Rejji P. Hayes
Executive Vice President and Chief Financial Officer of CMS Energy Corporation and Consumers Energy at CMS Energy
Thank you, Garrick, and good morning, everyone. As Garrick highlighted, we delivered strong financial performance in 2022 with adjusted net income of $838 million, which translates to $2.89 per share at the high end of our guidance range. The key drivers of our full year 2022 financial performance were higher sales, driven by favorable weather and solid commercial and industrial load. The latter of which is indicative of the attractive economic conditions in our service territory and rate relief net of investments. These positive drivers were partially offset by higher expenses attributable to discrete customer initiatives, which reduce bills, support our most vulnerable customers and improve the safety and reliability of our gas and electric systems.
Our strong performance in 2022 provided significant financial flexibility at year end, which, as Garrick highlighted, enabled us to de-risk our 2023 financial plan to the benefit of customers and investors, which I'll cover in more detail later. To elaborate on the strength of our financial performance in 2022, on Slide 10, you'll note that we met or exceeded the vast majority of our key financial objectives for the year.
From an EPS perspective, our consistent performance above plan over the course of 2022, enabled us to raise and narrow our 2022 adjusted EPS guidance on our third quarter call. From a financing perspective, we successfully settled $55 million of equity forward contracts as planned and more notably opportunistically priced approximately $440 million of equity forward contracts at a weighted-average price of over $68 per share.
To address the parent company's financing need for the pending acquisition of the Covert natural gas generation facility in support of our IRP. The only financial target missed in 2022 was related to our customer investment plan at the utility, which was budgeted for $2.6 billion. We ended the year just shy of that at $2.5 billion, primarily due to the timing of a wind project in support of Michigan's renewable portfolio standard, which was largely pushed into 2023, and is now under construction.
Moving to our 2023 EPS guidance on Slide 11, as Garrick noted. We are raising our 2023 adjusted earnings guidance to $3.06 to $3.12 per share from $3.05 to $3.11 per share with continued confidence toward the high end of the range. As you can see in the segment details, our EPS growth will primarily be driven by the utility as it has for the past several years and we also assume modest growth for non-utility business NorthStar Clean Energy.
Finally, we plan for limited activity at the plant given the lack of financing needs in 2023, beyond the settlement of the aforementioned equity forward contracts for the Covert acquisition, while maintaining the usual conservative assumptions throughout the business. To elaborate on the glide path to achieve our 2023 adjusted EPS guidance range, as you'll note on the waterfall chart on Slide 12, we'll plan for normal weather, which in this case, amounts to $0.20 per share of negative year-over-year variance, given the absence of the favorable weather we saw in 2022.
Additionally, we anticipate $0.14 of EPS pickup attributable to the rate - attributable to rate relief, largely driven by our recent electric and gas rate orders and the expectation of a constructive outcome in our pending gas rate case later this year. As always, our rate relief, figures are stated net of investment-related costs such as depreciation, property taxes and utility interest expense.
As we turn to our cost structure in 2023, you'll note $0.04 per share of positive variance attributable to continued productivity, driven by the CE Way and other cost reduction initiatives underway. Lastly, in the penultimate bar on the right hand side, we're assuming the usual conservative estimates around weather-normalized sales and non-utility performance coupled with the benefits of the significant reinvestment activity deployed in the fourth quarter of 2022 through a regulatory filings and traditional operational pull ahead. These assumptions equates to $0.19 to $0.25 of positive variance versus 2022. As always, we'll adapt to changing conditions throughout the year to mitigate risks and deliver our operational and financial objectives to the benefit of customers and investors.
On Slide 13, we have a summary of our near and long-term financial objectives. To avoid being repetitive, I'll limit my remarks to the metrics we have not yet covered. From a balance sheet perspective, we continue to target solid investment grade credit ratings and we'll continue to manage our key credit metrics accordingly. To that end, we'll look to settle the equity forward contracts for the Covert financing in the second quarter of 2023 and have no additional planned equity financing need until 2025. In the outer years of our plan, we intend to resume our At The Market or ATM equity issuance program in the amount of up to $350 million per year in 2025 through 2027, given the substantial increase in our five-year utility customer investment plan. And as such, you can expect us to file a - perspective supplement to reflect this revision to our ATM program later this year.
Slide 14 offers more specificity on the balance of our funding needs in 2023, which are limited to debt issuances at the utility, a good portion of which has been priced and or refunded over the past several weeks as noted on the page. In fact, the $825 million of utility bond financings address to date include the $400 million tranche of debt financing required to fund the acquisition of Covert in the second quarter. So we have fully de-risked our financing needs for that critical component of our IRP well in advance with attractive terms to the benefit of customers and investors, which I'll cover in more detail later.
