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Commission | Registrant; State of Incorporation; | IRS Employer | ||
File Number | Address; and Telephone Number | Identification No. | ||
1-9513 | CMS Energy Corporation (A Michigan Corporation) One Energy Plaza, Jackson, Michigan 49201 (517) 788-0550 | 38-2726431 | ||
1-5611 | Consumers Energy Company (A Michigan Corporation) One Energy Plaza, Jackson, Michigan 49201 (517) 788-0550 | 38-0442310 |
Name of Each Exchange | ||||
Registrant | Title of Class | on Which Registered | ||
CMS Energy Corporation | Common Stock, $.01 par value | New York Stock Exchange | ||
Consumers Energy Company | Preferred Stocks, $100 par value: $4.16 Series, $4.50 Series | New York Stock Exchange |
Large accelerated filer x | Accelerated filer o | Non-accelerated filer o | Smaller reporting company o |
Large accelerated filer o | Accelerated filer o | Non-accelerated filer x | Smaller reporting company o |
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ABATE | Association of Businesses Advocating Tariff Equity | |
ABO | Accumulated Benefit Obligation. The liabilities of a pension plan based on service and pay to date. This differs from the Projected Benefit Obligation that is typically disclosed in that it does not reflect expected future salary increases. | |
AEI | Ashmore Energy International, a non-affiliated company | |
AFUDC | Allowance for funds used during construction | |
AMT | Alternative minimum tax | |
AOC | Administrative Order on Consent | |
AOCI | Accumulated Other Comprehensive Income | |
AOCL | Accumulated Other Comprehensive Loss | |
APB | Accounting Principles Board | |
APB Opinion No. 18 | APB Opinion No. 18, “The Equity Method of Accounting for Investments in Common Stock” | |
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. | |
Beeland | Beeland Group LLC, a wholly owned indirect subsidiary of CMS Energy | |
bcf | Billion cubic feet of gas | |
Big Rock | Big Rock Point nuclear power plant | |
Big Rock ISFSI | Big Rock Independent Spent Fuel Storage Installation | |
Board of Directors | Board of Directors of CMS Energy | |
Btu | British thermal unit; one Btu equals the amount of energy required to raise the temperature of one pound of water by one degree Fahrenheit | |
CAIR | Clean Air Interstate Rule | |
CAMR | Clean Air Mercury Rule | |
CEO | Chief Executive Officer | |
CFO | Chief Financial Officer | |
City gate arrangement | The arrangement made for the point at which a local distribution company physically receives gas from a supplier or pipeline | |
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 Electric and Gas | CMS Electric & Gas Company, L.L.C., a wholly owned subsidiary of Enterprises | |
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 wholly owned 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 International Ventures | CMS International Ventures LLC, a subsidiary of Enterprises |
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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 wholly owned subsidiary of Enterprises | |
CMS Viron | CMS Viron Corporation, a wholly owned subsidiary of CMS ERM | |
Consumers | Consumers Energy Company, a wholly owned subsidiary of CMS Energy | |
CPEE | Companhia Paulista de Energia Eletrica, in which CMS International Ventures formerly owned a 94 percent interest | |
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 | |
Dekatherms/day | A measure of the heat content value of gas per day; one dekatherm/day is equivalent to 1,000,000 British thermal units (Btu) per day | |
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 | |
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 IssueNo. 06-11, “Accounting for Income Tax Benefits of Dividends on Share-Based Payment Awards” | |
EITF Issue 07-5 | EITF IssueNo. 07-5, “Determining Whether an Instrument (or Embedded Feature) Is Indexed to an Entity’s Own Stock” | |
EITF Issue 08-5 | EITF IssueNo. 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 Capital | |
Entergy | Entergy Corporation, a non-affiliated company | |
Enterprises | CMS Enterprises Company, a wholly owned 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 | |
FDIC | Federal Deposit Insurance Corporation | |
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” |
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FIN 47 | FASB Interpretation No. 47, “Accounting for Conditional Asset Retirement Obligations” | |
FIN 48 | FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes — an interpretation of FASB Statement No. 109” | |
First Mortgage Bond Indenture | The indenture dated as of September 1, 1945 between Consumers and The Bank of New York Mellon, as Trustee, and as amended and supplemented | |
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 EITFNo. 03-6, “Participating Securities and the Two-Class method under FASB Statement No. 128” | |
FSP FAS 132(R)-1 | FASB Staff Position on SFAS No. 132(R), “Employers’ Disclosures about Pensions and Other Postretirement Benefits” | |
FSP FAS 133-1 and FIN 45-4 | FASB Staff Position on SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities” and FIN 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others” | |
FSP FAS 142-3 | FASB Staff Position on SFAS No. 142, “Determination of the Useful Life of Intangible Assets” | |
FSP FAS 157-3 | FASB Staff Position on SFAS No. 157, “Fair Value Measurements” | |
FSP FIN 39-1 | FASB Staff Position on SFAS Interpretation No. 39, “Offsetting of Amounts Related to Certain Contracts” | |
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 | |
Genesee | Genesee Power Station Limited Partnership | |
GCR | Gas cost recovery | |
GWh | Gigawatt hour (a unit of energy equal to one million kilowatt hours) | |
Grayling | Grayling Generating Station Limited Partnership | |
HYDRA-CO | HYDRA-CO Enterprises, Inc. a wholly owned subsidiary of Enterprises | |
ICSID | International Centre for the Settlement of Investment Disputes | |
IPP | Independent power producer | |
IRS | Internal Revenue Service | |
ISFSI | Independent spent fuel storage installation | |
ITC | Income tax credit | |
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-based power plant in Morocco, in which CMS Generation formerly owned a 50 percent interest | |
kilovolts | Thousand volts (unit used to measure the difference in electrical pressure along a current) | |
kWh | Kilowatt-hour (a unit of energy equal to one thousand watt hours) |
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LS Power Group | LS Power Group, a non-affiliated company | |
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, each a non-affiliated company | |
mcf | One thousand cubic feet of gas | |
MCV Facility | A natural gas-fueled, combined-cycle cogeneration facility operated by the MCV Partnership | |
MCV GP II | Successor of CMS Midland, Inc., formerly a subsidiary of Consumers that had a 49 percent ownership interest in the MCV Partnership | |
MCV Partnership | Midland Cogeneration Venture Limited Partnership | |
MCV PPA | The Power Purchase Agreement between Consumers and the MCV Partnership with a35-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 | |
Midwest Energy Market | An energy market developed by the MISO to provide day-ahead and real-time market information and centralized dispatch for market participants | |
MISO | Midwest Independent Transmission System Operator, Inc. | |
MPSC | Michigan Public Service Commission | |
MRV | Market-Related Value of Plan assets | |
MSBT | Michigan Single Business Tax | |
MW | Megawatt (a unit of power equal to one million watts) | |
MWh | Megawatt hour (a unit of energy equal to one million watt hours) | |
NAV | Net Asset Values | |
Neyveli | ST-CMS Electric Company Private Ltd., a joint venture power project company located in India, in which CMS International Ventures formerly indirectly owned a 50 percent interest | |
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 | |
Palisades | Palisades nuclear power plant, formerly owned by Consumers | |
Panhandle | Panhandle Eastern Pipe Line Company, including its wholly owned 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 Corporation, a non-affiliated company |
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Pension Plan | The trusteed, non-contributory, defined benefit pension plan of Panhandle, Consumers and CMS Energy | |
Pension Protection Act | The Pension Protection Act of 2006, signed into law on August 17, 2006 | |
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 | |
PUHCA | Public Utility Holding Company Act | |
PURPA | Public Utility Regulatory Policies Act of 1978 | |
Quicksilver | Quicksilver Resources, Inc., 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 | |
RMRR | Routine maintenance, repair and replacement | |
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 | |
Securitization | A financing method authorized by statute and approved by the MPSC which allows a utility to sell its right to receive a portion of the rate payments received from its customers for the repayment of securitization bonds issued by a special purpose entity affiliated with such utility | |
SENECA | Sistema Electrico del Estado Nueva Esparta C.A., a former wholly owned subsidiary of CMS International Ventures | |
SERP | Supplemental Executive Retirement Plan | |
SFAS | Statement of Financial Accounting Standards | |
SFAS No. 13 | SFAS No. 13, “Accounting for Leases” | |
SFAS No. 71 | SFAS No. 71, “Accounting for the Effects of Certain Types of Regulation” | |
SFAS No. 87 | SFAS No. 87, “Employers’ Accounting for Pensions” | |
SFAS No. 98 | SFAS No. 98, “Accounting for Leases” | |
SFAS No. 106 | SFAS No. 106, “Employers’ Accounting for Postretirement Benefits Other Than Pensions” | |
SFAS No. 109 | SFAS No. 109, “Accounting for Income Taxes” | |
SFAS No. 123(R) | SFAS No. 123 (revised 2004), “Share-Based Payments” | |
SFAS No. 132(R) | SFAS No. 132 (revised 2003), “Employers’ Disclosures about Pensions and Other Postretirement Benefits” | |
SFAS No. 133 | SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities, as amended and interpreted” | |
SFAS No. 141(R) | SFAS No. 141 (revised 2007), “Business Combinations” | |
SFAS No. 142 | SFAS No. 142, “Goodwill and Other Intangible Assets” | |
SFAS No. 143 | SFAS No. 143, “Accounting for Asset Retirement Obligations” | |
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)” |
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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” | |
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 | |
Supplemental Environmental Programs | Environmentally beneficial projects which a party agrees to undertake as part of the settlement of an enforcement action, but which the party is not otherwise legally required to perform | |
Takoradi | A 200 MW open-cycle combustion turbine crude oil power plant located in Ghana, in which CMS Generation formerly owned a 90 percent interest | |
TAQA | Abu Dhabi National Energy Company, a subsidiary of Abu Dhabi Water and Electricity Authority, a non-affiliated company | |
T.E.S. Filer City | T.E.S. Filer City Station Limited Partnership | |
TGN | A natural gas transportation and pipeline business located in Argentina, in which CMS Gas Transmission formerly owned a 23.54 percent interest | |
TNEB | Tamil Nadu Electricity Board, a non-affiliated company | |
TRAC | Terminal Rental Adjustment Clause, a provision of a leasing agreement which permits or requires the rental price to be adjusted upward or downward by reference to the amount realized by the lessor under the agreement upon sale or other disposition of formerly leased property | |
Trunkline | CMS Trunkline Gas Company, LLC, formerly a wholly owned subsidiary of CMS Panhandle Holdings, LLC | |
Trust Preferred Securities | Securities representing an undivided beneficial interest in the assets of statutory business trusts, the interests of which have a preference with respect to certain trust distributions over the interests of either CMS Energy or Consumers, as applicable, as owner of the common beneficial interests of the trusts | |
TSR | Total shareholder return | |
Union | Utility Workers Union of America, AFL-CIO | |
VEBA | VEBA employees’ beneficiary association trusts accounts established to set aside specifically employer contributed assets to pay for future expenses of the OPEB plan | |
VIE | Variable interest entity | |
Wolverine | Wolverine Power Supply Cooperative, Inc., a non-affiliated company | |
Zeeland | A 935 MW gas-based power plant located in Zeeland, Michigan |
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2008 | 2008 Net | |||||||||
Summer Net | Generation | |||||||||
Number of Units and Year | Demonstrated | (Millions | ||||||||
Name and Location (Michigan) | Entering Service | Capability (MW) | of kWh) | |||||||
Coal Generation | ||||||||||
J H Campbell 1 & 2 — West Olive | 2 Units, 1962-1967 | 615 | 3,913 | |||||||
J H Campbell 3 — West Olive | 1 Unit, 1980 | 770 | (a) | 5,722 | ||||||
D E Karn — Essexville | 2 Units, 1959-1961 | 515 | 2,073 | |||||||
B C Cobb — Muskegon | 2 Units, 1956-1957 | 312 | 1,999 | |||||||
J R Whiting — Erie | 3 Units, 1952-1953 | 328 | 2,211 | |||||||
J C Weadock — Essexville | 2 Units, 1955-1958 | 310 | 1,783 | |||||||
Total coal generation | 2,850 | 17,701 | ||||||||
Oil/Gas Generation | ||||||||||
B C Cobb — Muskegon | 3 Units, 1999-2000(b) | 183 | — | |||||||
D E Karn — Essexville | 2 Units, 1975-1977 | 1,276 | 75 | |||||||
Zeeland — Zeeland | 1 Unit, 2002 | 538 | 552 | |||||||
Total oil/gas generation | 1,997 | 627 | ||||||||
Hydroelectric | ||||||||||
Conventional Hydro Generation | 13 Plants, 1906-1949 | 73 | 454 | |||||||
Ludington | 6 Units, 1973 | 955 | (c) | (382 | )(d) | |||||
Total hydroelectric | 1,028 | 72 | ||||||||
Gas/Oil Combustion Turbine | ||||||||||
Various Plants | 7 Plants, 1966-1971 | 331 | 8 | |||||||
Zeeland — Zeeland | 2 Units, 2001 | 330 | 210 | |||||||
Total gas/oil combustion turbine | 661 | 218 | ||||||||
Total owned generation | 6,536 | 18,618 | ||||||||
Purchased and Interchange Power(e) | 3,050 | (f) | 20,296 | (g) | ||||||
Total | 9,586 | 38,914 | ||||||||
(a) | Represents Consumers’ share of the capacity of the J H Campbell 3 unit, net of the 6.69 percent ownership interest of the Michigan Public Power Agency and Wolverine. |
(b) | Cobb 1-3 are retired coal-based units that were converted to gas-based. Units were placed back into service in the years indicated. | |
(c) | Represents Consumers’ 51 percent share of the capacity of Ludington. Detroit Edison owns 49 percent. | |
(d) | Represents Consumers’ share of net pumped storage generation. This facility electrically pumps water during off-peak hours for storage to generate electricity later during peak-demand hours. | |
(e) | Includes purchases from the Midwest Energy Market, long-term purchase contracts, options, spot market and other seasonal purchases. | |
(f) | Includes 1,240 MW of purchased contract capacity from the MCV Facility and 778 MW of purchased contract capacity from the Palisades plant. | |
(g) | Includes 6,837 million kWh of purchased energy from the Palisades plant and 3,789 million kWh of purchased energy from the MCV Facility. |
• | 398 miles of high-voltage distribution radial lines operating at 120 kilovolts or above; |
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• | 4,238 miles of high-voltage distribution overhead lines operating at 23 kilovolts and 46 kilovolts; | |
• | 17 subsurface miles of high-voltage distribution underground lines operating at 23 kilovolts and 46 kilovolts; | |
• | 55,734 miles of electric distribution overhead lines; | |
• | 9,872 miles of underground distribution lines; and | |
• | substations having an aggregate transformer capacity of 23,400,170 kilovoltamperes. |
Millions of kWh | ||||||||||||||||||||
Power Generated | 2008 | 2007 | 2006 | 2005 | 2004 | |||||||||||||||
Coal | 17,701 | 17,903 | 17,744 | 19,711 | 18,810 | |||||||||||||||
Nuclear | — | 1,781 | 5,904 | 6,636 | 5,346 | |||||||||||||||
Oil | 41 | 112 | 48 | 225 | 193 | |||||||||||||||
Gas | 804 | 129 | 161 | 356 | 38 | |||||||||||||||
Hydro | 454 | 416 | 485 | 387 | 445 | |||||||||||||||
Net pumped storage | (382 | ) | (478 | ) | (426 | ) | (516 | ) | (538 | ) | ||||||||||
Total net generation | 18,618 | 19,863 | 23,916 | 26,799 | 24,294 | |||||||||||||||
Cost per Million Btu | ||||||||||||||||||||
Fuel Consumed | 2008 | 2007 | 2006 | 2005 | 2004 | |||||||||||||||
Coal | $ | 2.01 | $ | 2.04 | $ | 2.09 | $ | 1.78 | $ | 1.43 | ||||||||||
Oil | 11.54 | 8.21 | 8.68 | 5.98 | 4.68 | |||||||||||||||
Gas | 10.94 | 10.29 | 8.92 | 9.76 | 10.07 | |||||||||||||||
Nuclear | — | 0.42 | 0.24 | 0.34 | 0.33 | |||||||||||||||
All Fuels(a) | 2.47 | 2.07 | 1.72 | 1.64 | 1.26 |
(a) | Weighted average fuel costs. |
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• | 26,451 miles of distribution mains; | |
• | 1,656 miles of transmission lines; | |
• | 7 compressor stations with a total of 159,250 installed horsepower; and | |
• | 15 gas storage fields with an aggregate storage capacity of 307 bcf and a working storage capacity of 142 bcf. |
Volume | ||||||||||
(dekatherms/day) | Expiration | |||||||||
ANR Pipeline Company | 50,000 | March | 2017 | |||||||
Great Lakes Gas Transmission, L.P | 100,000 | March | 2011 | |||||||
Great Lakes Gas Transmission, L.P | 50,000 | March | 2017 | |||||||
Trunkline Gas Company | 240,000 | October | 2012 | |||||||
Panhandle Eastern Pipe Line Company (starting 4/01/09) | 50,000 | October | 2009 | |||||||
Panhandle Eastern Pipe Line Company (starting 4/01/10) | 50,000 | October | 2010 | |||||||
Panhandle Eastern Pipe Line Company (starting 4/01/11) | 50,000 | October | 2011 | |||||||
Panhandle Eastern Pipe Line Company (starting 4/01/12) | 50,000 | October | 2012 | |||||||
Panhandle Eastern Pipe Line Company (starting 4/01/13) | 50,000 | October | 2013 | |||||||
Panhandle Eastern Pipe Line Company | 50,000 | October | 2013 | |||||||
Vector Pipeline | 50,000 | March | 2012 |
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Percentage of | ||||||||||||||||||
Gross Capacity | ||||||||||||||||||
Under Long-Term | ||||||||||||||||||
Primary | Ownership Interest | Gross Capacity | Contract | |||||||||||||||
Location | Fuel Type | (%) | (MW) | (%) | ||||||||||||||
California | Biomass | 37.8 | 36 | 100 | ||||||||||||||
Connecticut | Scrap tire | 100 | 31 | 0 | ||||||||||||||
Michigan | Coal | 50 | 70 | 100 | ||||||||||||||
Michigan | Natural gas | 100 | 710 | 92 | ||||||||||||||
Michigan | Natural gas | 100 | 224 | 0 | ||||||||||||||
Michigan | Biomass | 50 | 40 | 100 | ||||||||||||||
Michigan | Biomass | 50 | 38 | 100 | ||||||||||||||
North Carolina | Biomass | 50 | 50 | 0 | ||||||||||||||
Total | 1,199 | |||||||||||||||||
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• | a provision to streamline the regulatory process by generally allowing utilities to self-implement rates six months after filing, subject to refund, 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 no more than 10 percent of our weather-adjusted sales, | |
• | establishment of a certificate-of-necessity process at the MPSC for existing or proposed power plants, or power purchase agreements if the construction, investment, or purchase costs more than $500 million, | |
• | a requirement that 10 percent of electric sales volume come from renewable energy sources by 2015 with interim targets, and | |
• | new programs and incentives to encourage greater energy efficiency among customers, along with the requirement that the utility prepare energy cost savings optimization plans and achieve sales reduction targets beginning in 2009 through 2015. |
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• | industrial customers relocating all or a portion of their production capacity outside Consumers’ service territory for economic reasons; | |
• | municipalities owning or operating competing electric delivery systems; | |
• | customer self-generation; and | |
• | adjacent utilities that extend lines to customers in contiguous service territories. |
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Name | Age | Position | Period | |||
David W. Joos | 55 | President and CEO of CMS Energy | 2004-Present | |||
CEO of Consumers | 2004-Present | |||||
Chairman of the Board, President, CEO of Enterprises | 5/2008-Present | |||||
Director of CMS Energy | 2001-Present | |||||
Director of Consumers | 2001-Present | |||||
Director of Enterprises | 2000-Present | |||||
Chairman of the Board, CEO of Enterprises | 2003-5/2008 | |||||
President, Chief Operating Officer of CMS Energy | 2001-2004 | |||||
President, Chief Operating Officer of Consumers | 2001-2004 | |||||
Thomas J. Webb | 56 | Executive Vice President, CFO of CMS Energy | 2002-Present | |||
Executive Vice President, CFO of Consumers | 2002-Present | |||||
Executive Vice President, CFO of Enterprises | 2002-Present | |||||
Director of Enterprises | 2002-Present | |||||
James E. Brunner* | 56 | Senior Vice President and General Counsel of CMS Energy | 11/2006-Present | |||
Senior Vice President and General Counsel of Consumers | 11/2006-Present | |||||
Senior Vice President and General Counsel of Enterprises | 11/2007-Present | |||||
Director of Enterprises | 2006-Present | |||||
Senior Vice President of Enterprises | 2006-11/2007 | |||||
Senior Vice President, General Counsel and Chief Compliance Officer of CMS Energy | 5/2006-11/2006 | |||||
Senior Vice President, General Counsel and Chief Compliance Officer of Consumers | 5/2006-11/2006 | |||||
Senior Vice President, General Counsel and Interim Chief Compliance Officer of Consumers | 2/2006-5/2006 | |||||
Senior Vice President and General Counsel of CMS Energy | 2/2006-5/2006 | |||||
Senior Vice President and General Counsel of Consumers | 2/2006-5/2006 | |||||
Vice President and General Counsel of Consumers | 7/2004-2/2006 | |||||
Vice President of Consumers | 7/2004 |
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Name | Age | Position | Period | |||
John M. Butler ** | 44 | Senior Vice President of CMS Energy | 2006-Present | |||
Senior Vice President of Consumers | 2006-Present | |||||
Senior Vice President of Enterprises | 2006-Present | |||||
David G. Mengebier | 51 | Senior Vice President and Chief Compliance Officer of CMS Energy | 11/2006-Present | |||
Senior Vice President and Chief Compliance Officer of Consumers | 11/2006-Present | |||||
Senior Vice President of Enterprises | 2003-Present | |||||
Senior Vice President of CMS Energy | 2001-11/2006 | |||||
Senior Vice President of Consumers | 2001-11/2006 | |||||
John G. Russell | 51 | President and Chief Operating Officer of Consumers | 2004-Present | |||
Executive Vice President and President — Electric & Gas of Consumers | 7/2004-10/2004 | |||||
Executive Vice President, President and CEO — Electric of Consumers | 2001-2004 | |||||
Glenn P. Barba | 43 | Vice President, Controller and Chief Accounting Officer of CMS Energy | 2003-Present | |||
Vice President, Controller and Chief Accounting Officer of Consumers | 2003-Present | |||||
Vice President, Chief Accounting Officer and Controller of Enterprises | 11/2007-Present | |||||
Vice President and Chief Accounting Officer of Enterprises | 2003-11/2007 |
* | From 1993 until July 2004, Mr. Brunner was Assistant General Counsel of Consumers. | |
** | From 2002 until 2004, Mr. Butler was Global Compensation and Benefits Resource Center Director at Dow and from 2004 until June 2006, Mr. Butler was Human Resources Director, Manufacturing and Engineering at Dow. |
Name | Age | Position | Period | |||
David W. Joos | 55 | President and CEO of CMS Energy | 2004-Present | |||
CEO of Consumers | 2004-Present | |||||
Chairman of the Board, President, CEO of Enterprises | 5/2008-Present | |||||
Director of CMS Energy | 2001-Present | |||||
Director of Consumers | 2001-Present | |||||
Director of Enterprises | 2000-Present | |||||
Chairman of the Board, CEO of Enterprises | 2003-5/2008 | |||||
President, Chief Operating Officer of CMS Energy | 2001-2004 | |||||
President, Chief Operating Officer of Consumers | 2001-2004 | |||||
Thomas J. Webb | 56 | Executive Vice President, CFO of CMS Energy | 2002-Present | |||
Executive Vice President, CFO of Consumers | 2002-Present | |||||
Executive Vice President, CFO of Enterprises | 2002-Present | |||||
Director of Enterprises | 2002-Present |
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Name | Age | Position | Period | |||
James E. Brunner* | 56 | Senior Vice President and General Counsel of CMS Energy | 11/2006-Present | |||
Senior Vice President and General Counsel of Consumers | 11/2006-Present | |||||
Senior Vice President and General Counsel of Enterprises | 11/2007-Present | |||||
Director of Enterprises | 2006-Present | |||||
Senior Vice President of Enterprises | 2006-11/2007 | |||||
Senior Vice President, General Counsel and Chief Compliance Officer of CMS Energy | 5/2006-11/2006 | |||||
Senior Vice President, General Counsel and Chief Compliance Officer of Consumers | 5/2006-11/2006 | |||||
Senior Vice President, General Counsel and Interim Chief Compliance Officer of Consumers | 2/2006-5/2006 | |||||
Senior Vice President and General Counsel of CMS Energy | 2/2006-5/2006 | |||||
Senior Vice President and General Counsel of Consumers | 2/2006-5/2006 | |||||
Vice President and General Counsel of Consumers | 7/2004-2/2006 | |||||
Vice President of Consumers | 7/2004 | |||||
John M. Butler ** | 44 | Senior Vice President of CMS Energy | 2006-Present | |||
Senior Vice President of Consumers | 2006-Present | |||||
Senior Vice President of Enterprises | 2006-Present | |||||
David G. Mengebier | 51 | Senior Vice President and Chief Compliance Officer of CMS Energy | 11/2006-Present | |||
Senior Vice President and Chief Compliance Officer of Consumers | 11/2006-Present | |||||
Senior Vice President of Enterprises | 2003-Present | |||||
Senior Vice President of CMS Energy | 2001-11/2006 | |||||
Senior Vice President of Consumers | 2001-11/2006 | |||||
John G. Russell | 51 | President and Chief Operating Officer of Consumers | 2004-Present | |||
Executive Vice President and President — Electric & Gas of Consumers | 7/2004-10/2004 | |||||
Executive Vice President, President and CEO — Electric of Consumers | 2001-2004 | |||||
William E. Garrity | 60 | Senior Vice President of Consumers | 2005-Present | |||
Vice President of Consumers | 1999-2005 | |||||
Frank Johnson | 60 | Senior Vice President of Consumers | 2001-Present | |||
Glenn P. Barba | 43 | Vice President, Controller and Chief Accounting Officer of CMS Energy | 2003-Present | |||
Vice President, Controller and Chief Accounting Officer of Consumers | 2003-Present | |||||
Vice President, Chief Accounting Officer and Controller of Enterprises | 11/2007-Present | |||||
Vice President and Chief Accounting Officer of Enterprises | 2003-11/2007 |
* | From 1993 until July 2004, Mr. Brunner was Assistant General Counsel of Consumers. | |
** | From 2002 until 2004, Mr. Butler was Global Compensation and Benefits Resource Center Director at Dow and from 2004 until June 2006, Mr. Butler was Human Resources Director, Manufacturing and Engineering at Dow. |
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• | Corporate Governance Principles; | |
