Exhibit 99.1
GLOSSARY
Certain terms used in the text and financial statements are defined below
ABO | Accumulated Benefit Obligation. The liabilities of a pension plan based on service and pay to date. This differs from the Projected Benefit Obligation that is typically disclosed in that it does not reflect expected future salary increases. | |
AFUDC | Allowance for Funds Used During Construction | |
ALJ | Administrative Law Judge | |
AMT | Alternative minimum tax | |
AOCI | Accumulated Other Comprehensive Income | |
AOCL | Accumulated Other Comprehensive Loss | |
APB | Accounting Principles Board | |
APB Opinion No. 18 | APB Opinion No. 18, “The Equity Method of Accounting for Investments in Common Stock” | |
ARO | Asset retirement obligation | |
Attorney General | Michigan Attorney General | |
Bay Harbor | a residential/commercial real estate area located near Petoskey, Michigan. In 2002, CMS Energy sold its interest in Bay Harbor. | |
bcf | One billion cubic feet of gas | |
Big Rock | Big Rock Point nuclear power plant, owned by Consumers | |
Bluewater Pipeline | Bluewater Pipeline, a 24.9-mile pipeline that extends from Marysville, Michigan to Armada, Michigan | |
Board of Directors | Board of Directors of CMS Energy | |
CEO | Chief Executive Officer | |
CFO | Chief Financial Officer | |
CFTC | Commodity Futures Trading Commission | |
CKD | Cement Kiln Dust | |
Clean Air Act | Federal Clean Air Act, as amended | |
CMS Energy | CMS Energy Corporation, the parent of Consumers and Enterprises | |
CMS Energy Common Stock or common stock | Common stock of CMS Energy, par value $.01 per share | |
CMS Electric and Gas | CMS Electric and Gas Company, a subsidiary of Enterprises | |
CMS ERM | CMS Energy Resource Management Company, formerly CMS MST, a subsidiary of Enterprises | |
CMS Field Services | CMS Field Services, Inc., formerly a wholly owned subsidiary of CMS Gas Transmission. The sale of this subsidiary closed in July 2003. | |
CMS Gas Transmission | CMS Gas Transmission Company, a wholly owned subsidiary of Enterprises | |
CMS Generation | CMS Generation Co., a wholly owned subsidiary of Enterprises | |
CMS International Ventures | CMS International Ventures LLC, a subsidiary of Enterprises |
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CMS Midland | Midland Cogeneration Venture Group II, LLC, successor to CMS Midland Inc., formerly a subsidiary of Consumers that had a 49 percent ownership interest in the MCV Partnership | |
CMS Midland Holdings Company | CMS Midland Holdings Company, a subsidiary of Consumers that has a 46 percent ownership interest in First Midland Limited Partnership and a 35 percent lessor interest in the MCV Facility | |
CMS MST | CMS Marketing, Services and Trading Company, a wholly owned subsidiary of Enterprises, whose name was changed to CMS ERM effective January 2004 | |
CMS Oil and Gas | CMS Oil and Gas Company, formerly a subsidiary of Enterprises | |
Consumers | Consumers Energy Company, a subsidiary of CMS Energy | |
Court of Appeals | Michigan Court of Appeals | |
CPEE | Companhia Paulista de Energia Eletrica, in which CMS International Ventures owns a 94 percent interest | |
Customer Choice Act | Customer Choice and Electricity Reliability Act, a Michigan statute enacted in June 2000 | |
DCCP | Defined Company Contribution Plan | |
DIG | Dearborn Industrial Generation, LLC, an indirect wholly owned subsidiary of CMS Energy | |
DOE | U.S. Department of Energy | |
DOJ | U.S. Department of Justice | |
Dow | The Dow Chemical Company, a non-affiliated company | |
DTE Energy | DTE Energy Company, a non-affiliated company | |
EISP | Executive Incentive Separation Plan | |
EITF | Emerging Issues Task Force | |
EITF Issue No. 02-03 | Issues Involved in Accounting for Derivative Contracts Held for Trading Purposes and Contracts Involved in Energy Trading and Risk Management Activities | |
Ensenada | The 128 MW natural gas-fired power plant located in Argentina, in which CMS International Ventures owns 100 percent interest | |
Entergy | Entergy Corporation, a non-affiliated company | |
Enterprises | CMS Enterprises Company, a subsidiary of CMS Energy | |
