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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 (Do not check if a smaller reporting company) | Smaller reporting company o |
Large accelerated filer o | Accelerated filer o | Non-accelerated filer þ (Do not check if a smaller reporting company) | Smaller reporting company o |
CMS Energy Common Stock, $.01 par value | 226,207,584 | |||
Consumers Energy Company, $10 par value, privately held by CMS Energy Corporation | 84,108,789 |
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Consumers Energy Company
Quarterly reports on Form 10-Q to the
United States Securities and Exchange Commission
for the Quarter Ended September 30, 2008
Page | ||||
3 | ||||
PART I — FINANCIAL INFORMATION | ||||
Item 1. Financial Statements | ||||
CMS-28 | ||||
CMS-31 | ||||
CMS-32 | ||||
CMS-34 | ||||
CMS-37 | ||||
CMS-40 | ||||
CMS-43 | ||||
CMS-46 | ||||
CMS-58 | ||||
CMS-60 | ||||
CMS-62 | ||||
CMS-64 | ||||
CMS-65 | ||||
CMS-66 | ||||
CE-22 | ||||
CE-23 | ||||
CE-24 | ||||
CE-26 |
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(Continued)
Page | ||||||||
CE-29 | ||||||||
CE-31 | ||||||||
CE-34 | ||||||||
CE-34 | ||||||||
CE-42 | ||||||||
CE-43 | ||||||||
CE-44 | ||||||||
CE-46 | ||||||||
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations | ||||||||
CMS Energy Corporation | ||||||||
Forward-looking Statements and Information | CMS-1 | |||||||
Executive Overview | CMS-4 | |||||||
Results of Operations | CMS-5 | |||||||
Critical Accounting Policies | CMS-13 | |||||||
Capital Resources and Liquidity | CMS-15 | |||||||
Outlook | CMS-17 | |||||||
Implementation of New Accounting Standards | CMS-25 | |||||||
New Accounting Standards Not Yet Effective | CMS-26 | |||||||
Consumers Energy Company | ||||||||
Forward-looking Statements and Information | CE-1 | |||||||
Executive Overview | CE-3 | |||||||
Results of Operations | CE-5 | |||||||
Critical Accounting Policies | CE-10 | |||||||
Capital Resources and Liquidity | CE-11 | |||||||
Outlook | CE-13 | |||||||
Implementation of New Accounting Standards | CE-19 | |||||||
New Accounting Standards Not Yet Effective | CE-20 | |||||||
CO-1 | ||||||||
CO-1 | ||||||||
CO-1 | ||||||||
CO-2 | ||||||||
CO-6 | ||||||||
CO-9 | ||||||||
CO-9 | ||||||||
CO-9 | ||||||||
CO-10 | ||||||||
CO-10 | ||||||||
CO-11 | ||||||||
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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ALJ | Administrative Law Judge | |
AOC | Administrative Order on Consent | |
AOCI | Accumulated Other Comprehensive Income | |
AOCL | Accumulated Other Comprehensive Loss | |
APB | Accounting Principles Board | |
ARB | Accounting Research Bulletin | |
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 | |
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” | |
EITF Issue 08-5 | EITF Issue No. 08-5, “Issuer’s Accounting for Liabilities Measured at Fair Value with a Third-Party Credit Enhancement” | |
El Chocon | A 1,200 MW hydro power plant located in Argentina, in which CMS Generation formerly held a 17.2 percent ownership interest | |
EnerBank | EnerBank USA, a wholly owned subsidiary of CMS Energy | |
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 | |
FOV | Finding of Violation | |
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 133-1 and FIN 45-4 | FASB Staff Position on FASB No. 133, “Accounting for Derivative Instruments and Hedging Activities” and FASB Interpretation No. 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others” | |
FSP FAS 142-3 | FASB Staff Position on FASB No. 142, Determination of the Useful Life of Intangible Assets | |
FSP FAS 157-3 | FASB Staff Position on FASB No. 157, “Fair Value Measurements” | |
FSP FIN 39-1 | FASB Staff Position on FASB Interpretation No. 39, “Offsetting of Amounts Related to Certain Contracts” |
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GAAP | U.S. Generally Accepted Accounting Principles | |
GasAtacama | GasAtacama Holding Limited, a limited liability partnership that manages GasAtacama S.A., which includes an integrated natural gas pipeline and electric generating plant in Argentina and Chile and Atacama Finance Company, in which CMS International Ventures formerly owned a 50 percent interest | |
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) | |
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 | |
NOV | Notice of Violation | |
NREPA | Michigan Natural Resources and Environmental Protection Act | |
NSR | New Source Review | |
NYMEX | New York Mercantile Exchange | |
OPEB | Postretirement benefit plans other than pensions |
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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 | |
Prairie State | Prairie State Energy Campus, a planned 1,600 MW power plant and coal mine in southern Illinois | |
PSCR | Power supply cost recovery | |
PSD | Prevention of Significant Deterioration | |
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 | |
Reserve Margin | The amount of unused available electric capacity at peak demand as a percentage of total electric peak demand | |
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 | |
SENECA | Sistema Electrico del Estado Nueva Esparta C.A., a former subsidiary of CMS International Ventures | |
SERP | Supplemental Executive Retirement Plan | |
SFAS | Statement of Financial Accounting Standards | |
SFAS No. 87 | SFAS No. 87, “Employers’ Accounting for Pensions” | |
SFAS No. 106 | SFAS No. 106, “Employers’ Accounting for Postretirement Benefits Other Than Pensions” | |
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 Measurements” | |
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. 159 | SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities, Including an Amendment to FASB Statement No. 115” | |
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” |
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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 | |
Wolverine | Wolverine Power Supply Cooperative, Inc., a non-affiliated company | |
Zeeland | A 935 MW gas-fired power plant located in Zeeland, Michigan |
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MANAGEMENT’S DISCUSSION AND ANALYSIS
• | the price of CMS Energy Common Stock, capital and financial market conditions and the effect of such market conditions on our postretirement benefit plans, interest rates, and access to the capital markets including availability of financing (including our accounts receivable sales program and revolving credit facilities) to CMS Energy, Consumers, or any of their affiliates, and the energy industry, | ||
• | the impact of the continued downturn in the economy and the sharp downturn and extreme volatility in the financial and credit markets on CMS Energy including its: |
• | revenues, | ||
• | capital expenditure program and related earnings growth, | ||
• | ability to collect accounts receivable from our customers, | ||
• | access to capital, and | ||
• | contributions to the Pension Plan, |
• | market perception of the energy industry or of CMS Energy, Consumers, or any of their affiliates, | ||
• | credit ratings of CMS Energy or Consumers, | ||
• | 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, | ||
• | changes in federal or state laws or regulations or in the interpretation of existing laws and regulations that could have an impact on our business, | ||
• | 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, |
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• | 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, | ||
• | adequate and timely recovery of higher MISO energy and transmission costs, | ||
• | 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, | ||
• | authorization of a new clean coal plant, and | ||
• | implementation of new energy legislation, |
• | 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 natural gas prices and coal prices on our cash flow and working capital, | ||
• | the impact of construction material prices, | ||
• | the availability of qualified construction personnel to implement our construction program, | ||
• | 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, | ||
• | 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, |
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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, | ||
• | technological developments in energy production, delivery, usage, and gas storage, | ||
• | achievement of capital expenditure and operating expense goals, | ||
• | changes in financial or regulatory accounting principles or policies, including a possible future requirement to comply with International Financial Reporting Standards, | ||
• | changes in tax laws or new IRS interpretations of existing or past tax laws, | ||
• | the impact of our new integrated business software system on our operations, including customer billing, finance, purchasing, human resources and payroll processes, and utility asset construction and maintenance work management systems, | ||
• | the impact of credit market and economic conditions on EnerBank, | ||
• | 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, and the pending appeal of the Quicksilver litigation, 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. |
• | a provision to streamline the regulatory process by generally allowing utilities to self-implement rates six months after filing and requiring the MPSC to issue an order 12 months after filing or the rates as-filed become permanent, | ||
• | reform of the Customer Choice Act to limit generally alternative energy suppliers to 10 percent of our weather-adjusted sales, | ||
• | establishment of a certificate-of-necessity process at the MPSC for proposed power plants, power purchase agreements, and projects costing more than $500 million, | ||
• | a requirement that 10 percent of power come from renewable sources by 2015 with specific interim targets, and | ||
• | new programs and incentives to encourage greater energy efficiency among customers, along with the requirement of the utility to prepare energy cost savings optimization plans. |
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• | continuing investment in our utility business, | ||
• | growing earnings while controlling operating and fuel costs and parent debt, | ||