• | Codes of Conduct (Code of Business Conduct and Statement of Ethics); | |
• | Board committee charters (including the Audit Committee, the Compensation and Human Resources Committee, the Finance Committee and the Governance and Public Responsibility Committee); and | |
• | Articles of Incorporation (and amendments) and Bylaws. |
24
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• | a significant portion of its cash flow from operations will be dedicated to the payment of principal and interest on its indebtedness and will not be available for other purposes; | |
• | covenants contained in its existing debt arrangements require it to meet certain financial tests, which may affect its flexibility in planning for, and reacting to, changes in its business; | |
• | its ability to obtain additional financing for working capital, capital expenditures, acquisitions and general corporate and other purposes may be limited; | |
• | it may be at a competitive disadvantage to its competitors that are less leveraged; | |
• | its vulnerability to adverse economic and industry conditions may increase; and | |
• | its future credit ratings. |
25
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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. |
26
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• | retain specified preexisting liabilities, such as for taxes, pensions or environmental conditions; | |
• | indemnify the buyers against specified risks, including the inaccuracy of representations and warranties they make; and | |
• | make payments to the buyers depending on the outcome of post-closing adjustments, litigation, audits or other reviews. |
27
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28
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29
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30
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31
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32
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• | BUSINESS — GENERAL — Consumers — Consumers’ Properties — General; | |
• | BUSINESS — BUSINESS SEGMENTS — Consumers Electric Utility — Electric Utility Properties; | |
• | BUSINESS — BUSINESS SEGMENTS — Consumers Gas Utility — Gas Utility Properties; and | |
• | BUSINESS — BUSINESS SEGMENTS — Independent Power Production — Independent Power Production Properties. |
33
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34
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35
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36
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37
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MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
38
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FINANCIAL CONDITION AND RESULTS OF OPERATIONS
39
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Page | ||
Index to Financial Statements: | ||
CMS Energy Corporation | ||
CMS - 2 | ||
CMS - 3 | ||
CMS - 3 | ||
CMS - 5 | ||
CMS - 6 | ||
CMS - 13 | ||
CMS - 18 | ||
CMS - 23 | ||
CMS - 30 | ||
CMS - 31 | ||
Consolidated Financial Statements | ||
CMS - 34 | ||
CMS - 36 | ||
CMS - 38 | ||
CMS - 40 | ||
CMS - 42 | ||
CMS - 49 | ||
CMS - 53 | ||
CMS - 56 | ||
CMS - 67 | ||
CMS - 72 | ||
CMS - 73 | ||
CMS - 76 | ||
CMS - 82 | ||
CMS - 84 | ||
CMS - 87 | ||
CMS - 89 | ||
CMS - 91 | ||
CMS - 92 | ||
CMS - 94 | ||
CMS - 94 | ||
CMS - 97 | ||
CMS - 98 | ||
CMS - 99 |
40
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Page | ||
Consumers Energy Company | ||
Selected Financial Information | CE - 2 | |
Management’s Discussion and Analysis | ||
Forward-Looking Statements and Information | CE - 3 | |
Executive Overview | CE - 5 | |
Results of Operations | CE - 7 | |
Critical Accounting Policies | CE - 12 | |
Capital Resources and Liquidity | CE - 16 | |
Outlook | CE - 22 | |
Implementation of New Accounting Standards | CE - 27 | |
New Accounting Standards Not Yet Effective | CE - 28 | |
Consolidated Financial Statements | ||
Consolidated Statements of Income | CE - 31 | |
Consolidated Statements of Cash Flows | CE - 32 | |
Consolidated Balance Sheets | CE - 34 | |
Consolidated Statements of Common Stockholder’s Equity | CE - 36 | |
Notes to Consolidated Financial Statements: | ||
1. Corporate Structure and Accounting Policies | CE - 39 | |
2. Fair Value Measurements | CE - 45 | |
3. Asset Sales and Impairment Charges | CE - 48 | |
4. Contingencies | CE - 49 | |
5. Financings and Capitalization | CE - 56 | |
6. Financial and Derivative Instruments | CE - 59 | |
7. Retirement Benefits | CE - 61 | |
8. Asset Retirement Obligations | CE - 67 | |
9. Income Taxes | CE - 69 | |
10. Stock Based Compensation | CE - 71 | |
11. Leases | CE - 74 | |
12. Property, Plant, and Equipment | CE - 75 | |
13. Jointly Owned Regulated Utility Facilities | CE - 77 | |
14. Reportable Segments | CE - 77 | |
15. Quarterly Financial and Common Stock Information (Unaudited) | CE - 79 | |
Reports of Independent Registered Public Accounting Firms | CE - 80 |
41
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42
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CMS-1
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2008 | 2007 | 2006 | 2005 | 2004 | ||||||||||||||||||||
Operating revenue (in millions) | ($ | ) | 6,821 | 6,464 | 6,126 | 5,879 | 5,154 | |||||||||||||||||
Earnings from equity method investees (in millions) | ($ | ) | 5 | 40 | 89 | 125 | 115 | |||||||||||||||||
Income (loss) from continuing operations (in millions) | ($ | ) | 300 | (126 | ) | (133 | ) | (141 | ) | 112 | ||||||||||||||
Cumulative effect of change in accounting (in millions) | ($ | ) | — | — | — | — | (2 | ) | ||||||||||||||||
Income (loss) from discontinued operations (in millions) | ($ | ) | — | (89 | ) | 54 | 57 | 11 | ||||||||||||||||
Net income (loss) (in millions) | ($ | ) | 300 | (215 | ) | (79 | ) | (84 | ) | 121 | ||||||||||||||
Net income (loss) available to common stockholders (in millions) | ($ | ) | 289 | (227 | ) | (90 | ) | (94 | ) | 110 | ||||||||||||||
Average common shares outstanding (in thousands) | 223,931 | 222,644 | 219,857 | 211,819 | 168,553 | |||||||||||||||||||
Net income (loss) from continuing operations per average common share | ||||||||||||||||||||||||
CMS Energy — Basic | ($ | ) | 1.29 | (0.62 | ) | (0.66 | ) | (0.71 | ) | 0.59 | ||||||||||||||
— Diluted | ($ | ) | 1.23 | (0.62 | ) | (0.66 | ) | (0.71 | ) | 0.58 | ||||||||||||||
Cumulative effect of change in accounting per average common share | ||||||||||||||||||||||||
CMS Energy — Basic | ($ | ) | — | — | — | — | (0.01 | ) | ||||||||||||||||
— Diluted | ($ | ) | — | — | — | — | (0.01 | ) | ||||||||||||||||
Net income (loss) per average common share | ||||||||||||||||||||||||
CMS Energy — Basic | ($ | ) | 1.29 | (1.02 | ) | (0.41 | ) | (0.44 | ) | 0.65 | ||||||||||||||
— Diluted | ($ | ) | 1.23 | (1.02 | ) | (0.41 | ) | (0.44 | ) | 0.64 | ||||||||||||||
Cash provided by operations (in millions) | ($ | ) | 559 | 25 | 690 | 598 | 353 | |||||||||||||||||
Capital expenditures, excluding acquisitions and capital lease additions (in millions) | ($ | ) | 792 | 1,263 | 670 | 593 | 525 | |||||||||||||||||
Total assets (in millions)(a) | ($ | ) | 14,901 | 14,192 | 15,325 | 15,976 | 15,833 | |||||||||||||||||
Long-term debt, excluding current portion (in millions)(a) | ($ | ) | 5,859 | 5,385 | 6,200 | 6,778 | 6,414 | |||||||||||||||||
Long-term debt-related parties, excluding current portion (in millions) | ($ | ) | 178 | 178 | 178 | 178 | 504 | |||||||||||||||||
Non-current portion of capital leases and finance lease obligations (in millions) | ($ | ) | 206 | 225 | 42 | 308 | 315 | |||||||||||||||||
Total preferred stock (in millions) | ($ | ) | 287 | 294 | 305 | 305 | 305 | |||||||||||||||||
Cash dividends declared per common share | ($ | ) | 0.36 | 0.20 | — | — | — | |||||||||||||||||
Market price of common stock at year-end | ($ | ) | 10.11 | 17.38 | 16.70 | 14.51 | 10.45 | |||||||||||||||||
Book value per common share at year-end | ($ | ) | 10.88 | 9.46 | 10.03 | 10.53 | 10.62 | |||||||||||||||||
Number of employees at year-end (full-time equivalents) | 7,970 | 7,898 | 8,640 | 8,713 | 8,660 | |||||||||||||||||||
Electric Utility Statistics | ||||||||||||||||||||||||
Sales (billions of kWh) | 37 | 39 | 38 | 39 | 38 | |||||||||||||||||||
Customers (in thousands) | 1,814 | 1,799 | 1,797 | 1,789 | 1,772 | |||||||||||||||||||
Average sales rate per kWh | (c | ) | 9.48 | 8.65 | 8.46 | 6.73 | 6.88 | |||||||||||||||||
Gas Utility Statistics | ||||||||||||||||||||||||
Sales and transportation deliveries (bcf) | 338 | 340 | 309 | 350 | 385 | |||||||||||||||||||
Customers (in thousands)(b) | 1,713 | 1,710 | 1,714 | 1,708 | 1,691 | |||||||||||||||||||
Average sales rate per mcf | ($ | ) | 11.25 | 10.66 | 10.44 | 9.61 | 8.04 |
(a) | Until their sale in November 2006, we were the primary beneficiary of the MCV Partnership and the FMLP. As a result, we consolidated their assets, liabilities and activities into our consolidated financial statements through the date of sale and for the years ended December 31, 2005 and 2004. These partnerships had third-party obligations totaling $482 million at December 31, 2005 and $582 million at December 31, 2004. Property, plant and equipment serving as collateral for these obligations had a carrying value of $224 million at December 31, 2005 and $1.426 billion at December 31, 2004. | |
(b) | Excludes off-system transportation customers. |
CMS-2
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• | the price of CMS Energy Common Stock, capital and financial market conditions and the effect of these 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, | |
• | cost of capital and availability of capital, and | |
• | Pension Plan and postretirement benefit plans assets and required contributions, |
• | the market perception of the energy industry or of CMS Energy, Consumers, or any of their affiliates, | |
• | the 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 applicable laws, rules, regulations, principles or practices or in their interpretation, including with respect to taxes, environmental and accounting matters, that could have an impact on our business, | |
• | the impact of any future regulations or laws regarding: |
• | carbon dioxide, mercury and other greenhouse gas emissions, | |
• | limitations on the use of coal-based electric power plants, and | |
• | renewable portfolio standards and energy efficiency mandates, |
• | national, regional, and local economic, competitive, and regulatory policies, conditions and developments, | |
• | adverse regulatory or legal interpretations or decisions, including those related to environmental laws and regulations, and potential environmental remediation costs associated with these interpretations or decisions, including but not limited to those that may affect Bay Harbor and Consumers’ RMRR classification under NSR regulations, |
CMS-3
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• | potentially adverse regulatory treatment or failure to receive timely regulatory orders concerning a number of significant questions currently or potentially before the MPSC, including: |
• | adequate and timely recovery of : |
• | Clean Air Act capital and operating costs and other environmental and safety-related expenditures, | |
• | power supply and natural gas supply costs, | |
• | operation and maintenance expenses at Consumers, | |
• | additional utility rate-based investments, | |
• | increased MISO energy and transmission costs, | |
• | costs associated with energy efficiency investments and state or federally mandated renewable resource standards, | |
• | 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 foreign or domestic governments 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, and their impact on our cash flow and working capital, | |
• | the impact of construction material prices and 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 these 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, and stability of insurance providers, | |
• | technological developments in energy production, delivery, usage, and storage, | |
• | achievement of capital expenditure and operating expense goals, | |
• | 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, | |
• | changes in financial or regulatory accounting principles or policies, |
CMS-4
Table of Contents
• | a possible future requirement to comply with International Financial Reporting Standards, which differ from GAAP in various ways, including the present lack of special accounting treatment for regulated activities similar to that provided under SFAS No. 71, | |
• | 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 the gas price reporting litigation and the pending appeal of the Quicksilver litigation, | |
• | population growth or decline in the geographic areas where we do business, | |
• | changes in the economic and financial viability of our suppliers, customers, and other counterparties and the continued ability of these third parties to perform their obligations to us, | |
• | the effectiveness of our risk management policies and procedures, | |
• | our ability to achieve generation planning goals and the occurrence and duration of planned or unplanned generation outages, | |
• | adverse outcomes regarding tax positions due to the difficulty in quantifying tax effects of business decisions and reserves, and | |
• | other business or investment matters that may be disclosed from time to time in CMS Energy’s or Consumers’ SEC filings, or in other publicly issued written documents. |
• | 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 ratings. |
CMS-5
Table of Contents
• | 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. |
Years Ended December 31 | 2008 | 2007 | 2006 | |||||||||
In Millions (Except for Per Share Amounts) | ||||||||||||
Net Earnings (Loss) Available to Common Stockholders | $ | 289 | $ | (227 | ) | $ | (90 | ) | ||||
Basic Earnings (Loss) Per Share | $ | 1.29 | $ | (1.02 | ) | $ | (0.41 | ) | ||||
Diluted Earnings (Loss) Per Share | $ | 1.23 | $ | (1.02 | ) | $ | (0.41 | ) | ||||
Years Ended December 31 | 2008 | 2007 | Change | 2007 | 2006 | Change | ||||||||||||||||||
In Millions | ||||||||||||||||||||||||
Electric Utility | $ | 271 | $ | 196 | $ | 75 | $ | 196 | $ | 199 | $ | (3 | ) | |||||||||||
Gas Utility | 89 | 87 | 2 | 87 | 37 | 50 | ||||||||||||||||||
Enterprises | 14 | (412 | ) | 426 | (412 | ) | (227 | ) | (185 | ) | ||||||||||||||
Corporate Interest and Other | (85 | ) | (9 | ) | (76 | ) | (9 | ) | (153 | ) | 144 | |||||||||||||
Discontinued Operations | — | (89 | ) | 89 | (89 | ) | 54 | (143 | ) | |||||||||||||||
Net Earnings (Loss) Available to Common Stockholders | $ | 289 | $ | (227 | ) | $ | 516 | $ | (227 | ) | $ | (90 | ) | $ | (137 | ) | ||||||||
CMS-6
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In Millions | ||||
• absence of costs incurred by CMS ERM due to the termination of certain electricity sales agreements and the rescission of a contract with Quicksilver, | $ | 217 | ||
• absence of impairment charges related to international businesses sold in 2007, | 133 | |||
• increase in net earnings at our electric and gas utility segments primarily due to favorable MPSC rate orders, | 129 | |||
• absence of a net loss on the disposal of discontinued operations in 2007, | 89 | |||
• other net increase at Enterprises and corporate and other primarily due to reduced interest and operating and maintenance expense, and the absence of early debt retirement premiums paid in 2007, | 37 | |||
• elimination of certain costs at our electric utility from the power purchase agreement with the MCV Partnership, | 29 | |||
• absence of an increase in the provision for environmental remediation costs at Bay Harbor, | 29 | |||
• absence of a 2007 net tax benefit, associated with the sale of assets, recorded at Enterprises and corporate and other, | (53 | ) | ||
• decreased deliveries at our electric utility segment, | (51 | ) | ||
• decrease due to a charge that recognized an other than temporary decline in the fair value of our SERP investments in 2008 which replaced a gain on the sale of SERP assets in 2007, and | (30 | ) | ||
• other combined net decrease at our electric and gas utility segments due primarily to higher depreciation expense offset by a reduction in nuclear operating and maintenance costs. | (13 | ) | ||
Total change | $ | 516 | ||
CMS-7
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In Millions | ||||||
• | costs incurred by CMS ERM due to the rescission of a contract with Quicksilver and the termination of certain electricity sales agreements, | $ | (217 | ) | ||
• | impact from discontinued operations as losses recorded on the disposal of international businesses in 2007 replaced earnings recorded for these businesses in 2006, | (143 | ) | |||
• | reduction in earnings from equity method investees primarily due to the absence of earnings from international businesses sold in 2007, | (32 | ) | |||
• | increase in the provision for environmental remediation costs at Bay Harbor, | (29 | ) | |||
• | additional taxes at our corporate and Enterprises segments as the absence of tax benefits associated with the resolution of an IRS income tax audit in 2006 more than offset the net tax benefits associated with the sale of international businesses recorded in 2007, | (16 | ) | |||
• | absence of a 2006 net charge resulting from our agreement to settle shareholder class action lawsuits, | 80 | ||||
• | absence of activities related to our former interest in the MCV Partnership including asset impairments and mark-to-market impacts, | 60 | ||||
• | earnings from non-MCV-related mark-to-market impacts primarily at CMS ERM, as mark-to-market gains in 2007 replaced losses in 2006, | 49 | ||||
• | increase in combined net earnings at our gas utility and electric utility, primarily due to the positive effects of the MPSC gas rate orders and increased weather-related deliveries, | 47 | ||||
• | decrease in non-MCV-related asset impairment charges, net of insurance reimbursement, and | 38 | ||||
• | additional increase at Enterprises and corporate primarily due to gains on the sale of international businesses in 2007, a reduction in interest expense, and increased interest income. | 26 | ||||
Total change | $ | (137 | ) | |||
CMS-8
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Years Ended December 31 | 2008 | 2007 | Change | 2007 | 2006 | Change | ||||||||||||||||||
In Millions | ||||||||||||||||||||||||
Net income | $ | 271 | $ | 196 | $ | 75 | $ | 196 | $ | 199 | $ | (3 | ) | |||||||||||
Reasons for the change: | ||||||||||||||||||||||||
Electric deliveries and rate increase | $ | 89 | $ | (118 | ) | |||||||||||||||||||
Surcharge revenue | 15 | 6 | ||||||||||||||||||||||
Power supply costs and related revenue | 18 | (17 | ) | |||||||||||||||||||||
Non-commodity revenue | (14 | ) | (12 | ) | ||||||||||||||||||||
Depreciation and other operating expenses | 40 | 150 | ||||||||||||||||||||||
Other income | (46 | ) | 26 | |||||||||||||||||||||
General taxes | 15 | (15 | ) | |||||||||||||||||||||
Interest charges | 11 | (18 | ) | |||||||||||||||||||||
Income taxes | (53 | ) | (5 | ) | ||||||||||||||||||||
Total change | $ | 75 | $ | (3 | ) | |||||||||||||||||||
CMS-9
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CMS-10
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Years Ended December 31 | 2008 | 2007 | Change | 2007 | 2006 | Change | ||||||||||||||||||
In Millions | ||||||||||||||||||||||||
Net income | $ | 89 | $ | 87 | $ | 2 | $ | 87 | $ | 37 | $ | 50 | ||||||||||||
Reasons for the change: | ||||||||||||||||||||||||
Gas deliveries and rate increase | $ | 44 | $ | 91 | ||||||||||||||||||||
Gas wholesale and retail services, other gas revenues, and other income | (28 | ) | 14 | |||||||||||||||||||||
Other operating expenses | (24 | ) | (19 | ) | ||||||||||||||||||||
General taxes and depreciation | (1 | ) | (11 | ) | ||||||||||||||||||||
Interest charges | 9 | 4 | ||||||||||||||||||||||
Income taxes | 2 | (29 | ) | |||||||||||||||||||||
Total change | $ | 2 | $ | 50 | ||||||||||||||||||||
CMS-11
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Years Ended December 31 | 2008 | 2007 | Change | 2007 | 2006 | Change | ||||||||||||||||||
In Millions | ||||||||||||||||||||||||
Net income (loss) | $ | 14 | $ | (412 | ) | $ | 426 | $ | (412 | ) | $ | (227 | ) | $ | (185 | ) | ||||||||
Reasons for the change: | ||||||||||||||||||||||||
CMS ERM | $ | 242 | $ | (144 | ) | |||||||||||||||||||
Activities associated with the sale of international assets | 164 | (58 | ) | |||||||||||||||||||||
Environmental remediation | 29 | (23 | ) | |||||||||||||||||||||
DIG | (7 | ) | (22 | ) | ||||||||||||||||||||
Other | (2 | ) | 2 | |||||||||||||||||||||
The MCV Partnership | — | 60 | ||||||||||||||||||||||
Total Change | $ | 426 | $ | (185 | ) | |||||||||||||||||||
CMS-12
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Years Ended December 31 | 2008 | 2007 | Change | 2007 | 2006 | Change | ||||||||||||||||||
In Millions | ||||||||||||||||||||||||
Net loss | $ | (85 | ) | $ | (9 | ) | $ | (76 | ) | $ | (9 | ) | $ | (153 | ) | $ | 144 | |||||||
CMS-13
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• | the nature of the assets, | |
• | projected future economic benefits, | |
• | regulatory and political environments, | |
• | historical and future cash flow and profitability measurements, and | |
• | other external market conditions and factors. |
CMS-14
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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. |
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December 31 | 2008 | 2007 | ||||||
In Millions | ||||||||
Variable-rate financing — before-tax annual earnings exposure | $ | 1 | $ | 2 | ||||
Fixed-rate financing — potentialreductionin fair value(a) | 208 | 172 |
(a) | Fair value reduction could only be realized if we transferred all of our fixed-rate financing to other creditors. |
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December 31 | 2008 | 2007 | ||||||
In Millions | ||||||||
Potentialreductionin fair value: | ||||||||
Fixed price fuel contracts | $ | 1 | $ | — | ||||
Electricity swaps | — | 4 | ||||||
Natural gas swaps and futures | 1 | 1 |
December 31 | 2008 | 2007 | ||||||
In Millions | ||||||||
Potentialreductionin fair value of available-for-sale: | ||||||||
Equity securities | $ | 4 | $ | 6 | ||||
Debt securities | 1 | — | ||||||
(Primarily SERP investments) |
• | 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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Expected | Pension Cost | OPEB Cost | Pension Contribution | OPEB Contribution | ||||||||||||
In Millions | ||||||||||||||||
2009 | $ | 101 | $ | 77 | $ | 300 | $ | 53 | ||||||||
2010 | 91 | 74 | 127 | 53 | ||||||||||||
2011 | 88 | 72 | 105 | 53 |
• | 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 by holders for conversion, |
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• | working capital needs, | |
• | collateral requirements, and | |
• | access to credit markets. |
• | in September 2008, Consumers issued $350 million FMB, and | |
• | in September 2008, Consumers entered into a $150 million revolving credit agreement. |
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Years Ended December 31 | 2008 | 2007 | Change | 2007 | 2006 | Change | ||||||||||||||||||
In Millions | ||||||||||||||||||||||||
Net cash provided by operating activities | $ | 559 | $ | 25 | $ | 534 | $ | 25 | $ | 690 | $ | (665 | ) | |||||||||||
Reasons for the change: | ||||||||||||||||||||||||
Net income (loss) | $ | 515 | $ | (136 | ) | |||||||||||||||||||
Non-cash operating activities(a) | (154 | ) | 59 | |||||||||||||||||||||
Accounts receivable and accrued revenue | 371 | (526 | ) | |||||||||||||||||||||
Inventories | (61 | ) | 95 | |||||||||||||||||||||
Accounts payable | 40 | (2 | ) | |||||||||||||||||||||
Postretirement benefits contributions | 133 | (115 | ) | |||||||||||||||||||||
Shareholder class action settlement payment | 125 | (125 | ) | |||||||||||||||||||||
Electric sales contract termination payment | (275 | ) | — | |||||||||||||||||||||
MCV Partnership gas supplier funds on deposit | — | 147 | ||||||||||||||||||||||
Regulatory liabilities | (64 | ) | (173 | ) | ||||||||||||||||||||
Other assets and liabilities | (96 | ) | 111 | |||||||||||||||||||||
Total change | $ | 534 | $ | (665 | ) | |||||||||||||||||||
(a) | Represents adjustments to reconcile net income (loss) to net cash provided by operating activities, including depreciation and amortization, deferred income taxes, postretirement benefits expense, asset impairment charges, and other non-cash charges. |
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Years Ended December 31 | 2008 | 2007 | Change | 2007 | 2006 | Change | ||||||||||||||||||
In Millions | ||||||||||||||||||||||||
Net cash provided by (used in) investing activities | $ | (839 | ) | $ | 662 | $ | (1,501 | ) | $ | 662 | $ | (751 | ) | $ | 1,413 | |||||||||
Reasons for the change: | ||||||||||||||||||||||||
Proceeds from asset sales, net of cash relinquished | $ | (1,601 | ) | $ | 1,683 | |||||||||||||||||||
Proceeds from nuclear decommissioning trust funds | (333 | ) | 311 | |||||||||||||||||||||
Capital expenditures | 471 | (593 | ) | |||||||||||||||||||||
Other investing | (38 | ) | 12 | |||||||||||||||||||||
Total change | $ | (1,501 | ) | $ | 1,413 | |||||||||||||||||||
Years Ended December 31 | 2008 | 2007 | Change | 2007 | 2006 | Change | ||||||||||||||||||
In Millions | ||||||||||||||||||||||||
Net cash provided by (used in) financing activities | $ | 145 | $ | (692 | ) | $ | 837 | $ | (692 | ) | $ | (436 | ) | $ | (256 | ) | ||||||||
Reasons for the change: | ||||||||||||||||||||||||
Proceeds from notes, bonds and other long-term debt | $ | 881 | $ | 415 | ||||||||||||||||||||
Retirement of notes, bonds and other long-term debt | (35 | ) | (602 | ) | ||||||||||||||||||||
Other financing | (9 | ) | (69 | ) | ||||||||||||||||||||
Total change | $ | 837 | $ | (256 | ) | |||||||||||||||||||
(1) Minimum | Result at | |||||
(2) Maximum | December 31, | |||||
Credit Agreement or Facility | Ratio | Requirement | 2008 | |||
CMS senior notes indenture | Interest Coverage | (1)1.7 to 1.0 | 3.89 to 1.0 | |||
CMS revolving credit agreement | Debt to EBITDA | (2)7.0 to 1.0 | 4.71 to 1.0 | |||
CMS revolving credit agreement | Interest Coverage | (1)1.2 to 1.0 | 4.45 to 1.0 | |||
Consumers’ credit agreements | Debt to Capital | (2)0.7 to 1.0 | 0.52 to 1.0 |
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Issuer | Securities | S&P | Moody’s | Fitch | ||||
CMS Energy | Senior Unsecured Debt | BB+ | Ba1 | BB+ | ||||
CMS Energy | Secured Bank Credit Facilities | − | Baa3 | BBB- | ||||
CMS Energy | Trust Preferred Securities (Long-term debt - related parties) | BB | Ba2 | BB | ||||
Consumers | Senior Secured Debt (FMB) | BBB | Baa1 | BBB+ | ||||