To elaborate on the strength of our financial performance in 2022 on Slide 10, you'll note that we met or exceeded the vast majority of our key financial objectives for the year. From an EPS perspective, our consistent performance above plan over the course of 2022, enable us to raise and narrow our 2022 adjusted EPS guidance on our third quarter call. From a financing perspective, we successfully settled $55 million of equity forward contracts as planned and more notably, opportunistically priced approximately $440 million of equity forward contracts at a weighted average price of over $6 to $8 per share to address the parent company's financing needs for the pending acquisition of the covert natural gas generation facility in support of our IRP.
The only financial target missed in 2022 was related to our customer investment plan at the utility which was budgeted for $2.6 billion. We ended the year just shy of that at $2.5 billion, primarily due to the timing of a wind project in support of Michigan's renewable portfolio standard, which was largely pushed into 2023 and is now under construction.
Moving to our 2023 EPS guidance on Slide 11. As Garrick noted, we are raising our 2023 adjusted earnings guidance to $3.06 to $3.12 per share from $3.05 to $3.11 per share with continued confidence toward the high end of the range. As you can see in the segment details, our EPS growth will primarily be driven by the utility as it has for the past several years, and we also assume modest growth for our nonutility business, North Star Clean Energy.
Finally, we plan for limited activity at the parent given the lack of financing needs in 2023 beyond the settlement of the aforementioned equity forward contract for the Covert acquisition, while maintaining the usual conservative assumptions throughout the business. To elaborate on the glide path to achieve our 2023 adjusted EPS guidance range, as you'll note on the waterfall chart on Slide 12, we'll plan for normal weather, which in this case amounts to $0.20 per share of negative year-over-year variance, given the absence of the favorable weather we saw in 2022.
Additionally, we anticipate $0.14 of EPS pickup attributable to rate relief, largely driven by our recent electric and gas rate orders and the expectation of a constructive outcome in our pending gas rate case later this year. As always, our rate relief figures are stated net investment-related costs such as depreciation, property taxes and utility interest expense. As we turn to our cost structure in 2023, you'll note $0.04 per share of positive variance attributable to continued productivity driven by the CE Way and other cost reduction initiatives underway.
Lastly, the ultimate bar on the right-hand side were stemming the usual conservative estimates around weather-normalized sales and nonutility performance, coupled with the benefits of the significant reinvestment activity deployed in the fourth quarter of 2022 through our regulatory filings and traditional operational pull ahead. These assumptions equate to $0.19 to $0.25 of positive variance versus 2022. As always, we'll adapt to changing conditions throughout the year to mitigate risks and deliver our operational and financial objectives to the benefit of customers and investors.
On Slide 13, we have a summary of our near- and long-term financial objectives. To avoid being repetitive, I'll limit the metrics we have not yet covered. From a balance sheet perspective, we continue to target solid investment-grade credit ratings, and we'll continue to manage our key credit metrics accordingly. To that end, we'll look to settle the equity forward contracts for the Covert financing in the second quarter of 2023 and have no additional planned equity financing needs until 2025.
In the outer years of our plan, we intend to resume our at-the-market, or ATM, equity issuance program in the amount of up to $350 million per year in 2025 through 2027 and given the substantial increase in our five-year utility customer investment plan. And as such, you can expect us to file a prospectus supplement to reflect this revision to our ATM program later this year.
Slide 14 offers more specificity on the balance of our funding needs in 2023, which are limited to debt issuances at the utility a good portion of which has been priced and/or funded over the past several weeks as noted on the page. In fact, the $825 million of utility bond financings addressed to date include the $400 million tranche of debt financing required to fund the acquisition of Covert in the second quarter. So we have fully derisked our financing needs for that critical component of our IRP well in advance with attractive terms to the benefit of customers and investors. And as a reminder, the acquisition of the Covert natural gas facility will enable us to exit coal generation in 2025 and which makes us one of the first vertically integrated utilities in the country to do so.
To conclude my remarks on Slide 15, we've refreshed our sensitivity analysis on key variables for your modeling assumptions. As you'll note, with reasonable planning assumptions and our track record of risk mitigation, the probability of large variances from our plan is minimized. Our model has served and will continue to serve all stakeholders well. Our customers receive safe, reliable and clean energy at affordable prices. Our diverse workforce remains engaged, well-trained and in our purpose-driven organization, and our investors benefit from consistent industry-leading financial performance.
And with that, I'll hand it back to Garrick for his final remarks before the Q&A session.
