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þ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Commission | Registrant; State of Incorporation; | IRS Employer | ||
File Number | Address; and Telephone Number | Identification No. | ||
1-9513 | CMS ENERGY CORPORATION | 38-2726431 | ||
(A Michigan Corporation) | ||||
One Energy Plaza, Jackson, Michigan 49201 | ||||
(517) 788-0550 | ||||
1-5611 | CONSUMERS ENERGY COMPANY | 38-0442310 | ||
(A Michigan Corporation) | ||||
One Energy Plaza, Jackson, Michigan 49201 | ||||
(517) 788-0550 |
Large accelerated filer:þ | Accelerated filer:o | Non-accelerated filer:o | Smaller reporting company:o | |||
(Do not check if a smaller reporting company) |
Large accelerated filer:o | Accelerated filer:o | Non-accelerated filer:þ | Smaller reporting company:o | |||
(Do not check if a smaller reporting company) |
CMS Energy Corporation: | ||||
CMS Energy Common Stock, $.01 par value | 225,504,661 | |||
Consumers Energy Company, $10 par value, privately held by CMS Energy Corporation | 84,108,789 |
Table of Contents
Consumers Energy Company
Quarterly reports on Form 10-Q to the
United States Securities and Exchange Commission
for the Quarter Ended June 30, 2008
Page | ||||
3 | ||||
PART I — FINANCIAL INFORMATION | ||||
Item 1. Financial Statements | ||||
CMS-26 | ||||
CMS-29 | ||||
CMS-30 | ||||
CMS-32 | ||||
CMS-35 | ||||
CMS-37 | ||||
CMS-41 | ||||
CMS-43 | ||||
CMS-55 | ||||
CMS-57 | ||||
CMS-58 | ||||
CMS-60 | ||||
CMS-61 | ||||
CMS-62 | ||||
CE-20 | ||||
CE-21 | ||||
CE-22 | ||||
CE-24 |
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CE-27 | ||||||||
CE-29 | ||||||||
CE-31 | ||||||||
CE-31 | ||||||||
CE-39 | ||||||||
CE-40 | ||||||||
CE-41 | ||||||||
CE-43 | ||||||||
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations | ||||||||
CMS-1 | ||||||||
CMS-4 | ||||||||
CMS-5 | ||||||||
CMS-13 | ||||||||
CMS-14 | ||||||||
CMS-16 | ||||||||
CMS-22 | ||||||||
CMS-23 | ||||||||
CE-1 | ||||||||
CE-3 | ||||||||
CE-5 | ||||||||
CE-10 | ||||||||
CE-11 | ||||||||
CE-17 | ||||||||
CE-17 | ||||||||
CO-1 | ||||||||
CO-1 | ||||||||
CO-1 | ||||||||
CO-6 | ||||||||
CO-9 | ||||||||
CO-9 | ||||||||
CO-10 | ||||||||
CO-10 | ||||||||
CO-11 | ||||||||
CO-12 | ||||||||
EX-10(A) | ||||||||
EX-12(A) | ||||||||
EX-12(B) | ||||||||
EX-31(A) | ||||||||
EX-31(B) | ||||||||
EX-31(C) | ||||||||
EX-31(D) | ||||||||
EX-32(A) | ||||||||
EX-32(B) |
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AFUDC | Allowance for Funds Used During Construction | |
ALJ | Administrative Law Judge | |
AOC | Administrative Order on Consent | |
AOCL | Accumulated Other Comprehensive Loss | |
APB | Accounting Principles Board | |
ARO | Asset retirement obligation | |
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 | |
Big Rock ISFSI | Big Rock Independent Spent Fuel Storage Installation | |
CAIR | Clean Air Interstate Rule | |
CAMR | Clean Air Mercury Rule | |
CEO | Chief Executive Officer | |
CFO | Chief Financial Officer | |
CKD | Cement kiln dust | |
Clean Air Act | Federal Clean Air Act, as amended | |
CMS Capital | CMS Capital, L.L.C., a wholly owned subsidiary of CMS Energy | |
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 ERM | CMS Energy Resource Management Company, formerly CMS MST, a subsidiary of Enterprises | |
CMS Field Services | CMS Field Services, Inc., a former wholly owned subsidiary of CMS Gas Transmission | |
CMS Gas Transmission | CMS Gas Transmission Company, a wholly owned subsidiary of Enterprises | |
CMS Generation | CMS Generation Co., a former wholly owned subsidiary of Enterprises | |
CMS Land | CMS Land Company, a wholly owned subsidiary of CMS Energy | |
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 | |
Customer Choice Act | Customer Choice and Electricity Reliability Act, a Michigan statute enacted in June 2000 | |
DCCP | Defined Company Contribution Plan | |
DC SERP | Defined Contribution Supplemental Executive Retirement Plan | |
Detroit Edison | The Detroit Edison Company, a non-affiliated company | |
DIG | Dearborn Industrial Generation, LLC, a wholly owned subsidiary of CMS Energy | |
DOE | U.S. Department of Energy |
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DOJ | U.S. Department of Justice | |
Dow | The Dow Chemical Company, a non-affiliated company | |
DSSP | Deferred Salary Savings Plan | |
EISP | Executive Incentive Separation Plan | |
EITF | Emerging Issues Task Force | |
EITF Issue 06-11 | EITF Issue No. 06-11, “Accounting for Income Tax Benefits of Dividends on Share-Based Payment Awards” | |
EITF Issue 07-5 | EITF Issue No. 07-5, “Determining Whether an Instrument (or Embedded Feature) Is Indexed to an Entity’s Own Stock” | |
El Chocon | A 1,200 MW hydro power plant located in Argentina, in which CMS Generation formerly held a 17.2 percent ownership 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 | |
FERC | �� | Federal Energy Regulatory Commission |
FIN 14 | FASB Interpretation No. 14, Reasonable Estimation of Amount of a Loss | |
FIN 45 | FASB Interpretation No. 45, Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others | |
FIN 46(R) | Revised FASB Interpretation No. 46, Consolidation of Variable Interest Entities | |
FIN 48 | FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes — an interpretation of FASB Statement No. 109 | |
FMB | First Mortgage Bonds | |
FMLP | First Midland Limited Partnership, a partnership that holds a lessor interest in the MCV Facility | |
FSP | FASB Staff Position | |
FSP APB 14-1 | FASB Staff Position on APB No. 14, Accounting for Convertible Debt and Debt Issued with Stock Purchase Warrants | |
FSP EITF 03-6-1 | FASB Staff Position on EITF No. 03-6, Participating Securities and the Two-Class method under FASB Statement No. 128 | |
FSP FAS 142-3 | FASB Staff Position on FASB No. 142, Determination of the Useful Life of Intangible Assets | |
FSP FIN 39-1 | FASB Staff Position on FASB Interpretation No. 39-1, Amendment of FASB Interpretation No. 39 | |
GAAP | Generally Accepted Accounting Principles | |
GCR | Gas cost recovery | |
ICSID | International Centre for the Settlement of Investment Disputes | |
IRS | Internal Revenue Service | |
ISFSI | Independent spent fuel storage installation | |
Jamaica | Jamaica Private Power Company, Limited, a 63 MW diesel-fueled power plant in Jamaica, in which CMS Generation formerly owned a 42 percent interest | |
Jorf Lasfar | A 1,356 MW coal-fueled power plant in Morocco, in which CMS Generation formerly owned a 50 percent interest | |
kWh | Kilowatt-hour (a unit of energy equal to one thousand watt hours) |
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Lucid Energy | Lucid Energy LLC, a non-affiliated company | |
Ludington | Ludington pumped storage plant, jointly owned by Consumers and Detroit Edison | |
Marathon | Marathon Oil Company, Marathon E.G. Holding, Marathon E.G. Alba, Marathon E.G. LPG, Marathon Production LTD, and Alba Associates, LLC | |
mcf | One thousand cubic feet of gas | |
MCV Facility | A natural gas-fueled, combined-cycle cogeneration facility operated by the MCV Partnership | |
MCV Partnership | Midland Cogeneration Venture Limited Partnership | |
MCV PPA | The Power Purchase Agreement between Consumers and the MCV Partnership with a 35-year term commencing in March 1990, as amended and restated in an agreement dated as of June 9, 2008 between the MCV Partnership and Consumers | |
MD&A | Management’s Discussion and Analysis | |
MDEQ | Michigan Department of Environmental Quality | |
MDL | Multidistrict Litigation | |
MEI | Michigan Energy Investments LLC, an affiliate of Lucid Energy | |
METC | Michigan Electric Transmission Company, LLC, a non-affiliated company owned by ITC Holdings Corporation and a member of MISO | |
MGP | Manufactured Gas Plant | |
MISO | Midwest Independent Transmission System Operator, Inc. | |
MPSC | Michigan Public Service Commission | |
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) | |
NAV | Net Asset Values | |
NMC | Nuclear Management Company LLC, a non-affiliated company | |
NREPA | Michigan Natural Resources and Environmental Protection Act | |
NYMEX | New York Mercantile Exchange | |
OPEB | Postretirement benefit plans other than pensions | |
Palisades | Palisades nuclear power plant, formerly owned by Consumers | |
Panhandle | Panhandle Eastern Pipe Line Company, including its subsidiaries Trunkline, Pan Gas Storage, Panhandle Storage, and Panhandle Holdings, a former wholly owned subsidiary of CMS Gas Transmission | |
PCB | Polychlorinated biphenyl | |
PDVSA | Petroleos de Venezuela S.A., a non-affiliated company | |
Peabody Energy | Peabody Energy, a non-affiliated company | |
Pension Plan | The trusteed, non-contributory, defined benefit pension plan of Panhandle, Consumers and CMS Energy | |
PowerSmith | A 124 MW natural gas power plant located in Oklahoma, in which CMS Generation formerly held a 6.25% limited partner ownership interest | |
PSCR | Power supply cost recovery | |
PURPA | Public Utility Regulatory Policies Act of 1978 | |
Quicksilver | Quicksilver Resources, Inc., a non-affiliated company | |
RAKTL | Ronald A. Katz Technology Licensing L.P., a non-affiliated company | |
RCP | Resource Conservation Plan |
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Reserve Margin | The amount of unused available electric capacity at peak demand as a percentage of total electric capacity | |
ROA | Retail Open Access, which allows electric generation customers to choose alternative electric suppliers pursuant to the Customer Choice Act. | |
SEC | U.S. Securities and Exchange Commission | |
SERP | Supplemental Executive Retirement Plan | |
SFAS | Statement of Financial Accounting Standards | |
SFAS No. 133 | SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities, as amended and interpreted” | |
SFAS No. 141(R) | SFAS No. 141 (revised 2007), “Business Combinations” | |
SFAS No. 142 | SFAS No. 142, “Goodwill and Other Intangible 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)” | |
SFAS No. 160 | SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements — an amendment of ARB No. 51” | |
SFAS No. 161 | SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities, an amendment of FASB Statement No. 133” | |
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 | |
TAQA | Abu Dhabi National Energy Company, a subsidiary of Abu Dhabi Water and Electricity Authority, a non-affiliated company | |
TGN | A natural gas transportation and pipeline business located in Argentina, in which CMS Gas Transmission formerly owned a 23.54 percent interest | |
Trunkline | CMS Trunkline Gas Company, LLC, formerly a subsidiary of CMS Panhandle Holdings, LLC | |
TTT | Gas title transfer tracking fees and services | |
Zeeland | A 935 MW gas-fired power plant located in Zeeland, Michigan |
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• | the price of CMS Energy Common Stock, capital and financial market conditions, and the effect of such market conditions on our post-retirement benefit plans, interest rates, and access to the capital markets, including availability of financing to CMS Energy, Consumers, or any of their affiliates, and the energy industry, | ||
• | market perception of the energy industry, CMS Energy, Consumers, or any of their affiliates, | ||
• | factors affecting operations, such as unusual weather conditions, catastrophic weather-related damage, unscheduled generation outages, maintenance or repairs, environmental incidents, or electric transmission or gas pipeline system constraints, | ||
• | the impact of any future regulations or laws regarding carbon dioxide and other greenhouse gas emissions, | ||
• | national, regional, and local economic, competitive, and regulatory policies, conditions and developments, | ||
• | adverse regulatory or legal interpretations or decisions, including those related to environmental laws and regulations, and potential environmental remediation costs associated with such interpretations or decisions, including but not limited to those that may affect Bay Harbor, | ||
• | potentially adverse regulatory treatment or failure to receive timely regulatory orders concerning a number of significant questions currently or potentially before the MPSC, including: |
§ | recovery of Clean Air Act capital and operating costs and other environmental and safety-related expenditures, | ||
§ | recovery of power supply and natural gas supply costs, | ||
§ | timely recognition in rates of additional equity investments and additional operation and maintenance expenses at Consumers, | ||
§ | adequate and timely recovery of additional utility rate-based investments, |
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§ | adequate and timely recovery of higher MISO energy and transmission costs, | ||
§ | recovery of Stranded Costs incurred due to customers choosing alternative energy suppliers, | ||
§ | timely recovery of costs associated with energy efficiency investments and any state or federally mandated renewables resource standards, | ||
§ | recovery of Big Rock decommissioning funding shortfalls, | ||
§ | approval of the Balanced Energy Initiative, and | ||
§ | authorization of a new clean coal plant, |
• | adverse consequences resulting from a past or future assertion of indemnity or warranty claims associated with previously owned assets and businesses, including claims resulting from attempts by the governments of Equatorial Guinea and Morocco to assess taxes on past operations or transactions, | ||