Consumers | Senior Unsecured Debt | BBB- | Baa2 | BBB | ||||
Consumers | Securitization Bonds | AAA | Aaa | AAA | ||||
Consumers | Senior Secured Insured Quarterly Notes | AAA | Aaa | AAA | ||||
Consumers | Tax Exempt Bonds | BBB | Baa1 | − | ||||
Consumers | Tax Exempt Bonds, LOC backed | AAA | Aaa | − |
Payments Due | ||||||||||||||||||||
Less Than | One to | Three to | More Than | |||||||||||||||||
Contractual Obligations at December 31, 2008 | Total | One Year | Three Years | Five Years | Five Years | |||||||||||||||
In Millions | ||||||||||||||||||||
Long-term debt(a) | $ | 6,348 | $ | 489 | $ | 1,037 | $ | 1,197 | $ | 3,625 | ||||||||||
Long-term debt — related parties(a) | 178 | — | — | — | 178 | |||||||||||||||
Interest payments on long-term debt(b) | 2,707 | 341 | 591 | 461 | 1,314 | |||||||||||||||
Capital and finance leases(c) | 231 | 25 | 47 | 41 | 118 | |||||||||||||||
Interest payments on capital and finance leases(d) | 122 | 13 | 25 | 22 | 62 | |||||||||||||||
Operating leases(e) | 237 | 27 | 51 | 44 | 115 | |||||||||||||||
Purchase obligations(f) | 14,699 | 2,201 | 2,391 | 1,545 | 8,562 | |||||||||||||||
Total contractual obligations | $ | 24,522 | $ | 3,096 | $ | 4,142 | $ | 3,310 | $ | 13,974 | ||||||||||
(a) | Principal amounts due on outstanding debt obligations, current and long-term, at December 31, 2008. For additional details on long-term debt, see Note 5, Financings and Capitalization. | |
(b) | Currently scheduled interest payments on both variable and fixed-rate long-term debt and long-term debt — related parties, current and long-term. Variable interest payments are based on contractual rates in effect at December 31, 2008. | |
(c) | Principal portion of lease payments under our capital and finance leases, comprised mainly of leased service vehicles, leased office furniture, and certain power purchase agreements. | |
(d) | Imputed interest on the capital leases. | |
(e) | Minimum noncancelable lease payments under our leases of railroad cars, certain vehicles, and miscellaneous office buildings and equipment, which are accounted for as operating leases. |
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(f) | Long-term contracts for purchase of commodities and services. These obligations include operating contracts used to assure adequate supply with generating facilities that meet PURPA requirements. These commodities and services include: |
• | natural gas and associated transportation, | |
• | electricity, and | |
• | coal and associated transportation. |
Years Ending December 31 | 2009 | 2010 | 2011 | |||||||||
In Millions | ||||||||||||
Electric utility operations(a)(b) | $ | 574 | $ | 847 | $ | 705 | ||||||
Gas utility operations(b) | 276 | 287 | 251 | |||||||||
Enterprises | 1 | 1 | — | |||||||||
Total | $ | 851 | $ | 1,135 | $ | 956 | ||||||
(a) | These amounts include estimates for capital expenditures that may be required by revisions to the Clean Air Act’s national air quality standards or potential renewable energy programs. | |
(b) | These amounts include estimates for capital expenditures related to information technology projects, facility improvements, and vehicle leasing. |
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• | energy efficiency, | |
• | demand management, | |
• | expanded use of renewable energy, and | |
• | development of new power plants and pursuit of additional power purchase agreements to complement existing generating sources. |
• | whether additional generation is needed, and | |
• | whether other feasible and prudent alternatives to a new coal plant exist that would better protect the environment, including potential demand reduction measures and purchasing power from existing sources. |
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• | energy conservation measures and results of energy efficiency programs, | |
• | fluctuations in weather, and | |
• | changes in economic conditions, including utilization and expansion or contraction of manufacturing facilities, population trends, and housing activity. |
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• | fluctuations in weather, | |
• | 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. |
• | the impact of indemnity and environmental remediation obligations at Bay Harbor, |
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• | 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. |
• | extends the protection period from March 31, 2009 to April 30, 2009, | |
• | includes protection for physically or mentally disabled customers of record, | |
• | expands the qualifications for low income shutoff protection, and | |
• | gives customers the payment options. |
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Years Ended December 31 | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
In Millions | ||||||||||||
Operating Revenue | $ | 6,821 | $ | 6,464 | $ | 6,126 | ||||||
Earnings from Equity Method Investees | 5 | 40 | 89 | |||||||||
Operating Expenses | ||||||||||||
Fuel for electric generation | 600 | 523 | 711 | |||||||||
Fuel costs mark-to-market at the MCV Partnership | — | — | 204 | |||||||||
Purchased and interchange power | 1,335 | 1,407 | 709 | |||||||||
Cost of gas sold | 2,277 | 2,172 | 2,131 | |||||||||
Electric sales contract termination | — | 279 | — | |||||||||
Other operating expenses | 837 | 976 | 1,136 | |||||||||
Maintenance | 193 | 201 | 297 | |||||||||
Depreciation and amortization | 589 | 540 | 550 | |||||||||
General taxes | 204 | 222 | 151 | |||||||||
Asset impairment charges, net of insurance recoveries | — | 204 | 459 | |||||||||
Gain on asset sales, net | (9 | ) | (21 | ) | (79 | ) | ||||||
6,026 | 6,503 | 6,269 | ||||||||||
Operating Income (Loss) | 800 | 1 | (54 | ) | ||||||||
Other Income (Deductions) | ||||||||||||
Interest and dividends | 30 | 96 | 76 | |||||||||
Regulatory return on capital expenditures | 33 | 31 | 26 | |||||||||
Other income | 15 | 41 | 31 | |||||||||
Other expense | (37 | ) | (39 | ) | (21 | ) | ||||||
41 | 129 | 112 | ||||||||||
Fixed Charges | ||||||||||||
Interest on long-term debt | 349 | 382 | 448 | |||||||||
Interest on long-term debt — related parties | 14 | 14 | 15 | |||||||||
Other interest | 33 | 48 | 27 | |||||||||
Capitalized interest | (4 | ) | (6 | ) | (10 | ) | ||||||
Preferred dividends of subsidiaries | — | — | 3 | |||||||||
392 | 438 | 483 | ||||||||||
Income (Loss) Before Income Taxes | 449 | (308 | ) | (425 | ) | |||||||
Income Tax Expense (Benefit) | 142 | (195 | ) | (188 | ) | |||||||
Income (Loss) Before Minority Interests (Obligations), Net | 307 | (113 | ) | (237 | ) | |||||||
Minority Interests (Obligations), Net | 7 | 13 | (104 | ) | ||||||||
Income (Loss) From Continuing Operations | 300 | (126 | ) | (133 | ) | |||||||
Income (Loss) From Discontinued Operations, Net of Tax (Tax Benefit) of $1, $(1), and $32 | — | (89 | ) | 54 | ||||||||
Net Income (Loss) | 300 | (215 | ) | (79 | ) | |||||||
Preferred Dividends | 11 | 11 | 11 | |||||||||
Redemption Premium on Preferred Stock | — | 1 | — | |||||||||
Net Income (Loss) Available to Common Stockholders | $ | 289 | $ | (227 | ) | $ | (90 | ) | ||||
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Years Ended December 31 | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
In Millions, Except Per | ||||||||||||
Share Amounts | ||||||||||||
CMS Energy | ||||||||||||
Net Income (Loss) | ||||||||||||
Net Income (Loss) Available to Common Stockholders | $ | 289 | $ | (227 | ) | $ | (90 | ) | ||||
Basic Earnings (Loss) Per Average Common Share | ||||||||||||
Income (Loss) from Continuing Operations | $ | 1.29 | $ | (0.62 | ) | $ | (0.66 | ) | ||||
Income (Loss) from Discontinued Operations | — | (0.40 | ) | 0.25 | ||||||||
Net Income (Loss) Attributable to Common Stock | $ | 1.29 | $ | (1.02 | ) | $ | (0.41 | ) | ||||
Diluted Earnings (Loss) Per Average Common Share | ||||||||||||
Income (Loss) from Continuing Operations | $ | 1.23 | $ | (0.62 | ) | $ | (0.66 | ) | ||||
Income (Loss) from Discontinued Operations | — | (0.40 | ) | 0.25 | ||||||||
Net Income (Loss) Attributable to Common Stock | $ | 1.23 | $ | (1.02 | ) | $ | (0.41 | ) | ||||
Dividends Declared Per Common Share | $ | 0.36 | $ | 0.20 | $ | — | ||||||
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Years Ended December 31 | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
In Millions | ||||||||||||
Cash Flows from Operating Activities | ||||||||||||
Net income (loss) | $ | 300 | $ | (215 | ) | $ | (79 | ) | ||||
Adjustments to reconcile net income (loss) to net cash provided by operating activities | ||||||||||||
Depreciation and amortization, net of nuclear decommissioning of $-, $4, and $6 | 589 | 545 | 576 | |||||||||
Deferred income taxes and investment tax credit | 129 | (221 | ) | (271 | ) | |||||||
Minority interests (obligations), net | 7 | (8 | ) | (98 | ) | |||||||
Asset impairment charges, net of insurance recoveries | — | 204 | 459 | |||||||||
Postretirement benefits expense | 144 | 131 | 131 | |||||||||
Electric sales contract termination | — | 279 | — | |||||||||
Shareholder class action settlement expense | — | — | 125 | |||||||||
Fuel costs mark-to-market at the MCV Partnership | — | — | 204 | |||||||||
Regulatory return on capital expenditures | (33 | ) | (31 | ) | (26 | ) | ||||||
Capital lease and other amortization | 36 | 55 | 44 | |||||||||
Bad debt expense | 51 | 37 | 28 | |||||||||
Loss (gain) on the sale of assets | (9 | ) | 112 | (79 | ) | |||||||
Earnings from equity method investees | (5 | ) | (40 | ) | (89 | ) | ||||||
Cash distributions from equity method investees | 4 | 18 | 75 | |||||||||
Postretirement benefits contributions | (51 | ) | (184 | ) | (69 | ) | ||||||
Shareholder class action settlement payment | — | (125 | ) | — | ||||||||
Electric sales contract termination payment | (275 | ) | — | — | ||||||||
Changes in other assets and liabilities: | ||||||||||||
Decrease (increase) in accounts receivable and accrued revenues | (80 | ) | (451 | ) | 75 | |||||||
Decrease (increase) in accrued power supply and gas revenue | 35 | 99 | (91 | ) | ||||||||
Increase in inventories | (71 | ) | (10 | ) | (105 | ) | ||||||
Decrease in accounts payable | (5 | ) | (45 | ) | (43 | ) | ||||||
Increase (decrease) in accrued expenses | (31 | ) | (31 | ) | 39 | |||||||
Decrease in the MCV Partnership gas supplier funds on deposit | — | — | (147 | ) | ||||||||
Increase (decrease) in other current and non-current regulatory liabilities | (178 | ) | (114 | ) | 59 | |||||||
Decrease in other current and non-current assets | 12 | 37 | 58 | |||||||||
Decrease in other current and non-current liabilities | (10 | ) | (17 | ) | (86 | ) | ||||||
Net cash provided by operating activities | 559 | 25 | 690 | |||||||||
Cash Flows from Investing Activities | ||||||||||||
Capital expenditures (excludes assets placed under capital lease) | (792 | ) | (1,263 | ) | (670 | ) | ||||||
Cost to retire property | (34 | ) | (28 | ) | (78 | ) | ||||||
Restricted cash and restricted short-term investments | 1 | 49 | 124 | |||||||||
Investments in nuclear decommissioning trust funds | — | (1 | ) | (21 | ) | |||||||
Proceeds from nuclear decommissioning trust funds | — | 333 | 22 | |||||||||
Maturity of the MCV Partnership restricted investment securities held-to-maturity | — | — | 130 | |||||||||
Purchase of the MCV Partnership restricted investment securities held-to-maturity | — | — | (131 | ) | ||||||||
Proceeds from sale of assets | 3 | 1,717 | 69 | |||||||||
Cash relinquished from sale of assets | — | (113 | ) | (148 | ) | |||||||
Increase in non-current notes receivable | (19 | ) | (32 | ) | (50 | ) | ||||||
Other investing | 2 | — | 2 | |||||||||
Net cash provided by (used in) investing activities | (839 | ) | 662 | (751 | ) | |||||||
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Years Ended December 31 | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
In Millions | ||||||||||||
Cash Flows from Financing Activities | ||||||||||||
Proceeds from notes, bonds, and other long-term debt | 1,396 | 515 | 100 | |||||||||
Issuance of common stock | 9 | 15 | 8 | |||||||||
Retirement of bonds and other long-term debt | (1,130 | ) | (1,095 | ) | (493 | ) | ||||||
Redemption of preferred stock | (1 | ) | (32 | ) | — | |||||||
Payment of common stock dividends | (82 | ) | (45 | ) | — | |||||||
Payment of preferred stock dividends | (13 | ) | (13 | ) | (13 | ) | ||||||
Payment of capital lease and financial lease obligations | (26 | ) | (20 | ) | (26 | ) | ||||||
Debt issuance costs, financing fees, and other | (8 | ) | (17 | ) | (12 | ) | ||||||
Net cash provided by (used in) financing activities | 145 | (692 | ) | (436 | ) | |||||||
Effect of Exchange Rates on Cash | — | 2 | 1 | |||||||||
Net Decrease in Cash and Cash Equivalents | (135 | ) | (3 | ) | (496 | ) | ||||||
Cash and Cash Equivalents, Beginning of Period | 348 | 351 | 847 | |||||||||
Cash and Cash Equivalents, End of Period | $ | 213 | $ | 348 | $ | 351 | ||||||
Other cash flow activities and non-cash investing and financing activities were: | ||||||||||||
Cash transactions | ||||||||||||
Interest paid (net of amounts capitalized) | $ | 364 | $ | 432 | $ | 487 | ||||||
Income taxes paid (net of refunds of $2, $- , and $2) | 3 | 14 | 98 | |||||||||
Non-cash transactions | ||||||||||||
Other assets placed under capital lease | $ | 5 | $ | 229 | $ | 7 | ||||||
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December 31 | ||||||||
2008 | 2007 | |||||||
In Millions | ||||||||
ASSETS | ||||||||
Plant and Property (At cost) | ||||||||
Electric utility | $ | 8,965 | $ | 8,555 | ||||
Gas utility | 3,622 | 3,467 | ||||||
Enterprises | 390 | 391 | ||||||
Other | 33 | 34 | ||||||
13,010 | 12,447 | |||||||
Less accumulated depreciation, depletion and amortization | 4,428 | 4,166 | ||||||
8,582 | 8,281 | |||||||
Constructionwork-in-progress | 608 | 447 | ||||||
9,190 | 8,728 | |||||||
Equity Investments | ||||||||
Enterprises | 5 | 6 | ||||||
Other | 6 | 5 | ||||||
11 | 11 | |||||||
Current Assets | ||||||||
Cash and cash equivalents at cost, which equals fair value | 213 | 348 | ||||||
Restricted cash at cost, which equals fair value | 35 | 34 | ||||||
Accounts receivable and accrued revenue, less allowances of $26 in 2008 and $21 in 2007 | 851 | 837 | ||||||
Notes receivable | 95 | 68 | ||||||
Accrued power supply and gas revenue | 7 | 45 | ||||||
Accounts receivable and notes receivable — related parties | — | 2 | ||||||
Inventories at average cost | ||||||||
Gas in underground storage | 1,168 | 1,123 | ||||||
Materials and supplies | 110 | 86 | ||||||
Generating plant fuel stock | 127 | 125 | ||||||
Deferred property taxes | 165 | 158 | ||||||
Regulatory assets — postretirement benefits | 19 | 19 | ||||||
Prepayments and other | 37 | 35 | ||||||
2,827 | 2,880 | |||||||
Non-current Assets | ||||||||
Regulatory Assets | ||||||||
Securitized costs | 416 | 466 | ||||||
Postretirement benefits | 1,431 | 921 | ||||||
Customer Choice Act | 90 | 149 | ||||||
Other | 482 | 504 | ||||||
Deferred income taxes | — | 99 | ||||||
Notes receivable, less allowances of $34 in 2008 and $33 in 2007 | 186 | 168 | ||||||
Other | 268 | 266 | ||||||
2,873 | 2,573 | |||||||
Total Assets | $ | 14,901 | $ | 14,192 | ||||
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December 31 | ||||||||
2008 | 2007 | |||||||
In Millions | ||||||||
STOCKHOLDERS’ INVESTMENT AND LIABILITIES | ||||||||
Capitalization | ||||||||
Common stockholders’ equity | ||||||||
Common stock, authorized 350.0 shares; outstanding 226.4 shares and 225.1 shares, respectively | $ | 2 | $ | 2 | ||||
Other paid-in capital | 4,496 | 4,480 | ||||||
Accumulated other comprehensive loss | (28 | ) | (144 | ) | ||||
Accumulated deficit | (2,007 | ) | (2,208 | ) | ||||
2,463 | 2,130 | |||||||
Preferred stock of subsidiary | 44 | 44 | ||||||
Preferred stock | 243 | 250 | ||||||
Long-term debt | 5,859 | 5,385 | ||||||
Long-term debt — related parties | 178 | 178 | ||||||
Non-current portion of capital and finance lease obligations | 206 | 225 | ||||||
8,993 | 8,212 | |||||||
Minority Interests | 52 | 53 | ||||||
Current Liabilities | ||||||||
Current portion of long-term debt, capital and finance lease obligations | 514 | 722 | ||||||
Notes payable | — | 1 | ||||||
Accounts payable | 466 | 430 | ||||||
Accrued rate refunds | 7 | 19 | ||||||
Accounts payable — related parties | — | 1 | ||||||
Accrued interest | 107 | 103 | ||||||
Accrued taxes | 289 | 308 | ||||||
Deferred income taxes | 100 | 41 | ||||||
Regulatory liabilities | 120 | 164 | ||||||
Electric sales contract termination liability | 2 | 279 | ||||||
Argentine currency impairment reserve | — | 197 | ||||||
Other | 258 | 208 | ||||||
1,863 | 2,473 | |||||||
Non-current Liabilities | ||||||||
Regulatory Liabilities | ||||||||
Cost of removal | 1,203 | 1,127 | ||||||
Income taxes, net | 519 | 533 | ||||||
Other | 146 | 313 | ||||||
Postretirement benefits | 1,502 | 858 | ||||||
Asset retirement obligation | 206 | 198 | ||||||
Deferred investment tax credit | 54 | 58 | ||||||
Deferred income taxes | 46 | — | ||||||
Other | 317 | 367 | ||||||
3,993 | 3,454 | |||||||
Commitments and Contingencies (Notes 4, 5, 7, 10 and 12) | ||||||||
Total Stockholders’ Investment and Liabilities | $ | 14,901 | $ | 14,192 | ||||
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Years Ended December 31 | ||||||||||||||||||||||||
2008 | 2007 | 2006 | 2008 | 2007 | 2006 | |||||||||||||||||||
Number of Shares in Thousands | In Millions | |||||||||||||||||||||||
Common Stock | ||||||||||||||||||||||||
At beginning and end of period | $ | 2 | $ | 2 | $ | 2 | ||||||||||||||||||
Other Paid-in Capital | ||||||||||||||||||||||||
At beginning of period | 225,146 | 222,783 | 220,497 | 4,480 | 4,468 | 4,436 | ||||||||||||||||||
Common stock repurchased | (38 | ) | (318 | ) | (98 | ) | (1 | ) | (5 | ) | (2 | ) | ||||||||||||
Common stock reacquired | (445 | ) | (19 | ) | (59 | ) | — | — | — | |||||||||||||||
Common stock issued | 1,751 | 2,339 | 2,375 | 17 | 30 | 33 | ||||||||||||||||||
Common stock reissued | — | 361 | 68 | — | 6 | 1 | ||||||||||||||||||
Redemption of preferred stock | — | — | — | — | (19 | ) | — | |||||||||||||||||
At end of period | 226,414 | 225,146 | 222,783 | 4,496 | 4,480 | 4,468 | ||||||||||||||||||
Accumulated Other Comprehensive Loss | ||||||||||||||||||||||||
Retirement benefits liability | ||||||||||||||||||||||||
At beginning of period | (15 | ) | (23 | ) | (19 | ) | ||||||||||||||||||
Retirement benefits liability adjustments(a) | — | — | 3 | |||||||||||||||||||||
Net gain (loss) arising during the period(a) | (12 | ) | 7 | — | ||||||||||||||||||||
Amortization of net actuarial loss(a) | — | 1 | — | |||||||||||||||||||||
Adjustment to initially apply FASB Statement No. 158 | — | — | (7 | ) | ||||||||||||||||||||
At end of period | (27 | ) | (15 | ) | (23 | ) | ||||||||||||||||||
Investments | ||||||||||||||||||||||||
At beginning of period | — | 14 | 9 | |||||||||||||||||||||
Unrealized gain (loss) on investments(a) | (15 | ) | 1 | 5 | ||||||||||||||||||||
Reclassification adjustments included in net income (loss)(a) | 15 | (15 | ) | — | ||||||||||||||||||||
At end of period | — | — | 14 | |||||||||||||||||||||
Derivative instruments | ||||||||||||||||||||||||
At beginning of period | (1 | ) | (12 | ) | 35 | |||||||||||||||||||
Unrealized loss on derivative instruments(a) | — | (3 | ) | (15 | ) | |||||||||||||||||||
Reclassification adjustments included in net income (loss)(a) | — | 14 | (32 | ) | ||||||||||||||||||||
At end of period | (1 | ) | (1 | ) | (12 | ) | ||||||||||||||||||
Foreign currency translation | ||||||||||||||||||||||||
At beginning of period | (128 | ) | (297 | ) | (313 | ) | ||||||||||||||||||
Sale of interests in TGN(a) | 128 | — | — | |||||||||||||||||||||
Sale of Argentine assets(a) | — | 128 | — | |||||||||||||||||||||
Sale of Brazilian assets(a) | — | 36 | — | |||||||||||||||||||||
Other foreign currency translations(a) | — | 5 | 16 | |||||||||||||||||||||
At end of period | — | (128 | ) | (297 | ) | |||||||||||||||||||
At end of period | (28 | ) | (144 | ) | (318 | ) | ||||||||||||||||||
Accumulated Deficit | ||||||||||||||||||||||||
At beginning of period | (2,208 | ) | (1,918 | ) | (1,828 | ) | ||||||||||||||||||
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 | — | (18 | ) | — | ||||||||||||||||||||
Net income (loss)(a) | 300 | (215 | ) | (79 | ) | |||||||||||||||||||
Preferred stock dividends declared | (11 | ) | (11 | ) | (11 | ) | ||||||||||||||||||
Common stock dividends declared | (82 | ) | (45 | ) | — | |||||||||||||||||||
Redemption of preferred stock(a) | — | (1 | ) | — | ||||||||||||||||||||
At end of period | (2,007 | ) | (2,208 | ) | (1,918 | ) | ||||||||||||||||||
Total Common Stockholders’ Equity | $ | 2,463 | $ | 2,130 | $ | 2,234 | ||||||||||||||||||
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Years Ended December 31 | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
In Millions | ||||||||||||
(a) Disclosure of Comprehensive Income (Loss): | ||||||||||||
Net income (loss) | $ | 300 | $ | (215 | ) | $ | (79 | ) | ||||
Retirement benefits liability: | ||||||||||||
Retirement benefits liability adjustments, net of tax of $1 in 2006 | — | — | 3 | |||||||||
Net gain (loss) arising during the period, net of tax (tax benefit) of ($6) in 2008 and $5 in 2007 | (12 | ) | 7 | — | ||||||||
Amortization of net actuarial loss, net of tax of $- | — | 1 | — | |||||||||
Investments: | ||||||||||||
Unrealized gain (loss) on investments, net of tax (tax benefit) of ($9) in 2008, $- in 2007 and $2 in 2006 | (15 | ) | 1 | 5 | ||||||||
Reclassification adjustments included in net income (loss), net of tax (tax benefit) of $9 in 2008 and ($7) in 2007 | 15 | (15 | ) | — | ||||||||
Derivative instruments: | ||||||||||||
Unrealized loss on derivative instruments, net of tax (tax benefit) of $- in 2008, $2 in 2007, and $(11) in 2006 | — | (3 | ) | (15 | ) | |||||||
Reclassification adjustments included in net income (loss), net of tax (tax benefit) of $- in 2008, $7 in 2007, and $(19) in 2006 | — | 14 | (32 | ) | ||||||||
Foreign currency translation: | ||||||||||||
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, net of tax of $- in 2008, $2 in 2007, and $9 in 2006 | — | 5 | 16 | |||||||||
Total Comprehensive Income (Loss) | $ | 416 | $ | (41 | ) | $ | (102 | ) | ||||
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Years Ended December 31 | 2008 | 2007 | 2006 | |||||||||
Electric utility property | 3.0 | % | 3.0 | % | 3.1 | % | ||||||
Gas utility property | 3.6 | % | 3.6 | % | 3.6 | % | ||||||
Other property | 8.5 | % | 8.7 | % | 8.2 | % |
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Years Ended December 31 | 2008 | 2007 | 2006 | |||||||||
In Millions | ||||||||||||
Other income | ||||||||||||
Interest and dividends — related parties | $ | — | $ | — | $ | 8 | ||||||
Gain on SERP investment | — | 22 | — | |||||||||
Return on stranded and security costs | 5 | 6 | 5 | |||||||||
MCV Partnership emission allowance sales | — | — | 8 | |||||||||
Electric restructuring return | 1 | 2 | 4 | |||||||||
Foreign currency gain | 2 | 1 | — | |||||||||
Gain on investment | — | 7 | 1 | |||||||||
Refund of surety bond premium | — | — | 1 | |||||||||
All other | 7 | 3 | 4 | |||||||||
Total other income | $ | 15 | $ | 41 | $ | 31 | ||||||
Years Ended December 31 | 2008 | 2007 | 2006 | |||||||||
In Millions | ||||||||||||
Other expense | ||||||||||||
Accretion expense | $ | — | $ | — | $ | (4 | ) | |||||
Unrealized investment loss | (24 | ) | — | — | ||||||||
Loss on reacquired and extinguished debt | — | (22 | ) | (5 | ) | |||||||
Abandoned Midland project | — | (8 | ) | — | ||||||||
Derivative loss on debt tender offer | — | (3 | ) | — | ||||||||
Civic and political expenditures | (5 | ) | (2 | ) | (2 | ) | ||||||
Donations | — | — | (9 | ) | ||||||||
All other | (8 | ) | (4 | ) | (1 | ) | ||||||
Total other expense | $ | (37 | ) | $ | (39 | ) | $ | (21 | ) | |||
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Years Ended December 31 | 2008 | 2007 | 2006 | |||||||||
AFUDC capitalization rate | 7.7 | % | 7.4 | % | 7.5 | % |
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December 31 | End of Recovery or Refund Period | 2008 | 2007 | |||||||
In Millions | ||||||||||
Assets Earning a Return: | ||||||||||
Customer Choice Act | 2010 | $ | 90 | $ | 149 | |||||
Stranded Costs | See Note 4 | 71 | 68 | |||||||
Electric restructuring implementation plan | 2009 | 3 | 14 | |||||||
Manufactured gas plant sites (Note 4) | 2018 | 31 | 33 | |||||||
Other(a) | various | 44 | 50 | |||||||
Assets Not Earning a Return: | ||||||||||
Postretirement Benefits (Note 8) | various | 1,450 | 940 | |||||||
Securitized costs (Note 5) | 2015 | 416 | 466 | |||||||
Unamortized debt costs | n/a | 66 | 74 | |||||||
ARO (Note 9) | n/a | 92 | 85 | |||||||
Big Rock nuclear decommissioning and related costs (Note 4) | n/a | 129 | 129 | |||||||
Manufactured gas plant sites (Note 4) | n/a | 38 | 17 | |||||||
Palisades sales transaction costs (Notes 3 and 4) | n/a | — | 28 | |||||||
Other(a) | 2011 | 8 | 6 | |||||||
Total regulatory assets(b) | $ | 2,438 | $ | 2,059 | ||||||
Palisades refund — Current (Note 4)(c) | 2009 | $ | 120 | $ | 164 | |||||
Cost of removal (Note 9) | n/a | 1,203 | 1,127 | |||||||
Income taxes, net (Note 10) | n/a | 519 | 533 | |||||||
ARO (Note 9) | n/a | 137 | 141 | |||||||
Palisades refund — Non-current (Note 4)(c) | 2008 | — | 140 | |||||||
Other(a) | various | 9 | 32 | |||||||
Total regulatory liabilities(b) | $ | 1,988 | $ | 2,137 | ||||||
(a) | At December 31, 2008 and 2007, other regulatory assets include a gas inventory regulatory asset and OPEB and pension expense incurred in excess of the MPSC-approved amount. We will recover these regulatory assets from our customers by 2011. Other regulatory liabilities include liabilities related to the sale of sulfur dioxide allowances and AFUDC collected in excess of the MPSC-approved amount. | |
(b) | At December 31, 2008 and 2007, we classified $19 million of regulatory assets as current regulatory assets. At December 31, 2008, we classified $120 million of regulatory liabilities as current regulatory liabilities. At December 31, 2007, we classified $164 million of regulatory liabilities as current regulatory liabilities. | |
(c) | The MPSC order approving the Palisades and Big Rock ISFSI sale transaction required that we credit $255 million of excess sales proceeds and decommissioning amounts to our retail customers by December 2008. For 2007, the current portion of regulatory liabilities for Palisades refunds represents the remaining portion of this obligation, plus interest. There are additional excess sales proceeds and decommissioning fund balances above the amount in the MPSC order. For 2007, the non-current portion of regulatory liabilities for Palisades refunds represents this obligation, plus interest. For 2008, these additional excess sales proceeds are reported in the current portion of regulatory liabilities for Palisades refunds as it is probable the proceeds will be credited to customers within one year. For additional details, see Note 4, Contingencies, “Consumers’ Electric Utility Rate Matters.” |
