.

The sales bank and closure and queue for that also shapes that dividend and and so that's why we're on.

Most people have to come together, so that we can share that patel.

Potential here and at the end of the year, but go ahead.

Right. So if you think about some of the dynamism, we might see and the second half of the year, the closing and the timing of the closing a banner bank transaction could certainly impact what we might plan to do for 2022 dividend, but to go back to Garrett's comments, our commitment is to grow the dividend beyond the $1.74 per share where it is today.

And then a longer term again, we will certainly have that dividend growth commensurate with earnings, but certainly the bank sale and the timing of that will have an impact in the near term and and longer term again right in line with earnings growth and so we feel highly confidence and we will have a competitive dividend and we know that it's a core part of our value proposition as Garrick noted and his prepared remarks.

And and binge day, just add to that.

With the sale with the sales and that closure there there's upside potential from a dividend perspective again, so we won't be able to.

Our investors to be able to to share and some of that positive positive news.

If I could just.

1 last question.

Related to the <unk> is there any part of the <unk>. Thank you and good may be the most challenging.

May generate the most concerned with you to the nurse.

I don't know about most challenging and I think that's.

I'll just tell you this Anthony back in 2014 and 2015 on the policy witness.

I've been on the stand with intervenors and and crossed by attorneys.

They go after a lot of different things and the case and here's again, we've got strong testimony, we've got great precedent.

Or used to the stuff we do this all the time, although rate cases, we've done and where the previous RFP.

I don't think there's anything this team can't handle frankly.

And so we're and we're prepared to do that as Reggie alluded to a minute where there's a lot of detailed a lot of modeling and data that went into this and so.

It's a it's a very strong case.

Great. Thanks for taking my question.

Yep.

And our next question is do accents and they're Gonna show Burlwood Evercore I decided.

Hey, good morning, and thanks for taking my question.

Web address welcome and good morning, good morning.

Maybe just on the I R. B I noticed that you proposed a couple of coal plant shutdowns.

But then including them and the rate base for their their shutdown just got up.

Curious as to sort of.

If the state has done that previously or there is some precedent there that that you feel comfortable with that proposal.

While I do for comfortable.

Precedent set and Colorado, Florida, Wisconsin and for some more approach and.

And Michigan, we do have a base ability to securitize, but it is voluntary and that's an important piece of this and so.

It's essentially 1 and 2025 at about 1.1.2 billion of remaining book value to go on through and Securitise that just doesn't make sense. It is going to be a drag and credit metrics.

And have an impact on the cost of capital, which ultimately shows up on the customer's Bill that's I mean, none of it makes sense and so we really got a good approach there it's different and how we've approached previously but again, there's a nice precedent and spin set and I am really on it.

Testimony and <unk>.

The testimony, it's where and a good spot.

Understood I appreciate the color of their and and obviously there and then you can always fall back to securitization at that Lee.

Does that ends up being the case, but I appreciate the color day, and then just maybe to Reggie.

Can you clarify sort of the.

And I'm trying to feeding on equity elimination 2.2024.

You don't talk about 2025, so should we assume sort of been normal cadence of equity I believe that was $250 million per year.

To go back to that starting in 2025, I'm, just trying to reconcile that to the comment that the $1 billion additional.

You don't need you don't need to finance that with equity just any color their reggie would be helpful. Thank you and.

Happy to your desk first let me just circle back to you.

Closing comment and just to be unambiguous around us and so.

The notion of falling back on the securitization and as.

We noted when we rolled out the IP as we noted and are prepared remarks. This is the proposed plan. This is not a buffet and we're not thinking about any type of fallback option and again from a securitization perspective Garrick comments given the impact it can have on a balance sheet we've already on.

The inclusion of car and 1 and 2 and the retirement and securitization. There we will already have $1 billion of securitized debt on our balance sheet.

And as of 2023, so we really cannot accommodate alternatives like that so I want to be very clear, we do not view that as a fallback option and the proposed plan is what it is so with respect to the question around equity.

You're right and that as we disclose we announced the interbank sale, we are not planning to issue any equity.

From 2022 through 2020 for even with the capital opportunities that we've announced today with the IRT and potentially some of that upside opportunity. So narrow additional equity for 2025, you can assume the up to $250 million level that we articulated and when we first rolled out a 5 year plan. So that's still a good working assumption for now but obviously.

There's a lot of time left and if we can recalibrate and see the data moving away that supports reducing that at some point, we may revisit that for for now assume $250 million and that out of the year of 2025 is that helpful and very helpful and thanks for clarifying that securitization come and thank you ready and thanks for Eric.

Thanks.