EPA | U. S. Environmental Protection Agency | |
EPS | Earnings per share | |
Exchange Act | Securities Exchange Act of 1934, as amended | |
FASB | Financial Accounting Standards Board | |
FASB Interpretation No. 46(R) | Revised FASB Interpretation No. 46, Consolidation of Variable Interest Entities | |
FERC | Federal Energy Regulatory Commission | |
FIN 48 | FASB Interpretation No. 48, Uncertainty in Income Taxes | |
FMB | First Mortgage Bonds | |
FMLP | First Midland Limited Partnership, a partnership that holds a lessor interest in the MCV Facility and an indirect subsidiary of Consumers |
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FSP | FASB Staff Position | |
FTR | Financial transmission right | |
GAAP | Generally Accepted Accounting Principles | |
GasAtacama | GasAtacama Holding Limited, a limited liability partnership that manages GasAtacama S.A., which includes an integrated natural gas pipeline and electric generating plant located in Argentina and Chile and Atacama Finance Company, in which CMS International Ventures owns a 50 percent interest | |
GCR | Gas cost recovery | |
Goldfields | A pipeline business located in Australia, in which CMS Energy formerly held a 39.7 percent ownership interest | |
GVK | GVK Facility, a 250 MW gas fired power plant located in South Central India, in which CMS Generation formerly held a 33 percent interest | |
IPP | Independent Power Producer | |
IRS | Internal Revenue Service | |
ISFSI | Independent Spent Fuel Storage Installation | |
ITC | Income tax credit | |
Jorf Lasfar | The 1,356 MW coal-fueled power plant in Morocco, jointly owned by CMS Generation and ABB Energy Ventures, Inc., in which CMS Generation owns a 50 percent interest | |
Jubail | A 240 MW natural gas cogeneration power plant located in Saudi Arabia, in which CMS Generation owns a 25 percent interest | |
kWh | Kilowatt-hour (a unit of energy equal to one thousand watt hours) | |
Loy Yang | The 2,000 MW brown coal fueled Loy Yang A power plant and an associated coal mine in Victoria, Australia, in which CMS Generation formerly held a 50 percent ownership interest | |
Lucid Energy | Lucid Energy LLC, a non-affiliated company | |
Ludington | Ludington pumped storage plant, jointly owned by Consumers and Detroit Edison | |
Marysville | CMS Marysville Gas Liquids Company, a Michigan | |
corporation and a former subsidiary of CMS Gas Transmission that held a 100 percent interest in Marysville Fractionation Partnership and a 51 percent interest in St. Clair Underground Storage Partnership | ||
mcf | One thousand cubic feet of gas | |
MCV Facility | A natural gas-fueled, combined-cycle cogeneration facility operated by the MCV Partnership | |
MCV GP II | Midland Cogeneration Venture Group II, LLC which is the successor of CMS Midland, Inc. |
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MCV Partnership | Midland Cogeneration Venture Limited Partnership in which Consumers has a 49 percent interest through CMS Midland, Inc. | |
MCV PPA | The Power Purchase Agreement between Consumers and the MCV Partnership with a 35-year term commencing in March 1990, as amended, and as interpreted by the Settlement Agreement dated as of January 1, 1999 between the MCV Partnership and Consumers. | |
MD&A | Management’s Discussion and Analysis | |
MDEQ | Michigan Department of Environmental Quality | |
METC | Michigan Electric Transmission Company, LLC which is owned by ITC Holding Corporation, a company that operates electric transmission facilities through a wholly owned subsidiary, including the transmission system within Detroit Edison’s territory | |
Midwest Energy Market | An energy market developed by the MISO to provide day-ahead and real-time market information and centralized dispatch for market participants | |
MISO | Midwest Independent Transmission System Operator, Inc. | |
Moody’s | Moody’s Investors Service, Inc. | |
MPSC | Michigan Public Service Commission | |
MRV | Market-Related Value of Plan assets | |
MSBT | Michigan Single Business Tax | |
MW | Megawatt (a unit of power equal to one million watts) | |
MWh | Megawatt-hour (a unit of energy equal to one million watt hours) | |