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Years Ended December 31 | 2008 | 2007 | ||||||
In Millions | ||||||||
Regulatory Assets for PSCR and GCR | ||||||||
Underrecoveries of power supply and gas costs | $ | 7 | $ | 45 | ||||
Regulatory Liabilities for PSCR and GCR | ||||||||
Overrecoveries of power supply and gas costs | $ | 7 | $ | 19 | ||||
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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. |
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Total | Level 1 | Level 2 | Level 3 | |||||||||||||
In Millions | ||||||||||||||||
Assets: | ||||||||||||||||
Cash Equivalents | $ | 176 | $ | 176 | $ | — | $ | — | ||||||||
Nonqualified Deferred Compensation Plan Assets | 5 | 5 | — | — | ||||||||||||
SERP | ||||||||||||||||
Equity Securities | 39 | 39 | — | — | ||||||||||||
Debt Securities | 29 | — | 29 | — | ||||||||||||
Derivative Instruments: | ||||||||||||||||
CMS ERM Non-trading electricity/gas contracts(a) | 1 | — | 1 | — | ||||||||||||
Total | $ | 250 | $ | 220 | $ | 30 | $ | — | ||||||||
Liabilities: | ||||||||||||||||
Nonqualified Deferred Compensation Plan Liabilities | $ | (5 | ) | $ | (5 | ) | $ | — | $ | — | ||||||
Derivative Instruments: | ||||||||||||||||
CMS ERM Non-trading electricity/gas contracts(b) | (17 | ) | (2 | ) | — | (15 | ) | |||||||||
Interest rate collar | (1 | ) | — | — | (1 | ) | ||||||||||
Foreign exchange forward | (1 | ) | — | (1 | ) | — | ||||||||||
Fixed price fuel contracts | (1 | ) | — | (1 | ) | — | ||||||||||
Total(c) | $ | (25 | ) | $ | (7 | ) | $ | (2 | ) | $ | (16 | ) | ||||
(a) | This amount is gross and excludes the immaterial 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 immaterial impact of offsetting derivative assets and liabilities under master netting arrangements and the $2 million impact of offsetting cash margin deposits paid by CMS ERM to other parties. We report the fair values of our derivative liabilities net of these impacts within Other liabilities on our Consolidated Balance Sheets. | |
(c) | At December 31, 2008, liabilities classified as Level 3 represent 64 percent of total liabilities measured at fair value. |
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CMS ERM | ||||
Non-trading | ||||
contracts | ||||
In Millions | ||||
Balance at December 31, 2007 | $ | (19 | ) | |
Total gains (realized and unrealized) | ||||
Included in earnings(a) | 2 | |||
Purchases, sales, issuances, and settlements (net) | 1 | |||
Balance at December 31, 2008 | (16 | ) | ||
Unrealized gains included in earnings for the year ended December 31, 2008 relating to assets and liabilities still held at December 31, 2008(a) | $ | 3 | ||
(a) | Realized and unrealized gains 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). |
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Disposal of | ||||||||||||||
Continuing | Discontinued | |||||||||||||
Operations | Operations | |||||||||||||
Cash | Pretax | Pretax | ||||||||||||
Month sold | Business | Proceeds | Gain (Loss) | Gain (Loss) | ||||||||||
In Millions | ||||||||||||||
March | El Chocon(a) | $ | 50 | $ | 34 | $ | — | |||||||
March | Argentine/Michigan businesses(b) | 130 | (5 | ) | (278 | ) | ||||||||
April | Palisades(c) | 333 | — | — | ||||||||||
April | SENECA(d) | 106 | — | 46 | ||||||||||
May | Middle East, Africa and India businesses(e) | 792 | (15 | ) | 96 | |||||||||
June | CMS Energy Brasil S.A.(f) | 201 | — | 3 | ||||||||||
August | GasAtacama(g) | 80 | — | — | ||||||||||
October | Jamaica(h) | 14 | 1 | — | ||||||||||
Various | Other | 11 | 6 | — | ||||||||||
Total | $ | 1,717 | $ | 21 | $ | (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 2007. | |
(c) | We sold Palisades to Entergy for $380 million and as of December 31, 2007, received $363 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 in the Consolidated Statements of Income (Loss). We accounted for the remaining non-real estate assets and liabilities associated with the transaction as a sale. | ||
(d) | We sold our ownership interest in SENECA and certain associated generating equipment to PDVSA. | |
(e) | We sold our ownership interest in businesses in the Middle East, Africa, and India to TAQA. | |
(f) | We sold CMS Energy Brasil S.A. to CPFL Energia S.A., a Brazilian utility. | |
(g) | We sold our investment in GasAtacama to Endesa S.A. | |
(h) | We sold our investment in Jamaica to AEI. |
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Continuing | ||||||||||
Operations | ||||||||||
Gross Cash | Pretax | |||||||||
Month sold | Business/Project | Proceeds | Gain | |||||||
In Millions | ||||||||||
October | Land in Ludington, Michigan | $ | 6 | $ | 2 | |||||
November | MCV GP II(a) | 61 | 77 | |||||||
Various | Other | 2 | — | |||||||
Total | $ | 69 | $ | 79 | ||||||
(a) | In November 2006, we sold all of our interests in the Consumers’ subsidiaries that held the MCV Partnership and the MCV Facility to an affiliate of GSO Capital Partners and Rockland Capital Energy Investments. |
Years Ended December 31 | 2008 | 2007 | 2006 | |||||||||
In Millions | ||||||||||||
Revenues | $ | — | $ | 235 | $ | 684 | ||||||
Discontinued operations: | ||||||||||||
Pretax income (loss) from discontinued operations | $ | 1 | $ | (90 | ) | $ | 86 | |||||
Income tax expense (benefit) | 1 | (1 | ) | 32 | ||||||||
Income (Loss) From Discontinued Operations | $ | — | $ | (89 | )(a) | $ | 54 | |||||
(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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Years Ended December 31 | 2007 | 2006 | ||||||
In Millions | ||||||||
Asset impairments: | ||||||||
TGN(a) | $ | 140 | $ | — | ||||
GasAtacama(b) | 35 | 239 | ||||||
Jamaica(c) | 22 | — | ||||||
PowerSmith(d) | 5 | — | ||||||
Prairie State(e) | 2 | — | ||||||
MCV Partnership(f) | — | 218 | ||||||
Other | — | 2 | ||||||
Total asset impairments | $ | 204 | $ | 459 | ||||
(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 2007, we recognized a $75 million deferred credit in Asset impairment charges, net of insurance recoveries, in our Consolidated Statements of Income (Loss). | |
(b) | In 2007, we recorded an impairment charge to reflect the fair value of our investment in GasAtacama as determined in sale negotiations. In 2006, we performed an impairment analysis of our investment in GasAtacama and concluded that there had been a decline in fair value that was other than temporary. We recorded an impairment charge in the third quarter of 2006. | |
(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. | |
(f) | We recorded an impairment charge of $218 million to recognize the reduction in fair value of the MCV Facility’s real estate assets. |
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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. |
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• | 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, | |
• | delays in developing a long-term water disposal option, | |
• | additional or new legal or regulatory requirements, or | |
• | new or different landowner claims. |
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Power Supply Cost Recovery Reconciliation | ||||||||
Net Under- | PSCR Cost | |||||||
PSCR Year | Date Filed | recovery | of Power Sold | Description of Net Underrecovery | ||||
2007 | March 2008 | $42 million(a) | $1.628 billion | In our 2007 PSCR Plan we expected to offset power supply costs by including a $44 million credit for Palisades sale proceeds due customers. However, the MPSC directed that the Palisades sale proceeds be refunded through bill credits outside of the PSCR process. |
(a) | This amount includes 2006 underrecoveries as allowed by the MPSC order in our 2007 PSCR plan case. |
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Components of the Increase in Revenue | ||||
In Millions | ||||
Operating and maintenance | $ | 50 | ||
Rate of return | 17 | |||
Rate base | 76 | |||
Book depreciation on new investment | 14 | |||
Property taxes on new investment | 9 | |||
Gross margin | 43 | |||
Other | 5 | |||
Total | $ | 214 | ||
• | 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, | |
• | a $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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Gas Cost Recovery Reconciliation | ||||||||
Net Over- | GCR Cost | |||||||
GCR Year | Date Filed | recovery | of Gas 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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FIN 45 | ||||||||||||
Maximum | Carrying | |||||||||||
Guarantee Description | Issue Date | Expiration Date | Obligation | Amount | ||||||||
In Millions | ||||||||||||
Indemnifications from asset sales and other agreements | Various | Indefinite | $ | 1,445 | (a) | $ | 84 | (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 |
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purchase agreements and the failure of title to the assets or stock we sold 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) | In May 2007, CMS Energy provided an indemnification to TAQA in connection with the sale of its ownership interests in businesses in the Middle East, Africa, and India. This indemnification is capped at $50 million and expires two years after the May 2, 2007 sale closing date. The indemnification covers claims related to the following matters: | |
• a dispute between Neyveli and the TNEB regarding the capital costs to be reflected in the tariff paid by the TNEB to Neyveli, and | ||
• various matters, including the lack of a valid site lease and current operating license for Takoradi. | ||
As of December 31, 2008, we have recorded an $84 million liability in connection with indemnities related to the sale of certain subsidiaries, including a $50 million liability related to the indemnification to TAQA described in the preceding paragraphs. The TAQA indemnification liability may be resolved during 2009, and our ultimate payment obligation could be materially less than the amount we have accrued for the indemnification. | ||
(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 Agreement to provide power and steam to Dow Bay Harbor remediation efforts | Nonperformance or non-payment by a subsidiary under a related contract MCV Partnership’s nonperformance or non-payment under a related contract Owners exercising put options requiring us to purchase property |
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Purchase Obligations at December 31, 2008 | ||||||||||||||||||||
Payments Due | ||||||||||||||||||||
Less Than | One to | Three to | More Than | |||||||||||||||||
Total | One Year | Three Years | Five Years | Five Years | ||||||||||||||||
In Millions | ||||||||||||||||||||
Purchase obligations(a) | $ | 14,699 | $ | 2,201 | $ | 2,391 | $ | 1,545 | $ | 8,562 | ||||||||||
(a) | Long-term contracts for purchase of commodities and services. These obligations include operating contracts used to ensure adequate supply with generating facilities that meet PURPA requirements. The commodities and services include: | |
• natural gas and associated transportation, | ||
• electricity, and | ||
• and associated transportation. |
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Interest Rate (%) | Maturity | 2008 | 2007 | |||||||||||
In Millions | ||||||||||||||
CMSEnergy Corporation | ||||||||||||||
Senior notes | 7.750 | 2010 | $ | 300 | $ | 300 | ||||||||
8.500 | 2011 | 300 | 300 | |||||||||||
6.300 | 2012 | 150 | 150 | |||||||||||
Variable | (a) | 2013 | 150 | 150 | ||||||||||
6.875 | 2015 | 125 | 125 | |||||||||||
6.550 | 2017 | 250 | 250 | |||||||||||
3.375 | (b) | 2023 | 140 | 150 | ||||||||||
2.875 | (b) | 2024 | 288 | 288 | ||||||||||
1,703 | 1,713 | |||||||||||||
Revolving Credit Facility | 105 | — | ||||||||||||
Total — CMS Energy Corporation | 1,808 | 1,713 | ||||||||||||
Consumers Energy Company | ||||||||||||||
First mortgage bonds(c) | 4.250 | 2008 | — | 250 | ||||||||||
4.800 | 2009 | 200 | 200 | |||||||||||
4.400 | 2009 | 150 | 150 | |||||||||||
4.000 | 2010 | 250 | 250 | |||||||||||
5.000 | 2012 | 300 | 300 | |||||||||||
5.375 | 2013 | 375 | 375 | |||||||||||
6.000 | 2014 | 200 | 200 | |||||||||||
5.000 | 2015 | 225 | 225 | |||||||||||
5.500 | 2016 | 350 | 350 | |||||||||||
5.150 | 2017 | 250 | 250 | |||||||||||
5.650 | 2018 | 250 | — | |||||||||||
6.125 | 2019 | 350 | — | |||||||||||
5.650 | 2020 | 300 | 300 | |||||||||||
5.650 | 2035 | 142 | 145 | |||||||||||
5.800 | 2035 | 175 | 175 | |||||||||||
3,517 | 3,170 | |||||||||||||
Senior notes | 6.375 | 2008 | — | 159 | ||||||||||
6.875 | 2018 | 180 | 180 | |||||||||||
Securitization bonds | 5.495 | (d) | 2009-2015 | 277 | 309 | |||||||||
Nuclear fuel disposal liability | (e) | 162 | 159 | |||||||||||
Tax-exempt pollution control revenue bonds | Various | 2010-2035 | 161 | 161 | ||||||||||
Total — Consumers Energy Company | 4,297 | 4,138 | ||||||||||||
Other Subsidiaries | ||||||||||||||
EnerBank brokered certificates of deposit | 4.374 | (f) | 2009-2018 | 176 | 153 | |||||||||
Genesee tax exempt bonds | 7.500 | 2009-2021 | 57 | 59 | ||||||||||
Grayling tax exempt bonds | Variable | (g) | 2009-2012 | 19 | 24 | |||||||||
Total — other subsidiaries | 252 | 236 | ||||||||||||
Total principal amount outstanding | 6,357 | 6,087 | ||||||||||||
Current amounts | (489 | ) | (692 | ) | ||||||||||
Net unamortized discount | (9 | ) | (10 | ) | ||||||||||
Total long-term debt | $ | 5,859 | $ | 5,385 | ||||||||||
(a) | The variable rate senior notes bear interest at three-month LIBOR plus 95 basis points (5.7025 percent at December 31, 2008 which reset to 2.0444 percent in January 2009). |
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(b) | Contingently convertible notes. See the “Contingently Convertible Securities” section in this Note for further discussion of the conversion features. | |
(c) | The weighted-average interest rate for our FMB was 5.329 percent at December 31, 2008 and 5.131 percent at December 31, 2007. | |
(d) | Represents the weighted-average interest rate at December 31, 2008 (5.442 percent at December 31, 2007). | |
(e) | The maturity date is uncertain. | |
(f) | Represents the weighted-average interest rate for EnerBank’s brokered certificates of deposit at December 31, 2008 (5.198 percent at December 31, 2007). These deposits are sold through investment brokers in large pools with each certificate within the pool having a face value of $1,000. They cannot be withdrawn until maturity, except in the case of death or incompetence of the holder. | |
(g) | The interest rate for the tax exempt bonds was 0.910 percent at December 31, 2008 and 3.530 percent at December 31, 2007. |
Principal | ||||||||||||
(In millions) | Interest Rate (%) | Issue/Retirement 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 FMB. Consumers used the proceeds to redeem $28 million of insured tax-exempt bonds in April 2008. | |
(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. Consumers used the proceeds to redeem $68 million of insured tax-exempt bonds in April 2008. |
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Debenture and related party | Interest Rate (%) | Maturity | 2008 | 2007 | ||||||||||||
In Millions | ||||||||||||||||
Convertible subordinated debentures, CMS Energy Trust I | 7.75 | 2027 | $ | 178 | $ | 178 | ||||||||||
Payments Due | ||||||||||||||||||||
2009 | 2010 | 2011 | 2012 | 2013 | ||||||||||||||||
In Millions | ||||||||||||||||||||
Long-term debt and long-term debt — related parties | $ | 489 | $ | 673 | $ | 364 | $ | 618 | $ | 579 | ||||||||||
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Outstanding | ||||||||||||||||||
Amount of | Amount | Letters of | Amount | |||||||||||||||
Company | Expiration Date | Facility | Borrowed | Credit | Available | |||||||||||||
In Millions | ||||||||||||||||||
CMS Energy(a) | April 2, 2012 | $ | 550 | $ | 105 | $ | 24 | $ | 421 | |||||||||
Consumers | March 30, 2012 | 500 | — | 172 | 328 | |||||||||||||
Consumers(b) | November 30, 2009 | 192 | — | 192 | — | |||||||||||||
Consumers | September 9, 2009 | 150 | — | — | 150 |
(a) | Average borrowings during 2008 totaled $212 million, with a weighted average annual interest rate of 3.59 percent, at LIBOR plus 0.75 percent. At December 31, 2008, the annual interest rate on the amount borrowed was 2.0 percent. | |
(b) | Secured revolving letter of credit facility. |
Years Ended December 31 | 2008 | 2007 | ||||||
In Millions | ||||||||
Administrative fees | $ | 1 | $ | 3 | ||||
Net cash flow as a result of accounts receivable financing | $ | 170 | $ | (325 | ) | |||
Collections from customers | $ | 6,060 | $ | 5,881 | ||||
• | 350 million shares of CMS Energy Common Stock, par value $0.01 per share, and | |
• | 10 million shares of CMS Energy Preferred Stock, par value $0.01 per share. |
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Number of Shares | ||||||||||||||||
December 31 | 2008 | 2007 | 2008 | 2007 | ||||||||||||
In Millions | ||||||||||||||||
Preferred stock 4.50% convertible, Authorized 10,000,000 shares | 4,978,000 | 5,000,000 | $ | 249 | $ | 250 | ||||||||||
Optional | ||||||||||||||||||||||||
Redemption | Number of Shares | |||||||||||||||||||||||
December 31 | Series | Price | 2008 | 2007 | 2008 | 2007 | ||||||||||||||||||
In Millions | ||||||||||||||||||||||||
Preferred stock | ||||||||||||||||||||||||
Cumulative $100 par value, Authorized 7,500,000 shares, with no mandatory redemption | $ | 4.16 | $ | 103.25 | 68,451 | 68,451 | $ | 7 | $ | 7 | ||||||||||||||
$ | 4.50 | $ | 110.00 | 373,148 | 373,148 | 37 | 37 | |||||||||||||||||
Total Preferred stock of subsidiary | $ | 44 | $ | 44 | ||||||||||||||||||||
Adjusted | Adjusted | |||||||||||||||
Outstanding | Conversion | Trigger | ||||||||||||||
Security | Maturity | (In millions) | Price | Price | ||||||||||||
4.50% preferred stock | — | $ | 249 | $ | 9.51 | $ | 11.42 | |||||||||
3.375% senior notes | 2023 | $ | 140 | $ | 10.26 | $ | 12.31 | |||||||||
2.875% senior notes | 2024 | $ | 288 | $ | 14.18 | $ | 17.02 |
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Years Ended December 31 | 2008 | 2007 | 2006 | |||||||||
In Millions, Except | ||||||||||||
per Share Amounts | ||||||||||||
Income (Loss) Available to Common Stockholders | ||||||||||||
Income (Loss) from Continuing Operations | $ | 300 | $ | (126 | ) | $ | (133 | ) | ||||
Less Preferred Dividends and Redemption Premiums | (11 | ) | (12 | ) | (11 | ) | ||||||
Income (Loss) from Continuing Operations Available to Common Stockholders Basic and Diluted | 289 | (138 | ) | (144 | ) | |||||||
Average Common Shares Outstanding Applicable to Basic and Diluted EPS | ||||||||||||
Weighted Average Shares — Basic | 223.9 | 222.6 | 219.9 | |||||||||
Add dilutive impact of Contingently Convertible Securities | 10.4 | — | — | |||||||||
Add dilutive Options, Warrants and Restricted Stock Awards | 0.5 | — | — | |||||||||
Weighted Average Shares — Diluted | 234.8 | 222.6 | 219.9 | |||||||||
Earnings (Loss) Per Average Common Share Available to Common Stockholders | ||||||||||||
Basic | $ | 1.29 | $ | (0.62 | ) | $ | (0.66 | ) | ||||
Diluted | $ | 1.23 | $ | (0.62 | ) | $ | (0.66 | ) | ||||
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• | increased the numerator of diluted EPS by $9 million from an assumed reduction of interest expense, net of tax, and | |
• | increased the denominator of diluted EPS by 4.2 million shares. |
2008 | 2007 | |||||||||||||||
Cost or | Cost or | |||||||||||||||
Carrying | Carrying | |||||||||||||||
December 31 | Amount | Fair Value | Amount | Fair Value | ||||||||||||
In Millions | ||||||||||||||||
Securities held to maturity | $ | 3 | $ | 3 | $ | 3 | $ | 3 | ||||||||
Securities available for sale | 68 | 68 | 75 | 75 | ||||||||||||
Notes receivable, net | 186 | 201 | 163 | 170 | ||||||||||||
Long-term debt(a) | 6,348 | 5,962 | 6,077 | 6,287 | ||||||||||||
Long-term debt — related parties | 178 | 107 | 178 | 173 | ||||||||||||
(a) | Includes current maturities of $489 million at December 31, 2008 and $692 million at December 31, 2007. Settlement of long-term debt is generally not expected until maturity. |
2008 | 2007 | |||||||||||||||||||||||||||||||
Unrealized | Unrealized | Fair | Unrealized | Unrealized | Fair | |||||||||||||||||||||||||||
December 31 | Cost | Gains | Losses | Value | Cost | Gains | Losses | Value | ||||||||||||||||||||||||
In Millions | ||||||||||||||||||||||||||||||||
Available for sale: | ||||||||||||||||||||||||||||||||
Equity securities | $ | 39 | $ | — | $ | — | $ | 39 | $ | 62 | $ | — | $ | — | $ | 62 | ||||||||||||||||
Debt securities | 29 | — | — | 29 | 13 | — | — | 13 | ||||||||||||||||||||||||
Held to maturity: | ||||||||||||||||||||||||||||||||
Debt securities | 3 | — | — | 3 | 3 | — | — | 3 | ||||||||||||||||||||||||
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In Millions | ||||
Due one year or less | $ | 1 | ||
Due after one year through five years | 12 | |||
Due after five years through ten years | 13 | |||
Due after ten years | 6 | |||
Total | $ | 32 | ||
• | 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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December 31 | 2008 | 2007 | ||||||||||||||||||||||
Fair | Unrealized | Fair | Unrealized | |||||||||||||||||||||
Derivative Instruments | Cost | Value | Loss | Cost | Value | Loss | ||||||||||||||||||
In Millions | ||||||||||||||||||||||||
Interest rate collar | $ | — | $ | (1 | ) | $ | (1 | ) | $ | — | $ | — | $ | — | ||||||||||
Fixed price fuel contracts | — | (1 | ) | (1 | ) | — | — | — | ||||||||||||||||
Electricity and gas contracts | — | (16 | ) | (16 | ) | — | (23 | ) | (23 | ) | ||||||||||||||
Foreign exchange forward | — | (1 | ) | (1 | ) | — | — | — | ||||||||||||||||
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Net Exposure | Net Exposure | |||||||||||||||||||
Exposure | from Investment | from Investment | ||||||||||||||||||
Before | Collateral | Net | Grade | Grade | ||||||||||||||||
Collateral(a) | Held | Exposure | Companies | Companies (%) | ||||||||||||||||
In Millions | ||||||||||||||||||||
CMS ERM | $ | 1 | $ | — | $ | 1 | $ | 1 | 100 | % | ||||||||||
(a) | Exposure is reflected net of payables or derivative liabilities if netting arrangements exist. |
• | 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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One Percentage | One Percentage | |||||||
Point Increase | Point Decrease | |||||||
In Millions | ||||||||
Effect on total service and interest cost component | $ | 16 | $ | (13 | ) | |||
Effect on postretirement benefit obligation | $ | 177 | $ | (155 | ) |
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Pension & SERP | OPEB | |||||||||||||||||||||||
Years Ended December 31 | 2008 | 2007 | 2006 | 2008 | 2007 | 2006 | ||||||||||||||||||
Discount rate(a) | 6.50% | 6.40% | 5.65% | 6.50% | 6.50% | 5.65% | ||||||||||||||||||
Expected long-term rate of return on plan assets(b) | 8.25% | 8.25% | 8.25% | 7.75% | 7.75% | 7.75% | ||||||||||||||||||
Mortality table(c) | 2000 | 2000 | 2000 | 2000 | 2000 | 2000 | ||||||||||||||||||
Rate of compensation increase: | ||||||||||||||||||||||||
Pension | 4.00% | 4.00% | 4.00% | |||||||||||||||||||||
SERP | 5.50% | 5.50% | 5.50% |
Pension & SERP | OPEB | |||||||||||||||||||||||
Years Ended December 31 | 2008 | 2007 | 2006 | 2008 | 2007 | 2006 | ||||||||||||||||||
Discount rate(a) | 6.40% | 5.65% | 5.75% | 6.50% | 5.65% | 5.75% | ||||||||||||||||||
Expected long-term rate of return on plan assets(b) | 8.25% | 8.25% | 8.50% | 7.75% | 7.75% | 8.00% | ||||||||||||||||||
Mortality table(c) | 2000 | 2000 | 2000 | 2000 | 2000 | 2000 | ||||||||||||||||||
Rate of compensation increase: | ||||||||||||||||||||||||
Pension | 4.00% | 4.00% | 4.00% | |||||||||||||||||||||
SERP | 5.50% | 5.50% | 5.50% |
(a) | The discount rate is set to reflect the rates at which benefits can be effectively settled. It is set equal to the equivalent single rate that results from a yield curve analysis that incorporates projected benefit payments specific to our pension and other postretirement benefit plans, and the yields on high quality corporate bonds rated Aa or better. |
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(b) | We determine our long-term rate of return by considering historical market returns, the current and expected future economic environment, the capital market principles of risk and return, and the expert opinions of individuals and firms with financial market knowledge. We consider the asset allocation of the portfolio in forecasting the future expected total return of the portfolio. The goal is to determine a long-term rate of return that can be incorporated into the planning of future cash flow requirements in conjunction with the change in the liability. Annually, we review for reasonableness and appropriateness of the forecasted returns for various classes of assets used to construct an expected return model. | |
(c) | The mortality assumption is based on the RP-2000 mortality tables with projection of future mortality improvements using Scale AA, which aligns with the IRS prescriptions for cash funding valuations under the Pension Protection Act. |
Pension & SERP | ||||||||||||
Years Ended December 31 | 2008 | 2007 | 2006 | |||||||||
In Millions | ||||||||||||
Net periodic pension cost | ||||||||||||
Service cost | $ | 43 | $ | 50 | $ | 51 | ||||||
Interest expense | 101 | 91 | 88 | |||||||||
Expected return on plan assets | (81 | ) | (79 | ) | (85 | ) | ||||||
Amortization of: | ||||||||||||
Net loss | 41 | 46 | 43 | |||||||||
Prior service cost | 6 | 7 | 7 | |||||||||
Net periodic pension cost | 110 | 115 | 104 | |||||||||
Regulatory adjustment(a) | 4 | (22 | ) | (11 | ) | |||||||
Net periodic pension cost after regulatory adjustment | $ | 114 | $ | 93 | $ | 93 | ||||||
OPEB | ||||||||||||
Years Ended December 31 | 2008 | 2007 | 2006 | |||||||||
In Millions | ||||||||||||
Net periodic OPEB cost Service cost | $ | 22 | $ | 25 | $ | 23 | ||||||
Interest expense | 72 | 69 | 64 | |||||||||
Expected return on plan assets | (66 | ) | (62 | ) | (57 | ) | ||||||
Amortization of: | ||||||||||||
Net loss | 9 | 22 | 20 | |||||||||
Prior service credit | (10 | ) | (10 | ) | (10 | ) | ||||||
Net periodic OPEB cost | 27 | 44 | 40 | |||||||||
Regulatory adjustment(a) | 3 | (6 | ) | (2 | ) | |||||||
Net periodic OPEB cost after regulatory adjustment | $ | 30 | $ | 38 | $ | 38 | ||||||
(a) | Regulatory adjustments are the differences between amounts included in rates and the periodic benefit cost calculated pursuant to SFAS No. 87 and SFAS No. 106. The pension regulatory asset had a balance of $29 million at December 31, 2008 and $33 million at December 31, 2007. The OPEB regulatory asset had a balance of $5 million at December 31, 2008 and $8 million at December 31, 2007. |
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Pension Plan | SERP | OPEB | ||||||||||||||||||||||
Years Ended December 31 | 2008 | 2007 | 2008 | 2007 | 2008 | 2007 | ||||||||||||||||||
In Millions | ||||||||||||||||||||||||
Benefit obligation at beginning of period | $ | 1,565 | $ | 1,576 | $ | 95 | $ | 92 | $ | 1,136 | $ | 1,243 | ||||||||||||