• | the ability of Consumers to recover nuclear fuel storage costs due to the DOE’s failure to accept spent nuclear fuel on schedule, including the outcome of pending litigation with the DOE, | ||
• | the impact of expanded enforcement powers and investigation activities at the FERC, | ||
• | federal regulation of electric sales and transmission of electricity, including periodic re-examination by federal regulators of our market-based sales authorizations in wholesale power markets without price restrictions, | ||
• | energy markets, including availability of capacity and the timing and extent of changes in commodity prices for oil, coal, natural gas, natural gas liquids, electricity and certain related products due to lower or higher demand, shortages, transportation problems, or other developments, | ||
• | the impact of increases in natural gas prices and coal prices on our cash flow and working capital, | ||
• | the impact of increases in steel and other construction material prices, | ||
• | the availability of qualified construction personnel to implement our construction program, | ||
• | our ability to collect accounts receivable from our customers, | ||
• | earnings volatility resulting from the GAAP requirement that we apply mark-to-market accounting to certain energy commodity contracts, including electricity sales agreements, and interest rate swaps, | ||
• | the direct and indirect effects of the continued economic downturn in Michigan on Consumers and its revenues, | ||
• | potential disruption or interruption of facilities or operations due to accidents, war, or terrorism, and the ability to obtain or maintain insurance coverage for such events, | ||
• | technological developments in energy production, delivery, and usage, | ||
• | achievement of capital expenditure and operating expense goals, | ||
• | changes in financial or regulatory accounting principles or policies, | ||
• | changes in tax laws or new IRS interpretations of existing or past tax laws, |
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• | changes in federal or state regulations or laws that could have an impact on our business, | ||
• | the outcome, cost, and other effects of legal or administrative proceedings, settlements, investigations or claims, including those resulting from the investigation by the DOJ regarding round-trip trading and price reporting, | ||
• | disruptions in the normal commercial insurance and surety bond markets that may increase costs or reduce traditional insurance coverage, particularly terrorism and sabotage insurance, performance bonds, and tax exempt debt insurance, | ||
• | credit ratings of CMS Energy or Consumers, and | ||
• | other business or investment considerations that may be disclosed from time to time in CMS Energy’s or Consumers’ SEC filings, or in other publicly issued written documents. |
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• | weather, especially during the normal heating and cooling seasons, | ||
• | economic conditions, primarily in Michigan, | ||
• | regulation and regulatory issues that affect our electric and gas utility operations, | ||
• | energy commodity prices, | ||
• | interest rates, and | ||
• | our debt credit rating. |
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• | continuing investment in our utility business, | ||
• | growing earnings while controlling operating costs and parent debt, and | ||
• | maintaining principles of safe, efficient operations, customer value, fair and timely regulation, and consistent financial performance. |
In Millions (except for per share amounts) | ||||||||||||
Three months ended June 30 | 2008 | 2007 | Change | |||||||||
Net Income Available to Common Stockholders | $ | 46 | $ | 33 | $ | 13 | ||||||
Basic Earnings Per Share | $ | 0.20 | $ | 0.15 | $ | 0.05 | ||||||
Diluted Earnings Per Share | $ | 0.19 | $ | 0.15 | $ | 0.04 | ||||||
Electric Utility | $ | 57 | $ | 40 | $ | 17 | ||||||
Gas Utility | 2 | 4 | (2 | ) | ||||||||
Enterprises | 10 | (54 | ) | 64 | ||||||||
Corporate Interest and Other | (22 | ) | (48 | ) | 26 | |||||||
Discontinued Operations | (1 | ) | 91 | (92 | ) | |||||||
Net Income Available to Common Stockholders | $ | 46 | $ | 33 | $ | 13 | ||||||
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In Millions | ||||||
• | increase at Enterprises primarily due to reduced fuel costs and the absence of charges associated with the rescission of a contract with Quicksilver, | $ | 35 | |||
• | absence of impairment charges related to international businesses sold in 2007, | 25 | ||||
• | lower corporate interest costs and the absence of 2007 corporate debt retirement costs, | 17 | ||||
• | increase in net earnings at our combined electric and gas utility segments primarily due to favorable MPSC rate orders and the elimination of certain costs from the power purchase agreement with the MCV Partnership, partially offset by a weather-driven reduction in deliveries, | 15 | ||||
• | net gain from Enterprises assets sold, as a gain recorded in 2008 replaces losses recorded in 2007, and | 13 | ||||
• | absence of a net gain on the disposal of discontinued operations and earnings from these businesses, which more than offset the absence of foreign currency losses. | (92 | ) | |||
Total change | $ | 13 | ||||
In Millions (except for per share amounts) | ||||||||||||
Six months ended June 30 | 2008 | 2007 | Change | |||||||||
Net Income (Loss) Available to Common Stockholders | $ | 149 | $ | (182 | ) | $ | 331 | |||||
Basic Earnings (Loss) Per Share | $ | 0.66 | $ | (0.82 | ) | $ | 1.48 | |||||
Diluted Earnings (Loss) Per Share | $ | 0.62 | $ | (0.82 | ) | $ | 1.44 | |||||
Electric Utility | $ | 124 | $ | 91 | $ | 33 | ||||||
Gas Utility | 64 | 61 | 3 | |||||||||
Enterprises | 8 | (252 | ) | 260 | ||||||||
Corporate Interest and Other | (46 | ) | 5 | (51 | ) | |||||||
Discontinued Operations | (1 | ) | (87 | ) | 86 | |||||||
Net Income (Loss) Available to Common Stockholders | $ | 149 | $ | (182 | ) | $ | 331 | |||||
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In Millions | ||||||
• | absence of impairment charges related to international businesses sold in 2007, | $ | 182 | |||
• | the absence of a net loss on the disposal of discontinued operations in 2007, | 86 | ||||
• | increase at Enterprises primarily due to reduced fuel costs and the absence of charges associated with the rescission of a contract with Quicksilver, | 37 | ||||
• | increase in net earnings at our combined electric and gas utility segments primarily due to favorable MPSC rate orders and the elimination of certain costs from the power purchase agreement with the MCV Partnership, partially offset by a reduction in deliveries and increased depreciation expense, | 36 | ||||
• | lower corporate interest costs and the absence of 2007 corporate debt retirement costs, | 22 | ||||
• | net gain from Enterprises assets sold, as a gain recorded in 2008 replaces losses recorded in 2007, and | 7 | ||||
• | decrease at Enterprises and corporate interest and other as the absence of tax benefits and earnings related to international assets sold, more than offset the benefit from reduced operating and maintenance expenses. | (39 | ) | |||
Total change | $ | 331 | ||||
In Millions | ||||||||||||
June 30 | 2008 | 2007 | Change | |||||||||
Three months ended | $ | 57 | $ | 40 | $ | 17 | ||||||
Six months ended | $ | 124 | $ | 91 | $ | 33 | ||||||
Three Months Ended | Six Months Ended | |||||||
Reasons for the change: | June 30, 2008 vs. 2007 | June 30, 2008 vs. 2007 | ||||||
Electric deliveries and rate increase | $ | 10 | $ | 27 | ||||
Surcharge revenue | 10 | 10 | ||||||
Palisades revenue to PSCR | 4 | (42 | ) | |||||
Power supply costs and related revenue | 10 | 7 | ||||||
Other operating expenses, other income and non-commodity revenue | (16 | ) | 45 | |||||
General taxes | 4 | 8 | ||||||
Interest charges | 10 | 5 | ||||||
Income taxes | (15 | ) | (27 | ) | ||||
Total change | $ | 17 | $ | 33 | ||||
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In Millions | ||||||||||||
June 30 | 2008 | 2007 | Change | |||||||||
Three months ended | $ | 2 | $ | 4 | $ | (2 | ) | |||||
Six months ended | $ | 64 | $ | 61 | $ | 3 | ||||||
Three Months Ended | Six Months Ended | |||||||
Reasons for the change: | June 30, 2008 vs. 2007 | June 30, 2008 vs. 2007 | ||||||
Gas deliveries and rate increase | $ | 5 | $ | 18 | ||||
Gas wholesale and retail services, other gas revenues and other income | (7 | ) | (11 | ) | ||||
Operation and maintenance | (6 | ) | (9 | ) | ||||
General taxes and depreciation | 1 | (1 | ) | |||||
Interest charges | 2 | 6 | ||||||
Income taxes | 3 | — | ||||||
Total change | $ | (2 | ) | $ | 3 | |||
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In Millions | ||||||||||||
June 30 | 2008 | 2007 | Change | |||||||||
Three months ended | $ | 10 | $ | (54 | ) | $ | 64 | |||||
Six months ended | $ | 8 | $ | (252 | ) | $ | 260 | |||||
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Three Months Ended | Six Months Ended | |||||||
Reasons for the change: | June 30, 2008 vs. 2007 | June 30, 2008 vs. 2007 | ||||||
Operating revenues | $ | 27 | $ | (15 | ) | |||
Fuel for electric generation, cost of gas and purchased power | 21 | 69 | ||||||
Earnings (loss) from equity method investees | (18 | ) | (38 | ) | ||||
Gain (loss) on sale of assets | 22 | 10 | ||||||
Operation and maintenance | 17 | 33 | ||||||
2007 asset impairment charges | 21 | 263 | ||||||
Fixed charges | — | 3 | ||||||
Minority interests | 2 | 2 | ||||||
Income taxes | (28 | ) | (67 | ) | ||||
Total change | $ | 64 | $ | 260 | ||||
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In Millions | ||||||||||||
June 30 | 2008 | 2007 | Change | |||||||||
Three months ended | $ | (22 | ) | $ | (48 | ) | $ | 26 | ||||
Six months ended | $ | (46 | ) | $ | 5 | $ | (51 | ) | ||||
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• | results of operations, | ||
• | capital expenditures, | ||
• | energy commodity and transportation costs, | ||
• | contractual obligations, | ||
• | regulatory decisions, | ||
• | debt maturities, | ||
• | credit ratings, | ||
• | working capital needs, | ||
• | collateral requirements, and | ||
• | access to credit markets. |
• | our current level of cash and revolving credit facilities, | ||
• | our anticipated cash flows from operating and investing activities, and | ||
• | our ability to access secured and unsecured borrowing capacity in the capital markets. |
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In Millions | ||||||||
Six months ended June 30 | 2008 | 2007 | ||||||
Net cash provided by (used in): | ||||||||
Operating activities | $ | 651 | $ | 401 | ||||
Investing activities | (344 | ) | 1,479 | |||||
Net cash provided by operating and investing activities | 307 | 1,880 | ||||||
Financing activities | (128 | ) | (342 | ) | ||||
Effect of exchange rates on cash | — | 2 | ||||||
Net Increase in Cash and Cash Equivalents | $ | 179 | $ | 1,540 | ||||
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• | energy conservation measures and energy efficiency programs, | ||
• | fluctuations in weather conditions, and | ||
• | changes in economic conditions, including utilization and expansion or contraction of manufacturing facilities. |
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• | a capacity charge of $10.14 per MWh of available capacity, | ||
• | a fixed energy charge based on our annual average base load coal generating plant operating and maintenance cost, | ||
• | a variable energy charge for all delivered energy that reflects the MCV Partnership’s cost of production, and | ||
• | an option for us to extend the MCV PPA for five years or purchase the MCV Facility at the conclusion of the MCV PPA’s term in March 2025. |
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• | fluctuations in weather conditions, | ||
• | use by independent power producers, | ||
• | availability and development of renewable energy sources, | ||
• | changes in gas commodity prices, | ||
• | Michigan economic conditions, | ||
• | the price of competing energy sources or fuels, and | ||
• | energy efficiency and conservation. |
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• | the impact of indemnity and environmental remediation obligations at Bay Harbor, | ||
• | the outcome of certain legal proceedings, | ||
• | the impact of representations, warranties, and indemnities we provided in connection with the sales of our international assets, and | ||
• | changes in commodity prices and interest rates on certain derivative contracts that do not qualify for hedge accounting and must be marked to market through earnings. |
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In Millions | ||||||||||||||||
Three Months Ended | Six Months Ended | |||||||||||||||
June 30 | 2008 | 2007 | 2008 | 2007 | ||||||||||||
Operating Revenue | $ | 1,365 | $ | 1,319 | $ | 3,549 | $ | 3,508 | ||||||||
Earnings (Loss) from Equity Method Investees | (1 | ) | 17 | (2 | ) | 36 | ||||||||||
Operating Expenses | ||||||||||||||||
Fuel for electric generation | 135 | 125 | 297 | 250 | ||||||||||||
Purchased and interchange power | 297 | 374 | 620 | 689 | ||||||||||||
Cost of gas sold | 351 | 320 | 1,335 | 1,338 | ||||||||||||
Other operating expenses | 209 | 233 | 397 | 488 | ||||||||||||
Maintenance | 49 | 49 | 89 | 110 | ||||||||||||
Depreciation and amortization | 128 | 121 | 301 | 281 | ||||||||||||
General taxes | 48 | 55 | 108 | 123 | ||||||||||||