• | managing cash flow, 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 September 30 | 2008 | 2007 | Change | |||||||||
Net Income Available to Common Stockholders | $ | 79 | $ | 82 | $ | (3 | ) | |||||
Basic Earnings Per Share | $ | 0.36 | $ | 0.37 | $ | (0.01 | ) | |||||
Diluted Earnings Per Share | $ | 0.34 | $ | 0.34 | $ | — | ||||||
Electric Utility | $ | 108 | $ | 67 | $ | 41 | ||||||
Gas Utility | (18 | ) | (8 | ) | (10 | ) | ||||||
Enterprises | 5 | 58 | (53 | ) | ||||||||
Corporate Interest and Other | (17 | ) | (35 | ) | 18 | |||||||
Discontinued Operations | 1 | — | 1 | |||||||||
Net Income Available to Common Stockholders | $ | 79 | $ | 82 | $ | (3 | ) | |||||
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In Millions | ||||||
• | increase in net earnings at our electric utility segment primarily due to favorable MPSC rate orders, | $ | 63 | |||
• | lower corporate interest expense and the absence, in 2008, of premiums paid on the early retirement of CMS Energy debt in 2007, | 18 | ||||
• | the elimination of certain costs at our electric utility from the power purchase agreement with the MCV Partnership, | 9 | ||||
• | decrease in net income from Enterprises and discontinued operations primarily due to the absence, in 2008, of an insurance reimbursement recognized in 2007, related to the non-payment by the Argentine government of our ICSID award, | (52 | ) | |||
• | other combined net decrease at our electric and gas utility segments due primarily to reduced interest income and higher depreciation and other expenses, and | (31 | ) | |||
• | decreased deliveries at our electric utility segment. | (10 | ) | |||
Total change | $ | (3 | ) | |||
In Millions (except for per share amounts) | ||||||||||||
Nine months ended September 30 | 2008 | 2007 | Change | |||||||||
Net Income (Loss) Available to Common Stockholders | $ | 228 | $ | (100 | ) | $ | 328 | |||||
Basic Earnings (Loss) Per Share | $ | 1.02 | $ | (0.45 | ) | $ | 1.47 | |||||
Diluted Earnings (Loss) Per Share | $ | 0.96 | $ | (0.45 | ) | $ | 1.41 | |||||
Electric Utility | $ | 232 | $ | 158 | $ | 74 | ||||||
Gas Utility | 46 | 53 | (7 | ) | ||||||||
Enterprises | 13 | (194 | ) | 207 | ||||||||
Corporate Interest and Other | (63 | ) | (30 | ) | (33 | ) | ||||||
Discontinued Operations | — | (87 | ) | 87 | ||||||||
Net Income (Loss) Available to Common Stockholders | $ | 228 | $ | (100 | ) | $ | 328 | |||||
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In Millions | ||||||
• | absence of impairment charges related to international businesses sold in 2007 partially offset by the 2008 impairment charge recorded on our SERP investments, | $ | 133 | |||
• | increase in combined net earnings at our electric and gas utility segments primarily due to favorable MPSC rate orders, | 114 | ||||
• | absence in 2008, of a net loss on the disposal of discontinued operations in 2007, | 87 | ||||
• | lower corporate interest expense and the absence, in 2008, of premiums paid on the early retirement of CMS Energy debt in 2007, | 37 | ||||
• | the elimination of certain costs at our electric utility from the power purchase agreement with the MCV Partnership, | 29 | ||||
• | absence of charges associated with the rescission of a contract with Quicksilver, | 24 | ||||
• | decreased deliveries at our electric utility segment, | (52 | ) | |||
• | other combined net decrease at our electric and gas utility segments due primarily to reduced interest income and higher depreciation expense, and | (24 | ) | |||
• | absence of tax benefits and earnings related to international assets sold, which more than offset the benefit from reduced operating and maintenance expense. | (20 | ) | |||
Total change | $ | 328 | ||||
In Millions | ||||||||||||
September 30 | 2008 | 2007 | Change | |||||||||
Three months ended | $ | 108 | $ | 67 | $ | 41 | ||||||
Nine months ended | $ | 232 | $ | 158 | $ | 74 | ||||||
Three Months Ended | Nine Months Ended | |||||||
September 30, 2008 | September 30, 2008 | |||||||
Reasons for the change: | vs. 2007 | vs. 2007 | ||||||
Electric deliveries and rate increase | $ | 80 | $ | 65 | ||||
Surcharge revenue | — | 10 | ||||||
Power supply costs and related revenue | 5 | 12 | ||||||
Non-commodity revenue | (1 | ) | (13 | ) | ||||
Depreciation and other operating expenses | (11 | ) | 62 | |||||
Other income | (20 | ) | (36 | ) | ||||
General taxes | 6 | 14 | ||||||
Interest charges | 6 | 11 | ||||||
Income taxes | (24 | ) | (51 | ) | ||||
Total change | $ | 41 | $ | 74 | ||||
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In Millions | ||||||||||||
September 30 | 2008 | 2007 | Change | |||||||||
Three months ended | $ | (18 | ) | $ | (8 | ) | $ | (10 | ) | |||
Nine months ended | 46 | $ | 53 | $ | (7 | ) | ||||||
Three Months Ended | Nine Months Ended | |||||||
September 30, 2008 | September 30, 2008 | |||||||
Reasons for the change: | vs. 2007 | vs. 2007 | ||||||
Gas deliveries and rate increase | $ | 2 | $ | 20 | ||||
Gas wholesale and retail services, other gas revenues and other income, net | (12 | ) | (23 | ) | ||||
Operation and maintenance | (6 | ) | (15 | ) | ||||
General taxes and depreciation | 1 | — | ||||||
Interest charges | 1 | 7 | ||||||
Income taxes | 4 | 4 | ||||||
Total change | $ | (10 | ) | $ | (7 | ) | ||
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In Millions | ||||||||||||
September 30 | 2008 | 2007 | Change | |||||||||
Three months ended | $ | 5 | $ | 58 | $ | (53 | ) | |||||
Nine months ended | $ | 13 | $ | (194 | ) | $ | 207 | |||||
Three Months Ended | Nine months ended | |||||||
September 30, 2008 | September 30, 2008 | |||||||
Reasons for the change: | vs. 2007 | vs. 2007 | ||||||
Operating revenues | $ | 8 | $ | (7 | ) | |||
Fuel for electric generation, cost of gas and purchased power | (2 | ) | 67 | |||||
Earnings from equity method investees | 5 | (33 | ) | |||||
Gain (loss) on sale of assets | (18 | ) | (8 | ) | ||||
Operation and maintenance | 3 | 36 | ||||||
General taxes, depreciation, and other income, net | (1 | ) | (1 | ) | ||||
Asset impairment charges, net of insurance reimbursement in 2007 | (76 | ) | 187 | |||||
Fixed charges | 1 | 4 | ||||||
Minority interests | 1 | 3 | ||||||
Income taxes | 26 | (41 | ) | |||||
Total change | $ | (53 | ) | $ | 207 | |||
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In Millions | ||||||||||||
September 30 | 2008 | 2007 | Change | |||||||||
Three months ended | $ | (17 | ) | $ | (35 | ) | $ | 18 | ||||
Nine months ended | $ | (63 | ) | $ | (30 | ) | $ | (33 | ) | |||
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• | life expectancies, | ||
• | discount rates, | ||
• | expected long-term rate of return on plan assets, | ||
• | rate of compensation increases, and | ||
• | anticipated health care costs. |
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In Millions | ||||||||||||
Expected Costs | Pension Cost | OPEB Cost | Contributions | |||||||||
2008 | $ | 103 | $ | 27 | $ | 51 | ||||||
2009 | 93 | 61 | 263 | |||||||||
2010 | 88 | 58 | 180 | |||||||||
• | results of operations, | ||
• | capital expenditures, | ||
• | energy commodity and transportation costs, | ||
• | contractual obligations, | ||
• | regulatory decisions, | ||
• | debt maturities, | ||
• | credit ratings, | ||
• | pension plan funding requirements, | ||
• | tendering of our convertible securities for conversion, | ||
• | working capital needs, | ||
• | collateral requirements, and | ||
• | access to credit markets. |
• | in September 2008, Consumers issued $350 million FMB, | ||
• | in September 2008, Consumers entered into a $150 million revolving credit agreement, and | ||
• | in October 2008, CMS Energy drew $420 million, of the remaining $421 million balance, on its $550 million revolving credit facility. |
CMS-15
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In Millions | ||||||||
Nine months ended September 30 | 2008 | 2007 | ||||||
Net cash provided by (used in): | ||||||||
Operating activities | $ | 183 | $ | (115 | ) | |||
Investing activities | (538 | ) | 1,394 | |||||
Net cash provided by (used in) operating and investing activities | (355 | ) | 1,279 | |||||
Net cash provided by (used in) financing activities | 169 | (387 | ) | |||||
Effect of exchange rates on cash | — | 2 | ||||||
Net Increase (Decrease) in Cash and Cash Equivalents | $ | (186 | ) | $ | 894 | |||
CMS-16
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CMS-17
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• | a provision to streamline the regulatory process by generally allowing utilities to self-implement rates six months after filing and requiring the MPSC to issue an order 12 months after filing or the rates as-filed become permanent, | ||
• | reform of the Customer Choice Act to limit generally alternative energy suppliers to 10 percent of our weather-adjusted sales, | ||
• | establishment of a certificate-of-necessity process at the MPSC for proposed power plants, power purchase agreements, and projects costing more than $500 million, | ||
• | a requirement that 10 percent of power come from renewable sources by 2015 with specific interim targets, and | ||
• | new programs and incentives to encourage greater energy efficiency among customers, along with the requirement of the utility to prepare energy cost savings optimization plans. |
• | energy conservation measures and results of energy efficiency programs, | ||
• | fluctuations in weather conditions, and | ||
• | changes in economic conditions, including utilization and expansion or contraction of manufacturing facilities, population trends, and housing activity. |
CMS-18
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CMS-19
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CMS-20
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CMS-21
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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, | ||
• | the elimination of the RCP, but continues the $5 million annual contribution by the MCV Partnership to a renewable resources program, 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 prices, | ||
• | Michigan economic conditions including population trends and housing activity, | ||
• | the price of competing energy sources or fuels, and | ||
• | energy efficiency and conservation. |
CMS-22
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CMS-23