Service cost | 45 | 49 | 1 | 1 | 24 | 25 | ||||||||||||||||||
Interest cost | 103 | 86 | 7 | 5 | 78 | 69 | ||||||||||||||||||
Actuarial loss (gain) | (66 | ) | 30 | (3 | ) | 1 | 81 | (128 | ) | |||||||||||||||
Palisades sale | — | (38 | ) | — | — | — | (20 | ) | ||||||||||||||||
Benefits paid | (123 | ) | (138 | ) | (5 | ) | (4 | ) | (53 | ) | (53 | ) | ||||||||||||
Benefit obligation at end of period(a) | 1,524 | 1,565 | 95 | 95 | 1,266 | 1,136 | ||||||||||||||||||
Plan assets at fair value at beginning of period | 1,078 | 1,040 | — | — | 852 | 798 | ||||||||||||||||||
Actual return on plan assets | (231 | ) | 89 | — | — | (201 | ) | 55 | ||||||||||||||||
Company contribution | — | 109 | 5 | 4 | 64 | 52 | ||||||||||||||||||
Palisades sale | — | (22 | ) | — | — | — | (5 | ) | ||||||||||||||||
Actual benefits paid(b) | (123 | ) | (138 | ) | (5 | ) | (4 | ) | (53 | ) | (48 | ) | ||||||||||||
Plan assets at fair value at end of period | 724 | 1,078 | — | — | 662 | 852 | ||||||||||||||||||
Funded status at end of measurement period | (800 | ) | (487 | ) | (95 | ) | (95 | ) | (604 | ) | (284 | ) | ||||||||||||
Additional VEBA Contributions or Non-Trust Benefit Payments | — | — | — | — | — | 12 | ||||||||||||||||||
Funded status at December 31(c) | $ | (800 | ) | $ | (487 | ) | $ | (95 | ) | $ | (95 | ) | $ | (604 | ) | $ | (272 | ) | ||||||
(a) | The Medicare Prescription Drug, Improvement and Modernization Act of 2003 establishes a prescription drug benefit under Medicare (Medicare Part D) and a federal subsidy, which is tax-exempt, to sponsors of retiree health care benefit plans that provide a benefit that is actuarially equivalent to Medicare Part D. The Medicare Part D annualized reduction in net OPEB cost was $25 million for 2008 and $28 million for 2007. The reduction includes $7 million for 2008 and 2007 in capitalized OPEB costs. | |
(b) | We received $6 million in 2008 and $4 million in 2007 for Medicare Part D Subsidy payments. | |
(c) | Liabilities for retirement benefits comprised $1.494 billion classified as non-current and $5 million classified as current for the year ended December 31, 2008, and $850 million classified as non-current and $4 million classified as current for the year ended December 31, 2007. |
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Years Ended December 31 | 2008 | 2007 | ||||||
In Millions | ||||||||
Pension PBO | $ | 1,524 | $ | 1,565 | ||||
Pension ABO | 1,240 | 1,231 | ||||||
Fair value of Pension Plan assets | $ | 724 | $ | 1,078 | ||||
Pension & SERP | OPEB | |||||||||||||||
Years Ended December 31 | 2008 | 2007 | 2008 | 2007 | ||||||||||||
In Millions | ||||||||||||||||
Regulatory assets | ||||||||||||||||
Net loss | $ | 835 | $ | 636 | $ | 595 | $ | 265 | ||||||||
Prior service cost (credit) | 33 | 39 | (78 | ) | (89 | ) | ||||||||||
AOCL | ||||||||||||||||
Net loss (gain) | 50 | 46 | (9 | ) | (22 | ) | ||||||||||
Prior service cost (credit) | 3 | 3 | (3 | ) | (3 | ) | ||||||||||
Total amounts recognized in regulatory assets and AOCL | $ | 921 | $ | 724 | $ | 505 | $ | 151 | ||||||||
Pension | OPEB | |||||||||||||||
Years Ended December 31 | 2008 | 2007 | 2008 | 2007 | ||||||||||||
Asset Category: | ||||||||||||||||
Fixed Income | 37 | % | 30 | % | 55 | % | 34 | % | ||||||||
Equity Securities | 50 | % | 60 | % | 45 | % | 66 | % | ||||||||
Alternative Strategy | 13 | % | 10 | % | — | — |
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Pension | SERP | OPEB(a) | ||||||||||
In Millions | ||||||||||||
2009 | $ | 72 | $ | 5 | $ | 57 | ||||||
2010 | 78 | 5 | 60 | |||||||||
2011 | 85 | 5 | 62 | |||||||||
2012 | 96 | 6 | 64 | |||||||||
2013 | 106 | 6 | 65 | |||||||||
2014-2018 | 669 | 39 | 363 |
(a) | OPEB benefit payments are net of employee contributions and expected Medicare Part D prescription drug subsidy payments. The subsidies to be received are estimated to be $6 million for 2009 and 2010, $7 million for 2011, $8 million for 2012 and 2013 and $50 million combined for 2014 through 2018. |
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In Service | ||||
ARO Description | Date | Long-Lived Assets | ||
December 31, 2008 | ||||
Closure of coal ash disposal areas | Various | Generating plants coal ash areas | ||
Closure of wells at gas storage fields | Various | Gas storage fields | ||
Indoor gas services equipment relocations | Various | Gas meters located inside structures | ||
Asbestos abatement | 1973 | Electric and gas utility plant | ||
Gas distribution cut, purge & cap | Various | Gas distribution mains & services | ||
Natural gas-based power plant | 1997 | Gas fueled power plant | ||
Close gas treating plant and gas wells | Various | Gas transmission and storage |
ARO | ARO | |||||||||||||||||||||||
Liability | Cash flow | Liability | ||||||||||||||||||||||
ARO Description | 12/31/06 | Incurred | Settled(a) | Accretion | Revisions | 12/31/07 | ||||||||||||||||||
In Millions | ||||||||||||||||||||||||
Palisades-decommission | $ | 401 | $ | — | $ | (410 | ) | $ | 7 | $ | 2 | $ | — | |||||||||||
Big Rock-decommission | 2 | — | (3 | ) | 1 | — | — | |||||||||||||||||
Coal ash disposal areas | 57 | — | (4 | ) | 6 | — | 59 | |||||||||||||||||
Wells at gas storage fields | 1 | — | — | — | — | 1 | ||||||||||||||||||
Indoor gas services relocations | 1 | — | — | — | — | 1 | ||||||||||||||||||
Asbestos abatement | 35 | — | (1 | ) | 2 | — | 36 | |||||||||||||||||
Gas distribution cut, purge, cap | — | 101 | — | — | — | 101 | ||||||||||||||||||
Natural gas-based power plant | 1 | — | (1 | ) | — | — | — | |||||||||||||||||
Close gas treating plant and gas wells | 2 | — | (2 | ) | — | — | — | |||||||||||||||||
Total | $ | 500 | $ | 101 | $ | (421 | ) | $ | 16 | $ | 2 | $ | 198 | |||||||||||
ARO | ARO | |||||||||||||||||||||||
Liability | Cash flow | Liability | ||||||||||||||||||||||
ARO Description | 12/31/07 | Incurred | Settled(a) | Accretion | Revisions | 12/31/08 | ||||||||||||||||||
In Millions | ||||||||||||||||||||||||
Palisades-decommission | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||
Big Rock-decommission | — | — | — | — | — | — | ||||||||||||||||||
Coal ash disposal areas | 59 | — | (3 | ) | 6 | — | 62 | |||||||||||||||||
Wells at gas storage fields | 1 | — | — | — | — | 1 | ||||||||||||||||||
Indoor gas services relocations | 1 | — | — | — | — | 1 | ||||||||||||||||||
Asbestos abatement | 36 | — | (2 | ) | 2 | — | 36 | |||||||||||||||||
Gas distribution cut, purge, cap | 101 | (1 | ) | (2 | ) | 7 | — | 105 | ||||||||||||||||
Natural gas-based power plant | — | — | — | — | — | — | ||||||||||||||||||
Close gas treating plant and gas wells | — | — | — | 1 | — | 1 | ||||||||||||||||||
Total | $ | 198 | $ | (1 | ) | $ | (7 | ) | $ | 16 | $ | — | $ | 206 | ||||||||||
(a) | Cash payments of $7 million in 2008 and $5 million in 2007 are included in the Other current and non-current liabilities line in Net cash provided by operating activities in our Consolidated Statements of Cash Flows. In |
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CMS ENERGY CORPORATION |
Years Ended December 31 | 2008 | 2007 | 2006 | |||||||||
In Millions | ||||||||||||
Current income taxes: | ||||||||||||
Federal | $ | 4 | $ | 229 | $ | 133 | ||||||
Federal income tax benefit of operating loss carryforwards | — | (209 | ) | (31 | ) | |||||||
State and local | 9 | 1 | — | |||||||||
Foreign | — | — | (2 | ) | ||||||||
$ | 13 | $ | 21 | $ | 100 | |||||||
Deferred income taxes: | ||||||||||||
Federal | $ | 137 | $ | (212 | ) | $ | (281 | ) | ||||
State and local | (4 | ) | — | — | ||||||||
Foreign | — | — | (3 | ) | ||||||||
$ | 133 | $ | (212 | ) | $ | (284 | ) | |||||
Deferred ITC, net | (4 | ) | (4 | ) | (4 | ) | ||||||
Tax expense/(benefit) | $ | 142 | $ | (195 | ) | $ | (188 | ) | ||||
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December 31 | 2008 | 2007 | ||||||
In Millions | ||||||||
Current Assets and (Liabilities): | ||||||||
Deferred charges | $ | 1 | $ | 107 | ||||
Tax loss and credit carryforwards | 148 | — | ||||||
Reserves and accruals | 20 | — | ||||||
Employee benefits | (96 | ) | 8 | |||||
Gas inventory | (219 | ) | (204 | ) | ||||
Other | 46 | 48 | ||||||
Net Current (Liability) | $ | (100 | ) | $ | (41 | ) | ||
Noncurrent Assets and (Liabilities): | ||||||||
Tax loss and credit carryforwards | $ | 775 | $ | 761 | ||||
SFAS No. 109 regulatory liability | 205 | 207 | ||||||
Reserves and accruals | 43 | 92 | ||||||
Currency translation adjustment | — | 77 | ||||||
Foreign investments inflation indexing | 30 | 23 | ||||||
Employee benefits | 101 | 64 | ||||||
Valuation allowance | (32 | ) | (32 | ) | ||||
Property | (968 | ) | (840 | ) | ||||
Securitized costs | (161 | ) | (180 | ) | ||||
Nuclear decommissioning (including unrecovered costs) | (20 | ) | (18 | ) | ||||
Other | (19 | ) | (55 | ) | ||||
Net Noncurrent Asset/(Liability) | $ | (46 | ) | $ | 99 | |||
Total Deferred Income Tax Asset/(Liability) | $ | (146 | ) | $ | 58 | |||
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Years Ended December 31 | 2008 | 2007 | 2006 | |||||||||
In Millions | ||||||||||||
Income (loss) from continuing operations before income taxes | ||||||||||||
Domestic | $ | 440 | $ | (124 | ) | $ | (118 | ) | ||||
Foreign | 2 | (197 | ) | (203 | ) | |||||||
Total | 442 | (321 | ) | (321 | ) | |||||||
Statutory federal income tax rate | x 35 | % | x 35 | % | x 35 | % | ||||||
Expected income tax expense (benefit) | 155 | (112 | ) | (112 | ) | |||||||
Increase (decrease) in taxes from: | ||||||||||||
Property differences | 3 | 9 | 13 | |||||||||
Income tax effect of foreign investments | — | 47 | (29 | ) | ||||||||
ITC amortization | (4 | ) | (4 | ) | (4 | ) | ||||||
State and local income taxes, net of federal benefit | 3 | — | — | |||||||||
Medicare Part D exempt income | (9 | ) | (10 | ) | (10 | ) | ||||||
Tax exempt income | (1 | ) | (1 | ) | (3 | ) | ||||||
Tax contingency reserves | — | — | (15 | ) | ||||||||
Valuation allowance | (6 | ) | (121 | ) | 23 | |||||||
IRS settlement/credit restoration | — | — | (49 | ) | ||||||||
Other, net | 1 | (3 | ) | (2 | ) | |||||||
Recorded income tax benefit | $ | 142 | $ | (195 | ) | $ | (188 | ) | ||||
Effective tax rate | 32.1 | % | 60.7 | % | 58.6 | % | ||||||
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(In Millions) | ||||||||
Year Ended December 31 | 2008 | 2007 | ||||||
Balance at beginning of period | $ | 51 | $ | 151 | ||||
Reductions for prior year tax positions | — | (101 | ) | |||||
Additions for prior year tax positions | 12 | 1 | ||||||
Statute lapses | — | — | ||||||
Additions for current year tax positions | 2 | — | ||||||
Settlements | — | — | ||||||
Balance at end of period | $ | 65 | $ | 51 | ||||
• | retirement, | |
• | disability, or |
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• | change of control of CMS Energy, as defined by the Plan. |
Weighted-Average | ||||||||
Grant Date | ||||||||
Number of | Fair Value | |||||||
Restricted Stock | Shares | per Share | ||||||
Nonvested at December 31, 2007 | 1,681,454 | $ | 13.52 | |||||
Granted(a) | 739,350 | $ | 10.38 | |||||
Vested | (171,004 | ) | $ | 13.67 | ||||
Forfeited(b) | (445,500 | ) | $ | 15.34 | ||||
Nonvested at December 31, 2008 | 1,804,300 | $ | 12.10 | |||||
(a) | During 2008, we granted 482,240 TSR shares and 257,110 time-lapse shares of restricted stock. | |
(b) | During 2008, 432,500 TSR shares granted in 2005 were forfeited due to the failure to meet the specific market conditions. |
2008 | 2007 | 2006 | ||||||||||
Expected volatility | 19.70 | % | 19.11 | % | 20.51 | % | ||||||
Expected dividend yield | 2.67 | % | 1.20 | % | 0.00 | % | ||||||
Risk-free rate | 2.83 | % | 4.59 | % | 4.82 | % |
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Options | ||||||||||||||||
Outstanding, | ||||||||||||||||
Fully Vested, | Weighted-Average | Weighted-Average | Aggregate | |||||||||||||
and | Exercise Price | Remaining | Intrinsic | |||||||||||||
Stock Options | Exercisable | per Share | Contractual Term | Value | ||||||||||||
(In millions) | ||||||||||||||||
Outstanding at December 31, 2007 | 1,213,905 | $ | 21.51 | 3.8 years | $ | (5 | ) | |||||||||
Granted | — | — | ||||||||||||||
Exercised | (173,000 | ) | $ | 6.45 | ||||||||||||
Cancelled or Expired | (233,365 | ) | $ | 32.42 | ||||||||||||
Outstanding at December 31, 2008 | 807,540 | $ | 21.58 | 2.8 years | $ | (9 | ) | |||||||||
Years Ended December 31 | 2008 | 2007 | 2006 | |||||||||
Weighted average grant date fair value per share | ||||||||||||
Restricted stock granted | $ | 10.38 | $ | 14.18 | $ | 13.84 | ||||||
Stock options granted(a) | — | — | — |
(a) | No stock options were granted in 2008, 2007, or 2006. |
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Years Ended December 31 | 2008 | 2007 | 2006 | |||||||||
In Millions | ||||||||||||
Capital lease expense | $ | 46 | $ | 34 | $ | 15 | ||||||
Operating lease expense | 28 | 25 | 21 | |||||||||
Income from subleases | (1 | ) | (2 | ) | (2 | ) |
Capital | Finance | Operating | ||||||||||
Leases | Lease(a) | Leases | ||||||||||
In Millions | ||||||||||||
2009 | $ | 16 | $ | 23 | $ | 27 | ||||||
2010 | 15 | 22 | 26 | |||||||||
2011 | 13 | 21 | 25 | |||||||||
2012 | 15 | 20 | 25 | |||||||||
2013 | 8 | 20 | 19 | |||||||||
2014 and thereafter | 48 | 133 | 115 | |||||||||
Total minimum lease payments | 115 | 239 | $ | 237 | ||||||||
Less imputed interest | 58 | 65 | ||||||||||
Present value of net minimum lease payments | 57 | 174 | ||||||||||
Less current portion | 12 | 13 | ||||||||||
Non-current portion | $ | 45 | $ | 161 | ||||||||
(a) | In April 2007, we sold Palisades to Entergy and entered into a15-year power purchase agreement to buy all of the capacity and energy produced by Palisades, up to the annual average capacity of 798 MW. We provided $30 million in security to Entergy for our power purchase agreement obligation in the form of a letter of credit. We estimate that capacity and energy payments under the Palisades power purchase agreement will average $320 million annually. Our total purchases of capacity and energy under the Palisades power purchase agreement were $298 million in 2008 and $180 million in 2007. | |
Because of the Palisades power purchase agreement and our continuing involvement with the Palisades assets, we accounted for the disposal of Palisades as a financing and not a sale. SFAS No. 98 specifies the accounting required for a seller’s sale and simultaneous leaseback involving real estate. We have continuing involvement with Palisades through security provided to Entergy for our power purchase agreement obligation, our DOE liability and other forms of involvement. As a result, we accounted for the Palisades plant, which is the real estate asset subject to the leaseback, as a financing for accounting purposes and not a sale. As a financing, no gain on the sale of Palisades was recognized in the Consolidated Statements of Income (Loss). We accounted for the remaining non-real estate assets and liabilities associated with the transaction as a sale. | ||
As a financing, the Palisades plant remains on our Consolidated Balance Sheets and we continue to depreciate it. We recorded the related proceeds as a finance obligation with payments recorded to interest expense and the finance obligation based on the amortization of the obligation over the life of the Palisades power purchase |
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agreement. The value of the finance obligation was based on an allocation of the transaction proceeds to the fair values of the net assets sold and fair value of the Palisades plant asset under the financing. Total amortization and interest charges under the financing were $23 million in 2008 and $18 million in 2007. |
Estimated | ||||||||||||
Depreciable | ||||||||||||
December 31 | Life in Years | 2008 | 2007 | |||||||||
In Millions | ||||||||||||
Electric: | ||||||||||||
Generation | 18-85 | $ | 3,357 | $ | 3,328 | |||||||
Distribution | 12-75 | 4,766 | 4,496 | |||||||||
Other | 7-40 | 551 | 438 | |||||||||
Capital and finance leases(a) | 291 | 293 | ||||||||||
Gas: | ||||||||||||
Underground storage facilities(b) | 30-65 | 270 | 267 | |||||||||
Transmission | 13-75 | 473 | 570 | |||||||||
Distribution | 30-80 | 2,460 | 2,286 | |||||||||
Other | 5-50 | 398 | 320 | |||||||||
Capital leases(a) | 21 | 24 | ||||||||||
Enterprises: | �� | |||||||||||
IPP | 3-45 | 379 | 378 | |||||||||
CMS Electric and Gas | n/a | — | 2 | |||||||||
Other | 3-25 | 11 | 11 | |||||||||
Other: | 7-71 | 33 | 34 | |||||||||
Constructionwork-in-progress | 608 | 447 | ||||||||||
Less accumulated depreciation, depletion, and amortization(c) | 4,428 | 4,166 | ||||||||||
Net property, plant, and equipment(d) | $ | 9,190 | $ | 8,728 | ||||||||
(a) | Capital and finance leases presented in this table are gross amounts. Accumulated amortization of capital and finance leases was $79 million at December 31, 2008 and $62 million at December 31, 2007. Additions were $6 million and Retirements and adjustments were $3 million during 2008. Additions were $229 million during 2007, which includes $197 million related to assets under the Palisades finance lease. Retirements and adjustments were $26 million during 2007. | |
(b) | Includes base natural gas in underground storage of $26 million at December 31, 2008 and December 31, 2007, which is not subject to depreciation. | |
(c) | At December 31, 2008, accumulated depreciation, depletion, and amortization included $4.241 billion from our utility plant assets and $187 million from other plant assets. At December 31, 2007, accumulated depreciation, depletion, and amortization included $3.992 billion from our utility plant assets and $174 million from other plant assets. | |
(d) | At December 31, 2008, utility plant additions were $629 million and utility plant retirements, including other plant adjustments, were $60 million. At December 31, 2007, utility plant additions, including capital leases, were $1.303 billion and utility plant retirements, including other plant adjustments, were $1.094 billion. |
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Amortization | 2008 | 2007 | ||||||||||||||||||
December 31 | Life | Accumulated | Accumulated | |||||||||||||||||
Description | in years | Gross Cost(a) | Amortization | Gross Cost(a) | Amortization | |||||||||||||||
In Millions | ||||||||||||||||||||
Software development | 7-15 | $ | 370 | $ | 192 | $ | 207 | $ | 170 | |||||||||||
Plant acquisition adjustments | 40 | 214 | 6 | 214 | — | |||||||||||||||
Rights of way | 50-75 | 118 | 33 | 116 | 32 | |||||||||||||||
Leasehold improvements | various | 11 | 9 | 19 | 16 | |||||||||||||||
Franchises and consents | various | 14 | 6 | 14 | 5 | |||||||||||||||
Other intangibles | various | 20 | 14 | 20 | 14 | |||||||||||||||
Total | $ | 747 | $ | 260 | $ | 590 | $ | 237 | ||||||||||||
(a) | Intangible asset additions for our utility plant were $163 million during 2008, which included $161 million related to the installation and operation of our new integrated business software system. Intangible asset additions for our utility plant were $232 million during 2007, which included the Zeeland $213 million plant acquisition adjustment. Retirements were $23 million during 2007. |
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Year Ended | ||||
December 31, 2007 | ||||
Total(b) | ||||
In Millions | ||||
Operating revenue | $ | 598 | ||
Operating expenses | 448 | |||
Operating income | 150 | |||
Other expense, net | 69 | |||
Net income | $ | 81 | ||
Year Ended | ||||||||
December 31, 2006 | ||||||||
Jorf | ||||||||
Lasfar(a) | Total(b) | |||||||
In Millions | ||||||||
Operating revenue | $ | 482 | $ | 2,093 | ||||
Operating expenses | 317 | 1,600 | ||||||
Operating income | 165 | 493 | ||||||
Other expense, net | 57 | 252 | ||||||
Net income | $ | 108 | $ | 241 | ||||
December 31, 2007 | ||||
Total(b) | ||||
In Millions | ||||
Assets | ||||
Current assets | $ | 7 | ||
Property, plant and equipment, net | 6 | |||
Other assets | 177 | |||
$ | 190 | |||
Liabilities | ||||
Current liabilities | $ | 4 | ||
Long-term debt and other non-current liabilities | — | |||
Equity | 186 | |||
$ | 190 | |||
(a) | We sold our investment in Jorf Lasfar in 2007. At December 31, 2006, our investment in Jorf Lasfar was $313 million. Our share of net income from Jorf Lasfar was $16 million for the period January 1, 2007 through May 1, 2007, and $54 million for the year ended December 31, 2006. | |
(b) | Amounts include financial data from equity method investments through the date of sale. |
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Ownership | Net | Accumulated | Construction | |||||||||||||||||||||||||
Share | Investment(a) | Depreciation | Work in Progress | |||||||||||||||||||||||||
December 31 | (%) | 2008 | 2007 | 2008 | 2007 | 2008 | 2007 | |||||||||||||||||||||
In Millions | ||||||||||||||||||||||||||||
Campbell Unit 3 | 93.3 | $ | 675 | $ | 664 | $ | 360 | $ | 337 | $ | 19 | $ | 44 | |||||||||||||||
Ludington | 51.0 | 61 | 65 | 107 | 104 | 7 | 1 | |||||||||||||||||||||
Distribution | Various | 96 | 89 | 41 | 44 | 3 | 5 |
(a) | Net investment is the amount of utility plant in service less accumulated depreciation. |
• | electric utility, consisting of regulated activities associated with the generation and distribution of electricity in Michigan through our subsidiary, Consumers, | |
• | gas utility, consisting of regulated activities associated with the transportation, storage, and distribution of natural gas in Michigan through our subsidiary, Consumers, and | |
• | enterprises, consisting of various subsidiaries engaging primarily in domestic independent power production. |
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Years Ended December 31 | 2008 | 2007 | 2006 | |||||||||
In Millions | ||||||||||||
Operating Revenues | ||||||||||||
Electric utility | $ | 3,594 | $ | 3,443 | $ | 3,302 | ||||||
Gas utility | 2,827 | 2,621 | 2,373 | |||||||||
Enterprises | 379 | 383 | 438 | |||||||||
Other | 21 | 17 | 13 | |||||||||
$ | 6,821 | $ | 6,464 | $ | 6,126 | |||||||
Earnings from Equity Method Investees | ||||||||||||
Enterprises | $ | 5 | $ | 39 | $ | 87 | ||||||
Other | — | 1 | 2 | |||||||||
$ | 5 | $ | 40 | $ | 89 | |||||||
Depreciation and Amortization | ||||||||||||
Electric utility | $ | 438 | $ | 397 | $ | 380 | ||||||
Gas utility | 136 | 127 | 122 | |||||||||
Enterprises | 11 | 12 | 44 | |||||||||
Other | 4 | 4 | 4 | |||||||||
$ | 589 | $ | 540 | $ | 550 | |||||||
Fixed Charges | ||||||||||||
Electric utility | $ | 185 | $ | 192 | $ | 164 | ||||||
Gas utility | 60 | 69 | 73 | |||||||||
Enterprises | 6 | 9 | 66 | |||||||||
Other | 141 | 168 | 177 | |||||||||
$ | 392 | $ | 438 | $ | 480 | |||||||
Income Tax Expense (Benefit) | ||||||||||||
Electric utility | $ | 153 | $ | 100 | $ | 95 | ||||||
Gas utility | 45 | 47 | 18 | |||||||||
Enterprises | (10 | ) | (183 | ) | (145 | ) | ||||||
Other | (46 | ) | (159 | ) | (156 | ) | ||||||
$ | 142 | $ | (195 | ) | $ | (188 | ) | |||||
Net Income (Loss) Available to Common Stockholders | ||||||||||||
Electric utility | $ | 271 | $ | 196 | $ | 199 | ||||||
Gas utility | 89 | 87 | 37 | |||||||||
Enterprises | 14 | (412 | ) | (227 | ) | |||||||
Discontinued operations(a) | — | (89 | ) | 54 | ||||||||
Other | (85 | ) | (9 | ) | (153 | ) | ||||||
$ | 289 | $ | (227 | ) | $ | (90 | ) | |||||
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Years Ended December 31 | 2008 | 2007 | 2006 | |||||||||
In Millions | ||||||||||||
Investments | ||||||||||||
Enterprises | $ | 5 | $ | 6 | $ | 556 | ||||||
Other | 6 | 5 | 10 | |||||||||
$ | 11 | $ | 11 | $ | 566 | |||||||
Total Assets | ||||||||||||
Electric utility(b) | $ | 8,904 | $ | 8,492 | $ | 8,516 | ||||||
Gas utility(b) | 4,565 | 4,102 | 3,950 | |||||||||
Enterprises | 313 | 982 | 1,901 | |||||||||
Other | 1,119 | 616 | 958 | |||||||||
$ | 14,901 | $ | 14,192 | $ | 15,325 | |||||||
Capital Expenditures(c) | ||||||||||||
Electric utility | $ | 553 | $ | 1,319 | $ | 462 | ||||||
Gas utility | 241 | 168 | 172 | |||||||||
Enterprises | 3 | 5 | 42 | |||||||||
Other | — | — | 1 | |||||||||
$ | 797 | $ | 1,492 | $ | 677 | |||||||
2008 | 2007 | 2006 | ||||||||||
In Millions | ||||||||||||
United States | ||||||||||||
Operating revenue | $ | 6,821 | $ | 6,462 | $ | 6,123 | ||||||
Operating income | $ | 799 | $ | 151 | $ | 85 | ||||||
Total Assets | $ | 14,898 | $ | 14,187 | $ | 14,077 | ||||||
International | ||||||||||||
Operating revenue | $ | — | $ | 2 | $ | 3 | ||||||
Operating income (loss) | $ | 1 | $ | (150 | ) | $ | (139 | ) | ||||
Total Assets | $ | 3 | $ | 5 | $ | 1,248 |
(a) | Amounts include income tax expense of $1 million for December 31, 2008, an income tax benefit of $1 million for December 31, 2007, and income tax expense of $32 million for December 31, 2006. | |
(b) | Amounts include a portion of Consumers’ other common assets attributable to both the electric and gas utility businesses. | |
(c) | Amounts include purchase of nuclear fuel and capital lease additions. Amounts also include a portion of Consumers’ capital expenditures for plant and equipment attributable to both the electric and gas utility businesses. | |
(d) | Revenues are based on the country location of customers. |
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• | related party agreements such as operating and maintenance agreements, power purchase agreements and leases, | |
• | ownership interest, and | |
• | allocation of expected losses and return based on discounted cash flows at a weighted average cost of capital. |
Total | ||||||
Nature of | Generating | |||||
Name (Ownership Interest) | the Entity | Financing of Partnership | Capacity | |||
T.E.S. Filer City (50)% | Coal-based power generator | Non-recourse long-term debt that matured in December 2007. | 70 MW | |||
Grayling (50)% | Wood waste-based power generator | Sale of revenue bonds that mature in November 2012 and bear interest at variable rates. The debt is recourse to the partnership, but not the individual partners, and secured by a letter of credit equal to the outstanding balance. | 40 MW | |||
Genesee (50)% | Wood waste-based power generator | Sale of revenue bonds that mature in 2021 and bear interest at fixed rates. The debt is non-recourse to the partnership and secured by a CMS Energy guarantee capped at $3 million annually. | 38 MW | |||
Total | 148 MW | |||||
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2008 | ||||||||||||||||
Quarters Ended | March 31 | June 30 | Sept. 30 | Dec. 31 | ||||||||||||
In Millions, Except Per Share Amounts | ||||||||||||||||
Operating revenue | $ | 2,184 | $ | 1,365 | $ | 1,428 | $ | 1,844 | ||||||||
Operating income | 253 | 155 | 212 | 180 | ||||||||||||
Income from continuing operations | 106 | 50 | 80 | 64 | ||||||||||||
Income (loss) from discontinued operations(a) | — | (1 | ) | 1 | — | |||||||||||
Net income | 106 | 49 | 81 | 64 | ||||||||||||
Preferred dividends | 3 | 3 | 2 | 3 | ||||||||||||
Net income available to common stockholders | 103 | 46 | 79 | 61 | ||||||||||||
Income from continuing operations per average common share — basic | 0.46 | 0.21 | 0.35 | 0.27 | ||||||||||||