Asset impairment charges | — | 38 | — | 280 | ||||||||||||
Loss (gain) on asset sales, net | (8 | ) | 14 | (8 | ) | 2 | ||||||||||
1,209 | 1,329 | 3,139 | 3,561 | |||||||||||||
Operating Income (Loss) | 155 | 7 | 408 | (17 | ) | |||||||||||
Other Income (Deductions) | ||||||||||||||||
Interest and dividends | 9 | 30 | 18 | 45 | ||||||||||||
Regulatory return on capital expenditures | 8 | 7 | 16 | 15 | ||||||||||||
Foreign currency gain, net | — | 1 | — | 1 | ||||||||||||
Other income | 3 | 8 | 6 | 11 | ||||||||||||
Other expense | (5 | ) | (14 | ) | (6 | ) | (17 | ) | ||||||||
15 | 32 | 34 | 55 | |||||||||||||
Fixed Charges | ||||||||||||||||
Interest on long-term debt | 84 | 100 | 171 | 199 | ||||||||||||
Interest on long-term debt — related parties | 4 | 4 | 7 | 7 | ||||||||||||
Other interest | 7 | 17 | 18 | 22 | ||||||||||||
Capitalized interest | (1 | ) | (1 | ) | (3 | ) | (4 | ) | ||||||||
Preferred dividends of subsidiaries | — | — | 1 | 1 | ||||||||||||
94 | 120 | 194 | 225 | |||||||||||||
Income (Loss) Before Income Taxes | 76 | (81 | ) | 248 | (187 | ) | ||||||||||
Income Tax Expense (Benefit) | 25 | (29 | ) | 89 | (104 | ) | ||||||||||
Income (Loss) Before Minority Interests, Net | 51 | (52 | ) | 159 | (83 | ) | ||||||||||
Minority Interests, Net | 1 | 3 | 3 | 5 | ||||||||||||
Income (Loss) From Continuing Operations | 50 | (55 | ) | 156 | (88 | ) | ||||||||||
Income (Loss) From Discontinued Operations, Net of Tax (Tax Benefit) of $(1), $62, $(1) and $(1) | (1 | ) | 91 | (1 | ) | (87 | ) | |||||||||
Net Income (Loss) | 49 | 36 | 155 | (175 | ) | |||||||||||
Preferred Dividends | 3 | 3 | 6 | 6 | ||||||||||||
Redemption Premium on Preferred Stock | — | — | — | 1 | ||||||||||||
Net Income (Loss) Available to Common Stockholders | $ | 46 | $ | 33 | $ | 149 | $ | (182 | ) | |||||||
CMS-26
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In Millions, Except Per Share Amounts | ||||||||||||||||||||
Three Months Ended | Six Months Ended | |||||||||||||||||||
June 30 | 2008 | 2007 | 2008 | 2007 | ||||||||||||||||
(Unaudited) | ||||||||||||||||||||
CMS Energy | ||||||||||||||||||||
Net Income (Loss) | ||||||||||||||||||||
Net Income (Loss) Available to Common Stockholders | $ | 46 | $ | 33 | $ | 149 | $ | (182 | ) | |||||||||||
Basic Earnings (Loss) Per Average Common Share | ||||||||||||||||||||
Income (Loss) from Continuing Operations | $ | 0.21 | $ | (0.26 | ) | $ | 0.67 | $ | (0.43 | ) | ||||||||||
Income (Loss) from Discontinued Operations | (0.01 | ) | 0.41 | (0.01 | ) | (0.39 | ) | |||||||||||||
Net Income (Loss) Available to Common Stock | $ | 0.20 | $ | 0.15 | $ | 0.66 | $ | (0.82 | ) | |||||||||||
Diluted Earnings (Loss) Per Average Common Share | ||||||||||||||||||||
Income (Loss) from Continuing Operations | $ | 0.20 | $ | (0.26 | ) | $ | 0.63 | $ | (0.43 | ) | ||||||||||
Income (Loss) from Discontinued Operations | (0.01 | ) | 0.41 | (0.01 | ) | (0.39 | ) | |||||||||||||
Net Income (Loss) Available to Common Stock | $ | 0.19 | $ | 0.15 | $ | 0.62 | $ | (0.82 | ) | |||||||||||
Dividends Declared Per Common Share | $ | 0.09 | $ | 0.05 | $ | 0.18 | $ | 0.10 | ||||||||||||
CMS-27
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CMS-28
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In Millions | ||||||||
Six Months Ended June 30 | 2008 | 2007 | ||||||
Cash Flows from Operating Activities | ||||||||
Net income (loss) | $ | 155 | $ | (175 | ) | |||
Adjustments to reconcile net income (loss) to net cash provided by operating activities | ||||||||
Depreciation and amortization, net of nuclear decomissioning of $- and $2 | 301 | 286 | ||||||
Deferred income taxes and investment tax credit | 83 | (128 | ) | |||||
Minority interests (obligations), net | 3 | (16 | ) | |||||
Asset impairment charges | — | 280 | ||||||
Postretirement benefits expense | 76 | 69 | ||||||
Regulatory return on capital expenditures | (16 | ) | (15 | ) | ||||
Capital lease and other amortization | 19 | 24 | ||||||
Loss (gain) on the sale of assets | (8 | ) | 135 | |||||
Loss (earnings) from equity method investees | 2 | (36 | ) | |||||
Cash distributions from equity method investees | — | 14 | ||||||
Postretirement benefits contributions | (25 | ) | (25 | ) | ||||
Electric sales contract termination payment | (275 | ) | — | |||||
Changes in other assets and liabilities: | ||||||||
Decrease (increase) in accounts receivable and accrued revenues | 187 | (198 | ) | |||||
Decrease in accrued power supply and gas revenue | 40 | 41 | ||||||
Decrease in inventories | 139 | 192 | ||||||
Increase (decrease) in accounts payable | 3 | (7 | ) | |||||
Decrease in accrued expenses | (49 | ) | (61 | ) | ||||
Decrease in other current and non-current assets | 128 | 92 | ||||||
Decrease in other current and non-current liabilities | (112 | ) | (71 | ) | ||||
Net cash provided by operating activities | 651 | 401 | ||||||
Cash Flows from Investing Activities | ||||||||
Capital expenditures (excludes assets placed under capital lease) | (340 | ) | (378 | ) | ||||
Cost to retire property | (12 | ) | (5 | ) | ||||
Restricted cash | 7 | 30 | ||||||
Investments in nuclear decommissioning trust funds | — | (1 | ) | |||||
Proceeds from nuclear decommissioning trust funds | — | 317 | ||||||
Proceeds from sale of assets | — | 1,616 | ||||||
Cash relinquished from sale of assets | — | (113 | ) | |||||
Deposit on pending asset sale | — | 16 | ||||||
Other investing | 1 | (3 | ) | |||||
Net cash provided by (used in) investing activities | (344 | ) | 1,479 | |||||
Cash Flows from Financing Activities | ||||||||
Proceeds from notes, bonds, and other long-term debt | 526 | 47 | ||||||
Issuance of common stock | 4 | 11 | ||||||
Retirement of bonds and other long-term debt | (594 | ) | (332 | ) | ||||
Redemption of preferred stock | — | (32 | ) | |||||
Payment of common stock dividends | (41 | ) | (22 | ) | ||||
Payment of preferred stock dividends | (6 | ) | (6 | ) | ||||
Payment of capital lease and financial lease obligations | (12 | ) | (8 | ) | ||||
Debt issuance costs, financing fees, and other | (5 | ) | — | |||||
Net cash used in financing activities | (128 | ) | (342 | ) | ||||
Effect of Exchange Rates on Cash | — | 2 | ||||||
Net Increase in Cash and Cash Equivalents | 179 | 1,540 | ||||||
Cash and Cash Equivalents, Beginning of Period | 348 | 351 | ||||||
Cash and Cash Equivalents, End of Period | $ | 527 | $ | 1,891 | ||||
CMS-29
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In Millions | ||||||||
June 30 | December 31 | |||||||
2008 | 2007 | |||||||
(Unaudited) | ||||||||
Plant and Property (at cost) | ||||||||
Electric utility | $ | 8,695 | $ | 8,555 | ||||
Gas utility | 3,511 | 3,467 | ||||||
Enterprises | 392 | 391 | ||||||
Other | 34 | 34 | ||||||
12,632 | 12,447 | |||||||
Less accumulated depreciation, depletion and amortization | 4,294 | 4,166 | ||||||
8,338 | 8,281 | |||||||
Construction work-in-progress | 557 | 447 | ||||||
8,895 | 8,728 | |||||||
Investments | ||||||||
Enterprises | 3 | 6 | ||||||
Other | 5 | 5 | ||||||
8 | 11 | |||||||
Current Assets | ||||||||
Cash and cash equivalents at cost, which approximates market | 527 | 348 | ||||||
Restricted cash at cost, which approximates market | 28 | 34 | ||||||
Notes receivable | 75 | 68 | ||||||
Accounts receivable and accrued revenue, less allowances of $22 in 2008 and $21 in 2007 | 645 | 837 | ||||||
Accrued power supply revenue | 2 | 45 | ||||||
Accounts receivable — related parties | 2 | 2 | ||||||
Inventories at average cost | ||||||||
Gas in underground storage | 993 | 1,123 | ||||||
Materials and supplies | 95 | 86 | ||||||
Generating plant fuel stock | 106 | 125 | ||||||
Regulatory assets — postretirement benefits | 19 | 19 | ||||||
Deferred property taxes | 124 | 158 | ||||||
Prepayments and other | 31 | 35 | ||||||
2,647 | 2,880 | |||||||
Non-current Assets | ||||||||
Regulatory Assets | ||||||||
Securitized costs | 443 | 466 | ||||||
Postretirement benefits | 867 | 921 | ||||||
Customer Choice Act | 121 | 149 | ||||||
Other | 464 | 504 | ||||||
Deferred income taxes | 78 | 99 | ||||||
Notes receivable, less allowances of $31 in 2008 and 2007 | 169 | 170 | ||||||
Other | 198 | 264 | ||||||
2,340 | 2,573 | |||||||
Total Assets | $ | 13,890 | $ | 14,192 | ||||
CMS-30
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In Millions | ||||||||
June 30 | December 31 | |||||||
2008 | 2007 | |||||||
(Unaudited) | ||||||||
Capitalization | ||||||||
Common stockholders’ equity | ||||||||
Common stock, authorized 350.0 shares; outstanding 225.5 shares in 2008 and 225.1 shares in 2007 | $ | 2 | $ | 2 | ||||
Other paid-in capital | 4,488 | 4,480 | ||||||
Accumulated other comprehensive loss | (22 | ) | (144 | ) | ||||
Retained deficit | (2,106 | ) | (2,208 | ) | ||||
2,362 | 2,130 | |||||||
Preferred stock of subsidiary | 44 | 44 | ||||||
Preferred stock | 249 | 250 | ||||||
Long-term debt | 5,520 | 5,385 | ||||||
Long-term debt — related parties | 178 | 178 | ||||||
Non-current portion of capital lease obligations | 216 | 225 | ||||||
8,569 | 8,212 | |||||||
Minority Interests | 52 | 53 | ||||||
Current Liabilities | ||||||||
Current portion of long-term debt, capital and finance lease obligations | 517 | 722 | ||||||
Notes payable | — | 1 | ||||||
Accounts payable | 478 | 430 | ||||||
Accrued rate refunds | 66 | 19 | ||||||
Accounts payable — related parties | — | 1 | ||||||
Accrued interest | 99 | 103 | ||||||
Accrued taxes | 226 | 308 | ||||||
Regulatory liabilities | 204 | 164 | ||||||
Deferred income taxes | 122 | 41 | ||||||
Electric sales contract termination liability | 3 | 279 | ||||||
Argentine currency impairment reserve | — | 197 | ||||||
Other | 167 | 208 | ||||||
1,882 | 2,473 | |||||||
Non-current Liabilities | ||||||||
Regulatory Liabilities | ||||||||
Regulatory liabilities for cost of removal | 1,172 | 1,127 | ||||||
Income taxes, net | 572 | 533 | ||||||
Other regulatory liabilities | 150 | 313 | ||||||
Postretirement benefits | 868 | 858 | ||||||
Deferred investment tax credit | 56 | 58 | ||||||
Asset retirement obligation | 202 | 198 | ||||||
Other | 367 | 367 | ||||||
3,387 | 3,454 | |||||||
Commitments and Contingencies(Notes 4, 5 and 7) | ||||||||
Total Stockholders’ Investment and Liabilities | $ | 13,890 | $ | 14,192 | ||||
CMS-31
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In Millions | ||||||||||||||||
Three Months Ended | Six Months Ended | |||||||||||||||
June 30 | 2008 | 2007 | 2008 | 2007 | ||||||||||||
Common Stock | ||||||||||||||||
At beginning and end of period | $ | 2 | $ | 2 | $ | 2 | $ | 2 | ||||||||
Other Paid-in Capital | ||||||||||||||||
At beginning of period | 4,483 | 4,468 | 4,480 | 4,468 | ||||||||||||
Common stock issued | 5 | 9 | 8 | 22 | ||||||||||||
Common stock reissued | — | — | — | 6 | ||||||||||||
Redemption of preferred stock | — | — | — | (19 | ) | |||||||||||
At end of period | 4,488 | 4,477 | 4,488 | 4,477 | ||||||||||||
Accumulated Other Comprehensive Loss | ||||||||||||||||
Retirement Benefits Liability | ||||||||||||||||
At beginning of period | (16 | ) | (23 | ) | (15 | ) | (23 | ) | ||||||||
Retirement benefits liability adjustments (a) | — | — | (1 | ) | — | |||||||||||
At end of period | (16 | ) | (23 | ) | (16 | ) | (23 | ) | ||||||||
Investments | ||||||||||||||||
At beginning of period | (4 | ) | 14 | — | 14 | |||||||||||
Unrealized gain (loss) on investments (a) | (1 | ) | 2 | (5 | ) | 2 | ||||||||||
At end of period | (5 | ) | 16 | (5 | ) | 16 | ||||||||||
Derivative Instruments | ||||||||||||||||
At beginning of period | (1 | ) | (14 | ) | (1 | ) | (12 | ) | ||||||||
Unrealized loss on derivative instruments (a) | — | — | — | (3 | ) | |||||||||||
Reclassification adjustments included in net income (loss) (a) | — | 13 | — | 14 | ||||||||||||
At end of period | (1 | ) | (1 | ) | (1 | ) | (1 | ) | ||||||||
Foreign Currency Translation | ||||||||||||||||
At beginning of period | (128 | ) | (169 | ) | (128 | ) | (297 | ) | ||||||||
Sale of interests in TGN (a) | 128 | — | 128 | — | ||||||||||||
Sale of Argentine assets (a) | — | — | — | 128 | ||||||||||||
Sale of Brazilian assets (a) | — | 36 | — | 36 | ||||||||||||
Other foreign currency translations (a) | — | 4 | — | 4 | ||||||||||||
At end of period | — | (129 | ) | — | (129 | ) | ||||||||||
Total Accumulated Other Comprehensive Loss | (22 | ) | (137 | ) | (22 | ) | (137 | ) | ||||||||
Retained Deficit | ||||||||||||||||
At beginning of period | (2,131 | ) | (2,162 | ) | (2,208 | ) | (1,918 | ) | ||||||||
Effects of changing the retirement plans measurement date pursuant to SFAS No. 158 | ||||||||||||||||
Service cost, interest cost, and expected return on plan assets for December 1 through December 31, 2007, net of tax | — | — | (4 | ) | — | |||||||||||
Additional loss from December 1 through December 31, 2007, net of tax | — | — | (2 | ) | — | |||||||||||
Adjustment to initially apply FIN 48, net of tax | — | — | — | (18 | ) | |||||||||||
Net income (loss) (a) | 49 | 36 | 155 | (175 | ) | |||||||||||
Preferred stock dividends declared | (3 | ) | (3 | ) | (6 | ) | (6 | ) | ||||||||
Common stock dividends declared | (21 | ) | (11 | ) | (41 | ) | (22 | ) | ||||||||
Redemption of preferred stock | — | — | — | (1 | ) | |||||||||||
At end of period | (2,106 | ) | (2,140 | ) | (2,106 | ) | (2,140 | ) | ||||||||
Total Common Stockholders’ Equity | $ | 2,362 | $ | 2,202 | $ | 2,362 | $ | 2,202 | ||||||||
CMS-32
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In Millions | ||||||||||||||||
Three Months Ended | Six Months Ended | |||||||||||||||