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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. |
CMS-24
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CMS-25
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CMS-26
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CMS-27
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Consolidated Statements of Income (Loss)
(Unaudited)
In Millions | ||||||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30 | 2008 | 2007 | 2008 | 2007 | ||||||||||||
Operating Revenue | $ | 1,428 | $ | 1,282 | $ | 4,977 | $ | 4,790 | ||||||||
Earnings from Equity Method Investees | 5 | — | 3 | 36 | ||||||||||||
Operating Expenses | ||||||||||||||||
Fuel for electric generation | 173 | 158 | 470 | 408 | ||||||||||||
Purchased and interchange power | 406 | 390 | 1,026 | 1,079 | ||||||||||||
Cost of gas sold | 191 | 171 | 1,526 | 1,509 | ||||||||||||
Other operating expenses | 218 | 226 | 615 | 714 | ||||||||||||
Maintenance | 51 | 45 | 140 | 155 | ||||||||||||
Depreciation and amortization | 135 | 121 | 436 | 402 | ||||||||||||
General taxes | 47 | 53 | 155 | 176 | ||||||||||||
Asset impairment charges, net of insurance recoveries | — | (76 | ) | — | 204 | |||||||||||
Gain on asset sales, net | — | (18 | ) | (8 | ) | (16 | ) | |||||||||
1,221 | 1,070 | 4,360 | 4,631 | |||||||||||||
Operating Income | 212 | 212 | 620 | 195 | ||||||||||||
Other Income (Deductions) | ||||||||||||||||
Interest and dividends | 5 | 33 | 23 | 78 | ||||||||||||
Regulatory return on capital expenditures | 9 | 9 | 25 | 24 | ||||||||||||
Foreign currency gain, net | 1 | — | 1 | 1 | ||||||||||||
Other income | 3 | 4 | 9 | 15 | ||||||||||||
Other expense | (15 | ) | (12 | ) | (21 | ) | (29 | ) | ||||||||
3 | 34 | 37 | 89 | |||||||||||||
Fixed Charges | ||||||||||||||||
Interest on long-term debt | 86 | 96 | 257 | 295 | ||||||||||||
Interest on long-term debt — related parties | 3 | 3 | 10 | 10 | ||||||||||||
Other interest | 8 | 14 | 26 | 36 | ||||||||||||
Capitalized interest | (1 | ) | (1 | ) | (4 | ) | (5 | ) | ||||||||
96 | 112 | 289 | 336 | |||||||||||||
Income (Loss) Before Income Taxes | 119 | 134 | 368 | (52 | ) | |||||||||||
Income Tax Expense (Benefit) | 37 | 46 | 126 | (58 | ) | |||||||||||
Income Before Minority Interests, Net | 82 | 88 | 242 | 6 | ||||||||||||
Minority Interests, Net | 2 | 4 | 6 | 10 | ||||||||||||
Income (Loss) From Continuing Operations | 80 | 84 | 236 | (4 | ) | |||||||||||
Income (Loss) From Discontinued Operations, Net of Tax (Tax Benefit) of $1, $-, $- and $(1) | 1 | — | — | (87 | ) | |||||||||||
Net Income (Loss) | 81 | 84 | 236 | (91 | ) | |||||||||||
Preferred Dividends | 2 | 2 | 8 | 8 | ||||||||||||
Redemption Premium on Preferred Stock | — | — | — | 1 | ||||||||||||
Net Income (Loss) Available to Common Stockholders | $ | 79 | $ | 82 | $ | 228 | $ | (100 | ) | |||||||
CMS-28
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In Millions, Except Per Share Amounts | ||||||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30 | 2008 | 2007 | 2008 | 2007 | ||||||||||||
(Unaudited) | ||||||||||||||||
CMS Energy | ||||||||||||||||
Net Income (Loss) | ||||||||||||||||
Net Income (Loss) Available to Common Stockholders | $ | 79 | $ | 82 | $ | 228 | $ | (100 | ) | |||||||
Basic Earnings (Loss) Per Average Common Share | ||||||||||||||||
Income (Loss) from Continuing Operations | $ | 0.35 | $ | 0.37 | $ | 1.02 | $ | (0.06 | ) | |||||||
Income (Loss) from Discontinued Operations | 0.01 | — | — | (0.39 | ) | |||||||||||
Net Income (Loss) Available to Common Stock | $ | 0.36 | $ | 0.37 | $ | 1.02 | $ | (0.45 | ) | |||||||
Diluted Earnings (Loss) Per Average Common Share | ||||||||||||||||
Income (Loss) from Continuing Operations | $ | 0.33 | $ | 0.34 | $ | 0.96 | $ | (0.06 | ) | |||||||
Income (Loss) from Discontinued Operations | 0.01 | — | — | (0.39 | ) | |||||||||||
Net Income (Loss) Available to Common Stock | $ | 0.34 | $ | 0.34 | $ | 0.96 | $ | (0.45 | ) | |||||||
Dividends Declared Per Common Share | $ | 0.09 | $ | 0.05 | $ | 0.27 | $ | 0.15 | ||||||||
CMS-29
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CMS-30
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Consolidated Statements of Cash Flows
(Unaudited)
In Millions | ||||||||
Nine Months Ended September 30 | 2008 | 2007 | ||||||
Cash Flows from Operating Activities | ||||||||
Net income (loss) | $ | 236 | $ | (91 | ) | |||
Adjustments to reconcile net income (loss) to net cash provided by operating activities | ||||||||
Depreciation and amortization, net of nuclear decomissioning of $- and $4 | 436 | 407 | ||||||
Deferred income taxes and investment tax credit | 117 | (79 | ) | |||||
Minority interests (obligations), net | 6 | (12 | ) | |||||
Asset impairment charges, net of insurance recoveries | — | 204 | ||||||
Postretirement benefits costs | 110 | 102 | ||||||
Regulatory return on capital expenditures | (25 | ) | (24 | ) | ||||
Capital lease and other amortization | 28 | 41 | ||||||
Loss (gain) on the sale of assets | (8 | ) | 117 | |||||
Earnings from equity method investees | (3 | ) | (36 | ) | ||||
Cash distributions from equity method investees | 2 | 15 | ||||||
Postretirement benefits contributions | (38 | ) | (147 | ) | ||||
Shareholder class action settlement | — | (125 | ) | |||||
Electric sales contract termination payment | (275 | ) | — | |||||
Changes in other assets and liabilities: | ||||||||
Decrease (increase) in accounts receivable and accrued revenues | 178 | (148 | ) | |||||
Decrease in accrued power supply and gas revenue | 39 | 52 | ||||||
Increase in inventories | (393 | ) | (186 | ) | ||||
Decrease in deferred property taxes | 118 | 111 | ||||||
Decrease in accounts payable | (21 | ) | (91 | ) | ||||
Decrease in accrued taxes | (189 | ) | (144 | ) | ||||
Decrease in accrued expenses | (42 | ) | (37 | ) | ||||
Decrease in other current and non-current assets | 47 | 53 | ||||||
Decrease in other current and non-current liabilities | (140 | ) | (97 | ) | ||||
Net cash provided by (used in) operating activities | 183 | (115 | ) | |||||
Cash Flows from Investing Activities | ||||||||
Capital expenditures (excludes assets placed under capital lease) | (511 | ) | (523 | ) | ||||
Cost to retire property | (22 | ) | (18 | ) | ||||
Restricted cash | 4 | 34 | ||||||
Investments in nuclear decommissioning trust funds | — | (1 | ) | |||||
Proceeds from nuclear decommissioning trust funds | — | 333 | ||||||
Proceeds from sale of assets | 1 | 1,696 | ||||||
Cash relinquished from sale of assets | — | (113 | ) | |||||
Other investing | (10 | ) | (14 | ) | ||||
Net cash provided by (used in) investing activities | (538 | ) | 1,394 | |||||
Cash Flows from Financing Activities | ||||||||
Proceeds from notes, bonds, and other long-term debt | 930 | 476 | ||||||
Issuance of common stock | 6 | 13 | ||||||
Retirement of bonds and other long-term debt | (668 | ) | (769 | ) | ||||
Redemption of preferred stock | — | (32 | ) | |||||
Payment of common stock dividends | (61 | ) | (34 | ) | ||||
Payment of preferred stock dividends | (10 | ) | (9 | ) | ||||
Payment of capital lease and financial lease obligations | (18 | ) | (14 | ) | ||||
Debt issuance costs, financing fees, and other | (10 | ) | (18 | ) | ||||
Net cash provided by (used in) financing activities | 169 | (387 | ) | |||||
Effect of Exchange Rates on Cash | — | 2 | ||||||
Net Increase (Decrease) in Cash and Cash Equivalents | (186 | ) | 894 | |||||
Cash and Cash Equivalents, Beginning of Period | 348 | 351 | ||||||
Cash and Cash Equivalents, End of Period | $ | 162 | $ | 1,245 | ||||
CMS-31
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Consolidated Balance Sheets
ASSETS | In Millions | |||||||
September 30 | December 31 | |||||||
2008 | 2007 | |||||||
(Unaudited) | ||||||||
Plant and Property (at cost) | ||||||||
Electric utility | $ | 8,885 | $ | 8,555 | ||||
Gas utility | 3,598 | 3,467 | ||||||
Enterprises | 392 | 391 | ||||||
Other | 34 | 34 | ||||||
12,909 | 12,447 | |||||||
Less accumulated depreciation, depletion and amortization | 4,360 | 4,166 | ||||||
8,549 | 8,281 | |||||||
Construction work-in-progress | 446 | 447 | ||||||
8,995 | 8,728 | |||||||
Investments | ||||||||
Enterprises | 6 | 6 | ||||||
Other | 5 | 5 | ||||||
11 | 11 | |||||||
Current Assets | ||||||||
Cash and cash equivalents at cost, which approximates market | 162 | 348 | ||||||
Restricted cash at cost, which approximates market | 31 | 34 | ||||||
Notes receivable | 99 | 68 | ||||||
Accounts receivable and accrued revenue, less allowances of $20 in 2008 and $21 in 2007 | 638 | 837 | ||||||
Accrued power supply revenue | 4 | 45 | ||||||
Accounts receivable — related parties | 1 | 2 | ||||||
Inventories at average cost | ||||||||
Gas in underground storage | 1,476 | 1,123 | ||||||
Materials and supplies | 110 | 86 | ||||||
Generating plant fuel stock | 140 | 125 | ||||||
Deferred property taxes | 111 | 158 | ||||||
Regulatory assets — postretirement benefits | 19 | 19 | ||||||
Prepayments and other | 39 | 35 | ||||||
2,830 | 2,880 | |||||||
Non-current Assets | ||||||||
Regulatory Assets | ||||||||
Securitized costs | 429 | 466 | ||||||
Postretirement benefits | 849 | 921 | ||||||
Customer Choice Act | 104 | 149 | ||||||
Other | 462 | 504 | ||||||
Deferred income taxes | 48 | 99 | ||||||
Notes receivable, less allowances of $30 in 2008 and $31 in 2007 | 180 | 170 | ||||||
Other | 169 | 264 | ||||||
2,241 | 2,573 | |||||||
Total Assets | $ | 14,077 | $ | 14,192 | ||||
CMS-32
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STOCKHOLDERS’ INVESTMENT AND LIABILITIES | In Millions | |||||||
September 30 | December 31 | |||||||
2008 | 2007 | |||||||
(Unaudited) | ||||||||
Capitalization | ||||||||
Common stockholders’ equity | ||||||||
Common stock, authorized 350.0 shares; outstanding 226.1 shares in 2008 and 225.1 shares in 2007 | $ | 2 | $ | 2 | ||||
Other paid-in capital | 4,491 | 4,480 | ||||||
Accumulated other comprehensive loss | (17 | ) | (144 | ) | ||||
Accumulated deficit | (2,047 | ) | (2,208 | ) | ||||
2,429 | 2,130 | |||||||
Preferred stock of subsidiary | 44 | 44 | ||||||
Preferred stock | 249 | 250 | ||||||
Long-term debt | 5,718 | 5,385 | ||||||
Long-term debt — related parties | 178 | 178 | ||||||
Non-current portion of capital lease obligations | 212 | 225 | ||||||
8,830 | 8,212 | |||||||
Minority Interests | 53 | 53 | ||||||