NEIL | Nuclear Electric Insurance Limited, an industry mutual insurance company owned by member utility companies | |
Neyveli | CMS Generation Neyveli Ltd, a 250 MW lignite-fired power station located in Neyveli, Tamil Nadu, India, in which CMS International Ventures holds a 50 percent interest | |
NMC | Nuclear Management Company LLC, formed in 1999 by Northern States Power Company (now Xcel Energy Inc.), Alliant Energy, Wisconsin Electric Power Company, and Wisconsin Public Service Company to operate and manage nuclear generating facilities owned by the four utilities | |
NRC | Nuclear Regulatory Commission | |
NYMEX | New York Mercantile Exchange | |
OCI | Other Comprehensive Income | |
OPEB | Postretirement benefit plans other than pensions for retired employees | |
Palisades | Palisades nuclear power plant, which is owned by Consumers |
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Panhandle | Panhandle Eastern Pipe Line Company, including its subsidiaries Trunkline, Pan Gas Storage, Panhandle Storage, and Panhandle Holdings. Panhandle was a wholly owned subsidiary of CMS Gas Transmission. The sale of this subsidiary closed in June 2003. | |
Parmelia | A business located in Australia comprised of a pipeline, processing facilities, and a gas storage facility, a former subsidiary of CMS Gas Transmission | |
PCB | Polychlorinated biphenyl | |
Peabody Energy | Peabody Energy Corporation, a non-affiliated company | |
Pension Plan | The trusteed, non-contributory, defined benefit pension plan of Panhandle, Consumers and CMS Energy | |
Price Anderson Act | Price Anderson Act, enacted in 1957 as an amendment to the Atomic Energy Act of 1954, as revised and extended over the years. This act stipulates between nuclear licensees and the U.S. government the insurance, financial responsibility, and legal liability for nuclear accidents. | |
PSCR | Power supply cost recovery | |
PURPA | Public Utility Regulatory Policies Act of 1978 | |
RCP | Resource Conservation Plan | |
ROA | Retail Open Access | |
SAB No. 107 | Staff Accounting Bulletin No. 107, Share-Based Payment | |
SEC | U.S. Securities and Exchange Commission | |
Section 10d(4) Regulatory Asset | Regulatory asset as described in Section 10d(4) of the Customer Choice Act, as amended | |
Securitization | A financing method authorized by statute and approved by the MPSC which allows a utility to sell its right to receive a portion of the rate payments received from its customers for the repayment of Securitization bonds issued by a special purpose entity affiliated with such utility | |
SENECA | Sistema Electrico del Estado Nueva Esparta C.A., a subsidiary of Enterprises | |
SERP | Supplemental Executive Retirement Plan | |
SFAS | Statement of Financial Accounting Standards | |
SFAS No. 5 | SFAS No. 5, “Accounting for Contingencies” | |
SFAS No. 13 | SFAS No. 13, “Accounting for Leases” | |
SFAS No. 71 | SFAS No. 71, “Accounting for the Effects of Certain Types of Regulation” | |
SFAS No. 87 | SFAS No. 87, “Employers’ Accounting for Pensions” | |
SFAS No. 98 | SFAS No. 98, “Accounting for Leases” | |
SFAS No. 106 | SFAS No. 106, “Employers’ Accounting for Postretirement Benefits Other Than Pensions” | |
SFAS No. 109 | SFAS No. 109, “Accounting for Income Taxes” | |
SFAS No. 123(R) | SFAS No. 123 (revised 2004), “Share-Based Payment” | |
SFAS No. 132(R) | SFAS No. 132 (revised 2003), “Employers’ Disclosures about Pensions and Other Postretirement Benefits” | |
SFAS No. 133 | SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities, as amended and interpreted” |
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SFAS No. 143 | SFAS No. 143, “Accounting for Asset Retirement Obligations” | |
SFAS No. 144 | SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets” | |
SFAS No. 157 | SFAS No. 157, “Fair Value Measurement” | |
SFAS No. 158 | SFAS No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans – an amendment of FASB Statements No. 87, 88, 106, and 132(R)” | |
Shuweihat | A power and desalination plant of Shuweihat CMS International Power Company, in which CMS Generation holds a 20 percent interest | |
SLAP | Scudder Latin American Power Fund | |