June 30 | 2008 | 2007 | 2008 | 2007 | ||||||||||||
(Unaudited) | ||||||||||||||||
(a) Disclosure of Comprehensive Income: | ||||||||||||||||
Net income (loss) | $ | 49 | $ | 36 | $ | 155 | $ | (175 | ) | |||||||
Retirement benefits liability adjustments, net of tax of $-, $1, $2, and $1, respectively | — | — | (1 | ) | — | |||||||||||
Unrealized gain (loss) on investments, net of tax (tax benefit) of $(1), $1, $(3), and $1, respectively | (1 | ) | 2 | (5 | ) | 2 | ||||||||||
Derivative Instruments | ||||||||||||||||
Unrealized loss on derivative instruments, net of tax (tax benefit) of $-, $(1), $-, and $2, respectively | — | — | — | (3 | ) | |||||||||||
Reclassification adjustments included in net income (loss) , net of tax of $-, $7, $-, and $7, respectively | — | 13 | — | 14 | ||||||||||||
Sale of interests in TGN, net of tax of $69 | 128 | — | 128 | — | ||||||||||||
Sale of Argentine assets, net of tax of $68 | — | — | — | 128 | ||||||||||||
Sale of Brazilian assets, net of tax of $20 | — | 36 | — | 36 | ||||||||||||
Other foreign currency translations | — | 4 | — | 4 | ||||||||||||
Total Comprehensive Income | $ | 176 | $ | 91 | $ | 277 | $ | 6 | ||||||||
CMS-33
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CMS-34
Table of Contents
(Unaudited)
CMS-35
Table of Contents
In Millions | ||||||||||||||||
Three Months Ended | Six Months Ended | |||||||||||||||
June 30 | 2008 | 2007 | 2008 | 2007 | ||||||||||||
Other income | ||||||||||||||||
Electric restructuring return | $ | — | $ | — | $ | — | $ | 1 | ||||||||
Return on stranded and security costs | 2 | 2 | 3 | 3 | ||||||||||||
Gain on investment | — | 4 | — | 4 | ||||||||||||
All other | 1 | 2 | 3 | 3 | ||||||||||||
Total other income | $ | 3 | $ | 8 | $ | 6 | $ | 11 | ||||||||
In Millions | ||||||||||||||||
Three Months Ended | Six Months Ended | |||||||||||||||
June 30 | 2008 | 2007 | 2008 | 2007 | ||||||||||||
Other expense | ||||||||||||||||
Derivative loss on debt tender offer | $ | — | $ | (3 | ) | $ | — | $ | (3 | ) | ||||||
Loss on reacquired and extinguished debt | — | (11 | ) | — | (11 | ) | ||||||||||
Civic and political expenditures | (3 | ) | — | (4 | ) | (1 | ) | |||||||||
All other | (2 | ) | — | (2 | ) | (2 | ) | |||||||||
Total other expense | $ | (5 | ) | $ | (14 | ) | $ | (6 | ) | $ | (17 | ) | ||||
CMS-36
Table of Contents
CMS-37
Table of Contents
• | Level 1 inputs are unadjusted quoted prices in active markets for identical assets or liabilities. These markets must be accessible to us at the measurement date. | ||
• | Level 2 inputs are observable, market-based inputs, other than Level 1 prices. Level 2 inputs may include quoted prices for similar assets or liabilities in active markets, quoted prices in inactive markets, interest rates and yield curves observable at commonly quoted intervals, credit risks, default rates, and inputs derived from or corroborated by observable market data. | ||
• | Level 3 inputs are unobservable inputs that reflect our own assumptions about how market participants would value our assets and liabilities. |
• | AROs, | ||
• | most of the nonfinancial assets and liabilities acquired in a business combination, and | ||
• | impairment analyses performed for nonfinancial assets. |
CMS-38
Table of Contents
In Millions | ||||||||||||||||
June 30, 2008 | Level 1 | Level 2 | Level 3 | |||||||||||||
Assets: | ||||||||||||||||
Nonqualified Deferred Compensation Plan | $ | 5 | $ | 5 | $ | — | $ | — | ||||||||
Assets | ||||||||||||||||
SERP | ||||||||||||||||
Equity Securities | 55 | 55 | — | — | ||||||||||||
Debt Securities | 30 | — | 30 | — | ||||||||||||
CMS ERM derivative contracts: | ||||||||||||||||
Non-trading electric/gas contracts (a) | 31 | 9 | 19 | 3 | ||||||||||||
Total | $ | 121 | $ | 69 | $ | 49 | $ | 3 | ||||||||
Liabilities: | ||||||||||||||||
CMS ERM derivative contracts: | ||||||||||||||||
Non-trading electric/gas contracts (b) | $ | (52 | ) | $ | — | $ | (25 | ) | $ | (27 | ) | |||||
Nonqualified Deferred Compensation Plan | (5 | ) | (5 | ) | — | — | ||||||||||
Liability | ||||||||||||||||
Total | $ | (57 | ) | $ | (5 | ) | $ | (25 | ) | $ | (27 | ) | ||||
(a) | This amount is gross and excludes the $18 million impact of offsetting derivative assets and liabilities under master netting arrangements and the $8 million impact of offsetting cash margin deposits held by CMS ERM. | |
(b) | This amount is gross and excludes the $18 million impact of offsetting derivative assets and liabilities under a master netting arrangement. |
CMS-39
Table of Contents
In Millions | ||||
CMS ERM | ||||
Non-trading | ||||
contracts | ||||
Balance at March 31, 2008 | $ | (21 | ) | |
Total gains (losses) (realized and unrealized) | ||||
Included in earnings (a) | (3 | ) | ||
Included in AOCL | — | |||
Purchases, sales, issuances, and settlements (net) | — | |||
Balance at June 30, 2008 | $ | (24 | ) | |
Unrealized gains (losses) included in earnings for the quarter ended June 30, 2008 relating to assets and liabilities still held at June 30, 2008 (a) | $ | (4 | ) | |
CMS ERM | ||||
Non-trading | ||||
contracts | ||||
Balance at December 31, 2007 | $ | (19 | ) | |
Total gains (losses) (realized and unrealized) | ||||
Included in earnings (a) | (6 | ) | ||
Included in AOCL | — | |||
Purchases, sales, issuances, and settlements (net) | 1 | |||
Balance at June 30, 2008 | (24 | ) | ||
Unrealized gains (losses) included in earnings for the six months ended June 30, 2008 relating to assets and liabilities still held at June 30, 2008 (a) | $ | (8 | ) | |
(a) | Realized and unrealized gains (losses) for Level 3 recurring fair values are recorded in earnings as a |
CMS-40
Table of Contents
3: ASSET SALES, DISCONTINUED OPERATIONS AND IMPAIRMENT CHARGES |
In Millions | ||||||||||||||
Disposal of | ||||||||||||||
Continuing | Discontinued | |||||||||||||
Operations | Operations | |||||||||||||
Cash | Pretax | Pretax | ||||||||||||
Month Sold | Business | Proceeds | Gain (Loss) | Gain (Loss) | ||||||||||
March | El Chocon (a) | $ | 50 | $ | 34 | $ | — | |||||||
March | Argentine/Michigan businesses (b) | 130 | (22 | ) | (278 | ) | ||||||||
April | Palisades (c) | 334 | — | — | ||||||||||
April | SENECA (d) | 106 | — | 46 | ||||||||||
May | Middle East, Africa and India businesses (e) | 792 | (16 | ) | 96 | |||||||||
June | CMS Energy Brasil S.A. (f) | 201 | — | 3 | ||||||||||
Various | Other | 3 | 2 | — | ||||||||||
Total | $ | 1,616 | $ | (2 | ) | $ | (133 | ) | ||||||
(a) | We sold our interest in El Chocon to Endesa, S.A. |
CMS-41
Table of Contents
(b) | We sold a portfolio of our businesses in Argentina and our northern Michigan non-utility natural gas assets to Lucid Energy. | |
(c) | We sold Palisades to Entergy for $380 million and received $364 million after various closing adjustments. We also paid Entergy $30 million to assume ownership and responsibility for the Big Rock ISFSI. Because of the sale of Palisades, we paid the NMC, the former operator of Palisades, $7 million in exit fees and forfeited our $5 million investment in the NMC. Entergy assumed responsibility for the future decommissioning of Palisades and for storage and disposal of spent nuclear fuel located at Palisades and the Big Rock ISFSI sites. | |
We accounted for the disposal of Palisades as a financing for accounting purposes and thus we recognized no gain on the Consolidated Statements of Income (Loss). We accounted for the remaining non-real estate assets and liabilities associated with the transaction as a sale. | ||
(d) | We sold our ownership interest in SENECA and certain associated generating equipment to PDVSA. | |
(e) | We sold our ownership interest in businesses in the Middle East, Africa, and India to TAQA. | |
(f) | We sold CMS Energy Brasil S.A. to CPFL Energia S.A., a Brazilian utility. |
In Millions | ||||||||
Three months ended June 30 | 2008 | 2007 | ||||||
Revenues | $ | — | $ | 72 | ||||
Discontinued operations: | ||||||||
Pretax income (loss) from discontinued operations | $ | (2 | ) | $ | 153 | (a) | ||
Income tax expense (benefit) | (1 | ) | 62 | |||||
Income (Loss) From Discontinued Operations | $ | (1 | ) | $ | 91 | |||
In Millions | ||||||||
Six months ended June 30 | 2008 | 2007 | ||||||
Revenues | $ | — | $ | 235 | ||||
Discontinued operations: | ||||||||
Pretax loss from discontinued operations | $ | (2 | ) | $ | (88 | ) (b) | ||
Income tax benefit | (1 | ) | (1 | ) | ||||
Loss From Discontinued Operations | $ | (1 | ) | $ | (87 | ) | ||
(a) | Includes a gain on disposal of SENECA of $46 million ($33 million after-tax and after minority interest), a gain on disposal of our ownership interest in businesses in the Middle East, Africa, and India of $96 million ($62 million after-tax), and a gain on disposal of CMS Energy Brasil S.A. of $3 million ($2 million after-tax). | |
(b) | Includes a loss on disposal of our Argentine and northern Michigan non-utility assets of $278 million ($171 million after-tax and after minority interest), a gain on disposal of SENECA of $46 million ($33 million after-tax and after minority interest), a gain on disposal of our ownership interests in businesses in the Middle East, Africa, and India of $96 million ($62 million after-tax), and a gain on |
CMS-42
Table of Contents
In Millions | ||||
Six months ended June 30 | 2007 | |||
Asset impairments: | ||||
TGN (a) | $ | 215 | ||
GasAtacama (b) | 36 | |||
Jamaica (c) | 22 | |||
PowerSmith (d) | 5 | |||
Prairie State (e) | 2 | |||
Total asset impairments | $ | 280 | ||
CMS-43
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CMS-44
Table of Contents
• | the disposal of leachate, | ||
• | the capping and excavation of CKD, | ||
• | the location and design of collection lines and upstream diversion of water, | ||
• | potential flow of leachate below the collection system, | ||
• | applicable criteria for various substances such as mercury, and | ||
• | other matters that are likely to affect the scope of remedial work that CMS Land and CMS Capital may be obligated to undertake. |
• | an increase in the number of problem areas, | ||
• | different remediation techniques, | ||
• | nature and extent of contamination, | ||
• | continued inability to reach agreement with the MDEQ or the EPA over required remedial actions, | ||
• | delays in the receipt of requested permits, | ||
• | delays following the receipt of any requested permits due to legal appeals of third parties, | ||
• | increase in water disposal costs, | ||
• | additional or new legal or regulatory requirements, or | ||
• | new or different landowner claims. |
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PSCR Cost | ||||||||
Net Under- | of Power | Description of Net | ||||||
PSCR Year | Date Filed | recovery | Sold | Underrecovery | ||||
2007 Reconciliation | March 2008 | $42 million (a) | $1.628 billion | Underrecovery relates primarily to the removal of $44 million of Palisades sale proceeds credits from the PSCR. The MPSC directed that we refund these credits through a separate surcharge versus a reduction of power supply costs. | ||||
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In Millions | |||||||||||||
Consumers | MPSC | ||||||||||||
Components of the increase in revenue | Position | Order | Difference | ||||||||||
Revenue Sufficiency | $ | (21 | ) | $ | (46 | ) | $ | (25 | ) | ||||
Zeeland Plant Requirement | 86 | 74 | (12 | ) | |||||||||
Base Rates Total | 65 | 28 | (37 | ) | |||||||||
Eliminate Palisades Recovery Credit in PSCR (a) | 167 | 167 | — | ||||||||||
Palisades Sale Transaction Cost Surcharge | 28 | 26 | (2 | ) | |||||||||
Energy Efficiency Surcharge | 5 | — | (5 | ) | |||||||||
Total | $ | 265 | $ | 221 | $ | (44 | ) | ||||||
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• | a capacity charge of $10.14 per MWh of available capacity, | ||
• | a fixed energy charge based on our annual average base load coal generating plant operating and maintenance cost, | ||
• | a variable energy charge for all delivered energy that reflects the MCV Partnership’s cost of production, and | ||
• | an option for us to extend the MCV PPA for five years or purchase the MCV Facility at the conclusion of the MCV PPA’s term in March 2025. |
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Net Over- | GCR Cost of | |||||||||
GCR Year | Date Filed | Order Date | recovery | Gas Sold | Description of Net Overrecovery | |||||
2006-2007 | June 2007 | July 2008 | $5 million | $1.7 billion | The total overrecovery amount reflects an overrecovery of $1 million plus $4 million in accrued interest owed to customers. | |||||
2007-2008 | June 2008 | Pending | $17 million | $1.7 billion | The total overrecovery amount reflects an overrecovery of $15 million plus $2 million in accrued interest owed to customers. | |||||
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In Millions | ||||||||||||
Issue | Expiration | Maximum | FIN 45 Carrying | |||||||||
Guarantee Description | Date | Date | Obligation | Amount | ||||||||
Indemnifications from asset sales and other agreements | Various | Indefinite | $ | 1,447 | (a) | $ | 87 | (b) | ||||
Surety bonds and other indemnifications | Various | Indefinite | 24 | — | ||||||||
Guarantees and put options | Various | Various through September 2027 | 89 | (c) | 1 | |||||||
(a) | The majority of this amount arises from provisions in stock and asset sales agreements under which we indemnify the purchaser for losses resulting from claims related to tax disputes, claims related to power purchase agreements and the failure of title to the assets or stock sold by us to the purchaser. Except for items described elsewhere in this Note, we believe the likelihood of loss to be remote for the indemnifications we have not recorded as liabilities. | |