Current Liabilities | ||||||||
Current portion of long-term debt, capital and finance lease obligations | 649 | 722 | ||||||
Notes payable | — | 1 | ||||||
Accounts payable | 417 | 430 | ||||||
Accrued rate refunds | 11 | 19 | ||||||
Accounts payable — related parties | — | 1 | ||||||
Accrued interest | 78 | 103 | ||||||
Accrued taxes | 119 | 308 | ||||||
Deferred income taxes | 147 | 41 | ||||||
Regulatory liabilities | 159 | 164 | ||||||
Electric sales contract termination liability | 2 | 279 | ||||||
Argentine currency impairment reserve | — | 197 | ||||||
Other | 293 | 208 | ||||||
1,875 | 2,473 | |||||||
Non-current Liabilities | ||||||||
Regulatory Liabilities | ||||||||
Regulatory liabilities for cost of removal | 1,184 | 1,127 | ||||||
Income taxes, net | 561 | 533 | ||||||
Other regulatory liabilities | 147 | 313 | ||||||
Postretirement benefits | 876 | 858 | ||||||
Asset retirement obligation | 204 | 198 | ||||||
Deferred investment tax credit | 56 | 58 | ||||||
Other | 291 | 367 | ||||||
3,319 | 3,454 | |||||||
Commitments and Contingencies(Notes 4, 5 and 7) | ||||||||
Total Stockholders’ Investment and Liabilities | $ | 14,077 | $ | 14,192 | ||||
CMS-33
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Consolidated Statements of Common Stockholders’ Equity
(Unaudited)
In Millions | ||||||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||||
September 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 | 4,488 | 4,477 | 4,480 | 4,468 | ||||||||||||
Common stock issued | 4 | 4 | 12 | 26 | ||||||||||||
Common stock repurchased | (1 | ) | (5 | ) | (1 | ) | (5 | ) | ||||||||
Common stock reissued | — | — | — | 6 | ||||||||||||
Redemption of preferred stock | — | — | — | (19 | ) | |||||||||||
At end of period | 4,491 | 4,476 | 4,491 | 4,476 | ||||||||||||
Accumulated Other Comprehensive Loss | ||||||||||||||||
Retirement Benefits Liability | ||||||||||||||||
At beginning of period | (16 | ) | (23 | ) | (15 | ) | (23 | ) | ||||||||
Retirement benefits liability adjustments (a) | — | 1 | (1 | ) | 1 | |||||||||||
At end of period | (16 | ) | (22 | ) | (16 | ) | (22 | ) | ||||||||
Investments | ||||||||||||||||
At beginning of period | (5 | ) | 16 | — | 14 | |||||||||||
Unrealized gain (loss) on investments (a) | (3 | ) | — | (8 | ) | 2 | ||||||||||
Reclassification adjustments included in net income (loss) (a) | 8 | — | 8 | — | ||||||||||||
At end of period | — | 16 | — | 16 | ||||||||||||
Derivative Instruments | ||||||||||||||||
At beginning of period | (1 | ) | (1 | ) | (1 | ) | (12 | ) | ||||||||
Unrealized loss on derivative instruments (a) | — | — | — | (3 | ) | |||||||||||
Reclassification adjustments included in net income (loss) (a) | — | — | — | 14 | ||||||||||||
At end of period | (1 | ) | (1 | ) | (1 | ) | (1 | ) | ||||||||
Foreign Currency Translation | ||||||||||||||||
At beginning of period | — | (129 | ) | (128 | ) | (297 | ) | |||||||||
Sale of interests in TGN (a) | — | — | 128 | — | ||||||||||||
Sale of Argentine assets (a) | — | — | — | 128 | ||||||||||||
Sale of Brazilian assets (a) | — | — | — | 36 | ||||||||||||
Other foreign currency translations (a) | — | — | — | 4 | ||||||||||||
At end of period | — | (129 | ) | — | (129 | ) | ||||||||||
Total Accumulated Other Comprehensive Loss | (17 | ) | (136 | ) | (17 | ) | (136 | ) | ||||||||
Accumulated Deficit | ||||||||||||||||
At beginning of period | (2,106 | ) | (2,140 | ) | (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) | 81 | 84 | 236 | (91 | ) | |||||||||||
Preferred stock dividends declared | (2 | ) | (2 | ) | (8 | ) | (8 | ) | ||||||||
Common stock dividends declared | (20 | ) | (12 | ) | (61 | ) | (34 | ) | ||||||||
Redemption of preferred stock | — | — | — | (1 | ) | |||||||||||
At end of period | (2,047 | ) | (2,070 | ) | (2,047 | ) | (2,070 | ) | ||||||||
Total Common Stockholders’ Equity | $ | 2,429 | $ | 2,272 | $ | 2,429 | $ | 2,272 | ||||||||
CMS-34
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In Millions | ||||||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30 | 2008 | 2007 | 2008 | 2007 | ||||||||||||
(Unaudited) | ||||||||||||||||
(a) Disclosure of Comprehensive Income: | ||||||||||||||||
Net income (loss) | $ | 81 | $ | 84 | $ | 236 | $ | (91 | ) | |||||||
Retirement benefits liability adjustments, net of tax of $-, $1, $2, and $1, respectively | — | 1 | (1 | ) | 1 | |||||||||||
Unrealized gain (loss) on investments, net of tax (tax benefit) of $(3), $1, $(6), and $1, respectively | (3 | ) | — | (8 | ) | 2 | ||||||||||
Reclassification adjustments included in net income (loss), net of tax of $5, $-, $5, and $-, respectively | 8 | — | 8 | — | ||||||||||||
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 | — | — | — | 14 | ||||||||||||
Sale of interests in TGN, net of tax of $69 | — | — | 128 | — | ||||||||||||
Sale of Argentine assets, net of tax of $68 | — | — | — | 128 | ||||||||||||
Sale of Brazilian assets, net of tax of $20 | — | — | — | 36 | ||||||||||||
Other foreign currency translations | — | — | — | 4 | ||||||||||||
Total Comprehensive Income | $ | 86 | $ | 85 | $ | 363 | $ | 91 | ||||||||
CMS-35
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CMS-36
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
CMS-37
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In Millions | ||||||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30 | 2008 | 2007 | 2008 | 2007 | ||||||||||||
Other income | ||||||||||||||||
Electric restructuring return | $ | — | $ | — | $ | — | $ | 1 | ||||||||
Return on stranded and security costs | 1 | 1 | 4 | 4 | ||||||||||||
Gain on investment | — | 3 | — | 7 | ||||||||||||
All other | 2 | — | 5 | 3 | ||||||||||||
Total other income | $ | 3 | $ | 4 | $ | 9 | $ | 15 | ||||||||
In Millions | ||||||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30 | 2008 | 2007 | 2008 | 2007 | ||||||||||||
Other expense | ||||||||||||||||
Derivative loss on debt tender offer | $ | — | $ | — | $ | — | $ | (3 | ) | |||||||
Loss on reacquired and extinguished debt | — | (11 | ) | — | (22 | ) | ||||||||||
Unrealized investment loss | (13 | ) | — | (13 | ) | — | ||||||||||
Civic and political expenditures | (1 | ) | (1 | ) | (5 | ) | (2 | ) | ||||||||
All other | (1 | ) | — | (3 | ) | (2 | ) | |||||||||
Total other expense | $ | (15 | ) | $ | (12 | ) | $ | (21 | ) | $ | (29 | ) | ||||
CMS-38
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CMS-39
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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. |
• | AROs, | ||
• | most of the nonfinancial assets and liabilities acquired in a business combination, and | ||
• | impairment analyses performed for nonfinancial assets. |
CMS-40
Table of Contents
In Millions | ||||||||||||||||
Total | Level 1 | Level 2 | Level 3 | |||||||||||||
Assets: | ||||||||||||||||
Nonqualified Deferred Compensation Plan Assets | $ | 5 | $ | 5 | $ | — | $ | — | ||||||||
SERP | ||||||||||||||||
Equity Securities | 50 | 50 | — | — | ||||||||||||
Debt Securities | 29 | — | 29 | — | ||||||||||||
CMS ERM derivative contracts: | ||||||||||||||||
Non-trading electric/gas contracts (a) | 10 | 1 | 8 | 1 | ||||||||||||
Total (c) | $ | 94 | $ | 56 | $ | 37 | $ | 1 | ||||||||
Liabilities: | ||||||||||||||||
Nonqualified Deferred Compensation Plan Liabilities | $ | (5 | ) | $ | (5 | ) | $ | — | $ | — | ||||||
CMS ERM derivative contracts: | ||||||||||||||||
Non-trading electric/gas contracts (b) | (27 | ) | (1 | ) | (7 | ) | (19 | ) | ||||||||
Total (c) | $ | (32 | ) | $ | (6 | ) | $ | (7 | ) | $ | (19 | ) | ||||
(a) | This amount is gross and excludes the $4 million impact of offsetting derivative assets and liabilities under master netting arrangements. We report the fair values of our derivative assets net of these impacts within Other assets on our Consolidated Balance Sheets. | |
(b) | This amount is gross and excludes the $4 million impact of offsetting derivative assets and liabilities under a master netting arrangement. We report the fair values of our derivative liabilities net of these impacts within Other liabilities on our Consolidated Balance Sheets. | |
(c) | At September 30, 2008, assets classified as Level 3 represent one percent of total assets measured at fair value and liabilities classified as Level 3 represent 59 percent of total liabilities measured at fair value. |
CMS-41
Table of Contents
CMS-42
Table of Contents
In Millions | ||||
CMS ERM | ||||
Non-trading | ||||
contracts | ||||
Balance at June 30, 2008 | $ | (24 | ) | |
Total gains (losses) (realized and unrealized) | ||||
Included in earnings (a) | 5 | |||
Included in AOCL | — | |||
Purchases, sales, issuances, and settlements (net) | 1 | |||
Balance at September 30, 2008 | $ | (18 | ) | |
Unrealized gains (losses) included in earnings for the quarter ended September 30, 2008 relating to assets and liabilities still held at September 30, 2008 (a) | $ | 6 | ||
CMS ERM | ||||
Non-trading | ||||
contracts | ||||
Balance at December 31, 2007 | $ | (19 | ) | |
Total gains (losses) (realized and unrealized) | ||||
Included in earnings (a) | (1 | ) | ||
Included in AOCL | — | |||
Purchases, sales, issuances, and settlements (net) | 2 | |||
Balance at September 30, 2008 | (18 | ) | ||
Unrealized gains (losses) included in earnings for the nine months ended September 30, 2008 relating to assets and liabilities still held at September 30, 2008 (a) | $ | — | ||
(a) | Realized and unrealized gains (losses) for Level 3 recurring fair values are recorded in earnings as a component of Operating Revenue or Operating Expenses in our Consolidated Statements of Income (Loss). For the nine months ended September 30, 2008, unrealized gains (losses) included in earnings relating to Level 3 fair values still held at September 30, 2008 were immaterial. |
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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 | (5 | ) | (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 | ||||||||||||
August | GasAtacama (g) | 80 | — | — | ||||||||||||
Various | Other | 3 | 3 | — | ||||||||||||
Total | $ | 1,696 | $ | 16 | $ | (133 | ) | |||||||||
(a) | We sold our interest in El Chocon to Endesa, S.A. | |
(b) | We sold a portfolio of our businesses in Argentina and our northern Michigan non-utility natural gas assets to Lucid Energy. Due to the settlement of certain legal proceedings, we recognized a $17 million gain in the third quarter of 2007. | |