And our next question and comes from sharp for his over guggenheim's on it.

Hi, good morning team.

Actually compensating here for sure. Thanks for a very comprehensive all day.

But I think if I if I may.

Good morning, and if I could just follow up on kind of 1 more I.

I guess ERP Capex related question.

What are some of the cost of drugs that are and then.

Incremental portion for Capex fall under that has it all fully covered by the Ips proposed clause.

Annual rate case process that you have.

Any kind of non on any of the non IOP work needs any incremental trackers and but does.

Any of this incremental work and start pumping more equity and AIDS down the line or is it fully kind of baked and at this point.

Let me.

Think that ready and I'll tag team. This 1 and so let me just kind of frame up when I think about our.

Capital plans and I think it will talk about our current work across our utility but also this this IRB and so.

And yet at the end of the year and our January call and we're going to add another year to that 5 year capital plan and that's going to be more capital opportunities that 5 year plan is going to growth and it's going to be on our gas business is going to be and electric distribution business and so there's some growth opportunity there.

And then we will continue to followed and <unk> through the process did at 10 month process again, we feel confident and the outcome of that and then that's and incremental 1.3 and so you can imagine and Q2 of 2022 and we're going to.

And what their success Wellcome and there'll be an adjustment and 2023 to accommodate the and.

And the Cobra facility, and then also and adjustment and 2025 and so you can see some of that play out over the 5 year and into the 10 year because when you look at that.

This integrated resource plant. It goes from 25 to 27, and so simple about solar Bill will fall and the 10 year peace as well and so there's some updating and that will take place along those lines. So that's kind of a capital the capital layout reddish certainly.

Taking bets with me.

Appetizer Constantine and I appreciate the question that we're pretty methodical so I'll put the <unk> side, we're pretty methodical and how we think about.

The capital plan of utility and we really spend a lot of time for providing long term visibility on customer investment opportunities across each of the businesses and so the current 5 year plan has around 2 and a half billion dollars of what I'll call clean energy generation spend and then the balance is electric and.

Gas and infrastructure spend and so we noted when we filed our gas case.

Couple of years ago that we had about $10 billion.

The gas infrastructure related investments for safety reliability, and Decommunization of about about $1 billion per year run right and so you can expect and extension of that capital investment opportunity and subsequent iterations of 5 year plans and so we will do more gas infrastructure and again run about $1 billion per year.

Run right in that regard electric infrastructure is comparable what we're doing a little over $1 billion per year of electric infrastructure work to improve reliability and the <unk> is also where we're seeing capital investment opportunities to the existing RP remember, we're still executing on a 1.1 gigawatt tranche.

And we're going to on half of that and so all of that is going to be part of the next iteration and so those are the sort of non new IOP opportunities again, we will see those come in and we also talked about starting to take on some of those upside on opportunities, which and our 10 year plan on a 3 to 4 billion mood and do all of that and the next vintage, but a portion of and and again, it's more electric.

And and gas infrastructure as well as clean energy generation related spend and so those would be some of the projects that we would invest and it beyond this new <unk>.

Highly confident that we'll be able to create the headroom to introduce those into the capital plan you asked about trackers. The only thing I've mentioned and that regard as in our gas infrastructure capital plan, we do have that.

Equivalents are comparable structure like attract tracker and that's and on enhanced infrastructure replacement program and so we have that under the gas side, but we don't have any other sort of.

For the historical type trackers like that and so we obviously put them into the cases with file on a serial basis, and then that dictates what ends up and the and the final plan does that make sense.

And both I think Thats helped very helpful and.

On a shift a little bit for.

More on the phone number of question for the electric sales volume and seemed to be normalizing for 3 opening more or less and.

Especially with a strong on C&I growth and from natural coming down with it and you can talk about and your thoughts on for the residential low and how sticking vs expectations and maybe come and visit the reversion of the residential low, causing headwinds and some recordings for 21 on our expectations and for me too.

I'm going to have Reggie start with some of the specifics on on and I'll talk about some macro at the end zone Reggie that should cover Constantine we've been quite pleased with what we've seen really across all of the customer classes to date and.

So we have the detail and the 15 page Digest redistribute also and your appendix you can see the year to date trends and presentation today and so we've got residential year to date down a little over 1% on that compares favorably to plan, we had much more bearish expectations, because we were assuming and we were assuming and more rapid.

Return to facilities and so our full year plan was something closer to down roughly 5% and where had a plan. So that does imply that we're seeing a good level of stickiness to this mass teller working trend, which I do think will be part of a post pandemic normal and obviously, that's higher margin low and so residential continues to outperform our expectations.

And <unk>.

