CMS Energy : 2021 Annual Report

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CMS EN E RGY & CONSUMERS ENERGY

ANNUAL

REPORT

2021

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To Our Fellow Shareowners:

On behalf of our great company, I want to thank you for your investment. Our commitment to our customers, communities, co-workers, and investors is central to our purpose - World Class Performance Delivering Hometown Service.

Even through challenging times, our co-workers continue to provide excellence to our customers and communities. Their hearts of service are why I love leading this company.

We delivered another year of strong financial performance in 2021, marking 19 years of meeting our adjusted earnings guidance. Also, we were able to position our company for future success with the filing of our Clean Energy Plan (IRP) and the sale of EnerBank.

As we head into another year, I stay focused on delivering consistent industry-leading financial performance, mobilizing our co-workers to reach our long-term strategic destination, and working to enhance Michigan's top-tier regulatory climate.

I am happy to share our latest accomplishments that exemplify our impact on the triple bottom line - People, Planet and Profit.

PEOPLE:

• Awarded #1 Utility in the U.S. for America's Best Employers for Women by Forbes
• Awarded #1 Utility for Best Employers for Workplace Diversity by Forbes
• Made Military Times "Best for Vets: Employers" list
• Placed in the first quartile across all industries for employee engagement by Culture IQ
• Placed in the first quartile across all industries for customer experience measured by CXi Forrester Index
• Supported >$75M of customer assistance to help keep customer bills affordable
• Attracted 105 MW of new or expanding load - estimated to create ~4,000 jobs and bring >$1B of investment to Michigan

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PLANET:

• Filed historic Clean Energy Plan to exit coal in 2025 and achieve a 60% carbon emission reduction from our 2005 levels
• Invested more than $500M in gas, electric, and renewable infrastructure to support our clean energy transformation
• Received approval of 1,000 MW of solar for our Voluntary Green Pricing programs to support the growing solar needs of customers
• Launched PowerMIFleet Electric Vehicle (EV) program, coupled with PowerMIDrive, a strategy to drive 1M EVs in Michigan by 2030
• Secured options to develop renewable natural gas at 2 dairy farms to achieve net-zero methane by 2030

PROFIT:

• Achieved another year of 7% adjusted earnings per share growth
• Increased annual dividend to $1.84 for 2022, 16th increase in as many years
• Delivered adjusted operating cash flow of $1.84B, $80M above guidance
• Grossed over $1B in proceeds from the sale of EnerBank; ~3 times book equity and further positioned CMS Energy as a World Class Energy Company
• Achieved $55M in operations & maintenance and $95M in capital savings through the CE Way
• Established an economic development rate that, along with state economic incentives signed by the Governor in December, will generate sales and job growth in Michigan

This completes a great year, and I look forward to the coming year. Thank you for your continued support.

Sincerely,

Garrick Rochow

President and CEO

This letter includes non-GAAP measures. Reconciliations to the most directly comparable GAAP measures are found immediately following this letter and on our website at cmsenergy.com.

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CMS ENERGY CORPORATION

Reconciliation of GAAP to Non-GAAP Measures

(Unaudited)

	In Millions, Except Per Share Amounts	2021
			Twelve Months Ended
			12/31/21			12/31/20		Increase
Diluted Earnings Per Average Common Share
Reported net income per average common share	$	4.66	$	2.64	43%
Reconciling items:
Disposal of discontinued operations gain			(2.27)			-
Tax impact			0.49			-
Discontinued operations income			(0.39)			(0.26)
Tax impact			0.09			0.06
Other exclusions from adjusted earnings**			(*)			0.04
Tax impact			*			(0.01)
Loss on fleet impairment			0.10			-
Tax impact			(0.03)			-
Tax reform			-			(0.03)
Voluntary separation program			-			0.04
Tax impact			-			(0.01)
Adjusted net income per average common share - non-GAAP	$	2.65	$	2.47	7%

• Less than $0.5 million or $0.01 per share.
• Includes restructuring costs and unrealized gains or losses from mark-to-market adjustments recognized in net income related to CMS Enterprises' interest expense.

Management views adjusted (non-Generally Accepted Accounting Principles) earnings as a key measure of the Company's present operating financial performance and uses adjusted earnings for external communications with analysts and investors. Internally, the Company uses adjusted earnings to measure and assess performance. Adjustments could include items such as discontinued operations, asset sales, impairments, restructuring costs, changes in accounting principles, changes in federal tax policy, regulatory items from prior years, unrealized gains or losses from mark-to-market adjustments recognized in net income related to CMS Enterprises' interest expense, or other items. The adjusted earnings should be considered supplemental information to assist in understanding our business results, rather than as a substitute for reported earnings.

CMS ENERGY CORPORATION Reconciliation of GAAP Cash Flows from Operating Activities to

Non-GAAP Adjusted Cash Flows from Operating Activities

(Unaudited)

		In Millions
	Twelve Months Ended
	12/31/21
Cash Flows from Operating Activities	$	1,819
Adustments - EnerBank Operating Cash Flows			24
Non-GAAP Adjusted Cash Flows from Operating Activities		$	1,843

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