(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. |
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(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. | |
(g) | We sold our investment in GasAtacama to Endesa S.A. |
In Millions | ||||||||
Three months ended September 30 | 2008 | 2007 | ||||||
Revenues | $ | — | $ | — | ||||
Discontinued operations: | ||||||||
Pretax income from discontinued operations | $ | 2 | $ | — | ||||
Income tax expense | 1 | — | ||||||
Income From Discontinued Operations | $ | 1 | $ | — | ||||
In Millions | ||||||||
Nine months ended September 30 | 2008 | 2007 | ||||||
Revenues | $ | — | $ | 235 | ||||
Discontinued operations: | ||||||||
Pretax loss from discontinued operations | $ | — | $ | (88 | )(a) | |||
Income tax benefit | — | (1 | ) | |||||
Loss From Discontinued Operations | $ | — | $ | (87 | ) | |||
(a) | 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 disposal of CMS Energy Brasil S.A. of $3 million ($2 million after tax). |
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In Millions | ||||
Nine months ended September 30 | 2007 | |||
Asset impairments: | ||||
TGN (a) | $ | 140 | ||
GasAtacama (b) | 35 | |||
Jamaica (c) | 22 | |||
PowerSmith (d) | 5 | |||
Prairie State (e) | 2 | |||
Total asset impairments | $ | 204 | ||
(a) | We recorded a $215 million impairment charge to recognize the reduction in fair value of our investment in TGN, a natural gas business in Argentina. The impairment included a cumulative net foreign currency translation loss of $197 million. In September 2007, we recognized a $75 million deferred credit in Asset impairment charges, net of insurance recoveries, in our Consolidated Statements of Income (Loss). | |
(b) | We recorded an impairment charge to reflect the fair value of our investment in GasAtacama as determined in sale negotiations. | |
(c) | We recorded an impairment charge to reflect the fair value of our investment in an electric generating plant in Jamaica by discounting a set of probability-weighted streams of future operating cash flows. | |
(d) | We recorded an impairment charge to reflect the fair value of our investment in PowerSmith as determined in sale negotiations. | |
(e) | We recorded an impairment charge to reflect our withdrawal from the co-development of Prairie State with Peabody Energy because the project did not meet our investment criteria. |
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• | 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 | Net Under- | PSCR Cost of | ||||||
Year | Date Filed | recovery | Power Sold | Description of Net Underrecovery | ||||
2007 | 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 instead of as a reduction of power supply costs. | ||||
(a) | This amount includes 2006 underrecoveries as allowed by the MPSC order in our 2007 PSCR plan case. |
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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, | ||
• | the elimination of the RCP, but continues the $5 million annual contribution by the MCV Partnership to a renewable resources program, 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 Gas | |||||||
GCR Year | Date Filed | recovery | Sold | Description of Net Overrecovery | ||||
2007-2008 | June 2008 | $17 million | $1.7 billion | The total 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) | $ | 85 | (b) | ||||||||
Surety bonds and other indemnifications | Various | Indefinite | 35 | 1 | ||||||||||||
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 September 30, 2008, we have recorded an $85 million liability in connection with indemnities related to the sale of certain subsidiaries. |
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(c) | The maximum obligation includes $85 million related to the MCV Partnership’s nonperformance 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. |
Guarantee Description | How Guarantee Arose | Events That Would Require 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 | ||||||||
September 30, 2008 | December 31, 2007 | |||||||
CMS Energy Corporation | ||||||||
Senior notes | $ | 1,703 | $ | 1,713 | ||||
Revolving credit facility | 105 | — | ||||||
Total — CMS Energy Corporation | 1,808 | 1,713 | ||||||
Consumers Energy Company | ||||||||
First mortgage bonds | 3,518 | 3,170 | ||||||
Senior notes and other | 503 | 659 | ||||||
Securitization bonds | 286 | 309 | ||||||
Total — Consumers Energy Company | 4,307 | 4,138 | ||||||
Other Subsidiaries | 237 | 236 | ||||||
Total principal amounts outstanding | 6,352 | 6,087 | ||||||
Current amounts | (624 | ) | (692 | ) | ||||
Net unamortized discount | (10 | ) | (10 | ) | ||||
Total Long-term debt | $ | 5,718 | $ | 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 | ||||||||||||
First mortgage bonds | 350 | 6.125 | % | September 2008 | March 2019 | |||||||||||
Total | $ | 696 | ||||||||||||||
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 | ||||||||||||||||||
Company | Expiration Date | Amount of Facility | Amount Borrowed | Outstanding Letters of Credit | Amount Available | |||||||||||||
CMS Energy (a) | April 2, 2012 | $ | 550 | $ | 105 | $ | 24 | $ | 421 | |||||||||
Consumers | March 30, 2012 | 500 | — | 127 | 373 | |||||||||||||
Consumers (b) | November 30, 2009 | 200 | — | 185 | 15 | |||||||||||||
Consumers | September 9, 2009 | 150 | — | — | 150 | |||||||||||||
(a) | Average borrowings during the quarter totaled $112 million, with a weighted average annual interest rate of 3.25 percent, at LIBOR plus 0.75 percent. During October 2008, we borrowed an additional $420 million under this credit facility. | |
(b) | Secured revolving letter of credit facility. Effective November 30, 2008, this commitment will be reduced to $192 million. |
Outstanding | Adjusted Conversion | Adjusted Trigger | ||||||||||||||
Security | Maturity | (In Millions) | Price | Price | ||||||||||||
4.50% preferred stock | — | $ | 249 | $ | 9.66 | $ | 11.60 | |||||||||
3.375% senior notes | 2023 | $ | 140 | $ | 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 September 30 | 2008 | 2007 | ||||||
Earnings Available to Common Stockholders | ||||||||
Earnings from Continuing Operations | $ | 80 | $ | 84 | ||||
Less Preferred Dividends and Redemption Premium | (2 | ) | (2 | ) | ||||
Earnings from Continuing Operations Available to Common Stockholders — Basic and Diluted | $ | 78 | $ | 82 | ||||
Average Common Shares Outstanding | ||||||||
Weighted Average Shares — Basic | 224.1 | 223.0 | ||||||
Add dilutive impact of Contingently Convertible Securities | 9.6 | 17.0 | ||||||
Add dilutive Stock Options, Warrants, and Restricted Stock Awards | 0.6 | 1.3 | ||||||
Weighted Average Shares — Diluted | 234.3 | 241.3 | ||||||
Earnings Per Average Common Share Available to Common Stockholders | ||||||||
Basic | $ | 0.35 | $ | 0.37 | ||||
Diluted | $ | 0.33 | $ | 0.34 | ||||
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In Millions, Except Per Share Amounts | ||||||||
Nine Months Ended September 30 | 2008 | 2007 | ||||||
Earnings (Loss) Available to Common Stockholders | ||||||||
Earnings (Loss) from Continuing Operations | $ | 236 | $ | (4 | ) | |||
Less Preferred Dividends and Redemption Premium | (8 | ) | (9 | ) | ||||
Earnings (Loss) from Continuing Operations Available to Common Stockholders — Basic and Diluted | $ | 228 | $ | (13 | ) | |||
Average Common Shares Outstanding | ||||||||
Weighted Average Shares — Basic | 223.7 | 222.4 | ||||||
Add dilutive impact of Contingently Convertible Securities | 12.0 | — | ||||||
Add dilutive Stock Options, Warrants, and Restricted Stock Awards | 0.6 | — | ||||||
Weighted Average Shares — Diluted | 236.3 | 222.4 | ||||||
Earnings (Loss) Per Average Common Share Available to Common Stockholders | ||||||||
Basic | $ | 1.02 | $ | (0.06 | ) | |||
Diluted | $ | 0.96 | $ | (0.06 | ) | |||
• | increased the numerator of diluted EPS, by $2 million for the three months ended September 30, 2008 and 2007 and by $7 million for the nine months ended September 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. |
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In Millions | ||||||||||||||||||||||||||||||||
September 30, 2008 | December 31, 2007 | |||||||||||||||||||||||||||||||
Cost | Unrealized Gains | Unrealized Losses | Fair Value | Cost | Unrealized Gains | Unrealized Losses | Fair Value | |||||||||||||||||||||||||
Equity securities | $ | 50 | — | — | $ | 50 | $ | 62 | — | — | $ | 62 | ||||||||||||||||||||
Debt securities | 30 | — | (1 | ) | 29 | 13 | — | — | 13 | |||||||||||||||||||||||
• | 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. |
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In Millions | ||||||||||||||||||||||||
September 30, 2008 | December 31, 2007 | |||||||||||||||||||||||
Derivative Instruments | Cost | Fair Value | Unrealized Loss | Cost | Fair Value | Unrealized Loss | ||||||||||||||||||
Held by consolidated subsidiaries: | ||||||||||||||||||||||||
CMS ERM | $ | — | $ | (17 | ) | $ | (17 | ) | $ | — | $ | (23 | ) | $ | (23 | ) | ||||||||
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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 | Nine Months Ended | |||||||||||||||
September 30 | 2008 | 2007 | 2008 | 2007 | ||||||||||||
Service cost | $ | 11 | $ | 12 | $ | 32 | $ | 37 | ||||||||
Interest expense | 23 | 22 | 71 | 65 | ||||||||||||
Expected return on plan assets | (20 | ) | (19 | ) | (61 | ) | (59 | ) | ||||||||
Amortization of: | ||||||||||||||||
Net loss | 10 | 12 | 31 | 35 | ||||||||||||
Prior service cost | 1 | 1 | 4 | 5 | ||||||||||||
Net periodic cost | 25 | 28 | 77 | 83 | ||||||||||||
Regulatory adjustment | — | (6 | ) | 4 | (14 | ) | ||||||||||
Net periodic cost after regulatory adjustment | $ | 25 | $ | 22 | $ | 81 | $ | 69 | ||||||||
In Millions | ||||||||||||||||
OPEB | ||||||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30 | 2008 | 2007 | 2008 | 2007 | ||||||||||||
Service cost | $ | 6 | $ | 7 | $ | 17 | $ | 19 | ||||||||
Interest expense | 18 | 17 | 54 | 52 | ||||||||||||
Expected return on plan assets | (17 | ) | (16 | ) | (50 | ) | (47 | ) | ||||||||
Amortization of: | ||||||||||||||||
Net loss | 3 | 6 | 7 | 17 | ||||||||||||
Prior service credit | (3 | ) | (3 | ) | (8 | ) | (8 | ) | ||||||||