Income from continuing operations per average common share — diluted | 0.44 | 0.20 | 0.33 | 0.27 | ||||||||||||
Basic earnings per average common share(b) | 0.46 | 0.20 | 0.36 | 0.27 | ||||||||||||
Diluted earnings per average common share(b) | 0.44 | 0.19 | 0.34 | 0.27 | ||||||||||||
Common stock prices(c) | ||||||||||||||||
High | 17.16 | 15.83 | 14.91 | 12.58 | ||||||||||||
Low | 13.35 | 13.78 | 12.09 | 8.81 |
2007 | ||||||||||||||||
Quarters Ended | March 31 | June 30 | Sept. 30 | Dec. 31(d) | ||||||||||||
In Millions, Except Per Share Amounts | ||||||||||||||||
Operating revenue | $ | 2,189 | $ | 1,319 | $ | 1,282 | $ | 1,674 | ||||||||
Operating income (loss) | (24 | ) | 7 | 212 | (194 | ) | ||||||||||
Income (loss) from continuing operations | (33 | ) | (55 | ) | 84 | (122 | ) | |||||||||
Income (loss) from discontinued operations(a) | (178 | ) | 91 | — | (2 | ) | ||||||||||
Net income (loss) | (211 | ) | 36 | 84 | (124 | ) | ||||||||||
Preferred dividends | 3 | 3 | 2 | 3 | ||||||||||||
Redemption premium on preferred stock | 1 | — | — | — | ||||||||||||
Net income (loss) available to common stockholders | (215 | ) | 33 | 82 | (127 | ) | ||||||||||
Income (loss) from continuing operations per average common share — basic | (0.17 | ) | (0.26 | ) | 0.37 | (0.56 | ) | |||||||||
Income (loss) from continuing operations per average common share — diluted | (0.17 | ) | (0.26 | ) | 0.34 | (0.56 | ) | |||||||||
Basic earnings (loss) per average common share(b) | (0.97 | ) | 0.15 | 0.37 | (0.57 | ) | ||||||||||
Diluted earnings (loss) per average common share(b) | (0.97 | ) | 0.15 | 0.34 | (0.57 | ) | ||||||||||
Common stock prices(c) | ||||||||||||||||
High | 18.21 | 18.93 | 17.90 | 17.91 | ||||||||||||
Low | 16.00 | 16.78 | 15.48 | 16.06 |
(a) | Net of tax. | |
(b) | Sum of the quarters may not equal the annual earnings (loss) per share due to changes in shares outstanding. | |
(c) | Based on New York Stock Exchange composite transactions. | |
(d) | The quarter ended December 31, 2007 includes a $181 million net after-tax charge resulting from an electricity sales agreement termination. |
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2008 | 2007 | 2006 | 2005 | 2004 | ||||||||||||||||||
Operating revenue (in millions) | ($) | 6,421 | 6,064 | 5,721 | 5,232 | 4,711 | ||||||||||||||||
Earnings from equity method investees (in millions) | ($) | — | — | 1 | 1 | 1 | ||||||||||||||||
Income (loss) before cumulative effect of change in accounting principle (in millions) | ($) | 364 | 312 | 186 | (96 | ) | 280 | |||||||||||||||
Cumulative effect of change in accounting (in millions) | ($) | — | — | — | — | (1 | ) | |||||||||||||||
Net income (loss) (in millions) | ($) | 364 | 312 | 186 | (96 | ) | 279 | |||||||||||||||
Net income (loss) available to common stockholder (in millions) | ($) | 362 | 310 | 184 | (98 | ) | 277 | |||||||||||||||
Cash provided by operations (in millions) | ($) | 873 | 440 | 474 | 639 | 595 | ||||||||||||||||
Capital expenditures, excluding capital lease additions (in millions) | ($) | 789 | 1,258 | 646 | 572 | 508 | ||||||||||||||||
Total assets (in millions)(a) | ($) | 14,246 | 13,401 | 12,845 | 13,178 | 12,811 | ||||||||||||||||
Long-term debt, excluding current portion (in millions)(a) | ($) | 3,908 | 3,692 | 4,127 | 4,303 | 4,000 | ||||||||||||||||
Long-term debt — related parties, excluding current portion (in millions) | ($) | — | — | — | — | 326 | ||||||||||||||||
Non-current portion of capital and finance lease obligations (in millions) | ($) | 206 | 225 | 42 | 308 | 315 | ||||||||||||||||
Total preferred stock (in millions) | ($) | 44 | 44 | 44 | 44 | 44 | ||||||||||||||||
Number of preferred shareholders at year-end | 1,584 | 1,641 | 1,728 | 1,823 | 1,931 | |||||||||||||||||
Book value per common share at year-end | ($) | 44.05 | 43.37 | 35.17 | 33.03 | 28.68 | ||||||||||||||||
Number of full-time equivalent employees at year-end | 7,697 | 7,614 | 8,026 | 8,114 | 8,050 | |||||||||||||||||
Electric statistics | ||||||||||||||||||||||
Sales (billions of kWh) | 37 | 39 | 38 | 39 | 38 | |||||||||||||||||
Customers (in thousands) | 1,814 | 1,799 | 1,797 | 1,789 | 1,772 | |||||||||||||||||
Average sales rate per kWh | (¢) | 9.48 | 8.65 | 8.46 | 6.73 | 6.88 | ||||||||||||||||
Gas Utility Statistics | ||||||||||||||||||||||
Sales and transportation deliveries (bcf) | 338 | 340 | 309 | 350 | 385 | |||||||||||||||||
Customers (in thousands)(b) | 1,713 | 1,710 | 1,714 | 1,708 | 1,691 | |||||||||||||||||
Average sales rate per mcf | ($) | 11.25 | 10.66 | 10.44 | 9.61 | 8.04 |
(a) | Until their sale in November 2006 , we were the primary beneficiary of both the MCV Partnership and the FMLP. As a result, we consolidated their assets, liabilities and activities into our consolidated financial statements as of and for the years ended December 31, 2005 and 2004. These partnerships had third-party obligations totaling $482 million at December 31, 2005 and $582 million at December 31, 2004. Property, plant and equipment serving as collateral for these obligations had a carrying value of $224 million at December 31, 2005 and $1.426 billion at December 31, 2004. | |
(b) | Excludes off-system transportation customers. |
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• | the price of CMS Energy Common Stock, capital and financial market conditions and the effect of these 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 CMS Energy, including its: |
• | revenues, | |
• | capital expenditure program and related earnings growth, | |
• | ability to collect accounts receivable from our customers, | |
• | cost of capital and availability of capital, and | |
• | Pension Plan and postretirement benefit plans assets and required contributions, |
• | the market perception of the energy industry or of Consumers, CMS Energy, or any of their affiliates, | |
• | the 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 applicable laws, rules, regulations, principles or practices or in their interpretation, including with respect to taxes, environmental and accounting matters, that could have an impact on our business, | |
• | the impact of any future regulations or laws regarding: |
• | carbon dioxide, mercury and other greenhouse gas emissions, | |
• | limitations on the use of coal-based electric power plants, and | |
• | renewable portfolio standards and energy efficiency mandates, |
• | 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 these interpretations or decisions, including but not limited to those that may affect our RMRR classification under NSR regulation, | |
• | potentially adverse regulatory treatment or failure to receive timely regulatory orders concerning a number of significant questions currently or potentially before the MPSC, including: |
• | adequate and timely recovery of: |
• | Clean Air Act capital and operating costs and other environmental and safety-related expenditures, | |
• | power supply and natural gas supply costs, | |
• | additional electric and gas rate-based investments, | |
• | increased MISO energy and transmission costs, | |
• | costs associated with energy efficiency investments and state or federally mandated renewable resource standards, | |
• | Big Rock decommissioning funding shortfalls, |
• | timely recognition in rates of additional equity investments and additional operation and maintenance expenses at Consumers, | |
• | 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, and their impact on our cash flow and working capital, | |
• | the impact of construction material prices and 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 these 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, and stability of insurance providers, | |
• | technological developments in energy production, delivery, usage, and storage, | |
• | achievement of capital expenditure and operating expense goals, | |
• | earnings volatility resulting from the GAAP requirement that we apply mark-to-market accounting to certain energy commodity contracts, |
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• | changes in financial or regulatory accounting principles or policies, | |
• | a possible future requirement to comply with International Financial Reporting Standards, which differ from GAAP in various ways including the present lack of special accounting treatment for regulated activities similar to that provided under SFAS No. 71, | |
• | 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, | |
• | population growth or decline in the geographic areas where we do business, | |
• | changes in the economic and financial viability of our suppliers, customers, and other counterparties and the continued ability of these third parties to perform their obligations to us, | |
• | the effectiveness of our risk management policies and procedures, | |
• | our ability to achieve generation planning goals and the occurrence and duration of planned or unplanned generation outages, | |
• | adverse outcomes regarding tax positions due to the difficulty in quantifying tax effects of business decisions and reserves, and | |
• | other business or investment matters that may be disclosed from time to time in Consumers’ or CMS Energy’s SEC filings, or in other publicly issued written documents. |
• | weather, especially during the normal heating and cooling seasons, | |
• | economic conditions, | |
• | regulation and regulatory issues, | |
• | energy commodity prices, | |
• | interest rates, and | |
• | our debt credit rating. |
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• | investing in our utility system to enable us to meet our customer commitments, improve customer service, 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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Years Ended December 31 | 2008 | 2007 | Change | 2007 | 2006 | Change | ||||||||||||||||||
In Millions | ||||||||||||||||||||||||
Electric | $ | 271 | $ | 196 | $ | 75 | $ | 196 | $ | 199 | (3 | ) | ||||||||||||
Gas | 89 | 87 | 2 | 87 | 37 | 50 | ||||||||||||||||||
Other (Includes The MCV Partnership interest) | 2 | 27 | (25 | ) | 27 | (52 | ) | 79 | ||||||||||||||||
Net Income Available to Common Stockholder | $ | 362 | $ | 310 | $ | 52 | $ | 310 | $ | 184 | $ | 126 | ||||||||||||
In Millions | ||||||
• | increase in electric delivery revenue primarily due to the MPSC’s December 2007 and June 2008 electric rate orders, | $ | 109 | |||
• | 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 | ||||
• | absence of nuclear operating and maintenance costs, | 25 | ||||
• | increase in gas delivery revenue primarily due to the MPSC’s August 2007 gas rate order, | 20 | ||||
• | decrease in electric deliveries, | (51 | ) | |||
• | decrease in other income, | (48 | ) | |||
• | increase in depreciation expense, and | (31 | ) | |||
• | other net decreases | (1 | ) | |||
Total change | $ | 52 | ||||
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In Millions | ||||||
• | lower operating and maintenance costs primarily due to the sale of Palisades in April 2007, | $ | 82 | |||
• | decrease in losses from our ownership interest in the MCV Partnership primarily due to the absence, in 2007, of mark-to-market losses on certain long-term gas contracts and financial hedges, | 60 | ||||
• | increase in gas delivery revenue primarily due to the MPSC’s November 2006 and August 2007 gas rate orders, | 47 | ||||
• | decrease in other income tax adjustments primarily due to higher expected utilization of capital loss carryforwards, | 14 | ||||
• | increase in electric revenue primarily due to favorable weather and higher surcharge revenue, | 16 | ||||
• | increase in gas delivery revenue primarily due to colder weather, | 12 | ||||
• | decrease due to electric revenue being used to offset costs incurred under our power purchase agreement with Entergy, | (88 | ) | |||
• | increase in general taxes, primarily due to higher property tax expense, | (14 | ) | |||
• | increase in interest charges, and | (7 | ) | |||
• | other net increases to income | 4 | ||||
Total change | $ | 126 | ||||
Years Ended December 31 | 2008 | 2007 | Change | 2007 | 2006 | Change | ||||||||||||||||||
In Millions | ||||||||||||||||||||||||
Net income | $ | 271 | $ | 196 | $ | 75 | $ | 196 | $ | 199 | $ | (3 | ) | |||||||||||
Reasons for the change: | ||||||||||||||||||||||||
Electric deliveries and rate increase | $ | 89 | $ | (118 | ) | |||||||||||||||||||
Surcharge revenue | 15 | 6 | ||||||||||||||||||||||
Power supply costs and related revenue | 18 | (17 | ) | |||||||||||||||||||||
Non-commodity revenue | (14 | ) | (12 | ) | ||||||||||||||||||||
Depreciation and other operating expenses | 40 | 150 | ||||||||||||||||||||||
Other income | (46 | ) | 26 | |||||||||||||||||||||
General taxes | 15 | (15 | ) | |||||||||||||||||||||
Interest charges | 11 | (18 | ) | |||||||||||||||||||||
Income taxes | (53 | ) | (5 | ) | ||||||||||||||||||||
Total change | $ | 75 | $ | (3 | ) | |||||||||||||||||||
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Years Ended December 31 | 2008 | 2007 | Change | 2007 | 2006 | Change | ||||||||||||||||||
In Millions | ||||||||||||||||||||||||
Net income | $ | 89 | $ | 87 | $ | 2 | $ | 87 | $ | 37 | $ | 50 | ||||||||||||
Reasons for the change: | ||||||||||||||||||||||||
Gas deliveries and rate increase | $ | 44 | $ | 91 | ||||||||||||||||||||
Gas wholesale and retail services, other gas revenues, and other income | (28 | ) | 14 | |||||||||||||||||||||
Other operating expenses | (24 | ) | (19 | ) | ||||||||||||||||||||
General taxes and depreciation | (1 | ) | (11 | ) | ||||||||||||||||||||
Interest charges | 9 | 4 | ||||||||||||||||||||||
Income taxes | 2 | (29 | ) | |||||||||||||||||||||
Total change | $ | 2 | $ | 50 | ||||||||||||||||||||
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Years Ended December 31 | 2008 | 2007 | Change | 2007 | 2006 | Change | ||||||||||||||||||
In Millions | ||||||||||||||||||||||||
Net income (loss) | $ | 2 | $ | 27 | $ | (25 | ) | $ | 27 | $ | (52 | ) | $ | 79 | ||||||||||
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• | the nature of the assets, | |
• | projected future economic benefits, | |
• | regulatory and political environments, | |
• | historical and future cash flow and profitability measurements, and | |
• | other external market conditions and factors. |
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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. |
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December 31 | 2008 | 2007 | ||||||
In Millions | ||||||||
Variable-rate financing — before tax annual earnings exposure | $ | 1 | $ | 1 | ||||
Fixed-rate financing — potentialreductionin fair value(a) | 136 | 116 |
(a) | Fair value reduction could only be realized if we transferred all of our fixed-rate financing to other creditors. |
December 31 | 2008 | 2007 | ||||||
In Millions | ||||||||
Potentialreductionin fair value: | ||||||||
Fixed price fuel contracts | $ | 1 | $ | — |
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December 31 | 2008 | 2007 | ||||||
In Millions | ||||||||
Potentialreductionin fair value of available-for-sale equity securities (SERP investments and investment in CMS Energy common stock) | $ | 4 | $ | 7 |
• | life expectancies, | |
• | discount rates, | |
• | expected long-term rate of return on plan assets, | |
• | rate of compensation increases, and | |
• | anticipated health care costs. |
Expected | Pension Cost | OPEB Cost | Pension Contribution | OPEB Contribution | ||||||||||||
In Millions | ||||||||||||||||
2009 | $ | 98 | $ | 78 | $ | 291 | $ | 52 | ||||||||
2010 | 88 | 75 | 123 | 52 | ||||||||||||
2011 | 85 | 73 | 102 | 52 |
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• | purchase and sale of electricity from and to Enterprises, | |
• | payment of parent company overhead costs to CMS Energy, and | |
• | investment in CMS Energy Common Stock. |
• | results of operations, | |
• | capital expenditures, | |
• | energy commodity and transportation costs, | |
• | contractual obligations, | |
• | regulatory decisions, | |
• | debt maturities, |
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• | 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. |
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Years Ended December 31 | 2008 | 2007 | Change | 2007 | 2006 | Change | ||||||||||||||||||
In Millions | ||||||||||||||||||||||||
Net cash provided by operating activities | $ | 873 | $ | 440 | $ | 433 | $ | 440 | $ | 474 | $ | (34 | ) | |||||||||||
Reasons for the change: | ||||||||||||||||||||||||
Net income | $ | 52 | $ | 126 | ||||||||||||||||||||
Non-cash operating activities(a) | 209 | (62 | ) | |||||||||||||||||||||
Accounts receivable and accrued revenue | 363 | (466 | ) | |||||||||||||||||||||
Inventories | (84 | ) | 109 | |||||||||||||||||||||
Accounts payable | 24 | 9 | ||||||||||||||||||||||
Accrued taxes | (144 | ) | 181 | |||||||||||||||||||||
MCV Partnership gas supplier funds on deposit | — | 147 | ||||||||||||||||||||||
Postretirement benefits contributions | 123 | (105 | ) | |||||||||||||||||||||
Regulatory liabilities | (64 | ) | (173 | ) | ||||||||||||||||||||
Other assets and liabilities | (46 | ) | 200 | |||||||||||||||||||||
Total change | $ | 433 | $ | (34 | ) | |||||||||||||||||||
(a) | Represents adjustments to reconcile net income to net cash provided by operating activities including depreciation and amortization, deferred income taxes, postretirement benefits expense, asset impairment charges, and other non-cash charges. |
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Years Ended December 31 | 2008 | 2007 | Change | 2007 | 2006 | Change | ||||||||||||||||||
In Millions | ||||||||||||||||||||||||
Net cash used in investing activities | $ | (823 | ) | $ | (583 | ) | $ | (240 | ) | $ | (583 | ) | $ | (673 | ) | $ | 90 | |||||||
Reasons for the change: | ||||||||||||||||||||||||
Proceeds from asset sales, net of cash relinquished | $ | (337 | ) | $ | 416 | |||||||||||||||||||
Proceeds from nuclear decommissioning trust funds | (333 | ) | 311 | |||||||||||||||||||||
Capital expenditures | 469 | (612 | ) | |||||||||||||||||||||
Other investing | (39 | ) | (25 | ) | ||||||||||||||||||||
Total change | $ | (240 | ) | $ | 90 | |||||||||||||||||||
Years Ended December 31 | 2008 | 2007 | Change | 2007 | 2006 | Change | ||||||||||||||||||
In Millions | ||||||||||||||||||||||||
Net cash provided by (used in) financing activities | $ | (176 | ) | $ | 301 | $ | (477 | ) | $ | 301 | $ | (180 | ) | $ | 481 | |||||||||
Reasons for the change: | ||||||||||||||||||||||||
Proceeds from issuance of long-term debt | $ | 600 | $ | — | ||||||||||||||||||||
Retirement of long-term debt | (410 | ) | 183 | |||||||||||||||||||||
Payment of common stock dividends | (46 | ) | (104 | ) | ||||||||||||||||||||
Stockholder’s contribution, net | (650 | ) | 450 | |||||||||||||||||||||
Other financing | 29 | (48 | ) | |||||||||||||||||||||
Total change | $ | (477 | ) | $ | 481 | |||||||||||||||||||
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Securities | S&P | Moody’s | Fitch | |||
Senior Secured Debt (FMB) | BBB | Baa1 | BBB+ | |||
Senior Unsecured Debt | BBB- | Baa2 | BBB | |||
Securitization Bonds | AAA | Aaa | AAA | |||
Senior Secured Insured Quarterly Notes | AAA | Aaa | AAA | |||
Tax Exempt Bonds | BBB | Baa1 | — | |||
Tax Exempt Bonds, LOC backed | AAA | Aaa | — |
Payments Due | ||||||||||||||||||||
Contractual Obligations | Less Than | One to | Three to | More Than | ||||||||||||||||
at December 31, 2008 | Total | One Year | Three Years | Five Years | Five Years | |||||||||||||||
In Millions | ||||||||||||||||||||
Long-term debt(a) | $ | 4,291 | $ | 383 | $ | 380 | $ | 755 | $ | 2,773 | ||||||||||
Interest payments on long-term debt(b) | 1,814 | 213 | 378 | 332 | 891 | |||||||||||||||
Capital and finance leases(c) | 231 | 25 | 47 | 41 | 118 | |||||||||||||||
Interest payments on capital and finance leases(d) | 122 | 13 | 25 | 22 | 62 | |||||||||||||||
Operating leases(e) | 237 | 27 | 51 | 44 | 115 | |||||||||||||||
Purchase obligations(f) | 14,699 | 2,201 | 2,391 | 1,545 | 8,562 | |||||||||||||||
Purchase obligations — related parties(f) | 1,570 | 78 | 166 | 168 | 1,158 | |||||||||||||||
Total contractual obligations | $ | 22,964 | $ | 2,940 | $ | 3,438 | $ | 2,907 | $ | 13,679 | ||||||||||
(a) | Principal amounts due on outstanding debt obligations, current and long-term, at December 31, 2008. For additional details on long-term debt, see Note 5, Financings and Capitalization. | |
(b) | Currently scheduled interest payments on both variable and fixed-rate long-term debt, current and long-term. Variable interest payments are based on contractual rates in effect at December 31, 2008. | |
(c) | Principal portion of lease payments under our capital and finance leases, comprised mainly of leased service vehicles, leased office furniture, and certain power purchase agreements. |
(d) | Imputed interest on the capital leases. |
(e) | Minimum noncancelable lease payments under our leases of railroad cars, certain vehicles, and miscellaneous office buildings and equipment, which are accounted for as operating leases. |
(f) | Long-term contracts for purchase of commodities and services. These obligations include operating contracts used to assure adequate supply with generating facilities that meet PURPA requirements. These commodities and services include: |
• | natural gas and associated transportation, | |
• | electricity, and | |
• | coal and associated transportation. |
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Years Ending December 31 | 2009 | 2010 | 2011 | |||||||||
In Millions | ||||||||||||
Construction | $ | 628 | $ | 748 | $ | 664 | ||||||
Clean Air(a) | 69 | 197 | 105 | |||||||||
New Customers | 70 | 87 | 91 | |||||||||
Other(b) | 83 | 102 | 96 | |||||||||
Total | $ | 850 | $ | 1,134 | $ | 956 | ||||||
Electric utility operations(a)(b) | $ | 574 | $ | 847 | $ | 705 | ||||||
Gas utility operations(b) | 276 | 287 | 251 | |||||||||
Total | $ | 850 | $ | 1,134 | $ | 956 | ||||||
(a) | These amounts include estimates for capital expenditures that may be required by revisions to the Clean Air Act’s national air quality standards or potential renewable energy programs. | |
(b) | These amounts include estimates for capital expenditures related to information technology projects, facility improvements, and vehicle leasing. |
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• | energy efficiency, | |
• | demand management, | |
• | expanded use of renewable energy, and | |
• | development of new power plants and pursuit of additional power purchase agreements to complement existing generating sources. |
• | whether additional generation is needed, and | |
• | whether other feasible and prudent alternatives to a new coal plant exist that would better protect the environment, including potential demand reduction measures and purchasing power from existing sources. |
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• | energy conservation measures and results of energy efficiency programs, | |
• | fluctuations in weather, and | |
• | changes in economic conditions, including utilization and expansion or contraction of manufacturing facilities, population trends, and housing activity. |
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• | fluctuations in weather, | |
• | 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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• | extends the protection period from March 31, 2009 to April 30, 2009, | |
• | includes protection for physically or mentally disabled customers of record, | |
• | expands the qualifications for low income shutoff protection, and | |
• | gives customers the payment options. |
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Years Ended December 31 | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
In Millions | ||||||||||||
Operating Revenue | $ | 6,421 | $ | 6,064 | $ | 5,721 | ||||||
Earnings from Equity Method Investees | — | — | 1 | |||||||||
Operating Expenses | ||||||||||||
Fuel for electric generation | 483 | 385 | 672 | |||||||||
Fuel costs mark-to-market at the MCV Partnership | — | — | 204 | |||||||||
Purchased and interchange power | 1,313 | 1,370 | 647 | |||||||||
Purchased power — related parties | 75 | 79 | 74 | |||||||||
Cost of gas sold | 2,079 | 1,918 | 1,770 | |||||||||
Other operating expenses | 766 | 808 | 895 | |||||||||
Maintenance | 169 | 183 | 284 | |||||||||
Depreciation and amortization | 574 | 524 | 527 | |||||||||
General taxes | 195 | 217 | 150 | |||||||||
Asset impairment charges | — | — | 218 | |||||||||
Loss (gain) on asset sales, net | 1 | (2 | ) | (79 | ) | |||||||
5,655 | 5,482 | 5,362 | ||||||||||
Operating Income | 766 | 582 | 360 | |||||||||
Other Income (Deductions) | ||||||||||||
Interest | 25 | 69 | 62 | |||||||||
Interest and dividends — related parties | 1 | 1 | — | |||||||||
Regulatory return on capital expenditures | 33 | 31 | 26 | |||||||||
Other income | 12 | 32 | 20 | |||||||||
Other expense | (28 | ) | (14 | ) | (12 | ) | ||||||
43 | 119 | 96 | ||||||||||
Interest Charges Interest on long-term debt | 229 | 234 | 281 | |||||||||
Interest on long-term debt — related parties | — | 2 | 5 | |||||||||
Other interest | 22 | 34 | 13 | |||||||||
Capitalized interest | (4 | ) | (6 | ) | (10 | ) | ||||||
247 | 264 | 289 | ||||||||||
Income Before Income Taxes | 562 | 437 | 167 | |||||||||
Income Tax Expense | 198 | 125 | 91 | |||||||||
Income Before Minority Obligations, Net | 364 | 312 | 76 | |||||||||
Minority Obligations, Net | — | — | (110 | ) | ||||||||
Net Income | 364 | 312 | 186 | |||||||||
Preferred Stock Dividends | 2 | 2 | 2 | |||||||||
Net Income Available to Common Stockholder | $ | 362 | $ | 310 | $ | 184 | ||||||
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Years Ended December 31 | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
In Millions | ||||||||||||
Cash Flows from Operating Activities | ||||||||||||
Net income | $ | 364 | $ | 312 | $ | 186 | ||||||
Adjustments to reconcile net income to net cash provided by operating activities | ||||||||||||
Depreciation and amortization (includes nuclear decommissioning of $—, $4 and $6) | 574 | 524 | 527 | |||||||||
Deferred income taxes and investment tax credit | 196 | 55 | (113 | ) | ||||||||
Regulatory return on capital expenditures | (33 | ) | (31 | ) | (26 | ) | ||||||
Minority obligations, net | — | — | (110 | ) | ||||||||
Fuel costs mark-to-market at the MCV Partnership | — | — | 204 | |||||||||
Asset impairment charges | — | — | 218 | |||||||||
Postretirement benefits expense | 141 | 124 | 122 | |||||||||
Capital lease and other amortization | 30 | 44 | 37 | |||||||||
Bad debt expense | 47 | 33 | 30 | |||||||||
Loss (gain) on sale of assets | 1 | (2 | ) | (79 | ) | |||||||
Earnings from equity method investees | — | — | (1 | ) | ||||||||
Postretirement benefits contributions | (50 | ) | (173 | ) | (68 | ) | ||||||
Changes in assets and liabilities: | ||||||||||||
Decrease (increase) in accounts receivable, notes receivable and accrued revenue | (79 | ) | (442 | ) | 24 | |||||||
Decrease (increase) in accrued power supply and gas revenue | 35 | 99 | (91 | ) | ||||||||