SRLY | Separate Return Limitation Year | |
Stranded Costs | Costs incurred by utilities in order to serve their customers in a regulated monopoly environment, which may not be recoverable in a competitive environment because of customers leaving their systems and ceasing to pay for their costs. These costs could include owned and purchased generation and regulatory assets. | |
Superfund | Comprehensive Environmental Response, Compensation and Liability Act | |
Takoradi | A 200 MW open-cycle combustion turbine crude oil power plant located in Ghana, in which CMS Generation owns a 90 percent interest | |
TAQA | Abu Dhabi National Energy Company, a subsidiary of Abu Dhabi Water and Electricity Authority, CMS Generation’s partner in the Taweelah and Shuweihat projects | |
Taweelah | Al Taweelah A2, a power and desalination plant of Emirates CMS Power Company, in which CMS Generation holds a 40 percent interest | |
TGM | A natural gas transportation and pipeline business located in Argentina, in which CMS International Ventures owns a 20 percent interest | |
TGN | A natural gas transportation and pipeline business located in Argentina, in which CMS Gas Transmission owns a 23.54 percent interest | |
TRAC | Terminal Rental Adjustment Clause, a provision of a leasing agreement which permits or requires the rental price to be adjusted upward or downward by reference to the amount realized by the lessor under the agreement upon sale or other disposition of formerly leased property | |
Trust Preferred Securities | Securities representing an undivided beneficial interest in the assets of statutory business trusts, the interests of which have a preference with respect to certain trust distributions over the interests of either CMS Energy or Consumers, as applicable, as owner of the common beneficial interests of the trusts | |
Union | Utility Workers Union of America, AFL-CIO |
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VEBA Trusts | VEBA employees’ beneficiary association trusts accounts established to specifically set aside employer contributed assets to pay for future expenses of the OPEB plan |
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INDEX TO FINANCIAL STATEMENTS
CMS Energy Corporation | ||||
Exhibit 99.1. Item 6. Selected Financial Information | CMS – 2 | |||
Exhibit 99.2 Item 7. Management’s Discussion and Analysis | ||||
Executive Overview | CMS – 3 | |||
Forward-Looking Statements and Information | CMS – 4 | |||
Results of Operations | CMS – 7 | |||
Critical Accounting Policies | CMS – 19 | |||
Capital Resources and Liquidity | CMS – 30 | |||
Outlook | CMS – 34 | |||
Implementation of New Accounting Standards | CMS – 44 | |||
New Accounting Standards Not Yet Effective | CMS – 44 | |||
Exhibit 99.3 Item 8. Financial Statements and Supplementary Data | ||||
Consolidated Financial Statements | ||||
Consolidated Statements of Income (Loss) | CMS – 46 | |||
Consolidated Statements of Cash Flows | CMS – 48 | |||
Consolidated Balance Sheets | CMS – 50 | |||
Consolidated Statements of Common Stockholders’ Equity | CMS – 52 | |||
Notes to Consolidated Financial Statements: | ||||
1. Corporate Structure and Accounting Policies | CMS – 53 | |||
2. Asset Sales, Impairment Charges and Discontinued Operations | CMS – 59 | |||
3. Contingencies | CMS – 65 | |||
4. Financings and Capitalization | CMS – 80 | |||
5. Earnings Per Share | CMS – 85 | |||
6. Financial and Derivative Instruments | CMS – 86 | |||
7. Retirement Benefits | CMS – 92 | |||
8. Asset Retirement Obligations | CMS – 101 | |||
9. Income Taxes | CMS – 103 | |||
10. Executive Incentive Compensation | CMS – 107 | |||
11. Leases | CMS – 108 | |||
12. Property, Plant, and Equipment | CMS – 111 | |||
13. Equity Method Investments | CMS – 112 | |||
14. Jointly Owned Regulated Utility Facilities | CMS – 115 | |||
15. Reportable Segments | CMS – 115 | |||
16. Consolidation of Variable Interest Entities | CMS – 117 | |||
17. Quarterly Financial and Common Stock Information (Unaudited) | CMS – 120 | |||
Reports of Independent Registered Public Accounting Firms | CMS – 123 |
2006 Consolidated Financial Statements
CMS-1