Net periodic cost | 7 | 11 | 20 | 33 | ||||||||||||
Regulatory adjustment | — | (2 | ) | 3 | (5 | ) | ||||||||||
Net periodic cost after regulatory adjustment | $ | 7 | $ | 9 | $ | 23 | $ | 28 | ||||||||
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In Millions | ||||||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30 | 2008 | 2007 | 2008 | 2007 | ||||||||||||
Operating Revenue | ||||||||||||||||
Electric utility | $ | 1,074 | $ | 963 | $ | 2,775 | $ | 2,663 | ||||||||
Gas utility | 233 | 209 | 1,886 | 1,811 | ||||||||||||
Enterprises | 115 | 105 | 300 | 303 | ||||||||||||
Other | 6 | 5 | 16 | 13 | ||||||||||||
Total Operating Revenue | $ | 1,428 | $ | 1,282 | $ | 4,977 | $ | 4,790 | ||||||||
Net Income (Loss) Available to Common Stockholders | ||||||||||||||||
Electric utility | $ | 108 | $ | 67 | $ | 232 | $ | 158 | ||||||||
Gas utility | (18 | ) | (8 | ) | 46 | 53 | ||||||||||
Enterprises | 5 | 58 | 13 | (194 | ) | |||||||||||
Discontinued operations | 1 | — | — | (87 | ) | |||||||||||
Other | (17 | ) | (35 | ) | (63 | ) | (30 | ) | ||||||||
Total Net Income (Loss) Available to Common Stockholders | $ | 79 | $ | 82 | $ | 228 | $ | (100 | ) | |||||||
In Millions | ||||||||
September 30, 2008 | December 31, 2007 | |||||||
Assets | ||||||||
Electric utility (a) | $ | 8,343 | $ | 8,492 | ||||
Gas utility (a) | 4,541 | 4,102 | ||||||
Enterprises | 801 | 982 | ||||||
Other | 392 | 616 | ||||||
Total Assets | $ | 14,077 | $ | 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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Management’s Discussion and Analysis
• | the price of CMS Energy Common Stock, capital and financial market conditions and the effect of such market conditions on our postretirement benefit plans, interest rates, and access to the capital markets including availability of financing (including our accounts receivable sales program and revolving credit facilities) to Consumers, CMS Energy, or any of their affiliates, and the energy industry, | ||
• | the impact of the continued downturn in the economy and the sharp downturn and extreme volatility in the financial and credit markets on Consumers including its: |
• | revenues, | ||
• | capital expenditure program and related earnings growth, | ||
• | ability to collect accounts receivable from our customers, | ||
• | access to capital, and | ||
• | contributions to the Pension Plan, |
• | market perception of the energy industry or of Consumers, CMS Energy, or any of their affiliates, | ||
• | credit ratings of Consumers or CMS Energy, | ||
• | 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, | ||
• | changes in federal or state laws or regulations or in the interpretation of existing laws and regulations that could have an impact on our business, | ||
• | 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, |
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• | 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, | ||
• | adequate and timely recovery of higher MISO energy and transmission costs, | ||
• | 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, | ||
• | authorization of a new clean coal plant, and | ||
• | implementation of new energy legislation, |
• | 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 natural gas prices and coal prices on our cash flow and working capital, | ||
• | the impact of construction material prices, | ||
• | the availability of qualified construction personnel to implement our construction program, | ||
• | 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, | ||
• | 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, | ||
• | technological developments in energy production, delivery, usage, and gas storage, | ||
• | achievement of capital expenditure and operating expense goals, |
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• | changes in financial or regulatory accounting principles or policies, including a possible future requirement to comply with International Financial Reporting Standards, | ||
• | changes in tax laws or new IRS interpretations of existing or past tax laws, | ||
• | the impact of our new integrated business software system on our operations, including customer billing, finance, purchasing, human resources and payroll processes, and utility asset construction and maintenance work management systems, | ||
• | the outcome, cost, and other effects of legal or administrative proceedings, settlements, investigations or claims, 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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• | a provision to streamline the regulatory process by generally allowing utilities to self-implement rates six months after filing and requiring the MPSC to issue an order 12 months after filing or the rates as-filed become permanent, | ||
• | reform of the Customer Choice Act to limit generally alternative energy suppliers to 10 percent of our weather-adjusted sales, | ||
• | establishment of a certificate-of-necessity process at the MPSC for proposed power plants, power purchase agreements, and projects costing more than $500 million, | ||
• | a requirement that 10 percent of power come from renewable sources by 2015 with specific interim targets, and | ||
• | new programs and incentives to encourage greater energy efficiency among customers, along with the requirement of the utility to prepare energy cost savings optimization plans. |
• | 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, 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 September 30 | 2008 | 2007 | Change | |||||||||
Electric | $ | 108 | $ | 67 | $ | 41 | ||||||
Gas | (18 | ) | (8 | ) | (10 | ) | ||||||
Other | — | 1 | (1 | ) | ||||||||
Net Income Available to Common Stockholder | $ | 90 | $ | 60 | $ | 30 | ||||||
In Millions | ||||||
• | increase in electric delivery revenue primarily due to the MPSC’s December 2007 and June 2008 electric rate orders, | $ | 63 | |||
• | 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, | 9 | ||||
• | other net increases, | 2 | ||||
• | decrease in other income primarily due to reduced interest income, | (14 | ) | |||
• | decrease in electric deliveries, | (10 | ) | |||
• | increase in operating expenses, and | (11 | ) | |||
• | increase in depreciation expense. | (9 | ) | |||
Total Change | $ | 30 | ||||
In Millions | ||||||||||||
Nine months ended September 30 | 2008 | 2007 | Change | |||||||||
Electric | $ | 232 | $ | 158 | $ | 74 | ||||||
Gas | 46 | 53 | (7 | ) | ||||||||
Other | 1 | 5 | (4 | ) | ||||||||
Net Income Available to Common Stockholder | $ | 279 | $ | 216 | $ | 63 | ||||||
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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, | $ | 94 | |||
• | 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, | 29 | ||||
• | lower nuclear operating and maintenance costs, | 24 | ||||
• | increase in gas delivery revenue primarily due to the MPSC’s August 2007 gas rate order, | 20 | ||||
• | decrease in electric deliveries, | (52 | ) | |||
• | decrease in other income, | (29 | ) | |||
• | increase in depreciation expense, and | (20 | ) | |||
• | other net decreases. | (3 | ) | |||
Total Change | $ | 63 | ||||
In Millions | ||||||||||||
September 30 | 2008 | 2007 | Change | |||||||||
Three months ended | $ | 108 | $ | 67 | $ | 41 | ||||||
Nine months ended | $ | 232 | $ | 158 | $ | 74 | ||||||
Three Months Ended | Nine Months Ended | |||||||
September 30, 2008 | September 30, 2008 | |||||||
Reasons for the change: | vs. 2007 | vs. 2007 | ||||||
Electric deliveries and rate increase | $ | 80 | $ | 65 | ||||
Surcharge revenue | — | 10 | ||||||
Power supply costs and related revenue | 5 | 12 | ||||||
Non-commodity revenue | (1 | ) | (13 | ) | ||||
Depreciation and other operating expenses | (11 | ) | 62 | |||||
Other income | (20 | ) | (36 | ) | ||||
General taxes | 6 | 14 | ||||||
Interest charges | 6 | 11 | ||||||
Income taxes | (24 | ) | (51 | ) | ||||
Total change | $ | 41 | $ | 74 | ||||
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CE-7
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In Millions | ||||||||||||
September 30 | 2008 | 2007 | Change | |||||||||
Three months ended | $ | (18 | ) | $ | (8 | ) | $ | (10 | ) | |||
Nine months ended | 46 | $ | 53 | $ | (7 | ) | ||||||
Three Months Ended | Nine Months Ended | |||||||
September 30, 2008 | September 30, 2008 | |||||||
Reasons for the change: | vs. 2007 | vs. 2007 | ||||||
Gas deliveries and rate increase | $ | 2 | $ | 20 | ||||
Gas wholesale and retail services, other gas revenues and other income, net | (12 | ) | (23 | ) | ||||
Operation and maintenance | (6 | ) | (15 | ) | ||||
General taxes and depreciation | 1 | — | ||||||
Interest charges | 1 | 7 | ||||||
Income taxes | 4 | 4 | ||||||
Total change | $ | (10 | ) | $ | (7 | ) | ||
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September 30 | 2008 | 2007 | Change | |||||||||
Three months ended | $ | — | $ | 1 | $ | (1 | ) | |||||
Nine months ended | $ | 1 | $ | 5 | $ | (4 | ) | |||||
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• | life expectancies, | ||
• | discount rates, | ||
• | expected long-term rate of return on plan assets, | ||
• | rate of compensation increases, and | ||
• | anticipated health care costs. |
In Millions | ||||||||||||
Expected Costs | Pension Cost | OPEB Cost | Contributions | |||||||||
2008 | $ | 100 | $ | 29 | $ | 50 | ||||||
2009 | 90 | 64 | 255 | |||||||||
2010 | 85 | 61 | 175 | |||||||||
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• | results of operations, | ||
• | capital expenditures, | ||
• | energy commodity and transportation costs, | ||
• | contractual obligations, | ||
• | regulatory decisions, | ||
• | debt maturities, | ||
• | credit ratings, | ||
• | pension plan funding requirements, | ||
• | working capital needs, | ||
• | collateral requirements, and | ||
• | access to credit markets. |
• | in September 2008, we issued $350 million FMB, and | ||
• | in September 2008, we entered into a $150 million revolving credit agreement. |
CE-11
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In Millions | ||||||||
Nine months ended September 30 | 2008 | 2007 | ||||||
Net cash provided by (used in): | ||||||||
Operating activities | $ | 524 | $ | 189 | ||||
Investing activities | (531 | ) | 151 | |||||
Net cash provided by (used in) operating and investing activities | (7 | ) | 340 | |||||