Increase in inventories | (89 | ) | (5 | ) | (114 | ) | ||||||
Increase (decrease) in accounts payable | 1 | (23 | ) | (32 | ) | |||||||
Increase (decrease) in accrued expenses | (15 | ) | (15 | ) | 35 | |||||||
Increase (decrease) in accrued taxes | (64 | ) | 80 | (101 | ) | |||||||
Decrease in the MCV Partnership gas supplier funds on deposit | — | — | (147 | ) | ||||||||
Increase (decrease) in other current and non-current regulatory liabilities | (178 | ) | (114 | ) | 59 | |||||||
Decrease (increase) in other current and non-current assets | 14 | (7 | ) | (50 | ) | |||||||
Decrease in other current and non-current liabilities | (22 | ) | (19 | ) | (36 | ) | ||||||
Net cash provided by operating activities | 873 | 440 | 474 | |||||||||
Cash Flows from Investing Activities | ||||||||||||
Capital expenditures (excludes assets placed under capital lease) | (789 | ) | (1,258 | ) | (646 | ) | ||||||
Cost to retire property | (34 | ) | (28 | ) | (78 | ) | ||||||
Restricted cash and restricted short-term investments | — | 32 | 126 | |||||||||
Investments in nuclear decommissioning trust funds | — | (1 | ) | (21 | ) | |||||||
Proceeds from nuclear decommissioning trust funds | — | 333 | 22 | |||||||||
Maturity of the MCV Partnership restricted investment securities held-to-maturity | — | — | 130 | |||||||||
Purchase of the MCV Partnership restricted investment securities held-to-maturity | — | — | (131 | ) | ||||||||
Cash proceeds from sale of assets | — | 337 | 69 | |||||||||
Cash relinquished from sale of assets | — | — | (148 | ) | ||||||||
Other investing | — | 2 | 4 | |||||||||
Net cash used in investing activities | (823 | ) | (583 | ) | (673 | ) | ||||||
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Years Ended December 31 | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
In Millions | ||||||||||||
Cash Flows from Financing Activities | ||||||||||||
Proceeds from issuance of long term debt | 600 | — | — | |||||||||
Retirement of long-term debt | (444 | ) | (34 | ) | (217 | ) | ||||||
Payment of common stock dividends | (297 | ) | (251 | ) | (147 | ) | ||||||
Payment of capital and finance lease obligations | (26 | ) | (20 | ) | (26 | ) | ||||||
Stockholder’s contribution, net | — | 650 | 200 | |||||||||
Payment of preferred stock dividends | (2 | ) | (1 | ) | (2 | ) | ||||||
Increase (decrease) in notes payable | — | (42 | ) | 15 | ||||||||
Debt issuance and financing costs | (7 | ) | (1 | ) | (3 | ) | ||||||
Net cash provided by (used in) financing activities | (176 | ) | 301 | (180 | ) | |||||||
Net Increase (Decrease) in Cash and Cash Equivalents | (126 | ) | 158 | (379 | ) | |||||||
Cash and Cash Equivalents, Beginning of Period | 195 | 37 | 416 | |||||||||
Cash and Cash Equivalents, End of Period | $ | 69 | $ | 195 | $ | 37 | ||||||
Other cash flow activities and non-cash investing and financing activities were: | ||||||||||||
Cash transactions | ||||||||||||
Interest paid (net of amounts capitalized) | $ | 206 | $ | 242 | $ | 279 | ||||||
Income taxes paid (net of refunds, $—, $98, and $39) | 84 | — | 306 | |||||||||
Non-cash transactions | ||||||||||||
Other assets placed under capital lease | $ | 5 | $ | 229 | $ | 7 | ||||||
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December 31 | ||||||||
2008 | 2007 | |||||||
In Millions | ||||||||
ASSETS | ||||||||
Plant and Property (at cost) | ||||||||
Electric | $ | 8,965 | $ | 8,555 | ||||
Gas | 3,622 | 3,467 | ||||||
Other | 15 | 15 | ||||||
12,602 | 12,037 | |||||||
Less accumulated depreciation, depletion, and amortization | 4,242 | 3,993 | ||||||
8,360 | 8,044 | |||||||
Constructionwork-in-progress | 607 | 447 | ||||||
8,967 | 8,491 | |||||||
Investments | ||||||||
Stock of affiliates | 19 | 32 | ||||||
Current Assets | ||||||||
Cash and cash equivalents at cost, which equals fair value | 69 | 195 | ||||||
Restricted cash at cost, which equals fair value | 25 | 25 | ||||||
Accounts receivable and accrued revenue, less allowances of $24 in 2008 and $16 in 2007 | 829 | 810 | ||||||
Notes receivable | 93 | 67 | ||||||
Accrued power supply and gas revenue | 7 | 45 | ||||||
Accounts receivable — related parties | 2 | 4 | ||||||
Inventories at average cost | ||||||||
Gas in underground storage | 1,168 | 1,123 | ||||||
Materials and supplies | 103 | 79 | ||||||
Generating plant fuel stock | 118 | 100 | ||||||
Deferred property taxes | 165 | 158 | ||||||
Regulatory assets — postretirement benefits | 19 | 19 | ||||||
Prepayments and other | 30 | 28 | ||||||
2,628 | 2,653 | |||||||
Non-current Assets | ||||||||
Regulatory assets Securitized costs | 416 | 466 | ||||||
Postretirement benefits | 1,431 | 921 | ||||||
Customer Choice Act | 90 | 149 | ||||||
Other | 482 | 504 | ||||||
Other | 213 | 185 | ||||||
2,632 | 2,225 | |||||||
Total Assets | $ | 14,246 | $ | 13,401 | ||||
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December 31 | ||||||||
2008 | 2007 | |||||||
In Millions | ||||||||
STOCKHOLDER’S INVESTMENT AND LIABILITIES | ||||||||
Capitalization | ||||||||
Common stockholder’s equity | ||||||||
Common stock, authorized 125.0 shares; outstanding 84.1 shares for both periods | $ | 841 | $ | 841 | ||||
Paid-in capital | 2,482 | 2,482 | ||||||
Accumulated other comprehensive loss | (1 | ) | — | |||||
Retained earnings | 383 | 324 | ||||||
3,705 | 3,647 | |||||||
Preferred stock | 44 | 44 | ||||||
Long-term debt | 3,908 | 3,692 | ||||||
Non-current portion of capital and finance lease obligations | 206 | 225 | ||||||
7,863 | 7,608 | |||||||
Current Liabilities | ||||||||
Current portion of long-term debt, capital and finance lease obligations | 408 | 470 | ||||||
Accounts payable | 444 | 403 | ||||||
Accrued rate refunds | 7 | 19 | ||||||
Accounts payable — related parties | 14 | 13 | ||||||
Accrued interest | 69 | 65 | ||||||
Accrued taxes | 289 | 353 | ||||||
Deferred income taxes | 277 | 151 | ||||||
Regulatory liabilities | 120 | 164 | ||||||
Other | 151 | 150 | ||||||
1,779 | 1,788 | |||||||
Non-current Liabilities | ||||||||
Deferred income taxes | 792 | 713 | ||||||
Regulatory liabilities | ||||||||
Cost of removal | 1,203 | 1,127 | ||||||
Income taxes, net | 519 | 533 | ||||||
Other | 146 | 313 | ||||||
Postretirement benefits | 1,436 | 813 | ||||||
Asset retirement obligations | 205 | 198 | ||||||
Deferred investment tax credit | 54 | 58 | ||||||
Other | 249 | 250 | ||||||
4,604 | 4,005 | |||||||
Commitments and Contingencies (Notes 4, 5, 6, 9, and 11) | ||||||||
Total Stockholder’s Investment and Liabilities | $ | 14,246 | $ | 13,401 | ||||
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Years Ended December 31 | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
In Millions | ||||||||||||
Common Stock | ||||||||||||
At beginning and end of period(a) | $ | 841 | $ | 841 | $ | 841 | ||||||
Other Paid-in Capital | ||||||||||||
At beginning of period | 2,482 | 1,832 | 1,632 | |||||||||
Stockholder’s contribution | — | 650 | 200 | |||||||||
At end of period | 2,482 | 2,482 | 1,832 | |||||||||
Accumulated Other Comprehensive Income | ||||||||||||
Retirement benefits liability | ||||||||||||
At beginning of period | (15 | ) | (8 | ) | (2 | ) | ||||||
Retirement benefits liability adjustments(b) | 6 | — | — | |||||||||
Net gain (loss) arising during the period(b) | 2 | (7 | ) | — | ||||||||
Adjustment to initially apply FASB Statement No. 158, net of tax | — | — | (6 | ) | ||||||||
At end of period | (7 | ) | (15 | ) | (8 | ) | ||||||
Investments | ||||||||||||
At beginning of period | 15 | 23 | 18 | |||||||||
Unrealized gain (loss) on investments(b) | (19 | ) | (1 | ) | 5 | |||||||
Reclassification adjustments included in net income(b) | 10 | (7 | ) | — | ||||||||
At end of period | 6 | 15 | 23 | |||||||||
Derivative instruments | ||||||||||||
At beginning of period | — | — | 56 | |||||||||
Unrealized loss on derivative instruments(b) | — | — | (21 | ) | ||||||||
Reclassification adjustments included in net income(b) | — | — | (35 | ) | ||||||||
At end of period | — | — | — | |||||||||
Total Accumulated Other Comprehensive Income (Loss) | (1 | ) | — | 15 | ||||||||
Retained Earnings | ||||||||||||
At beginning of period | 324 | 270 | 233 | |||||||||
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(b) | 364 | 312 | 186 | |||||||||
Cash dividends declared — Common Stock | (297 | ) | (251 | ) | (147 | ) | ||||||
Cash dividends declared — Preferred Stock | (2 | ) | (2 | ) | (2 | ) | ||||||
At end of period | 383 | 324 | 270 | |||||||||
Total Common Stockholder’s Equity | $ | 3,705 | $ | 3,647 | $ | 2,958 | ||||||
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Years Ended December 31 | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
In Millions | ||||||||||||
(a) Number of shares of common stock outstanding was 84,108,789 for all periods presented | ||||||||||||
(b) Disclosure of Comprehensive Income: | ||||||||||||
Net income | $ | 364 | $ | 312 | $ | 186 | ||||||
Retirement benefits liability | ||||||||||||
Retirement benefits liability adjustment, net of tax of $2 in 2008 | 6 | — | — | |||||||||
Net gain (loss) arising during the period, net of tax (tax benefit) of $1 in 2008, and $(4) in 2007 | 2 | (7 | ) | — | ||||||||
Investments | ||||||||||||
Unrealized gain (loss) on investments, net of tax (tax benefit) of $(10) in 2008, $(1) in 2007, and $2 in 2006 | (19 | ) | (1 | ) | 5 | |||||||
Reclassification adjustments included in net income, net of tax (tax benefit) of $6 in 2008 and $(3) in 2007 | 10 | (7 | ) | — | ||||||||
Derivative instruments | ||||||||||||
Unrealized loss on derivative instruments, net of tax benefit of $(11) in 2006 | — | — | (21 | ) | ||||||||
Reclassification adjustments included in net income, net of tax benefit of $(19) in 2006 | — | — | (35 | ) | ||||||||
Total Comprehensive Income | $ | 363 | $ | 297 | $ | 135 | ||||||
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Years Ended December 31 | 2008 | 2007 | 2006 | |||||||||
Electric utility property | 3.0% | 3.0% | 3.1% | |||||||||
Gas utility property | 3.6% | 3.6% | 3.6% | |||||||||
Other property | 8.5% | 8.7% | 8.2% |
Years Ended December 31 | 2008 | 2007 | 2006 | |||||||||
In Millions | ||||||||||||
Other income | ||||||||||||
Electric restructuring return | $ | 1 | $ | 2 | $ | 4 | ||||||
Return on stranded and security costs | 5 | 6 | 5 | |||||||||
MCV Partnership emission allowance sales | — | — | 8 | |||||||||
Gain on SERP investment | — | 10 | — | |||||||||
Gain on investment | — | 7 | — | |||||||||
Gain on stock | — | 4 | 1 | |||||||||
All other | 6 | 3 | 2 | |||||||||
Total other income | $ | 12 | $ | 32 | $ | 20 | ||||||
Years Ended December 31 | 2008 | 2007 | 2006 | |||||||||
In Millions | ||||||||||||
Other expense | ||||||||||||
Unrealized investment loss | $ | (17 | ) | $ | — | $ | — | |||||
Civic and political expenditures | (5 | ) | (2 | ) | (2 | ) | ||||||
Donations | — | — | (9 | ) | ||||||||
Abandoned Midland Project | — | (8 | ) | — | ||||||||
All other | (6 | ) | (4 | ) | (1 | ) | ||||||
Total other expense | $ | (28 | ) | $ | (14 | ) | $ | (12 | ) | |||
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Years Ended December 31 | 2008 | 2007 | 2006 | |||||||||
AFUDC capitalization rate | 7.7 | % | 7.4 | % | 7.5 | % |
Description | Related Party | 2008 | 2007 | 2006 | ||||||||||
In Millions | ||||||||||||||
Type of Income: | ||||||||||||||
Dividend Income | CMS Energy | $ | 1 | $ | 1 | $ | — | |||||||
Type of Expense: | ||||||||||||||
Electric generating capacity and energy | Affiliates of Enterprises | (75 | ) | (79 | ) | (74 | ) | |||||||
Interest expense on note payable | CMS Energy and Consumers’ affiliated Trust Preferred Securities Companies | — | (2 | ) | (5 | ) | ||||||||
Gas transportation(a) | CMS Bay Area Pipeline, L.L.C. | — | (1 | ) | (4 | ) |
(a) | CMS Bay Area Pipeline, L.L.C. was sold to Lucid Energy in March 2007. |
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End of | ||||||||||
recovery or | ||||||||||
December 31 | refund period | 2008 | 2007 | |||||||
In Millions | ||||||||||
Assets Earning a Return: | ||||||||||
Customer Choice Act | 2010 | $ | 90 | $ | 149 | |||||
Stranded Costs | See Note 4 | 71 | 68 | |||||||
Electric restructuring implementation plan | 2009 | 3 | 14 | |||||||
Manufactured gas plant sites (Note 4) | 2018 | 31 | 33 | |||||||
Other(a) | various | 44 | 50 | |||||||
Assets Not Earning a Return: | ||||||||||
Postretirement Benefits (Note 7) | various | 1,450 | 940 | |||||||
Securitized costs (Note 5) | 2015 | 416 | 466 | |||||||
Unamortized debt costs | n/a | 66 | 74 | |||||||
ARO (Note 8) | n/a | 92 | 85 | |||||||
Big Rock nuclear decommissioning and related costs (Note 4) | n/a | 129 | 129 | |||||||
Manufactured gas plant sites (Note 4) | n/a | 38 | 17 | |||||||
Palisades sales transaction costs (Notes 3 and 4) | n/a | — | 28 | |||||||
Other(a) | 2011 | 8 | 6 | |||||||
Total regulatory assets(b) | $ | 2,438 | $ | 2,059 | ||||||
Palisades refund — Current (Note 4)(c) | 2009 | $ | 120 | $ | 164 | |||||
Cost of removal (Note 8) | n/a | 1,203 | 1,127 | |||||||
Income taxes, net (Note 9) | n/a | 519 | 533 | |||||||
ARO (Note 8) | n/a | 137 | 141 | |||||||
Palisades refund — Non-current (Note 4)(c) | 2008 | — | 140 | |||||||
Other(a) | various | 9 | 32 | |||||||
Total regulatory liabilities(b) | $ | 1,988 | $ | 2,137 | ||||||
(a) | At December 31, 2008 and 2007, other regulatory assets include a gas inventory regulatory asset and OPEB and pension expense incurred in excess of the MPSC-approved amount. We will recover these regulatory assets from our customers by 2011. Other regulatory liabilities include liabilities related to the sale of sulfur dioxide allowances and AFUDC collected in excess of the MPSC-approved amount. |
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(b) | At December 31, 2008 and 2007, we classified $19 million of regulatory assets as current regulatory assets. At December 31, 2008, we classified $120 million of regulatory liabilities as current regulatory liabilities. At December 31, 2007, we classified $164 million of regulatory liabilities as current regulatory liabilities. | |
(c) | The MPSC order approving the Palisades and Big Rock ISFSI sale transaction required that we credit $255 million of excess sales proceeds and decommissioning amounts to our retail customers by December 2008. For 2007, the current portion of regulatory liabilities for Palisades refunds represents the remaining portion of this obligation, plus interest. There are additional excess sales proceeds and decommissioning fund balances above the amount in the MPSC order. For 2007, the non-current portion of regulatory liabilities for Palisades refunds represents this obligation, plus interest. For 2008, these additional excess sales proceeds are reported in the current portion of regulatory liabilities for Palisades refunds as it is probable the proceeds will be credited to customers within one year. For additional details, see Note 4, Contingencies, “Electric Rate Matters.” |
Years Ended December 31 | 2008 | 2007 | ||||||
In Millions | ||||||||
Regulatory Assets for PSCR and GCR underrecoveries of power supply and gas costs | $ | 7 | $ | 45 | ||||
Regulatory Liabilities for PSCR and GCR overrecoveries of power supply and gas costs | $ | 7 | $ | 19 | ||||
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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 |
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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. |
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Total | Level 1 | Level 2 | ||||||||||
In Millions | ||||||||||||
Assets: | ||||||||||||
Cash Equivalents | $ | 56 | $ | 56 | $ | — | ||||||
CMS Energy Common Stock | 19 | 19 | — | |||||||||
Nonqualified Deferred Compensation Plan Assets | 3 | 3 | — | |||||||||
SERP | ||||||||||||
Equity Securities | 25 | 25 | — | |||||||||
Debt Securities | 19 | — | 19 | |||||||||
Total | $ | 122 | $ | 103 | $ | 19 | ||||||
Liabilities: | ||||||||||||
Nonqualified Deferred Compensation Plan Liabilities | $ | (3 | ) | $ | (3 | ) | $ | — | ||||
Derivative Instruments: | ||||||||||||
Fixed price fuel contracts | (1 | ) | — | (1 | ) | |||||||
Total | $ | (4 | ) | $ | (3 | ) | $ | (1 | ) | |||
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Gross Cash | Pretax | |||||||||
Month sold | Business/Project | Proceeds | Gain | |||||||
In Millions | ||||||||||
April | Palisades(a) | $ | 333 | $ | — | |||||
Various | Other | 4 | 2 | |||||||
Total | $ | 337 | $ | 2 | ||||||
(a) | We sold Palisades to Entergy for $380 million and as of December 31, 2007, received $363 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. |
Gross Cash | Pretax | |||||||||
Month sold | Business/Project | Proceeds | Gain | |||||||
In Millions | ||||||||||
October | Land in Ludington, Michigan | $ | 6 | $ | 2 | |||||
November | MCV GP II(a) | 61 | 77 | |||||||
Various | Other | 2 | — | |||||||
Total | $ | 69 | $ | 79 | ||||||
(a) | In November 2006, we sold all of our interests in the Consumers’ subsidiaries that held the MCV Partnership and the MCV Facility to an affiliate of GSO Capital Partners and Rockland Capital Energy Investments. |
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Net Under- | PSCR Cost | |||||||
PSCR Year | Date Filed | recovery | of Power Sold | Description of Net Underrecovery | ||||
2007 | March 2008 | $42 million(a) | $1.628 billion | In our 2007 PSCR Plan we expected to offset power supply costs by including a $44 million credit for Palisades sale proceeds due customers. However, the MPSC directed that the Palisades sale proceeds be refunded through bill credits outside of the PSCR process. |
(a) | This amount includes 2006 underrecoveries as allowed by the MPSC order in our 2007 PSCR plan case. |
Components of the increase in revenue | In Millions | |||
Operating and maintenance | $ | 50 | ||
Rate of return | 17 | |||
Rate base | 76 | |||
Book depreciation on new investment | 14 | |||
Property taxes on new investment | 9 | |||
Gross margin | 43 | |||
Other | 5 | |||
Total | $ | 214 | ||
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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, | |
• | a $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 | |||||||
GCR Year | Date Filed | recovery | of Gas 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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Expiration | Maximum | |||||||||||
Guarantee Description | Issue Date | Date | Obligation | |||||||||
In Millions | ||||||||||||
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 December 31, 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. |
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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. |
Payments Due | ||||||||||||||||||||
Less Than | One to | Three to | More Than | |||||||||||||||||
Total | One Year | Three Years | Five Years | Five Years | ||||||||||||||||
In Millions | ||||||||||||||||||||
Purchase obligations(a) | $ | 14,699 | $ | 2,201 | $ | 2,391 | $ | 1,545 | $ | 8,562 | ||||||||||
Purchase obligations — related parties(a) | 1,570 | 78 | 166 | 168 | 1,158 |
(a) | Long-term contracts for purchase of commodities and services. These obligations include operating contracts used to ensure adequate supply with generating facilities that meet PURPA requirements. The commodities and services include: |
• | natural gas and associated transportation, | |
• | electricity, and | |
• | coal and associated transportation. |
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Interest Rate (%) | Maturity | 2008 | 2007 | |||||||||||
(In Millions) | ||||||||||||||
First mortgage bonds(a) | 4.250 | 2008 | $ | — | $ | 250 | ||||||||
4.800 | 2009 | 200 | 200 | |||||||||||
4.400 | 2009 | 150 | 150 | |||||||||||
4.000 | 2010 | 250 | 250 | |||||||||||
5.000 | 2012 | 300 | 300 | |||||||||||
5.375 | 2013 | 375 | 375 | |||||||||||
6.000 | 2014 | 200 | 200 | |||||||||||
5.000 | 2015 | 225 | 225 | |||||||||||
5.500 | 2016 | 350 | 350 | |||||||||||
5.150 | 2017 | 250 | 250 | |||||||||||
5.650 | 2018 | 250 | — | |||||||||||
6.125 | 2019 | 350 | — | |||||||||||
5.650 | 2020 | 300 | 300 | |||||||||||
5.650 | 2035 | 142 | 145 | |||||||||||
5.800 | 2035 | 175 | 175 | |||||||||||
3,517 | 3,170 | |||||||||||||
Senior notes | 6.375 | 2008 | — | 159 | ||||||||||
6.875 | 2018 | 180 | 180 | |||||||||||
Securitization bonds | 5.495 | (b) | 2009-2015 | 277 | 309 | |||||||||
Nuclear fuel disposal liability | (c) | 162 | 159 | |||||||||||
Tax-exempt pollution control revenue bonds | Various | 2010-2035 | 161 | 161 | ||||||||||
Total principal amount outstanding | 4,297 | 4,138 | ||||||||||||
Current amounts | (383 | ) | (440 | ) | ||||||||||
Net unamortized discount | (6 | ) | (6 | ) | ||||||||||
Total long-term debt | $ | 3,908 | $ | 3,692 | ||||||||||
(a) | The weighted-average interest rate for our FMB was 5.329 percent at December 31, 2008 and 5.131 percent at December 31, 2007. | |
(b) | Represents the weighted-average interest rate at December 31, 2008 (5.442 percent at December 31, 2007). | |
(c) | The maturity date is uncertain. |
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Issue/Retirement | ||||||||||
Principal | Interest Rate (%) | Date | Maturity Date | |||||||
(In millions) | ||||||||||
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 FMB. We used the proceeds to redeem $28 million of insured tax-exempt bonds in April 2008. | |
(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. We used the proceeds to redeem $68 million of insured tax-exempt bonds in April 2008. |
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Payments Due | ||||||||||||||||||||
2009 | 2010 | 2011 | 2012 | 2013 | ||||||||||||||||
In Millions | ||||||||||||||||||||
Long-term debt | $ | 383 | $ | 343 | $ | 37 | $ | 339 | $ | 416 |
Outstanding | ||||||||||||||||
Amount of | Amount | Letters of | Amount | |||||||||||||
Expiration Date | Facility | Borrowed | Credit | Available | ||||||||||||
In Millions | ||||||||||||||||
March 30, 2012 | $ | 500 | $ | — | $ | 172 | $ | 328 | ||||||||
November 30, 2009(a) | 192 | — | 192 | — | ||||||||||||
September 9, 2009 | 150 | — | — | 150 |
(a) | Secured revolving letter of credit facility. |
Years Ended December 31 | 2008 | 2007 | ||||||
In Millions | ||||||||
Administrative fees | $ | 1 | $ | 3 | ||||
Net cash flow as a result of accounts receivable financing | $ | 170 | $ | (325 | ) | |||
Collections from customers | $ | 6,060 | $ | 5,881 |
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Optional | ||||||||||||||||||||||||
Redemption | Number of Shares | |||||||||||||||||||||||
December 31 | Series | Price | 2008 | 2007 | 2008 | 2007 | ||||||||||||||||||
In Millions | ||||||||||||||||||||||||
Preferred stock | ||||||||||||||||||||||||
Cumulative $100 par value, Authorized 7,500,000 shares, with no mandatory redemption | $ | 4.16 | $ | 103.25 | 68,451 | 68,451 | $ | 7 | $ | 7 | ||||||||||||||
$ | 4.50 | $ | 110.00 | 373,148 | 373,148 | 37 | 37 | |||||||||||||||||
Total Preferred stock | $ | 44 | $ | 44 | ||||||||||||||||||||
2008 | 2007 | |||||||||||||||
Book | Fair | Book | Fair | |||||||||||||
December 31 | Value | Value | Value | Value | ||||||||||||
In Millions | ||||||||||||||||
Long-term debt(a) | $ | 4,291 | $ | 4,073 | $ | 4,132 | $ | 4,099 |
(a) | Includes current maturities of $383 million at December 31, 2008 and $440 million at December 31, 2007. Settlement of long-term debt is generally not expected until maturity. |
2008 | 2007 | |||||||||||||||||||||||||||||||
Unrealized | Unrealized | Fair | Unrealized | Unrealized | Fair | |||||||||||||||||||||||||||
December 31 | Cost | Gains | Losses | Value | Cost | Gains | Losses | Value | ||||||||||||||||||||||||
In Millions | ||||||||||||||||||||||||||||||||
Common stock of CMS Energy(a) | $ | 8 | $ | 11 | $ | — | $ | 19 | $ | 8 | $ | 24 | $ | — | $ | 32 | ||||||||||||||||
SERP: | ||||||||||||||||||||||||||||||||
Equity securities | 25 | — | — | 25 | 35 | — | — | 35 | ||||||||||||||||||||||||
Debt securities | 19 | — | — | 19 | 7 | — | — | 7 |
(a) | At December 31, 2008 and 2007, we held 1.8 million shares of CMS Energy Common Stock. |
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In Millions | ||||
Due one year or less | $ | 1 | ||
Due after one year through five years | 8 | |||
Due after five years through ten years | 7 | |||
Due after ten years | 3 | |||
Total | $ | 19 | ||
• | 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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• | 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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One Percentage | One Percentage | |||||||
Point Increase | Point Decrease | |||||||
In Millions | ||||||||
Effect on total service and interest cost component | $ | 15 | $ | (13 | ) | |||
Effect on postretirement benefit obligation | $ | 172 | $ | (150 | ) | |||
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Pension & SERP | OPEB | |||||||||||||||||||||||
Years Ended December 31 | 2008 | 2007 | 2006 | 2008 | 2007 | 2006 | ||||||||||||||||||
Discount rate(a) | 6.50 | % | 6.40 | % | 5.65 | % | 6.50 | % | 6.50 | % | 5.65 | % | ||||||||||||
Expected long-term rate of return on plan assets(b) | 8.25 | % | 8.25 | % | 8.25 | % | 7.75 | % | 7.75 | % | 7.75 | % | ||||||||||||
Mortality table(c) | 2000 | 2000 | 2000 | 2000 | 2000 | 2000 | ||||||||||||||||||
Rate of compensation increase: | ||||||||||||||||||||||||
Pension | 4.00 | % | 4.00 | % | 4.00 | % | ||||||||||||||||||
SERP | 5.50 | % | 5.50 | % | 5.50 | % |
Pension & SERP | OPEB | |||||||||||||||||||||||
Years Ended December 31 | 2008 | 2007 | 2006 | 2008 | 2007 | 2006 | ||||||||||||||||||
Discount rate(a) | 6.40 | % | 5.65 | % | 5.75 | % | 6.50 | % | 5.65 | % | 5.75 | % | ||||||||||||
Expected long-term rate of return on plan assets(b) | 8.25 | % | 8.25 | % | 8.50 | % | 7.75 | % | 7.75 | % | 8.00 | % | ||||||||||||
Mortality table(c) | 2000 | 2000 | 2000 | 2000 | 2000 | 2000 | ||||||||||||||||||
Rate of compensation increase: | ||||||||||||||||||||||||
Pension | 4.00 | % | 4.00 | % | 4.00 | % | ||||||||||||||||||
SERP | 5.50 | % | 5.50 | % | 5.50 | % |
(a) | The discount rate is set to reflect the rates at which benefits can be effectively settled. It is set equal to the equivalent single rate that results from a yield curve analysis that incorporates projected benefit payments specific to our pension and other postretirement benefit plans, and the yields on high quality corporate bonds rated Aa or better. | |
(b) | We determine our long-term rate of return by considering historical market returns, the current and expected future economic environment, the capital market principles of risk and return, and the expert opinions of individuals and firms with financial market knowledge. We consider the asset allocation of the portfolio in forecasting the future expected total return of the portfolio. The goal is to determine a long-term rate of return that can be incorporated into the planning of future cash flow requirements in conjunction with the change in the liability. Annually, we review for reasonableness and appropriateness of the forecasted returns for various classes of assets used to construct an expected return model. | |