(b) | As of June 30, 2008, we have recorded an $87 million liability in connection with indemnities related to the sale of certain subsidiaries. | |
(c) | The maximum obligation includes $85 million related to the MCV Partnership’s non-performance under a steam and electric power agreement with Dow. We sold our interests in the MCV Partnership and the FMLP. The sales agreement calls for the purchaser, an affiliate of GSO Capital Partners and Rockland Capital Energy Investments, to pay $85 million, subject to certain reimbursement rights, if Dow terminates an agreement under which the MCV Partnership provides it steam and electric power. This agreement expires in March 2016, subject to certain terms and conditions. The purchaser secured its reimbursement obligation with an irrevocable letter of credit of up to $85 million. |
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Events That Would Require | ||||
Guarantee Description | How Guarantee Arose | Performance | ||
Indemnifications from asset sales and other agreements | Stock and asset sales agreements | Findings of misrepresentation, breach of warranties, tax claims and other specific events or circumstances | ||
Surety bonds and other indemnifications | Normal operating activity, permits and licenses | Nonperformance | ||
Guarantees and put options | Normal operating activity | Nonperformance or non-payment by a subsidiary under a related contract | ||
Agreement to provide power and steam to Dow | MCV Partnership’s nonperformance or non-payment under a related contract | |||
Bay Harbor remediation efforts | Owners exercising put options requiring us to purchase property | |||
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In Millions | ||||||||
June 30, 2008 | December 31, 2007 | |||||||
CMS Energy Corporation | ||||||||
Senior notes | $ | 1,713 | $ | 1,713 | ||||
Revolving credit facility | 105 | — | ||||||
Total — CMS Energy Corporation | 1,818 | 1,713 | ||||||
Consumers Energy Company | ||||||||
First mortgage bonds | 3,169 | 3,170 | ||||||
Senior notes and other | 502 | 659 | ||||||
Securitization bonds | 293 | 309 | ||||||
Total — Consumers Energy Company | 3,964 | 4,138 | ||||||
Other Subsidiaries | 239 | 236 | ||||||
Total principal amounts outstanding | 6,021 | 6,087 | ||||||
Current amounts | (491 | ) | (692 | ) | ||||
Net unamortized discount | (10 | ) | (10 | ) | ||||
Total Long-term debt | $ | 5,520 | $ | 5,385 | ||||
Principal | Issue/Retirement | |||||||||||
(in millions) | Interest Rate (%) | Date | Maturity Date | |||||||||
Debt Issuances | ||||||||||||
Consumers | ||||||||||||
First mortgage bonds | $ | 250 | 5.650% | March 2008 | September 2018 | |||||||
Tax-exempt bonds (a) | 28 | 4.250% | March 2008 | June 2010 | ||||||||
Tax-exempt bonds (b) | 68 | Variable | March 2008 | April 2018 | ||||||||
Total | $ | 346 | ||||||||||
Debt Retirements: | ||||||||||||
Consumers | ||||||||||||
Senior notes | $ | 159 | 6.375% | February 2008 | February 2008 | |||||||
First mortgage bonds | 250 | 4.250% | April 2008 | April 2008 | ||||||||
Tax-exempt bonds (a) | 28 | Variable | April 2008 | June 2010 | ||||||||
Tax-exempt bonds (b) | 68 | Variable | April 2008 | April 2018 | ||||||||
Total | $ | 505 | ||||||||||
(a) | In March 2008, Consumers utilized the Michigan Strategic Fund for the issuance of $28 million of tax-exempt Michigan Strategic Fund Limited Obligation Refunding Revenue Bonds, bearing interest at a 4.25 percent annual rate. The bonds are secured by FMBs. The proceeds were used for the April 2008 redemption of $28 million of insured tax-exempt bonds. | |
(b) | In March 2008, Consumers utilized the Michigan Strategic Fund for the issuance of $68 million of tax-exempt Michigan Strategic Fund Variable Rate Limited Obligation Refunding Revenue Bonds. The initial interest rate was 2.25 percent and it resets weekly. The bonds, which are backed by a letter of credit, are subject to optional tender by the holders that would result in remarketing. The proceeds were used for the April 2008 redemption of $68 million of insured tax-exempt bonds. |
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In Millions | ||||||||||||||||||||
Outstanding | ||||||||||||||||||||
Amount of | Amount | Letters-of- | Amount | |||||||||||||||||
Company | Expiration Date | Facility | Borrowed | Credit | Available | |||||||||||||||
CMS Energy (a) | April 2, 2012 | $550 | $ | 105 | $ | 3 | $ | 442 | ||||||||||||
Consumers | March 30, 2012 | 500 | — | 127 | 373 | |||||||||||||||
Consumers (b) | November 28, 2008 | 200 | — | 185 | 15 | |||||||||||||||
(a) | Average borrowings during the quarter totaled $120 million, with a weighted average annual interest rate of 3.47 percent, at LIBOR plus 0.75 percent. | |
(b) | Secured revolving letter of credit facility. |
Outstanding | Adjusted | Adjusted | ||||||||||||||
Security | Maturity | (In Millions) | Conversion Price | Trigger Price | ||||||||||||
4.50% preferred stock | — | $ | 250 | $ | 9.66 | $ | 11.60 | |||||||||
3.375% senior notes | 2023 | $ | 150 | $ | 10.42 | $ | 12.51 | |||||||||
2.875% senior notes | 2024 | $ | 288 | $ | 14.41 | $ | 17.29 | |||||||||
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In Millions, Except Per Share Amounts | ||||||||
Three Months Ended June 30 | 2008 | 2007 | ||||||
Earnings (Loss) Available to Common Stockholders | ||||||||
Earnings (Loss) from Continuing Operations | $ | 50 | $ | (55 | ) | |||
Less Preferred Dividends and Redemption Premium | (3 | ) | (3 | ) | ||||
Earnings (Loss) from Continuing Operations Available to Common Stockholders — Basic and Diluted | $ | 47 | $ | (58 | ) | |||
Average Common Shares Outstanding | ||||||||
Weighted Average Shares — Basic | 223.7 | 222.6 | ||||||
Add dilutive impact of Contingently Convertible Securities | 14.4 | — | ||||||
Add dilutive Stock Options, Warrants, and Restricted Stock Awards | 1.0 | — | ||||||
Weighted Average Shares — Diluted | 239.1 | 222.6 | ||||||
Earnings (Loss) Per Average Common Share Available to Common Stockholders | ||||||||
Basic | $ | 0.21 | $ | (0.26 | ) | |||
Diluted | $ | 0.20 | $ | (0.26 | ) | |||
In Millions, Except Per Share Amounts | ||||||||
Six Months Ended June 30 | 2008 | 2007 | ||||||
Earnings (Loss) Available to Common Stockholders | ||||||||
Earnings (Loss) from Continuing Operations | $ | 156 | $ | (88 | ) | |||
Less Preferred Dividends and Redemption Premium | (6 | ) | (7 | ) | ||||
Earnings (Loss) from Continuing Operations Available to Common Stockholders — Basic and Diluted | $ | 150 | $ | (95 | ) | |||
Average Common Shares Outstanding | ||||||||
Weighted Average Shares — Basic | 223.6 | 222.1 | ||||||
Add dilutive impact of Contingently Convertible Securities | 13.7 | — | ||||||
Add dilutive Stock Options, Warrants, and Restricted Stock Awards | 1.0 | — | ||||||
Weighted Average Shares — Diluted | 238.3 | 222.1 | ||||||
Earnings (Loss) Per Average Common Share Available to Common Stockholders | ||||||||
Basic | $ | 0.67 | $ | (0.43 | ) | |||
Diluted | $ | 0.63 | $ | (0.43 | ) | |||
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• | increased the numerator of diluted EPS, by $2 million for the three months ended June 30, 2008 and 2007 and by $4 million for the six months ended June 30, 2008 and 2007, from an assumed reduction of interest expense, net of tax, and | ||
• | increased the denominator of diluted EPS by 4.2 million shares. |
In Millions | ||||||||||||||||||||||||||||||||
June 30, 2008 | December 31, 2007 | |||||||||||||||||||||||||||||||
Unrealized | Unrealized | Fair | Unrealized | Unrealized | Fair | |||||||||||||||||||||||||||
Cost | Gains | Losses | Value | Cost | Gains | Losses | Value | |||||||||||||||||||||||||
SERP: | ||||||||||||||||||||||||||||||||
Equity securities | $ | 63 | — | $ | (8 | ) | $ | 55 | $ | 62 | — | — | $ | 62 | ||||||||||||||||||
Debt securities | 31 | — | (1 | ) | 30 | 13 | — | — | 13 | |||||||||||||||||||||||
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• | they do not have a notional amount (that is, a number of units specified in a derivative instrument, such as MWh of electricity or bcf of natural gas), | ||
• | they qualify for the normal purchases and sales exception, or | ||
• | there is not an active market for the commodity. |
In Millions | ||||||||||||||||||||||||
June 30, 2008 | December 31, 2007 | |||||||||||||||||||||||
Fair | Unrealized | Fair | Unrealized | |||||||||||||||||||||
Derivative Instruments | Cost | Value | Loss | Cost | Value | Loss | ||||||||||||||||||
Held by consolidated subsidiaries: | ||||||||||||||||||||||||
CMS ERM | — | (21 | ) | (21 | ) | — | (23 | ) | (23 | ) | ||||||||||||||
Held by equity investments: | ||||||||||||||||||||||||
Craven County Wood Energy | — | (3 | ) | (3 | ) | — | — | — | ||||||||||||||||
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• | a non-contributory, qualified defined benefit Pension Plan (closed to new non-union participants as of July 1, 2003 and closed to new union participants as of September 1, 2005), | ||
• | a qualified cash balance Pension Plan for certain employees hired between July 1, 2003 and August 31, 2005, | ||
• | a non-contributory, qualified DCCP for employees hired on or after September 1, 2005, | ||
• | benefits to certain management employees under a non-contributory, nonqualified defined benefit SERP (closed to new participants as of March 31, 2006), | ||
• | benefits to certain management employees under a non-contributory, nonqualified DC SERP hired on or after April 1, 2006, | ||
• | health care and life insurance benefits under OPEB, | ||
• | benefits to a selected group of management under a non-contributory, nonqualified EISP, and | ||
• | a contributory, qualified defined contribution 401(k) plan. |
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In Millions | ||||||||||||||||
Pension | ||||||||||||||||
Three Months Ended | Six Months Ended | |||||||||||||||
June 30 | 2008 | 2007 | 2008 | 2007 | ||||||||||||
Service cost | $ | 10 | $ | 13 | $ | 21 | $ | 25 | ||||||||
Interest expense | 24 | 21 | 48 | 43 | ||||||||||||
Expected return on plan assets | (21 | ) | (20 | ) | (41 | ) | (40 | ) | ||||||||
Amortization of: | ||||||||||||||||
Net loss | 11 | 12 | 21 | 23 | ||||||||||||
Prior service cost | 2 | 2 | 3 | 4 | ||||||||||||
Net periodic cost | 26 | 28 | 52 | 55 | ||||||||||||
Regulatory adjustment | 8 | (4 | ) | 4 | (8 | ) | ||||||||||
Net periodic cost after regulatory adjustment | $ | 34 | $ | 24 | $ | 56 | $ | 47 | ||||||||
In Millions | ||||||||||||||||
OPEB | ||||||||||||||||
Three Months Ended | Six Months Ended | |||||||||||||||
June 30 | 2008 | 2007 | 2008 | 2007 | ||||||||||||
Service cost | $ | 5 | $ | 6 | $ | 11 | $ | 12 | ||||||||
Interest expense | 18 | 18 | 36 | 35 | ||||||||||||
Expected return on plan assets | (17 | ) | (15 | ) | (33 | ) | (31 | ) | ||||||||
Amortization of: | ||||||||||||||||
Net loss | 2 | 5 | 4 | 11 | ||||||||||||
Prior service credit | (2 | ) | (3 | ) | (5 | ) | (5 | ) | ||||||||
Net periodic cost | 6 | 11 | 13 | 22 | ||||||||||||
Regulatory adjustment | 2 | (1 | ) | 3 | (3 | ) | ||||||||||
Net periodic cost after regulatory adjustment | $ | 8 | $ | 10 | $ | 16 | $ | 19 | ||||||||
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In Millions | ||||||||||||||||
Three Months Ended | Six Months Ended | |||||||||||||||
June 30 | 2008 | 2007 | 2008 | 2007 | ||||||||||||
Operating Revenue | ||||||||||||||||
Electric utility | $ | 841 | $ | 856 | $ | 1,701 | $ | 1,700 | ||||||||
Gas utility | 422 | 391 | 1,653 | 1,602 | ||||||||||||
Enterprises | 97 | 68 | 185 | 198 | ||||||||||||
Other | 5 | 4 | 10 | 8 | ||||||||||||
Total Operating Revenue | $ | 1,365 | $ | 1,319 | $ | 3,549 | $ | 3,508 | ||||||||
Net Income (Loss) Available to Common Stockholders | ||||||||||||||||
Electric utility | $ | 57 | $ | 40 | $ | 124 | $ | 91 | ||||||||
Gas utility | 2 | 4 | 64 | 61 | ||||||||||||
Enterprises | 10 | (54 | ) | 8 | (252 | ) | ||||||||||
Discontinued operations | (1 | ) | 91 | (1 | ) | (87 | ) | |||||||||
Other | (22 | ) | (48 | ) | (46 | ) | 5 | |||||||||
Total Net Income (Loss) Available to Common Stockholders | $ | 46 | $ | 33 | $ | 149 | $ | (182 | ) | |||||||
In Millions | ||||||||
June 30, 2008 | December 31, 2007 | |||||||
Assets | ||||||||
Electric utility (a) | $ | 8,573 | $ | 8,492 | ||||
Gas utility (a) | 4,038 | 4,102 | ||||||
Enterprises | 834 | 982 | ||||||
Other | 445 | 616 | ||||||
Total Assets | $ | 13,890 | $ | 14,192 | ||||
(a) | Amounts include a portion of Consumers’ other common assets attributable to both the electric and gas utility businesses. |
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§ | the price of CMS Energy Common Stock, capital and financial market conditions, and the effect of such market conditions on our post-retirement benefit plans, interest rates, and access to the capital markets, including availability of financing to Consumers, CMS Energy, or any of their affiliates, and the energy industry, | ||
§ | market perception of the energy industry, Consumers, CMS Energy, or any of their affiliates, | ||
§ | factors affecting operations, such as unusual weather conditions, catastrophic weather-related damage, unscheduled generation outages, maintenance or repairs, environmental incidents, or electric transmission or gas pipeline system constraints, | ||
