Rejji P. Hayes
Executive Vice President and Chief Financial Officer at CMS Energy
Thank you, Garrick, and good morning, everyone. As Garrick highlighted, we delivered strong financial performance in 2023 with adjusted net income of $907 million, which translates to $3.11 per share towards the high end of our guidance range.
The key drivers of our 2023 financial performance included strong cost performance throughout the organization, fueled by the CE Way, a solid beat at NorthStar, and a variety of non-operational countermeasures, such as liability management and tax planning, which more than offset the significant weather-related headwinds experienced throughout the year.
And to further underscore the magnitude of cost performance delivered by our workforce, our fourth quarter operational -- operating and maintenance or O&M expense, exclusive of service restoration and vegetation management, was approximately 25% below the comparable period in 2022 and over 20% below our five year average for this cost category, a truly impressive achievement.
All in, we managed to offset nearly $300 million of weather-related financial headwinds without compromising our operational commitments to our customers and the communities we serve.
At CMS, we've had plenty of years of adversity, followed by impressive operational and financial feed, but I can't recall one quite like 2023, a year in which our workforce personified grit and displayed that perennial will to deliver for all stakeholders.
To elaborate on the strength of our financial performance in 2023 on Slide 10, you'll note that we met or exceeded the vast majority of our key financial objectives for the year. From a financing perspective, we successfully settled $178 million in equity forward contracts in November and settled the remaining roughly $265 million in forwards in January. As a reminder, these forwards are priced at levels favorable to our planning assumption.
The only financial target missed in 2023 was related to our customer investment plan at the utility, which was budgeted for $3.7 billion. We ended the year below that at $3.3 billion, primarily due to siding and permitting delays at select solar projects. As mentioned in the past, we fully intend to build out all of the solar projects approved in our IRP and voluntary green pricing program. And with the Michigan renewable energy siting reform bill passed last fall, we should see better progress here going forward.
Moving to our 2024 EPS guidance. On Slide 11, we are raising our 2024 adjusted earnings guidance range to $3.29 to $3.35 per share from $3.27 to $3.33 per share, as Garrick noted, 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 providing $3.74 to $3.80 of adjusted earnings, the details of which I'll cover on the next slide.
At NorthStar, we're assuming EPS contribution of $0.16 to $0.18, which reflects strong underlying performance, primarily at DIG and ongoing contributions from our renewables business. Lastly, our financing assumptions remain conservative at the parent segment, and our 2024 guidance range assumes the absence of liability management transactions. As always, we'll remain opportunistic in this regard, and we'll look to capitalize on attractive market conditions should they arise.
To elaborate on the glide path to achieve our 2024 adjusted EPS guidance range, you'll see the usual waterfall chart on Slide 12. For clarification purposes, all of the variance analyses herein are measured on a full year basis and are relative to 2023.
From left to right, we'll plan for normal weather, which in this case, amounts to $0.43 per share of positive year-over-year variance, given the absence of the atypically mild temperatures experienced throughout 2023. Additionally, we anticipate $0.23 of EPS pickup attributable to rate relief, driven by the residual benefits of last year's constructive gas rate case settlement and assumed supportive outcomes in our pending electric and gas rate cases.
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 2024, you'll note $0.16 per share of positive variance due to continued productivity, driven by the CE Way, the ongoing benefits of cost reduction measures implemented in 2023 such as our voluntary separation plan, which reduced our salaried workforce by roughly 10%, and initiatives already underway. It is also worth noting that our cost assumptions exclude the impact of the catastrophic ice storm we experienced in the first quarter of 2023.
Lastly, in the penultimate bar on the right hand side, you'll note a significant negative variance, which largely consists of the reversal of select one-time cost reduction measures. These are partially offset by the ongoing benefits of our well-executed financing plan in 2023 and we're assuming the usual conservative assumptions around weather-normalized sales, taxes and non-utility performance, among other items.
In aggregate, these assumptions equate to $0.58 to $0.64 per share of negative variance. As always, we'll adapt to changing conditions throughout the year to mitigate risk 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 focus my remarks on those 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 as we balance the needs of the business. As previously mentioned, we have already settled the remaining equity forwards and have no additional equity needs in 2024.
Longer term, we intend to resume our at-the-market or ATM equity issuance program in the amount of up to $350 million per year beginning in 2025 and extending through 2028, which is essentially the same assumption in our previous five-year plan, but for the extension of an additional year.
We're able to maintain our pre-existing equity needs despite an increased utility capital plan, given the expectation of strong operating cash flow generation and the ability to monetize tax credits, courtesy of the Inflation Reduction Act. It is also worth noting that this morning's decision by Moody's to increase the equity credit ascribed to junior subordinated notes, which represents about 40% of our debt at the parent company is not embedded in our plan, thus providing further cushion in these metrics.
Slide 14 offers more specificity on the balance of our funding needs in 2024, which are limited to debt issuances at the utility, over half of which has been opportunistically issued, as noted on the page. And the coupon rate on this newly issued debt is favorable to plan, thus providing a helpful tailwind as we start the year.
Over the coming year, we have no planned long-term financings at the parent and already redeemed its full maturity in January at par. Longer term, we have relatively modest near-term maturities at the parent, with $250 million due in 2025 and $300 million due in 2026.
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 and battle-tested workforce remains committed to our purpose-driven organization, and our investors benefit from consistent, industry-leading financial performance.
Before I hand it back to Garrick, I would be remiss if I didn't take a moment to echo Garrick's praise of Sri, whom I've worked closely with over the past seven years. Sri's contributions to the finance team and the company have been immeasurable since he joined CMS. So thank you, Sri, for leaving it better than you found it, and I look forward to working with you and Jason in your new roles.
And with that, I'll pass it on to Garrick for his final remarks before the Q&A session.