Net cash provided by (used in) financing activities | (99 | ) | 392 | |||||
Net Increase (Decrease) in Cash and Cash Equivalents | $ | (106 | ) | $ | 732 | |||
CE-12
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• | a provision to streamline the regulatory process by generally allowing utilities to self-implement rates six months after filing and requiring the MPSC to issue an order 12 months after filing or the rates as-filed become permanent, | ||
• | reform of the Customer Choice Act to limit generally alternative energy suppliers to 10 percent of our weather-adjusted sales, | ||
• | establishment of a certificate-of-necessity process at the MPSC for proposed power plants, power purchase agreements, and projects costing more than $500 million, | ||
• | a requirement that 10 percent of power come from renewable sources by 2015 with specific interim targets, and | ||
• | new programs and incentives to encourage greater energy efficiency among customers, along with the requirement of the utility to prepare energy cost savings optimization plans. |
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• | energy conservation measures and results of energy efficiency programs, | ||
• | fluctuations in weather conditions, and | ||
• | changes in economic conditions, including utilization and expansion or contraction of manufacturing facilities, population trends, and housing activity. |
CE-14
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CE-15
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CE-16
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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, | ||
• | the elimination of the RCP, but continues the $5 million annual contribution by the MCV Partnership to a renewable resources program, 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 prices, | ||
• | Michigan economic conditions including population trends and housing activity, | ||
• | the price of competing energy sources or fuels, and | ||
• | energy efficiency and conservation. |
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CE-18
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CE-21
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Consolidated Statements of Income
(Unaudited)
In Millions | ||||||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30 | 2008 | 2007 | 2008 | 2007 | ||||||||||||
Operating Revenue | $ | 1,307 | $ | 1,172 | $ | 4,661 | $ | 4,474 | ||||||||
Operating Expenses | ||||||||||||||||
Fuel for electric generation | 128 | 122 | 373 | 298 | ||||||||||||
Purchased and interchange power | 405 | 383 | 1,015 | 1,055 | ||||||||||||
Purchased power — related parties | 20 | 20 | 57 | 59 | ||||||||||||
Cost of gas sold | 135 | 113 | 1,368 | 1,309 | ||||||||||||
Other operating expenses | 201 | 201 | 565 | 619 | ||||||||||||
Maintenance | 44 | 41 | 124 | 143 | ||||||||||||
Depreciation and amortization | 131 | 117 | 425 | 390 | ||||||||||||
General taxes | 44 | 51 | 146 | 166 | ||||||||||||
Gain on asset sales, net | — | — | — | (2 | ) | |||||||||||
1,108 | 1,048 | 4,073 | 4,037 | |||||||||||||
Operating Income | 199 | 124 | 588 | 437 | ||||||||||||
Other Income (Deductions) | ||||||||||||||||
Interest | 4 | 24 | 20 | 55 | ||||||||||||
Regulatory return on capital expenditures | 9 | 9 | 25 | 24 | ||||||||||||
Other income | 4 | 5 | 9 | 19 | ||||||||||||
Other expense | (11 | ) | (1 | ) | (17 | ) | (4 | ) | ||||||||
6 | 37 | 37 | 94 | |||||||||||||
Interest Charges | ||||||||||||||||
Interest on long-term debt | 56 | 59 | 169 | 177 | ||||||||||||
Interest on long-term debt — related parties | — | — | — | 2 | ||||||||||||
Other interest | 6 | 10 | 17 | 25 | ||||||||||||
Capitalized interest | (1 | ) | (1 | ) | (4 | ) | (5 | ) | ||||||||
61 | 68 | 182 | 199 | |||||||||||||
Income Before Income Taxes | 144 | 93 | 443 | 332 | ||||||||||||
Income Tax Expense | 53 | 33 | 162 | 115 | ||||||||||||
Net Income | 91 | 60 | 281 | 217 | ||||||||||||
Preferred Stock Dividends | 1 | — | 2 | 1 | ||||||||||||
Net Income Available to Common Stockholder | $ | 90 | $ | 60 | $ | 279 | $ | 216 | ||||||||
CE-22
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Consolidated Statements of Cash Flows
(Unaudited)
In Millions | ||||||||
Nine Months Ended September 30 | 2008 | 2007 | ||||||
Cash Flows from Operating Activities | ||||||||
Net income | $ | 281 | $ | 217 | ||||
Adjustments to reconcile net income to net cash provided by operating activities | ||||||||
Depreciation and amortization (includes nuclear decommissioning of $- and $4) | 425 | 390 | ||||||
Deferred income taxes and investment tax credit | 87 | (6 | ) | |||||
Regulatory return on capital expenditures | (25 | ) | (24 | ) | ||||
Gain on sale of assets | — | (2 | ) | |||||
Postretirement benefits costs | 107 | 96 | ||||||
Capital lease and other amortization | 23 | 32 | ||||||
Postretirement benefits contributions | (37 | ) | (140 | ) | ||||
Changes in assets and liabilities: | ||||||||
Decrease (increase) in accounts receivable, notes receivable and accrued revenue | 178 | (142 | ) | |||||
Decrease in accrued power supply and gas revenue | 39 | 52 | ||||||
Increase in inventories | (411 | ) | (184 | ) | ||||
Decrease in deferred property taxes | 118 | 111 | ||||||
Decrease in accounts payable | (14 | ) | (67 | ) | ||||
Decrease in accrued taxes | (127 | ) | (75 | ) | ||||
Decrease in accrued expenses | (36 | ) | (21 | ) | ||||
Decrease in other current and non-current assets | 50 | 41 | ||||||
Decrease in other current and non-current liabilities | (134 | ) | (89 | ) | ||||
Net cash provided by operating activities | 524 | 189 | ||||||
Cash Flows from Investing Activities | ||||||||
Capital expenditures (excludes assets placed under capital lease) | (510 | ) | (518 | ) | ||||
Cost to retire property | (22 | ) | (18 | ) | ||||
Restricted cash | 1 | 16 | ||||||
Investments in nuclear decommissioning trust funds | — | (1 | ) | |||||
Proceeds from nuclear decommissioning trust funds | — | 333 | ||||||
Proceeds from sale of assets | — | 337 | ||||||
Other investing | — | 2 | ||||||
Net cash provided by (used in) investing activities | (531 | ) | 151 | |||||
Cash Flows from Financing Activities | ||||||||
Proceeds from issuance of long term debt | 600 | — | ||||||
Retirement of long-term debt | (434 | ) | (24 | ) | ||||
Payment of common stock dividends | (238 | ) | (176 | ) | ||||
Payment of capital and finance lease obligations | (18 | ) | (14 | ) | ||||
Stockholder’s contribution | — | 650 | ||||||
Payment of preferred stock dividends | (2 | ) | (1 | ) | ||||
Decrease in notes payable | — | (42 | ) | |||||
Debt issuance and financing costs | (7 | ) | (1 | ) | ||||
Net cash provided by (used in) financing activities | (99 | ) | 392 | |||||
Net Increase (Decrease) in Cash and Cash Equivalents | (106 | ) | 732 | |||||
Cash and Cash Equivalents, Beginning of Period | 195 | 37 | ||||||
Cash and Cash Equivalents, End of Period | $ | 89 | $ | 769 | ||||
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Consolidated Balance Sheets
In Millions | ||||||||
September 30 | December 31 | |||||||
2008 | 2007 | |||||||
(Unaudited) | ||||||||
Plant and Property (at cost) | ||||||||
Electric | $ | 8,885 | $ | 8,555 | ||||
Gas | 3,598 | 3,467 | ||||||
Other | 15 | 15 | ||||||
12,498 | 12,037 | |||||||
Less accumulated depreciation, depletion, and amortization | 4,177 | 3,993 | ||||||
8,321 | 8,044 | |||||||
Construction work-in-progress | 446 | 447 | ||||||
8,767 | 8,491 | |||||||
Investments | ||||||||
Stock of affiliates | 23 | 32 | ||||||
Current Assets | ||||||||
Cash and cash equivalents at cost, which approximates market | 89 | 195 | ||||||
Restricted cash at cost, which approximates market | 24 | 25 | ||||||
Notes receivable | 97 | 67 | ||||||
Accounts receivable and accrued revenue, less allowances of $16 in 2008 and $16 in 2007 | 616 | 810 | ||||||
Accrued power supply revenue | 4 | 45 | ||||||
Accounts receivable — related parties | 2 | 4 | ||||||
Inventories at average cost | ||||||||
Gas in underground storage | 1,476 | 1,123 | ||||||
Materials and supplies | 102 | 79 | ||||||
Generating plant fuel stock | 133 | 100 | ||||||
Deferred property taxes | 111 | 158 | ||||||
Regulatory assets — postretirement benefits | 19 | 19 | ||||||
Prepayments and other | 30 | 28 | ||||||
2,703 | 2,653 | |||||||
Non-current Assets | ||||||||
Regulatory assets | ||||||||
Securitized costs | 429 | 466 | ||||||
Postretirement benefits | 849 | 921 | ||||||
Customer Choice Act | 104 | 149 | ||||||
Other | 462 | 504 | ||||||
Other | 111 | 185 | ||||||
1,955 | 2,225 | |||||||
Total Assets | $ | 13,448 | $ | 13,401 | ||||
CE-24
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In Millions | ||||||||
September 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 | ||||||
Retained earnings | 359 | 324 | ||||||
3,682 | 3,647 | |||||||
Preferred stock | 44 | 44 | ||||||
Long-term debt | 3,918 | 3,692 | ||||||
Non-current portion of capital and finance lease obligations | 212 | 225 | ||||||
7,856 | 7,608 | |||||||
Current Liabilities | ||||||||
Current portion of long-term debt, capital and finance lease obligations | 408 | 470 | ||||||
Accounts payable | 396 | 403 | ||||||
Accrued rate refunds | 11 | 19 | ||||||
Accounts payable — related parties | 14 | 13 | ||||||
Accrued interest | 45 | 65 | ||||||
Accrued taxes | 226 | 353 | ||||||
Deferred income taxes | 173 | 151 | ||||||
Regulatory liabilities | 159 | 164 | ||||||
Other | 180 | 150 | ||||||
1,612 | 1,788 | |||||||
Non-current Liabilities | ||||||||
Deferred income taxes | 746 | 713 | ||||||
Regulatory liabilities | ||||||||
Regulatory liabilities for cost of removal | 1,184 | 1,127 | ||||||
Income taxes, net | 561 | 533 | ||||||
Other regulatory liabilities | 147 | 313 | ||||||
Postretirement benefits | 831 | 813 | ||||||
Asset retirement obligations | 203 | 198 | ||||||
Deferred investment tax credit | 56 | 58 | ||||||
Other | 252 | 250 | ||||||
3,980 | 4,005 | |||||||
Commitments and Contingencies (Notes 4, 5, and 6) | ||||||||
Total Stockholder’s Investment and Liabilities | $ | 13,448 | $ | 13,401 | ||||
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Consolidated Statements of Common Stockholder’s Equity
(Unaudited)
In Millions | ||||||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||||