§ | the impact of any future regulations or laws regarding carbon dioxide and other greenhouse gas emissions, | ||
§ | national, regional, and local economic, competitive, and regulatory policies, conditions and developments, | ||
§ | adverse regulatory or legal interpretations or decisions, including those related to environmental laws and regulations, and potential environmental remediation costs associated with such interpretations or decisions, | ||
§ | potentially adverse regulatory treatment or failure to receive timely regulatory orders concerning a number of significant questions currently or potentially before the MPSC, including: |
§ | recovery of Clean Air Act capital and operating costs and other environmental and safety-related expenditures, | ||
§ | recovery of power supply and natural gas supply costs, | ||
§ | timely recognition in rates of additional equity investments and additional operation and maintenance expenses at Consumers, | ||
§ | adequate and timely recovery of additional electric and gas rate-based investments, |
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§ | adequate and timely recovery of higher MISO energy and transmission costs, | ||
§ | recovery of Stranded Costs incurred due to customers choosing alternative energy suppliers, | ||
§ | timely recovery of costs associated with energy efficiency investments and any state or federally mandated renewables resource standards, | ||
§ | recovery of Big Rock decommissioning funding shortfalls, | ||
§ | approval of the Balanced Energy Initiative, and | ||
§ | authorization of a new clean coal plant, |
§ | adverse consequences resulting from a past or future assertion of indemnity or warranty claims associated with previously owned assets and businesses, | ||
§ | our ability to recover nuclear fuel storage costs due to the DOE’s failure to accept spent nuclear fuel on schedule, including the outcome of pending litigation with the DOE, | ||
§ | the impact of expanded enforcement powers and investigation activities at the FERC, | ||
§ | federal regulation of electric sales and transmission of electricity, including periodic re-examination by federal regulators of our market-based sales authorizations in wholesale power markets without price restrictions, | ||
§ | energy markets, including availability of capacity and the timing and extent of changes in commodity prices for oil, coal, natural gas, natural gas liquids, electricity and certain related products due to lower or higher demand, shortages, transportation problems, or other developments, | ||
§ | the impact of increases in natural gas prices and coal prices on our cash flow and working capital, | ||
§ | the impact of increases in steel and other construction material prices, | ||
§ | the availability of qualified construction personnel to implement our construction program, | ||
§ | our ability to collect accounts receivable from our customers, | ||
§ | the direct and indirect effects of the continued economic downturn in Michigan on us and our revenues, | ||
§ | potential disruption or interruption of facilities or operations due to accidents, war, or terrorism, and the ability to obtain or maintain insurance coverage for such events, | ||
§ | technological developments in energy production, delivery, and usage, | ||
§ | achievement of capital expenditure and operating expense goals, | ||
§ | changes in financial or regulatory accounting principles or policies, | ||
§ | changes in tax laws or new IRS interpretations of existing or past tax laws, | ||
§ | changes in federal or state regulations or laws that could have an impact on our business, | ||
§ | the outcome, cost, and other effects of legal or administrative proceedings, settlements, investigations or claims, |
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§ | disruptions in the normal commercial insurance and surety bond markets that may increase costs or reduce traditional insurance coverage, particularly terrorism and sabotage insurance, performance bonds, and tax exempt debt insurance, | ||
§ | credit ratings of Consumers or CMS Energy, and | ||
§ | other business or investment considerations that may be disclosed from time to time in Consumers’ or CMS Energy’s SEC filings, or in other publicly issued written documents. |
• | weather, especially during the normal heating and cooling seasons, | ||
• | economic conditions, | ||
• | regulation and regulatory issues, | ||
• | energy commodity prices, | ||
• | interest rates, and | ||
• | our debt credit rating. |
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• | investing in our utility system to enable us to meet our customer commitments, comply with increasing environmental performance standards, improve system performance, and maintain adequate supply and capacity, | ||
• | growing earnings while controlling operating and fuel costs, | ||
• | managing cash flow issues, and | ||
• | maintaining principles of safe, efficient operations, customer value, fair and timely regulation, and consistent financial performance. |
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In Millions | ||||||||||||
Three months ended June 30 | 2008 | 2007 | Change | |||||||||
Electric | $ | 57 | $ | 40 | $ | 17 | ||||||
Gas | 2 | 4 | (2 | ) | ||||||||
Other | 1 | — | 1 | |||||||||
Net Income Available to Common Stockholder | $ | 60 | $ | 44 | $ | 16 | ||||||
In Millions | ||||||
• | increase in electric delivery revenue primarily due to the MPSC’s December 2007 and June 2008 electric rate orders, | $ | 20 | |||
• | decrease in electric operating expense due to the absence, in 2008, of certain costs which are no longer incurred under our power purchase agreement with the MCV Partnership, | 11 | ||||
• | decrease in electric deliveries primarily due to unfavorable weather, and | (14 | ) | |||
• | other net decreases. | (1 | ) | |||
Total change | $ | 16 | ||||
In Millions | ||||||||||||
Six months ended June 30 | 2008 | 2007 | Change | |||||||||
Electric | $ | 124 | $ | 91 | $ | 33 | ||||||
Gas | 64 | 61 | 3 | |||||||||
Other | 1 | 4 | (3 | ) | ||||||||
Net Income Available to Common Stockholder | $ | 189 | $ | 156 | $ | 33 | ||||||
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In Millions | ||||||
• | increase in electric delivery revenue primarily due to the MPSC’s December 2007 and June 2008 electric rate orders, | $ | 31 | |||
• | lower nuclear operating and maintenance costs, | 23 | ||||
• | decrease in electric operating expense due to the absence, in 2008, of certain costs which are no longer incurred under our power purchase agreement with the MCV Partnership, | 20 | ||||
• | increase in gas delivery revenue primarily due to the MPSC’s August 2007 gas rate order, | 18 | ||||
• | decrease due to electric revenue being used to offset costs incurred under our power purchase agreement with Entergy, | (28 | ) | |||
• | decrease in electric deliveries, | (14 | ) | |||
• | increase in depreciation, and | (11 | ) | |||
• | other net decreases. | (6 | ) | |||
Total change | $ | 33 | ||||
In Millions | ||||||||||||
June 30 | 2008 | 2007 | Change | |||||||||
Three months ended | $ | 57 | $ | 40 | $ | 17 | ||||||
Six months ended | $ | 124 | $ | 91 | $ | 33 | ||||||
Three Months Ended | Six Months Ended | |||||||
Reasons for the change: | June 30, 2008 vs. 2007 | June 30, 2008 vs. 2007 | ||||||
Electric deliveries and rate increase | $ | 10 | $ | 27 | ||||
Surcharge revenue | 10 | 10 | ||||||
Palisades revenue to PSCR | 4 | (42 | ) | |||||
Power supply costs and related revenue | 10 | 7 | ||||||
Other operating expenses, other income and non-commodity revenue | (16 | ) | 45 | |||||
General taxes | 4 | 8 | ||||||
Interest charges | 10 | 5 | ||||||
Income taxes | (15 | ) | (27 | ) | ||||
Total change | $ | 17 | $ | 33 | ||||
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In Millions | ||||||||||||
June 30 | 2008 | 2007 | Change | |||||||||
Three months ended | $ | 2 | $ | 4 | $ | (2 | ) | |||||
Six months ended | $ | 64 | $ | 61 | $ | 3 | ||||||
Three Months Ended | Six Months Ended | |||||||
Reasons for the change: | June 30, 2008 vs. 2007 | June 30, 2008 vs. 2007 | ||||||
Gas deliveries and rate increase | $ | 5 | $ | 18 | ||||
Gas wholesale and retail services, other gas revenues and other income | (7 | ) | (11 | ) | ||||
Operation and maintenance | (6 | ) | (9 | ) | ||||
General taxes and depreciation | 1 | (1 | ) | |||||
Interest charges | 2 | 6 | ||||||
Income taxes | 3 | — | ||||||
Total change | $ | (2 | ) | $ | 3 | |||
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June 30 | 2008 | 2007 | Change | |||||||||
Three months ended | $ | 1 | $ | — | $ | 1 | ||||||
Six months ended | $ | 1 | $ | 4 | $ | (3 | ) | |||||
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• | results of operations, | ||
• | capital expenditures, | ||
• | energy commodity and transportation costs, | ||
• | contractual obligations, | ||
• | regulatory decisions, | ||
• | debt maturities, | ||
• | credit ratings, | ||
• | working capital needs, | ||
• | collateral requirements, and | ||
• | access to credit markets. |
• | our current level of cash and revolving credit facilities, | ||
• | our anticipated cash flows from operating and investing activities, and | ||
• | our ability to access secured and unsecured borrowing capacity in the capital markets. |
In Millions | ||||||||
Six months ended June 30 | 2008 | 2007 | ||||||
Net cash provided by (used in): | ||||||||
Operating activities | $ | 954 | $ | 559 | ||||
Investing activities | (345 | ) | 290 | |||||
Net cash provided by operating and investing activities | 609 | 849 | ||||||
Financing activities | (361 | ) | 446 | |||||
Net Increase in Cash and Cash Equivalents | $ | 248 | $ | 1,295 | ||||
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• | energy conservation measures and energy efficiency programs, | ||
• | fluctuations in weather conditions, and | ||
• | changes in economic conditions, including utilization and expansion or contraction of manufacturing facilities. |
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• | a capacity charge of $10.14 per MWh of available capacity, | ||
• | a fixed energy charge based on our annual average base load coal generating plant operating and maintenance cost, | ||
• | a variable energy charge for all delivered energy that reflects the MCV Partnership’s cost of production, and | ||
• | an option for us to extend the MCV PPA for five years or purchase the MCV Facility at the conclusion of the MCV PPA’s term in March 2025. |
• | fluctuations in weather conditions, | ||
• | use by independent power producers, | ||
• | availability and development of renewable energy sources, | ||
• | changes in gas commodity prices, | ||
• | Michigan economic conditions, | ||
• | the price of competing energy sources or fuels, and | ||
• | energy efficiency and conservation. |
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In Millions | ||||||||||||||||
Three Months Ended | Six Months Ended | |||||||||||||||
June 30 | 2008 | 2007 | 2008 | 2007 | ||||||||||||
Operating Revenue | $ | 1,263 | $ | 1,247 | $ | 3,354 | $ | 3,302 | ||||||||
Operating Expenses | ||||||||||||||||
Fuel for electric generation | 118 | 88 | 245 | 176 | ||||||||||||
Purchased and interchange power | 293 | 365 | 610 | 672 | ||||||||||||
Purchased power — related parties | 17 | 20 | 37 | 39 | ||||||||||||
Cost of gas sold | 289 | 261 | 1,233 | 1,196 | ||||||||||||
Other operating expenses | 194 | 198 | 364 | 418 | ||||||||||||
Maintenance | 44 | 45 | 80 | 102 | ||||||||||||
Depreciation and amortization | 124 | 117 | 294 | 273 | ||||||||||||
General taxes | 45 | 51 | 102 | 115 | ||||||||||||
1,124 | 1,145 | 2,965 | 2,991 | |||||||||||||
Operating Income | 139 | 102 | 389 | 311 | ||||||||||||
Other Income (Deductions) | ||||||||||||||||
Interest | 9 | 20 | 16 | 31 | ||||||||||||
Regulatory return on capital expenditures | 8 | 7 | 16 | 15 | ||||||||||||
Other income | 2 | 9 | 5 | 16 | ||||||||||||
Other expense | (5 | ) | — | (6 | ) | (3 | ) | |||||||||
14 | 36 | 31 | 59 | |||||||||||||
Interest Charges | ||||||||||||||||
Interest on long-term debt | 55 | 59 | 113 | 118 | ||||||||||||
Interest on long-term debt — related parties | — | — | — | 2 | ||||||||||||
Other interest | 4 | 14 | 11 | 15 | ||||||||||||
Capitalized interest | (1 | ) | (1 | ) | (3 | ) | (4 | ) | ||||||||
58 | 72 | 121 | 131 | |||||||||||||
Income Before Income Taxes | 95 | 66 | 299 | 239 | ||||||||||||
Income Tax Expense | 35 | 22 | 109 | 82 | ||||||||||||
Net Income | 60 | 44 | 190 | 157 | ||||||||||||
Preferred Stock Dividends | — | — | 1 | 1 | ||||||||||||
Net Income Available to Common Stockholder | $ | 60 | $ | 44 | $ | 189 | $ | 156 | ||||||||
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In Millions | ||||||||
Six Months Ended June 30 | 2008 | 2007 | ||||||
Cash Flows from Operating Activities | ||||||||
Net income | $ | 190 | $ | 157 | ||||
Adjustments to reconcile net income to net cash provided by operating activities | ||||||||
Depreciation and amortization (includes nuclear decommissioning of $- and $2) | 294 | 273 | ||||||
Deferred income taxes and investment tax credit | 44 | (14 | ) | |||||
Regulatory return on capital expenditures | (16 | ) | (15 | ) | ||||
Gain on sale of assets | — | (2 | ) | |||||
Postretirement benefits expense | 74 | 66 | ||||||
Capital lease and other amortization | 16 | 20 | ||||||
Postretirement benefits contributions | (24 | ) | (25 | ) | ||||
Changes in assets and liabilities: | ||||||||