And then we're also seeing commercial and industrial as I mentioned and my prepared remarks come back nicely and so year to date commercials up around 3 and 5%.

And and we had and our plan about that level and then industrials at 13% year to date 2021 vs 2020, and our plan, we said for on a full year based on about 6% up and so we're seeing surprised for the upside across all fronts and so entry year that obviously creates upside and.

Potential contingencies begun to the second half of the year, but longer term as you roll that into your rate cases that creates headroom, because you're introducing more kilowatt hours and do the dump denominator of your rate calculations. So we feel very good about the road ahead to date and it's still.

David Pandemics not behind this yet, but again, we're still seeing very encouraging trends on the low side. The other leading indicators, we've talked about and the past are just interconnection activities new service requests they're up over 30% year to date vs, where they were and 2020 and 2020 may not be the best comp given the Pandemics and we also look for 2019 and again up 30.

Percent vs, where we were prepandemic. So interconnections are strong staking requests are strong customer accounts are quite good with commercial up 1% and so again everything seems to be trying to and from a low perspective and.

The right direction.

And just add to that just for a little bit of clarification. So.

Those new service connection Interconnects and those are installs those aren't for someone dreaming of putting in a house or thinking about a business those are actually in the ground and so again and gives us some idea of the momentum here, we continue to have unemployment rates well below the national average here in Michigan and the heart of our service territory Grand.

Rapid that's even better just to give you a little flavor over the quarter, even seen growth and.

And again macro trends and people opening new business in Michigan and in fact.

We're under and NDA right now with the company, but.

3 and it's $300 million investment 30 megawatts of 150 jobs that are located here and our service territory, Michigan and I could tame and 2 other example of that and so on it come out of the pandemic here and we're seeing nice economic development and growth here in Michigan as well.

That's very helpful cause thanks, so much for taking the question again and congrats on record.

Thank you.

And the next question comes from Paul Patterson with 1 rock associates.

Good morning, guys How're you doing.

And we're doing great ball.

So for most of the questions and answer puts us back on that securitization question could you remind me too.

Sides of the asset that's now going to be amortized as opposed to securitized.

The remaining book value and 2025 of those for plants.

B 1.2 billion.

That is on a consideration and this and this violence.

Okay, and you guys mentioned that the securitization you thought it would be credit.

Negative and comparison to the plan that you are putting forward and could you.

Just to sort of walk to sort of very high level.

And for that is because you'll be amortizing the cash flow faster is that the way to sort of think about excuse me and you'll be amortized and he has a faster and.

Casualties stronger that how it works.

This was there something else I should be thinking for.

So Paul this is Reggie so a couple of things there. So Moody's as you may recall treat securitized debt is dead and their metric calculations and so.

You have that levering effect of securitization is because they are effectively non recourse step of Moody's is the 1 rating agency that those imputed as debt and so that billion to that Garrick noted would be dollar for dollar Canada's debt and our credit metric calculations. So you get credit dilution. There and then you couple that with the fact that you're going to forego on.

<unk> on a 1 billion to a rate base over time, and so you're a couple sort of the impact on the denominator, where you just have dollar for dollar debt of 1 billion too and then you have the dilution and your numerator cause you for going earnings on that equity portion of that rate base over that period of time, that's what offers that levering effect okay.

And of course for getting the cash upfront, though with the securitization so I mean.

And I'm just sort of.

But we can take on offline broke and.

And then in terms of the plan and it sounds like it really is a win win win.

I'm just wondering is it and any change in the trajectory of your what you were expecting in terms of customer and it's going forward.

As a result of the IOP or is that too early and it's <unk>.

And you guys pretty much.

Pretty much on track as you would figure before and this is going to be some incremental savings that will help you reach your goals for worms.

And you thought what you say and and so we look at low across that 5 year plan of investments, we look at the rate impact and and to to Bill impact, which is also critically important for.

For residential and commercial customers and and and.

And so that is part of the fire and as we again this incremental capital of 1.3 for.

<unk> $650 million of savings over our current plan and so this is.

So again this comes together nicely to your point, Paul from affordability perspective for our customers.

Also thanks, so much and congratulations.

Yeah. Thank you Paul.

Hey, ladies and gentlemen. This concludes the question and answer session turn the conference back over to gather gross sales for for that.

But again.

I want to thank everyone for joining us today again strong quarter of great first half of the year and upward momentum and just again I am looking forward to seeing everyone and person here as we again safely as we move through the latter half of the year take care and be safe.

Thank you Sir this is what it's for.

And is known for this call and thank you all for attending today's presentations you may not disconnect your lines and have a wonderful day.