September 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 | 2,482 | 2,482 | 1,832 | ||||||||||||
Stockholder’s contribution | — | — | — | 650 | ||||||||||||
At 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 end of period | (9 | ) | (8 | ) | (9 | ) | (8 | ) | ||||||||
Investments | ||||||||||||||||
At beginning of period | 8 | 22 | 15 | 23 | ||||||||||||
Unrealized loss on investments (b) | (5 | ) | — | (12 | ) | (1 | ) | |||||||||
Reclassification adjustments included in net income (b) | 6 | — | 6 | — | ||||||||||||
At end of period | 9 | 22 | 9 | 22 | ||||||||||||
Total Accumulated Other Comprehensive Income | — | 14 | — | 14 | ||||||||||||
Retained Earnings | ||||||||||||||||
At beginning of period | 339 | 286 | 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 | 91 | 60 | 281 | 217 | ||||||||||||
Cash dividends declared — Common Stock | (70 | ) | (41 | ) | (238 | ) | (176 | ) | ||||||||
Cash dividends declared — Preferred Stock | (1 | ) | — | (2 | ) | (1 | ) | |||||||||
At end of period | 359 | 305 | 359 | 305 | ||||||||||||
Total Common Stockholder’s Equity | $ | 3,682 | $ | 3,642 | $ | 3,682 | $ | 3,642 | ||||||||
CE-26
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In Millions | ||||||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||||
September 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 | $ | 91 | $ | 60 | $ | 281 | $ | 217 | ||||||||
Retirement benefits liability | ||||||||||||||||
Retirement benefits liability adjustment, net of tax of $-, $-, $2 and $-, respectively | — | — | 6 | — | ||||||||||||
Investments | ||||||||||||||||
Unrealized loss on investments, net of tax benefit of $(3), $-, $(6) and $(1), respectively | (5 | ) | — | (12 | ) | (1 | ) | |||||||||
Reclassification adjustments included in net income, net of tax $3, $-, $3 and $-, respectively | 6 | — | 6 | — | ||||||||||||
Total Comprehensive Income | $ | 92 | $ | 60 | $ | 281 | $ | 216 | ||||||||
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CE-28
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Notes to Consolidated Financial Statements
(Unaudited)
CE-29
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In Millions | ||||||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30 | 2008 | 2007 | 2008 | 2007 | ||||||||||||
Other income | ||||||||||||||||
Electric restructuring return | $ | — | $ | — | $ | — | $ | 1 | ||||||||
Return on stranded and security costs | 1 | 1 | 4 | 4 | ||||||||||||
Gain on stock | — | — | — | 4 | ||||||||||||
Gain on investment | — | 3 | — | 7 | ||||||||||||
All other | 3 | 1 | 5 | 3 | ||||||||||||
Total other income | $ | 4 | $ | 5 | $ | 9 | $ | 19 | ||||||||
In Millions | ||||||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30 | 2008 | 2007 | 2008 | 2007 | ||||||||||||
Other expense | ||||||||||||||||
Unrealized investment loss | $ | (9 | ) | $ | — | $ | (9 | ) | $ | — | ||||||
Civic and political expenditures | (1 | ) | (1 | ) | (5 | ) | (2 | ) | ||||||||
All other | (1 | ) | — | (3 | ) | (2 | ) | |||||||||
Total other expense | $ | (11 | ) | $ | (1 | ) | $ | (17 | ) | $ | (4 | ) | ||||
CE-30
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CE-31
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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. |
• | AROs, | ||
• | most of the nonfinancial assets and liabilities acquired in a business combination, and | ||
• | impairment analyses performed for nonfinancial assets. |
CE-32
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In Millions | ||||||||||||
Total | Level 1 | Level 2 | ||||||||||
Assets: | ||||||||||||
CMS Energy Common Stock | $ | 23 | $ | 23 | $ | — | ||||||
Nonqualified Deferred Compensation Plan Assets | 3 | 3 | — | |||||||||
SERP | ||||||||||||
Equity Securities | 32 | 32 | — | |||||||||
Debt Securities | 19 | — | 19 | |||||||||
Total | $ | 77 | $ | 58 | $ | 19 | ||||||
Liabilities: | ||||||||||||
Nonqualified Deferred Compensation Plan Liabilities | $ | (3 | ) | $ | (3 | ) | $ | — | ||||
CE-33
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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-35
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PSCR | Net Under- | PSCR Cost of | ||||||
Year | Date Filed | recovery | Power Sold | Description of Net Underrecovery | ||||
2007 | 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 instead of as 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-36
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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, | ||
• | the elimination of the RCP, but continues the $5 million annual contribution by the MCV Partnership to a renewable resources program, 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 Gas | |||||||
GCR Year | Date Filed | recovery | Sold | Description of Net Overrecovery | ||||
2007-2008 | June 2008 | $17 million | $1.7 billion | The total 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 September 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 | ||||||||
September 30, 2008 | December 31, 2007 | |||||||
First mortgage bonds | $ | 3,518 | $ | 3,170 | ||||
Senior notes and other | 503 | 659 | ||||||
Securitization bonds | 286 | 309 | ||||||
Principal amounts outstanding | 4,307 | 4,138 | ||||||
Current amounts | (383 | ) | (440 | ) | ||||
Net unamortized discount | (6 | ) | (6 | ) | ||||
Total Long-term debt | $ | 3,918 | $ | 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 | ||||||||||||
First mortgage bonds | 350 | 6.125 | % | September 2008 | March 2019 | |||||||||||
Total | $ | 696 | ||||||||||||||
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 Letters | ||||||||||||||||
Expiration Date | Amount of Facility | Amount Borrowed | of Credit | Amount Available | ||||||||||||
March 30, 2012 | $ | 500 | $ | — | $ | 127 | $ | 373 | ||||||||
November 30, 2009 (a) | 200 | — | 185 | 15 | ||||||||||||
September 9, 2009 | 150 | — | — | 150 | ||||||||||||
(a) | Secured revolving letter of credit facility. Effective November 30, 2008, this commitment will be reduced to $192 million. |
In Millions | ||||||||||||||||||||||||||||||||
September 30, 2008 | December 31, 2007 | |||||||||||||||||||||||||||||||
Cost | Unrealized Gains | Unrealized Losses | Fair Value | Cost | Unrealized Gains | Unrealized Losses | Fair Value | |||||||||||||||||||||||||
Common stock of CMS Energy | $ | 8 | $ | 15 | $ | — | $ | 23 | $ | 8 | $ | 24 | $ | — | $ | 32 | ||||||||||||||||
SERP: | ||||||||||||||||||||||||||||||||
Equity securities | 32 | — | — | 32 | 35 | — | — | 35 | ||||||||||||||||||||||||
Debt securities | 20 | — | (1 | ) | 19 | 7 | — | — | 7 | |||||||||||||||||||||||
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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 | Nine Months Ended | |||||||||||||||
September 30 | 2008 | 2007 | 2008 | 2007 | ||||||||||||
Service cost | $ | 10 | $ | 12 | $ | 30 | $ | 35 | ||||||||
Interest expense | 23 | 20 | 69 | 61 | ||||||||||||
Expected return on plan assets | (20 | ) | (18 | ) | (59 | ) | (56 | ) | ||||||||
Amortization of: | ||||||||||||||||
Net loss | 10 | 11 | 30 | 33 | ||||||||||||
Prior service cost | 2 | 1 | 5 | 5 | ||||||||||||
Net periodic cost | 25 | 26 | 75 | 78 | ||||||||||||
Regulatory adjustment | — | (6 | ) | 4 | (14 | ) | ||||||||||
Net periodic cost after regulatory adjustment | $25 | $ | 20 | $ | 79 | $ | 64 | |||||||||
In Millions | ||||||||||||||||
OPEB | ||||||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30 | 2008 | 2007 | 2008 | 2007 | ||||||||||||
Service cost | $ | 6 | $ | 7 | $ | 17 | $ | 20 | ||||||||
Interest expense | 18 | 17 | 54 | 52 | ||||||||||||
Expected return on plan assets | (16 | ) | (16 | ) | (49 | ) | (47 | ) | ||||||||
Amortization of: | ||||||||||||||||
Net loss | 3 | 6 | 8 | 17 | ||||||||||||
Prior service credit | (3 | ) | (3 | ) | (8 | ) | (8 | ) | ||||||||
Net periodic cost | 8 | 11 | 22 | 34 | ||||||||||||
Regulatory adjustment | — | (2 | ) | 3 | (5 | ) | ||||||||||
Net periodic cost after regulatory adjustment | $ | 8 | $ | 9 | $ | 25 | $ | 29 | ||||||||
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In Millions | ||||||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30 | 2008 | 2007 | 2008 | 2007 | ||||||||||||
Operating Revenue | ||||||||||||||||
Electric | $ | 1,074 | $ | 963 | $ | 2,775 | $ | 2,663 | ||||||||
Gas | 233 | 209 | 1,886 | 1,811 | ||||||||||||
Total Operating Revenue | $ | 1,307 | $ | 1,172 | $ | 4,661 | $ | 4,474 | ||||||||
Net Income Available to Common Stockholder | ||||||||||||||||
Electric | $ | 108 | $ | 67 | $ | 232 | $ | 158 | ||||||||
Gas | (18 | ) | (8 | ) | 46 | 53 | ||||||||||
Other | — | 1 | 1 | 5 | ||||||||||||
Total Net Income Available to Common Stockholder | $ | 90 | $ | 60 | $ | 279 | $ | 216 | ||||||||
In Millions | ||||||||
September 30, 2008 | December 31, 2007 | |||||||
Assets | ||||||||
Electric (a) | $ | 8,343 | $ | 8,492 | ||||
Gas (a) | 4,541 | 4,102 | ||||||
Other | 564 | 807 | ||||||
Total Assets | $ | 13,448 | $ | 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, | ||
• | the elimination of the RCP, but continues the $5 million annual contribution by the MCV Partnership to a renewable resources program, 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. |
Total Number of | Maximum Number of | |||||||||||||||
Shares | Shares that May Yet | |||||||||||||||
Total Number | Purchased as Part of | Be Purchased Under | ||||||||||||||
of Shares | Average Price | Publicly Announced | Publicly Announced | |||||||||||||
Period | Purchased* | Paid per Share | Plans or Programs | Plans or Programs | ||||||||||||
July 1, 2008 to July 31, 2008 | — | $ | — | — | — | |||||||||||
August 1, 2008 to August 31, 2008 | 32,802 | $ | 13.34 | — | — | |||||||||||
September 1, 2008 to September 30, 2008 | 1,252 | $ | 13.16 | — | — | |||||||||||
Total | 34,054 | — | — | — | ||||||||||||
* | 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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(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: November 5, 2008 | By: | /s/ Thomas J. Webb | ||
Thomas J. Webb | ||||
Executive Vice President and Chief Financial Officer | ||||
CONSUMERS ENERGY COMPANY (Registrant) | ||||
Dated: November 5, 2008 | By: | /s/ Thomas J. Webb | ||
Thomas J. Webb | ||||
Executive Vice President and Chief Financial Officer | ||||
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