Decrease (increase) in accounts receivable, notes receivable and accrued revenue | 199 | (181 | ) | |||||
Decrease in accrued power supply and gas revenue | 40 | 41 | ||||||
Decrease in inventories | 122 | 197 | ||||||
Increase (decrease) in accounts payable | (3 | ) | 13 | |||||
Increase in accrued expenses | 7 | 2 | ||||||
Decrease in other current and non-current assets | 117 | 83 | ||||||
Decrease in other current and non-current liabilities | (106 | ) | (56 | ) | ||||
Net cash provided by operating activities | 954 | 559 | ||||||
Cash Flows from Investing Activities | ||||||||
Capital expenditures (excludes assets placed under capital lease) | (338 | ) | (373 | ) | ||||
Cost to retire property | (12 | ) | (5 | ) | ||||
Restricted cash | 5 | 12 | ||||||
Investments in nuclear decommissioning trust funds | — | (1 | ) | |||||
Proceeds from nuclear decommissioning trust funds | — | 317 | ||||||
Proceeds from sale of assets | 338 | |||||||
Other investing | — | 2 | ||||||
Net cash provided by (used in) investing activities | (345 | ) | 290 | |||||
Cash Flows from Financing Activities | ||||||||
Proceeds from issuance of long term debt | 250 | — | ||||||
Retirement of long-term debt | (426 | ) | (17 | ) | ||||
Payment of common stock dividends | (168 | ) | (135 | ) | ||||
Payment of capital and finance lease obligations | (12 | ) | (8 | ) | ||||
Stockholder’s contribution | — | 650 | ||||||
Payment of preferred stock dividends | (1 | ) | (1 | ) | ||||
Decrease in notes payable | — | (42 | ) | |||||
Debt issuance and financing costs | (4 | ) | (1 | ) | ||||
Net cash provided by (used in) financing activities | (361 | ) | 446 | |||||
Net Increase in Cash and Cash Equivalents | 248 | 1,295 | ||||||
Cash and Cash Equivalents, Beginning of Period | 195 | 37 | ||||||
Cash and Cash Equivalents, End of Period | $ | 443 | $ | 1,332 | ||||
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In Millions | ||||||||
June 30 | December 31 | |||||||
2008 | 2007 | |||||||
(Unaudited) | ||||||||
Plant and Property (at cost) | ||||||||
Electric | $ | 8,695 | $ | 8,555 | ||||
Gas | 3,511 | 3,467 | ||||||
Other | 15 | 15 | ||||||
12,221 | 12,037 | |||||||
Less accumulated depreciation, depletion, and amortization | 4,114 | 3,993 | ||||||
8,107 | 8,044 | |||||||
Construction work-in-progress | 557 | 447 | ||||||
8,664 | 8,491 | |||||||
Investments | ||||||||
Stock of affiliates | 27 | 32 | ||||||
Current Assets | ||||||||
Cash and cash equivalents at cost, which approximates market | 443 | 195 | ||||||
Restricted cash at cost, which approximates market | 20 | 25 | ||||||
Notes receivable | 74 | 67 | ||||||
Accounts receivable and accrued revenue, less allowances of $18 in 2008 and $16 in 2007 | 611 | 810 | ||||||
Accrued power supply revenue | 2 | 45 | ||||||
Accounts receivable — related parties | 1 | 4 | ||||||
Inventories at average cost | ||||||||
Gas in underground storage | 993 | 1,123 | ||||||
Materials and supplies | 88 | 79 | ||||||
Generating plant fuel stock | 99 | 100 | ||||||
Deferred property taxes | 124 | 158 | ||||||
Regulatory assets — postretirement benefits | 19 | 19 | ||||||
Prepayments and other | 25 | 28 | ||||||
2,499 | 2,653 | |||||||
Non-current Assets | ||||||||
Regulatory assets | ||||||||
Securitized costs | 443 | 466 | ||||||
Postretirement benefits | 867 | 921 | ||||||
Customer Choice Act | 121 | 149 | ||||||
Other | 464 | 504 | ||||||
Other | 132 | 185 | ||||||
2,027 | 2,225 | |||||||
Total Assets | $ | 13,217 | $ | 13,401 | ||||
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In Millions | ||||||||
June 30 | December 31 | |||||||
2008 | 2007 | |||||||
(Unaudited) | ||||||||
Capitalization | ||||||||
Common stockholder’s equity | ||||||||
Common stock, authorized 125.0 shares; outstanding 84.1 shares for all periods | $ | 841 | $ | 841 | ||||
Paid-in capital | 2,482 | 2,482 | ||||||
Accumulated other comprehensive loss | (1 | ) | — | |||||
Retained earnings | 339 | 324 | ||||||
3,661 | 3,647 | |||||||
Preferred stock | 44 | 44 | ||||||
Long-term debt | 3,725 | 3,692 | ||||||
Non-current portion of capital and finance lease obligations | 216 | 225 | ||||||
7,646 | 7,608 | |||||||
Current Liabilities | ||||||||
Current portion of long-term debt, capital and finance lease obligations | 259 | 470 | ||||||
Accounts payable | 448 | 403 | ||||||
Accrued rate refunds | 66 | 19 | ||||||
Accounts payable — related parties | 9 | 13 | ||||||
Accrued interest | 62 | 65 | ||||||
Accrued taxes | 324 | 353 | ||||||
Deferred income taxes | 140 | 151 | ||||||
Regulatory liabilities | 204 | 164 | ||||||
Other | 113 | 150 | ||||||
1,625 | 1,788 | |||||||
Non-current Liabilities | ||||||||
Deferred income taxes | 724 | 713 | ||||||
Regulatory liabilities | ||||||||
Regulatory liabilities for cost of removal | 1,172 | 1,127 | ||||||
Income taxes, net | 572 | 533 | ||||||
Other regulatory liabilities | 150 | 313 | ||||||
Postretirement benefits | 822 | 813 | ||||||
Asset retirement obligations | 201 | 198 | ||||||
Deferred investment tax credit | 56 | 58 | ||||||
Other | 249 | 250 | ||||||
3,946 | 4,005 | |||||||
Commitments and Contingencies (Notes 4, 5, and 6) | ||||||||
Total Stockholder’s Investment and Liabilities | $ | 13,217 | $ | 13,401 | ||||
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In Millions | ||||||||||||||||
Three Months Ended | Six Months Ended | |||||||||||||||
June 30 | 2008 | 2007 | 2008 | 2007 | ||||||||||||
Common Stock | ||||||||||||||||
At beginning and end of period (a) | $ | 841 | $ | 841 | $ | 841 | $ | 841 | ||||||||
Other Paid-in Capital | ||||||||||||||||
At beginning of period | 2,482 | 1,832 | 2,482 | 1,832 | ||||||||||||
Stockholder’s contribution | — | 650 | — | 650 | ||||||||||||
At beginning and end of period | 2,482 | 2,482 | 2,482 | 2,482 | ||||||||||||
Accumulated Other Comprehensive Income | ||||||||||||||||
Retirement benefits liability | ||||||||||||||||
At beginning of period | (9 | ) | (8 | ) | (15 | ) | (8 | ) | ||||||||
Retirement benefits liability adjustment (b) | — | — | 6 | — | ||||||||||||
At beginning and end of period | (9 | ) | (8 | ) | (9 | ) | (8 | ) | ||||||||
Investments | ||||||||||||||||
At beginning of period | 7 | 22 | 15 | 23 | ||||||||||||
Unrealized gain (loss) on investments (b) | 1 | — | (7 | ) | (1 | ) | ||||||||||
At end of period | 8 | 22 | 8 | 22 | ||||||||||||
Total Accumulated Other Comprehensive Income (Loss) | (1 | ) | 14 | (1 | ) | 14 | ||||||||||
Retained Earnings | ||||||||||||||||
At beginning of period | 334 | 283 | 324 | 270 | ||||||||||||
Effects of changing the retirement plans measurement date pursuant to SFAS No. 158 | ||||||||||||||||
Service cost, interest cost, and expected return on plan assets for December 1 through December 31, 2007, net of tax | — | — | (4 | ) | — | |||||||||||
Additional loss from December 1 through December 31, 2007, net of tax | — | — | (2 | ) | — | |||||||||||
Adjustment to initially apply FIN 48, net of tax | — | — | — | (5 | ) | |||||||||||
Net income | 60 | 44 | 190 | 157 | ||||||||||||
Cash dividends declared — Common Stock | (55 | ) | (41 | ) | (168 | ) | (135 | ) | ||||||||
Cash dividends declared — Preferred Stock | — | — | (1 | ) | (1 | ) | ||||||||||
At end of period | 339 | 286 | 339 | 286 | ||||||||||||
Total Common Stockholder’s Equity | $ | 3,661 | $ | 3,623 | $ | 3,661 | $ | 3,623 | ||||||||
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In Millions | ||||||||||||||||
Three Months Ended | Six Months Ended | |||||||||||||||
June 30 | 2008 | 2007 | 2008 | 2007 | ||||||||||||
(Unaudited) | ||||||||||||||||
(a) Number of shares of common stock outstanding was 84,108,789 for all periods presented. | ||||||||||||||||
(b) Disclosure of Comprehensive Income: | ||||||||||||||||
Net income | $ | 60 | $ | 44 | $ | 190 | $ | 157 | ||||||||
Retirement benefits liability | ||||||||||||||||
Retirement benefits liability adjustment, net of tax of $-, $-, $2 and $-, respectively | — | — | 6 | — | ||||||||||||
Investments | ||||||||||||||||
Unrealized gain (loss) on investments, net of tax (tax benefit) of $1, $-, $(3) and $(1), respectively | 1 | — | (7 | ) | (1 | ) | ||||||||||
Total Comprehensive Income | $ | 61 | $ | 44 | $ | 189 | $ | 156 | ||||||||
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CE-26
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CE-27
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In Millions | ||||||||||||||||
Three Months Ended | Six Months Ended | |||||||||||||||
June 30 | 2008 | 2007 | 2008 | 2007 | ||||||||||||
Other income | ||||||||||||||||
Electric restructuring return | $ | — | $ | — | $ | — | $ | 1 | ||||||||
Return on stranded and security costs | 2 | 2 | 3 | 3 | ||||||||||||
Gain on stock | — | — | — | 4 | ||||||||||||
Gain on investment | — | 4 | — | 4 | ||||||||||||
Gain on asset sales, net | — | 2 | — | 2 | ||||||||||||
All other | — | 1 | 2 | 2 | ||||||||||||
Total other income | $ | 2 | $ | 9 | $ | 5 | $ | 16 | ||||||||
In Millions | ||||||||||||||||
Three Months Ended | Six Months Ended | |||||||||||||||
June 30 | 2008 | 2007 | 2008 | 2007 | ||||||||||||
Other expense | ||||||||||||||||
Civic and political expenditures | $ | (3 | ) | $ | — | $ | (4 | ) | $ | (1 | ) | |||||
All other | (2 | ) | — | (2 | ) | (2 | ) | |||||||||
Total other expense | $ | (5 | ) | $ | — | $ | (6 | ) | $ | (3 | ) | |||||
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• | Level 1 inputs are unadjusted quoted prices in active markets for identical assets or liabilities. These markets must be accessible to us at the measurement date. | ||
• | Level 2 inputs are observable, market-based inputs, other than Level 1 prices. Level 2 inputs may include quoted prices for similar assets or liabilities in active markets, quoted prices in inactive markets, interest rates and yield curves observable at commonly quoted intervals, credit risks, default rates, and inputs derived from or corroborated by observable market data. | ||
• | Level 3 inputs are unobservable inputs that reflect our own assumptions about how market participants would value our assets and liabilities. |
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• | AROs, | ||
• | most of the nonfinancial assets and liabilities acquired in a business combination, and | ||
• | impairment analyses performed for nonfinancial assets. |
In Millions | ||||||||||||
June 30, 2008 | Level 1 | Level 2 | ||||||||||
Assets: | ||||||||||||
CMS Energy Common Stock | $ | 27 | $ | 27 | $ | — | ||||||
Nonqualified Deferred Compensation Plan Assets | 3 | 3 | — | |||||||||
SERP | ||||||||||||
Equity Securities | 35 | 35 | — | |||||||||
Debt Securities | 20 | — | 20 | |||||||||
Total | $ | 85 | $ | 65 | $ | 20 | ||||||
Liabilities: | ||||||||||||
Nonqualified Deferred Compensation Plan Liability | $ | (3 | ) | $ | (3 | ) | $ | — | ||||
CE-30
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In Millions | ||||||||||
Pretax | After-tax | |||||||||
Month Sold | Business/Project | Gain | Gain | |||||||
April | Palisades (a) | $ | — | $ | — | |||||
Various | Other | 2 | 1 | |||||||
Total gain on asset sales | $ | 2 | $ | 1 | ||||||
(a) | We sold Palisades to Entergy for $380 million and received $364 million after various closing adjustments. We also paid Entergy $30 million to assume ownership and responsibility for the Big Rock ISFSI. Because of the sale of Palisades, we paid the NMC, the former operator of Palisades, $7 million in exit fees and forfeited our $5 million investment in the NMC. Entergy assumed responsibility for the future decommissioning of Palisades and for storage and disposal of spent nuclear fuel located at Palisades and the Big Rock ISFSI sites. |
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CE-32
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Power Supply Cost Recovery Reconciliation | ||||||||
PSCR Cost | ||||||||
Net Under- | of Power | Description of Net | ||||||
PSCR Year | Date Filed | recovery | Sold | Underrecovery | ||||
2007 Reconciliation | March 2008 | $42 million (a) | $1.628 billion | Underrecovery relates primarily to the removal of $44 million of Palisades sale proceeds credits from the PSCR. The MPSC directed that we refund these credits through a separate surcharge versus a reduction of power supply costs. | ||||
(a) | This amount includes 2006 underrecoveries as allowed by the MPSC order in our 2007 PSCR plan case. |
CE-33
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In Millions | ||||||||||||
Consumers | MPSC | |||||||||||
Components of the increase in revenue | Position | Order | Difference | |||||||||
Revenue Sufficiency | $ | (21 | ) | $ | (46 | ) | $ | (25 | ) | |||
Zeeland Plant Requirement | 86 | 74 | (12 | ) | ||||||||
Base Rates Total | 65 | 28 | (37 | ) | ||||||||
Eliminate Palisades Recovery Credit in PSCR (a) | 167 | 167 | — | |||||||||
Palisades Sale Transaction Cost Surcharge | 28 | 26 | (2 | ) | ||||||||
Energy Efficiency Surcharge | 5 | — | (5 | ) | ||||||||
Total | $ | 265 | $ | 221 | $ | (44 | ) | |||||
(a) | Palisades power purchase agreement costs in the PSCR were offset through a base rate recovery credit until the MPSC order discontinued and removed the Palisades costs from base rates. |
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• | a capacity charge of $10.14 per MWh of available capacity, | ||
• | a fixed energy charge based on our annual average base load coal generating plant operating and maintenance cost, | ||
• | a variable energy charge for all delivered energy that reflects the MCV Partnership’s cost of production, and | ||
• | an option for us to extend the MCV PPA for five years or purchase the MCV Facility at the conclusion of the MCV PPA’s term in March 2025. |
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CE-36
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Gas Cost Recovery Reconciliation | ||||||||||
Net Over- | GCR Cost of | |||||||||
GCR Year | Date Filed | Order Date | recovery | Gas Sold | Description of Net Overrecovery | |||||
2006-2007 | June 2007 | July 2008 | $5 million | $1.7 billion | The total overrecovery amount reflects an overrecovery of $1 million plus $4 million in accrued interest owed to customers. | |||||
2007-2008 | June 2008 | Pending | $17 million | $1.7 billion | The total overrecovery amount reflects an overrecovery of $15 million plus $2 million in accrued interest owed to customers. | |||||
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In Millions | ||||||||||
Expiration | Maximum | |||||||||
Guarantee Description | Issue Date | Date | Obligation | |||||||
Surety bonds and other indemnifications | Various | Various | $ | — | (a) | |||||
Guarantee | January 1987 | March 2016 | 85 | (b) | ||||||
(a) | In the normal course of business, we issue surety bonds and indemnities to third parties to facilitate commercial transactions. We would be required to pay a counterparty if it incurs losses due to a breach of contract terms or nonperformance under the contract. At June 30, 2008, the guarantee liability recorded for surety bonds and indemnities was immaterial. The maximum obligation for surety bonds and indemnities was less than $1 million. | |
(b) | The maximum obligation includes $85 million related to the MCV Partnership’s non-performance under a steam and electric power agreement with Dow. We sold our interests in the MCV Partnership and the FMLP. The sales agreement calls for the purchaser, an affiliate of GSO Capital Partners and Rockland Capital Energy Investments, to pay $85 million, subject to certain reimbursement rights, if Dow terminates an agreement under which the MCV Partnership provides it steam and electric power. This agreement expires in March 2016, subject to certain terms and conditions. The purchaser secured its reimbursement obligation with an irrevocable letter of credit of up to $85 million. |
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In Millions | ||||||||
June 30, 2008 | December 31, 2007 | |||||||
First mortgage bonds | $ | 3,169 | $ | 3,170 | ||||
Senior notes and other | 502 | 659 | ||||||
Securitization bonds | 293 | 309 | ||||||
Principal amounts outstanding | 3,964 | 4,138 | ||||||
Current amounts | (233 | ) | (440 | ) | ||||
Net unamortized discount | (6 | ) | (6 | ) | ||||
Total Long-term debt | $ | 3,725 | $ | 3,692 | ||||
Principal | Interest | Issue/Retirement | ||||||||||||||
(in millions) | Rate (%) | Date | Maturity Date | |||||||||||||
Debt Issuances: | ||||||||||||||||
First mortgage bonds | $ | 250 | 5.650 | % | March 2008 | September 2018 | ||||||||||
Tax-exempt bonds (a) | 28 | 4.250 | % | March 2008 | June 2010 | |||||||||||
Tax-exempt bonds (b) | 68 | Variable | March 2008 | April 2018 | ||||||||||||
Total | $ | 346 | ||||||||||||||
Debt Retirements: | ||||||||||||||||
Senior notes | $ | 159 | 6.375 | % | February 2008 | February 2008 | ||||||||||
First mortgage bonds | 250 | 4.250 | % | April 2008 | April 2008 | |||||||||||
Tax-exempt bonds (a) | 28 | Variable | April 2008 | June 2010 | ||||||||||||
Tax-exempt bonds (b) | 68 | Variable | April 2008 | April 2018 | ||||||||||||
Total | $ | 505 | ||||||||||||||
(a) | In March 2008, we utilized the Michigan Strategic Fund for the issuance of $28 million of tax-exempt Michigan Strategic Fund Limited Obligation Refunding Revenue Bonds, bearing interest at a 4.25 percent annual rate. The bonds are secured by FMBs. The proceeds were used for the April 2008 redemption of $28 million of insured tax-exempt bonds. | |
(b) | In March 2008, we utilized the Michigan Strategic Fund for the issuance of $68 million of tax-exempt Michigan Strategic Fund Variable Rate Limited Obligation Refunding Revenue Bonds. The initial interest rate was 2.25 percent and it resets weekly. The bonds, which are backed by a letter of credit, are subject to optional tender by the holders that would result in remarketing. The proceeds were used for the April 2008 redemption of $68 million of insured tax-exempt bonds. |
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In Millions | ||||||||||||||||
Outstanding | ||||||||||||||||
Amount of | Amount | Letters-of- | Amount | |||||||||||||
Expiration Date | Facility | Borrowed | Credit | Available | ||||||||||||
March 30, 2012 | $ | 500 | $ | — | $ | 127 | $ | 373 | ||||||||
November 28, 2008 (a) | 200 | — | 185 | 15 | ||||||||||||
(a) | Secured revolving letter of credit facility. |
In Millions | ||||||||||||||||||||||||||||||||
June 30, 2008 | December 31, 2007 | |||||||||||||||||||||||||||||||
Unrealized | Unrealized | Fair | Unrealized | Unrealized | Fair | |||||||||||||||||||||||||||
Cost | Gains | Losses | Value | Cost | Gains | Losses | Value | |||||||||||||||||||||||||
Common stock of CMS Energy | $ | 8 | $ | 19 | $ | — | $ | 27 | $ | 8 | $ | 24 | $ | — | $ | 32 | ||||||||||||||||
SERP: | ||||||||||||||||||||||||||||||||
Equity securities | 41 | — | (6 | ) | 35 | 35 | — | — | 35 | |||||||||||||||||||||||
Debt securities | 20 | — | — | 20 | 7 | — | — | 7 | ||||||||||||||||||||||||
CE-40
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• | they do not have a notional amount (that is, a number of units specified in a derivative instrument, such as MWh of electricity or bcf of natural gas), | ||
• | they qualify for the normal purchases and sales exception, or | ||
• | there is not an active market for the commodity. |
• | a non-contributory, qualified defined benefit Pension Plan (closed to new non-union participants as of July 1, 2003 and closed to new union participants as of September 1, 2005), | ||
• | a qualified cash balance Pension Plan for certain employees hired between July 1, 2003 and August 31, 2005, | ||
• | a non-contributory, qualified DCCP for employees hired on or after September 1, 2005, | ||
• | benefits to certain management employees under a non-contributory, nonqualified defined benefit SERP (closed to new participants as of March 31, 2006), | ||
• | benefits to certain management employees under a non-contributory, nonqualified DC SERP hired on or after April 1, 2006, | ||
• | health care and life insurance benefits under OPEB, | ||
• | benefits to a selected group of management under a non-contributory, nonqualified EISP, and | ||
• | a contributory, qualified defined contribution 401(k) plan. |
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In Millions | ||||||||||||||||
Pension | ||||||||||||||||
Three Months Ended | Six Months Ended | |||||||||||||||
June 30 | 2008 | 2007 | 2008 | 2007 | ||||||||||||
Service cost | $ | 10 | $ | 11 | $ | 20 | $ | 23 | ||||||||
Interest expense | 23 | 21 | 46 | 41 | ||||||||||||
Expected return on plan assets | (20 | ) | (19 | ) | (39 | ) | (38 | ) | ||||||||
Amortization of: | ||||||||||||||||
Net loss | 10 | 11 | 20 | 22 | ||||||||||||
Prior service cost | 2 | 2 | 3 | 4 | ||||||||||||
Net periodic cost | 25 | 26 | 50 | 52 | ||||||||||||
Regulatory adjustment | 8 | (4 | ) | 4 | (8 | ) | ||||||||||
Net periodic cost after regulatory adjustment | $ | 33 | $ | 22 | $ | 54 | $ | 44 | ||||||||
In Millions | ||||||||||||||||
OPEB | ||||||||||||||||
Three Months Ended | Six Months Ended | |||||||||||||||
June 30 | 2008 | 2007 | 2008 | 2007 | ||||||||||||
Service cost | $ | 5 | $ | 7 | $ | 11 | $ | 13 | ||||||||
Interest expense | 18 | 18 | 36 | 35 | ||||||||||||
Expected return on plan assets | (17 | ) | (15 | ) | (33 | ) | (31 | ) | ||||||||
Amortization of: | ||||||||||||||||
Net loss | 3 | 5 | 5 | 11 | ||||||||||||
Prior service credit | (2 | ) | (3 | ) | (5 | ) | (5 | ) | ||||||||
Net periodic cost | 7 | 12 | 14 | 23 | ||||||||||||
Regulatory adjustment | 2 | (1 | ) | 3 | (3 | ) | ||||||||||
Net periodic cost after regulatory adjustment | $ | 9 | $ | 11 | $ | 17 | $ | 20 | ||||||||
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In Millions | ||||||||||||||||
Three Months Ended | Six Months Ended | |||||||||||||||
June 30 | 2008 | 2007 | 2008 | 2007 | ||||||||||||
Operating Revenue | ||||||||||||||||
Electric | $ | 841 | $ | 856 | $ | 1,701 | $ | 1,700 | ||||||||
Gas | 422 | 391 | 1,653 | 1,602 | ||||||||||||
Total Operating Revenue | $ | 1,263 | $ | 1,247 | $ | 3,354 | $ | 3,302 | ||||||||
Net Income Available to Common Stockholder | ||||||||||||||||
Electric | $ | 57 | $ | 40 | $ | 124 | $ | 91 | ||||||||
Gas | 2 | 4 | 64 | 61 | ||||||||||||
Other | 1 | — | 1 | 4 | ||||||||||||
Total Net Income Available to Common Stockholder | $ | 60 | $ | 44 | $ | 189 | $ | 156 | ||||||||
In Millions | ||||||||
June 30, 2008 | December 31, 2007 | |||||||
Assets | ||||||||
Electric (a) | $ | 8,573 | $ | 8,492 | ||||
Gas (a) | 4,038 | 4,102 | ||||||
Other | 606 | 807 | ||||||
Total Assets | $ | 13,217 | $ | 13,401 | ||||
(a) | Amounts include a portion of our other common assets attributable to both the electric and gas utility businesses. |
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• | a capacity charge of $10.14 per MWh of available capacity, | ||
• | a fixed energy charge based on Consumers’ annual average base load coal generating plant operating and maintenance cost, | ||
• | a variable energy charge for all delivered energy that reflects the MCV Partnership’s cost of production, and | ||
• | an option for us to extend the MCV PPA for five years or purchase the MCV Facility at the conclusion of the MCV PPA’s term in March 2025. |
Maximum Number of | ||||||||||||||||
Total | Average | Total Number of Shares | Shares that May Yet | |||||||||||||
Number | Price | Purchased as Part of | Be Purchased Under | |||||||||||||
of Shares | Paid per | Publicly Announced | Publicly Announced | |||||||||||||
Period | Purchased* | Share | Plans or Programs | Plans or Programs | ||||||||||||
April 1, 2008 to April 30, 2008 | 924 | $ | 13.76 | — | — | |||||||||||
May 1, 2008 to May 31, 2008 | — | — | — | — | ||||||||||||
June 1, 2008 to June 30, 2008 | 2,315 | $ | 15.59 | — | — | |||||||||||
Total | 3,239 | — | — | — | ||||||||||||
* | We repurchase certain restricted shares upon vesting under the Performance Incentive Stock Plan from participants in the Performance Incentive Stock Plan, equal to our minimum statutory income tax withholding obligation. Shares repurchased have a value based on the market price on the vesting date. |
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• | Ratification of the appointment of PricewaterhouseCoopers LLP as the independent registered public accounting firm to audit CMS Energy’s financial statements for the year ending December 31, 2008, with a vote of 199,151,717 shares in favor, 1,766,475 against and 1,854,838 abstentions; and | ||
• | Election of eleven members to the Board of Directors. The votes for individual nominees were as follows: |
Number of Votes: | For | Withheld | Total | |||||||||
Merribel S. Ayres | 200,016,326 | 2,756,701 | 202,773,027 | |||||||||
Jon E. Barfield | 200,006,693 | 2,766,334 | 202,773,027 | |||||||||
Richard M. Gabrys | 199,986,818 | 2,786,209 | 202,773,027 | |||||||||
David W. Joos | 199,671,447 | 3,101,580 | 202,773,027 | |||||||||
Philip R. Lochner, Jr. | 199,774,452 | 2,998,575 | 202,773,027 | |||||||||
Michael T. Monahan | 199,985,351 | 2,787,676 | 202,773,027 | |||||||||
Joseph F. Paquette, Jr. | 199,986,057 | 2,786,970 | 202,773,027 | |||||||||
Percy A. Pierre | 199,592,822 | 3,180,205 | 202,773,027 | |||||||||
Kenneth L. Way | 199,991,031 | 2,781,996 | 202,773,027 | |||||||||
Kenneth Whipple | 199,644,173 | 3,128,854 | 202,773,027 | |||||||||
John B. Yasinsky | 199,593,247 | 3,179,780 | 202,773,027 |
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(10)(a) | Settlement Agreement and Amended and Restated Power Purchase Agreement between Consumers Energy Company and Midland Cogeneration Venture Limited Partnership | |
(12)(a) | Statement regarding computation of CMS Energy’s Ratios of Earnings to Fixed Charges and Combined Fixed Charges and Preferred Dividends | |
(12)(b) | Statement regarding computation of Consumers’ Ratios of Earnings to Fixed Charges and Combined Fixed Charges and Preferred Dividends | |
(31)(a) | CMS Energy Corporation’s certification of the CEO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
(31)(b) | CMS Energy Corporation’s certification of the CFO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
(31)(c) | Consumers Energy Company’s certification of the CEO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
(31)(d) | Consumers Energy Company’s certification of the CFO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
(32)(a) | CMS Energy Corporation’s certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |
(32)(b) | Consumers Energy Company’s certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
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CMS ENERGY CORPORATION (Registrant) | ||||
Dated: August 5, 2008 | By: | /s/ Thomas J. Webb | ||
Thomas J. Webb | ||||
Executive Vice President and Chief Financial Officer | ||||
CONSUMERS ENERGY COMPANY (Registrant) | ||||
Dated: August 5, 2008 | By: | /s/ Thomas J. Webb | ||
Thomas J. Webb | ||||
Executive Vice President and Chief Financial Officer | ||||
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