(c) | The mortality assumption is based on the RP-2000 mortality tables with projection of future mortality improvements using Scale AA, which aligns with the IRS prescriptions for cash funding valuations under the Pension Protection Act. |
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Pension & SERP | ||||||||||||
Years Ended December 31 | 2008 | 2007 | 2006 | |||||||||
In Millions | ||||||||||||
Net periodic pension cost | ||||||||||||
Service cost | $ | 41 | $ | 47 | $ | 47 | ||||||
Interest expense | 96 | 84 | 81 | |||||||||
Expected return on plan assets | (78 | ) | (75 | ) | (80 | ) | ||||||
Amortization of: | ||||||||||||
Net loss | 40 | 44 | 41 | |||||||||
Prior service cost | 6 | 7 | 7 | |||||||||
Net periodic pension cost | 105 | 107 | 96 | |||||||||
Regulatory adjustment(a) | 4 | (22 | ) | (11 | ) | |||||||
Net periodic pension cost after regulatory adjustment | $ | 109 | $ | 85 | $ | 85 | ||||||
OPEB | ||||||||||||
Years Ended December 31 | 2008 | 2007 | 2006 | |||||||||
In Millions | ||||||||||||
Net periodic OPEB cost | ||||||||||||
Service cost | $ | 21 | $ | 24 | $ | 22 | ||||||
Interest expense | 69 | 65 | 60 | |||||||||
Expected return on plan assets | (61 | ) | (57 | ) | (53 | ) | ||||||
Amortization of: | ||||||||||||
Net loss | 10 | 23 | 20 | |||||||||
Prior service credit | (10 | ) | (10 | ) | (10 | ) | ||||||
Net periodic OPEB cost | 29 | 45 | 39 | |||||||||
Regulatory adjustment(a) | 3 | (6 | ) | (2 | ) | |||||||
Net periodic OPEB cost after regulatory adjustment | $ | 32 | $ | 39 | $ | 37 | ||||||
(a) | Regulatory adjustments are the differences between amounts included in rates and the periodic benefit cost calculated pursuant to SFAS No. 87 and SFAS No. 106. The pension regulatory asset had a balance of $29 million at December 31, 2008 and $33 million at December 31, 2007. The OPEB regulatory asset had a balance of $5 million at December 31, 2008 and $8 million at December 31, 2007. |
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Pension Plan | SERP | OPEB | ||||||||||||||||||||||
Years Ended December 31 | 2008 | 2007 | 2008 | 2007 | 2008 | 2007 | ||||||||||||||||||
In Millions | ||||||||||||||||||||||||
Benefit obligation at beginning of period | $ | 1,565 | $ | 1,576 | $ | 61 | $ | 47 | $ | 1,082 | $ | 1,179 | ||||||||||||
Service cost | 45 | 49 | 1 | 1 | 23 | 24 | ||||||||||||||||||
Interest cost | 103 | 86 | 4 | 3 | 74 | 65 | ||||||||||||||||||
Actuarial loss (gain) | (66 | ) | 30 | (2 | ) | 12 | 91 | (115 | ) | |||||||||||||||
Palisades sale | — | (38 | ) | — | — | — | (20 | ) | ||||||||||||||||
Benefits paid | (123 | ) | (138 | ) | (2 | ) | (2 | ) | (51 | ) | (51 | ) | ||||||||||||
Benefit obligation at end of period(a) | 1,524 | 1,565 | 62 | 61 | 1,219 | 1,082 | ||||||||||||||||||
Plan assets at fair value at beginning of period | 1,078 | 1,040 | — | — | 785 | 734 | ||||||||||||||||||
Actual return on plan assets | (231 | ) | 89 | — | — | (185 | ) | 51 | ||||||||||||||||
Company contribution | — | 109 | 2 | 2 | 62 | 51 | ||||||||||||||||||
Palisades sale | — | (22 | ) | — | — | — | (5 | ) | ||||||||||||||||
Actual benefits paid(b) | (123 | ) | (138 | ) | (2 | ) | (2 | ) | (50 | ) | (46 | ) | ||||||||||||
Plan assets at fair value at end of period | 724 | 1,078 | — | — | 612 | 785 | ||||||||||||||||||
Funded status at end of measurement period | (800 | ) | (487 | ) | (62 | ) | (61 | ) | (607 | ) | (297 | ) | ||||||||||||
Additional VEBA Contributions or Non-Trust Benefit Payments | — | — | — | — | — | 12 | ||||||||||||||||||
Funded status at December 31(c)(d) | $ | (800 | ) | $ | (487 | ) | $ | (62 | ) | $ | (61 | ) | $ | (607 | ) | $ | (285 | ) | ||||||
(a) | The Medicare Prescription Drug, Improvement and Modernization Act of 2003 establishes a prescription drug benefit under Medicare (Medicare Part D), and a federal subsidy, which is tax-exempt, to sponsors of retiree health care benefit plans that provide a benefit that is actuarially equivalent to Medicare Part D. The Medicare Part D annualized reduction in net OPEB cost was $24 million for 2008 and $27 million for 2007. The reduction includes $7 million for 2008 and 2007 in capitalized OPEB costs. | |
(b) | We received $5 million in 2008 and $4 million in 2007 for Medicare Part D Subsidy payments. | |
(c) | Liabilities for retirement benefits comprised $1.429 billion classified as non-current and $2 million classified as current for the year ended December 31, 2008, and $805 million classified as non-current and $2 million classified as current for the year ended December 31, 2007. | |
(d) | Of the $800 million funded status of Pension Plan at December 31, 2008, $762 million is attributable to Consumers. Of the $487 million funded status of the Pension Plan at December 31, 2007, $461 million is attributable to Consumers, based on allocation of expenses. |
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Years Ended December 31 | 2008 | 2007 | ||||||
In Millions | ||||||||
Pension PBO | $ | 1,524 | $ | 1,565 | ||||
Pension ABO | 1,240 | 1,231 | ||||||
Fair value of Pension Plan assets | $ | 724 | $ | 1,078 | ||||
Pension & SERP | OPEB | |||||||||||||||
Years Ended December 31 | 2008 | 2007 | 2008 | 2007 | ||||||||||||
In Millions | ||||||||||||||||
Regulatory assets | ||||||||||||||||
Net loss | $ | 835 | $ | 636 | $ | 595 | $ | 265 | ||||||||
Prior service cost (credit) | 33 | 39 | (78 | ) | (89 | ) | ||||||||||
AOCL | ||||||||||||||||
Net loss | 8 | 18 | — | — | ||||||||||||
Prior service cost | 1 | 1 | — | — | ||||||||||||
Total amounts recognized in regulatory assets and AOCL | $ | 877 | $ | 694 | $ | 517 | $ | 176 | ||||||||
Pension | OPEB | |||||||||||||||
Years Ended December 31 | 2008 | 2007 | 2008 | 2007 | ||||||||||||
Asset Category: | ||||||||||||||||
Fixed Income | 37 | % | 30 | % | 55 | % | 34 | % | ||||||||
Equity Securities | 50 | % | 60 | % | 45 | % | 66 | % | ||||||||
Alternative Strategy | 13 | % | 10 | % | — | — |
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Pension | SERP | OPEB(a) | ||||||||||
In Millions | ||||||||||||
2009 | $ | 72 | $ | 2 | $ | 53 | ||||||
2010 | 78 | 2 | 55 | |||||||||
2011 | 85 | 2 | 58 | |||||||||
2012 | 96 | 2 | 60 | |||||||||
2013 | 106 | 2 | 61 | |||||||||
2014-2018 | 669 | 9 | 338 |
(a) | OPEB benefit payments are net of employee contributions and expected Medicare Part D prescription drug subsidy payments. The subsidies to be received are estimated to be $5 million for 2009, $6 million for 2010 and 2011, $7 million for 2012, $8 million for 2013 and $46 million combined for 2014 through 2018. |
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In Service | ||||||
ARO Description | Date | Long-Lived Assets | ||||
December 31, 2008 | ||||||
Closure of coal ash disposal areas | Various | Generating plants coal ash areas | ||||
Closure of wells at gas storage fields | Various | Gas storage fields | ||||
Indoor gas services equipment relocations | Various | Gas meters located inside structures | ||||
Asbestos abatement | 1973 | Electric and gas utility plant | ||||
Gas distribution cut, purge & cap | Various | Gas distribution mains & services |
ARO | ARO | |||||||||||||||||||||||
Liability | Cash flow | Liability | ||||||||||||||||||||||
ARO Description | 12/31/06 | Incurred | Settled(a) | Accretion | Revisions | 12/31/07 | ||||||||||||||||||
In Millions | ||||||||||||||||||||||||
Palisades — decommission | $ | 401 | $ | — | $ | (410 | ) | $ | 7 | $ | 2 | $ | — | |||||||||||
Big Rock — decommission | 2 | — | (3 | ) | 1 | — | — | |||||||||||||||||
Coal ash disposal areas | 57 | — | (4 | ) | 6 | — | 59 | |||||||||||||||||
Wells at gas storage fields | 1 | — | — | — | — | 1 | ||||||||||||||||||
Indoor gas services relocations | 1 | — | — | — | — | 1 | ||||||||||||||||||
Asbestos abatement | 35 | — | (1 | ) | 2 | — | 36 | |||||||||||||||||
Gas distribution cut, purge, cap | — | 101 | — | — | — | 101 | ||||||||||||||||||
Total | $ | 497 | $ | 101 | $ | (418 | ) | $ | 16 | $ | 2 | $ | 198 | |||||||||||
ARO | ARO | |||||||||||||||||||||||
Liability | Cash flow | Liability | ||||||||||||||||||||||
ARO Description | 12/31/07 | Incurred | Settled(a) | Accretion | Revisions | 12/31/08 | ||||||||||||||||||
In Millions | ||||||||||||||||||||||||
Palisades — decommission | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||
Big Rock — decommission | — | — | — | — | — | — | ||||||||||||||||||
Coal ash disposal areas | 59 | — | (3 | ) | 6 | — | 62 | |||||||||||||||||
Wells at gas storage fields | 1 | — | — | — | — | 1 | ||||||||||||||||||
Indoor gas services relocations | 1 | — | — | — | — | 1 | ||||||||||||||||||
Asbestos abatement | 36 | — | (2 | ) | 2 | — | 36 | |||||||||||||||||
Gas distribution cut, purge, cap | 101 | (1 | ) | (2 | ) | 7 | — | 105 | ||||||||||||||||
Total | $ | 198 | $ | (1 | ) | $ | (7 | ) | $ | 15 | $ | — | $ | 205 | ||||||||||
(a) | Cash payments of $7 million in 2008 and $5 million in 2007 are included in the Other current and non-current liabilities line in Net cash provided by operating activities in our Consolidated Statements of Cash Flows. In |
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April 2007, we sold Palisades to Entergy and paid Entergy to assume ownership and responsibility for the Big Rock ISFSI. Our AROs related to Palisades and the Big Rock ISFSI ended with the sale, and we removed the related ARO liabilities from our Consolidated Balance Sheets. We also removed the Big Rock ARO related to the plant in the second quarter of 2007 due to the completion of decommissioning. |
Years Ended December 31 | 2008 | 2007 | 2006 | |||||||||
In Millions | ||||||||||||
Current income taxes: | ||||||||||||
Federal | $ | (10 | ) | $ | 114 | $ | 212 | |||||
Federal income tax benefit of operating loss carryforwards | — | (44 | ) | (8 | ) | |||||||
State and local | 12 | — | — | |||||||||
$ | 2 | $ | 70 | $ | 204 | |||||||
Deferred income taxes: | ||||||||||||
Federal | $ | 200 | $ | 59 | $ | (109 | ) | |||||
State | — | — | — | |||||||||
$ | 200 | $ | 59 | $ | (109 | ) | ||||||
Deferred ITC, net | (4 | ) | (4 | ) | (4 | ) | ||||||
Tax expense | $ | 198 | $ | 125 | $ | 91 | ||||||
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December 31 | 2008 | 2007 | ||||||
In Millions | ||||||||
Current Assets and (Liabilities): | ||||||||
Tax loss and credit carryforwards | $ | 8 | $ | — | ||||
Employee benefits | (100 | ) | 5 | |||||
Gas inventory | (219 | ) | (204 | ) | ||||
Other | 34 | 48 | ||||||
Net Current (Liability) | $ | (277 | ) | $ | (151 | ) | ||
Noncurrent Assets and (Liabilities): | ||||||||
Tax loss and credit carryforwards | $ | 213 | $ | 249 | ||||
SFAS No. 109 regulatory liability | 205 | 207 | ||||||
Nuclear decommissioning (including unrecovered costs) | (20 | ) | (18 | ) | ||||
Property | (1,056 | ) | (919 | ) | ||||
Securitized costs | (161 | ) | (180 | ) | ||||
Employee benefits | 80 | 39 | ||||||
Other | (53 | ) | (91 | ) | ||||
Net Noncurrent (Liability) | $ | (792 | ) | $ | (713 | ) | ||
Total Deferred Income Tax (Liability) | $ | (1,069 | ) | $ | (864 | ) | ||
Years Ended December 31 | 2008 | 2007 | 2006 | |||||||||
In Millions | ||||||||||||
Income before income taxes and minority obligations, net | 562 | 437 | 277 | |||||||||
Statutory federal income tax rate | x 35 | % | x 35 | % | x 35 | % | ||||||
Expected income tax expense | 197 | 153 | 97 | |||||||||
Increase (decrease) in taxes from: | ||||||||||||
Property differences | 3 | 9 | 13 | |||||||||
IRS settlement/credit restoration | — | — | (19 | ) | ||||||||
State and local income tax, net | 8 | — | — | |||||||||
Medicare part D exempt income | (8 | ) | (9 | ) | (10 | ) | ||||||
ITC amortization | (4 | ) | (3 | ) | (4 | ) | ||||||
Valuation allowance | — | (23 | ) | 15 | ||||||||
Other, net | 2 | (2 | ) | (1 | ) | |||||||
Recorded income tax expense | $ | 198 | $ | 125 | $ | 91 | ||||||
Effective tax rate | 35.2 | % | 28.6 | % | 32.9 | % | ||||||
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(In millions) | ||||||||
Year ended December 31 | 2008 | 2007 | ||||||
Balance at beginning of period | $ | 41 | $ | 51 | ||||
Reductions for prior year tax positions | — | (11 | ) | |||||
Additions for prior year tax positions | 12 | 1 | ||||||
Statute lapses | — | — | ||||||
Additions for current year tax positions | 2 | — | ||||||
Settlements | — | — | ||||||
Balance at end of period | $ | 55 | $ | 41 | ||||
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• | retirement, | |
• | disability, or | |
• | change of control of CMS Energy, as defined by the Plan. |
Weighted-Average | ||||||||
Grant Date Fair Value | ||||||||
Restricted Stock | Number of Shares | per Share | ||||||
Nonvested at December 31, 2007 | 1,375,079 | $ | 13.54 | |||||
Granted(a) | 672,370 | $ | 10.43 | |||||
Vested | (135,804 | ) | $ | 13.71 | ||||
Forfeited(b) | (343,725 | ) | $ | 15.60 | ||||
Nonvested at December 31, 2008 | 1,567,920 | $ | 12.03 | |||||
(a) | During 2008, we granted 432,656 TSR shares and 239,714 time-lapse shares of restricted stock. | |
(b) | During 2008, 338,725 TSR shares granted in 2005 were forfeited due to the failure to meet the specific market conditions. |
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2008 | 2007 | 2006 | ||||||||||
Expected volatility | 19.70 | % | 19.11 | % | 20.51 | % | ||||||
Expected dividend yield | 2.67 | % | 1.20 | % | 0.00 | % | ||||||
Risk-free rate | 2.83 | % | 4.59 | % | 4.82 | % |
Weighted- | Weighted- | |||||||||||||||
Options | Average | Average | ||||||||||||||
Outstanding, | Exercise | Remaining | Aggregate | |||||||||||||
Fully Vested, | Price per | Contractual | Intrinsic | |||||||||||||
Stock Options | and Exercisable | Share | Term | Value | ||||||||||||
(In millions) | ||||||||||||||||
Outstanding at December 31, 2007 | 686,226 | $ | 21.83 | 3.6 years | $ | (3 | ) | |||||||||
Granted | — | — | ||||||||||||||
Exercised | (44,561 | )(a) | 6.35 | |||||||||||||
Cancelled or Expired | (143,879 | )(b) | 35.85 | |||||||||||||
Outstanding at December 31, 2008 | 497,786 | 19.81 | 2.9 years | $ | (1 | ) | ||||||||||
(a) | Exercised shares of 8,000 relate to improper allocation of exercised shares to Consumers in 2007. | |
(b) | Cancelled or expired shares of 64,000 relate to improper allocation of cancelled shares to Consumers in 2007. |
Years Ended December 31 | 2008 | 2007 | 2006 | |||||||||
Weighted average grant date fair value per share | ||||||||||||
Restricted stock granted | $ | 10.43 | $ | 14.12 | $ | 13.82 | ||||||
Stock options granted(a) | — | — | — |
(a) | No stock options were granted in 2008, 2007, or 2006. |
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Years Ended December 31 | 2008 | 2007 | 2006 | |||||||||
In Millions | ||||||||||||
Capital lease expense | $ | 46 | $ | 34 | $ | 15 | ||||||
Operating lease expense | 27 | 23 | 19 |
Capital | Finance | Operating | ||||||||||
Leases | Lease(a) | Leases | ||||||||||
In Millions | ||||||||||||
2009 | $ | 16 | $ | 23 | $ | 27 | ||||||
2010 | 15 | 22 | 26 | |||||||||
2011 | 13 | 21 | 25 | |||||||||
2012 | 15 | 20 | 25 | |||||||||
2013 | 8 | 20 | 19 | |||||||||
2014 and thereafter | 47 | 133 | 115 | |||||||||
Total minimum lease payments | 114 | 239 | $ | 237 | ||||||||
Less imputed interest | 57 | 65 | ||||||||||
Present value of net minimum lease payments | 57 | 174 | ||||||||||
Less current portion | 12 | 13 | ||||||||||
Non-current portion | $ | 45 | $ | 161 | ||||||||
(a) | In April 2007, we sold Palisades to Entergy and entered into a15-year power purchase agreement to buy all of the capacity and energy produced by Palisades, up to the annual average capacity of 798 MW. We provided $30 million in security to Entergy for our power purchase agreement obligation in the form of a letter of credit. We estimate that capacity and energy payments under the Palisades power purchase agreement will average $320 million annually. Our total purchases of capacity and energy under the Palisades power purchase agreement were $298 million in 2008 and $180 million in 2007. |
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Estimated | ||||||||||||
Depreciable | ||||||||||||
December 31 | Life in Years | 2008 | 2007 | |||||||||
In Millions | ||||||||||||
Electric: | ||||||||||||
Generation | 18-85 | $ | 3,357 | $ | 3,328 | |||||||
Distribution | 12-75 | 4,766 | 4,496 | |||||||||
Other | 7-40 | 551 | 438 | |||||||||
Capital and finance leases(a) | 291 | 293 | ||||||||||
Gas: | ||||||||||||
Underground storage facilities(b) | 30-65 | 270 | 267 | |||||||||
Transmission | 13-75 | 473 | 570 | |||||||||
Distribution | 30-80 | 2,460 | 2,286 | |||||||||
Other | 5-50 | 398 | 320 | |||||||||
Capital leases(a) | 21 | 24 | ||||||||||
Other: | ||||||||||||
Non-utility property | 7-71 | 15 | 15 | |||||||||
Constructionwork-in-progress | 607 | 447 | ||||||||||
Less accumulated depreciation, depletion, and amortization(c) | 4,242 | 3,993 | ||||||||||
Net property, plant, and equipment(d) | $ | 8,967 | $ | 8,491 | ||||||||
(a) | Capital and finance leases presented in this table are gross amounts. Accumulated amortization of capital and finance leases was $79 million at December 31, 2008 and $62 million at December 31, 2007. Additions were $5 million and Retirements and adjustments were $3 million during 2008. Additions were $229 million during 2007, which includes $197 million related to assets under the Palisades finance lease. Retirements and adjustments were $26 million during 2007. |
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(b) | Includes base natural gas in underground storage of $26 million at December 31, 2008 and December 31, 2007, which is not subject to depreciation. | |
(c) | At December 31, 2008, accumulated depreciation, depletion, and amortization included $4.241 billion from our utility plant and $1 million related to our non-utility plant assets. At December 31, 2007, accumulated depreciation, depletion, and amortization included $3.992 billion from our utility plant and $1 million related to our non-utility plant assets. | |
(d) | At December 31, 2008, utility plant additions were $629 million and utility plant retirements, including other plant adjustments, were $60 million. At December 31, 2007, utility plant additions were $1.303 billion and utility plant retirements, including other plant adjustments, were $1.094 billion. |
December 31 | 2008 | 2007 | ||||||||||||||||||
Amortization | Accumulated | Accumulated | ||||||||||||||||||
Description | Life in years | Gross Cost(a) | Amortization | Gross Cost(a) | Amortization | |||||||||||||||
In Millions | ||||||||||||||||||||
Software development | 7-15 | $ | 370 | $ | 192 | $ | 207 | $ | 170 | |||||||||||
Plant acquisition adjustments | 40 | 214 | 6 | 214 | — | |||||||||||||||
Rights of way | 50-75 | 118 | 33 | 116 | 32 | |||||||||||||||
Leasehold improvements | various | 11 | 9 | 19 | 16 | |||||||||||||||
Franchises and consents | n/a | 14 | 6 | 14 | 5 | |||||||||||||||
Other intangibles | n/a | 18 | 13 | 18 | 13 | |||||||||||||||
Total | $ | 745 | $ | 259 | $ | 588 | $ | 236 | ||||||||||||
(a) | Intangible asset additions were $163 million during 2008, which included $161 million related to the installation and operation of our new integrated business software system. Intangible asset additions for our utility plant were $232 million during 2007, which included the Zeeland $213 million plant acquisition adjustment. Retirements were $23 million during 2007. |
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Accumulated | Construction | |||||||||||||||||||||||||||
Ownership | Net Investment(a) | Depreciation | Work in Progress | |||||||||||||||||||||||||
December 31 | Share | 2008 | 2007 | 2008 | 2007 | 2008 | 2007 | |||||||||||||||||||||
(%) | In Millions | |||||||||||||||||||||||||||
Campbell Unit 3 | 93.3 | $ | 675 | $ | 664 | $ | 360 | $ | 337 | $ | 19 | $ | 44 | |||||||||||||||
Ludington | 51.0 | 61 | 65 | 107 | 104 | 7 | 1 | |||||||||||||||||||||
Distribution | Various | 96 | 89 | 41 | 44 | 3 | 5 |
(a) | Net investment is the amount of utility plant in service less accumulated depreciation. |
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Years Ended December 31 | 2008 | 2007 | 2006 | |||||||||
In Millions | ||||||||||||
Operating Revenues | ||||||||||||
Electric | $ | 3,594 | $ | 3,443 | $ | 3,302 | ||||||
Gas | 2,827 | 2,621 | 2,374 | |||||||||
Other | — | — | 45 | |||||||||
$ | 6,421 | $ | 6,064 | $ | 5,721 | |||||||
Earnings from Equity Method Investees | ||||||||||||
Electric | $ | — | $ | — | $ | 1 | ||||||
Depreciation and Amortization | ||||||||||||
Electric | $ | 438 | $ | 397 | $ | 380 | ||||||
Gas | 136 | 127 | 122 | |||||||||
Other | — | — | 25 | |||||||||
$ | 574 | $ | 524 | $ | 527 | |||||||
Interest Charges | ||||||||||||
Electric | $ | 185 | $ | 193 | $ | 167 | ||||||
Gas | 60 | 70 | 73 | |||||||||
Other | 2 | 1 | 49 | |||||||||
$ | 247 | $ | 264 | $ | 289 | |||||||
Income Tax Expense (Benefit) | ||||||||||||
Electric | $ | 153 | $ | 100 | $ | 95 | ||||||
Gas | 45 | 47 | 18 | |||||||||
Other | — | (22 | ) | (22 | ) | |||||||
$ | 198 | $ | 125 | $ | 91 | |||||||
Net Income (Loss) Available to Common Stockholder | ||||||||||||
Electric | $ | 271 | $ | 196 | $ | 199 | ||||||
Gas | 89 | 87 | 37 | |||||||||
Other | 2 | 27 | (52 | ) | ||||||||
$ | 362 | $ | 310 | $ | 184 | |||||||
Investments in Equity Method Investees | ||||||||||||
Electric | $ | — | $ | — | $ | 5 | ||||||
Total Assets | ||||||||||||
Electric(a) | $ | 8,904 | $ | 8,492 | $ | 8,516 | ||||||
Gas(a) | 4,565 | 4,102 | 3,950 | |||||||||
Other | 777 | 807 | 379 | |||||||||
$ | 14,246 | $ | 13,401 | $ | 12,845 | |||||||
Capital Expenditures(b) | ||||||||||||
Electric | $ | 553 | $ | 1,319 | $ | 462 | ||||||
Gas | 241 | 168 | 172 | |||||||||
Other | — | — | 19 | |||||||||
$ | 794 | $ | 1,487 | $ | 653 | |||||||
(a) | Amounts include a portion of our other common assets attributable to both the electric and gas utility businesses. |
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(b) | Amounts include capital lease additions and a portion of our capital expenditures for plant and equipment attributable to both the electric and gas utility businesses. |
2008 | ||||||||||||||||
Quarters Ended | March 31 | June 30 | Sept. 30 | Dec. 31 | ||||||||||||
In Millions | ||||||||||||||||
Operating revenue | $ | 2,091 | $ | 1,263 | $ | 1,307 | $ | 1,760 | ||||||||
Operating income | 250 | 139 | 199 | 178 | ||||||||||||
Net income | 130 | 60 | 91 | 83 | ||||||||||||
Preferred stock dividends | 1 | — | 1 | — | ||||||||||||
Net income available to common stockholder | 129 | 60 | 90 | 83 |
2007 | ||||||||||||||||
Quarters Ended | March 31 | June 30 | Sept. 30 | Dec. 31 | ||||||||||||
In Millions | ||||||||||||||||
Operating revenue | $ | 2,055 | $ | 1,247 | $ | 1,172 | $ | 1,590 | ||||||||
Operating income | 209 | 104 | 124 | 145 | ||||||||||||
Net income | 113 | 44 | 60 | 95 | ||||||||||||
Preferred stock dividends | 1 | — | — | 1 | ||||||||||||
Net income available to common stockholder | 112 | 44 | 60 | 94 |
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CE-80
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CE-81
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CE-82
Table of Contents
ON ACCOUNTING AND FINANCIAL DISCLOSURE
• | pertain to the maintenance of records that in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of CMS Energy; | |
• | provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that receipts and expenditures of CMS Energy are being made only in accordance with authorizations of management and directors of CMS Energy; and | |
• | provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of CMS Energy’s assets that could have a material effect on its financial statements. |
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• | pertain to the maintenance of records that in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of Consumers; | |
• | provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that receipts and expenditures of Consumers are being made only in accordance with authorizations of management and directors of Consumers; and | |
• | provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of Consumers’ assets that could have a material effect on its financial statements. |
CO-2
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CO-3
Table of Contents
MANAGEMENT AND RELATED STOCKHOLDER MATTERS
AND DIRECTOR INDEPENDENCE
(a)(1) | Financial Statements and Reports of Independent Public Accountants for CMS Energy and Consumers are included in each company’s ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA and are incorporated by reference herein. |
(a)(2) | Index to Financial Statement Schedules. |
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Page | ||||
Schedule I | Condensed Financial Information of Registrant CMS Energy-Parent Company | |||
Condensed Statements of Income (Loss) | CO-12 | |||
Statements of Cash Flows | CO-13 | |||
Condensed Balance Sheets | CO-14 | |||
Notes to Condensed Financial Statements | CO-16 | |||
Schedule II | Valuation and Qualifying Accounts and Reserves | |||
CMS Energy Corporation | CO-18 | |||
Consumers Energy Company | CO-18 | |||
Report of Independent Registered Public Accounting Firm | ||||
CMS Energy Corporation | CMS-99 | |||
Consumers Energy Company | CE-80 |
(a)(3) | Exhibits for CMS Energy and Consumers are listed after Item 15(b) below and are incorporated by reference herein. |
(b) | Exhibits, including those incorporated by reference. |
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Previously Filed | ||||||||
With File | As Exhibit | |||||||
Exhibits | Number | Number | Description | |||||
(3)(a) | 1-9513 | (99)(a) | — | Restated Articles of Incorporation of CMS Energy, effective June 1, 2004(Form 8-K filed June 3, 2004) | ||||
(3)(b) | — | CMS Energy Corporation Bylaws, amended and restated as of January 22, 2009 | ||||||
(3)(c) | 1-5611 | 3(c) | — | Restated Articles of Incorporation of Consumers effective June 7, 2000 (2000Form 10-K) | ||||
(3)(d) | — | Consumers Energy Company Bylaws, amended and restated as of January 22, 2009 | ||||||
(4)(a) | 2-65973 | (b)(1)-4 | — | Indenture dated as of September 1, 1945, between Consumers and Chemical Bank (successor to Manufacturers Hanover Trust Company), as Trustee, including therein indentures supplemental thereto through the Forty-third Supplemental Indenture dated as of May 1, 1979(Form S-16 filed November 13, 1979) Indentures Supplemental thereto: | ||||
1-5611 | (4)(a) | — | 71st dated as of 3/06/98 (1997Form 10-K) | |||||
1-5611 | (4)(d) | — | 90th dated as of 4/30/03 (1st qtr. 2003Form 10-Q) | |||||
1-5611 | (4)(a) | — | 91st dated as of 5/23/03 (3rd qtr. 2003Form 10-Q) | |||||
1-5611 | (4)(b) | — | 92nd dated as of 8/26/03 (3rd qtr. 2003Form 10-Q) | |||||
1-5611 | (4)(a) | — | 96th dated as of 8/17/04(Form 8-K filed August 20, 2004) | |||||
333-120611 | (4)(e)(xv) | — | 97th dated as of 9/1/04 (ConsumersForm S-3 dated November 18, 2004) | |||||
1-5611 | 4.4 | — | 98th dated as of 12/13/04(Form 8-K filed December 13, 2004) | |||||
1-5611 | (4)(a)(i) | — | 99th dated as of 1/20/05 (2004Form 10-K) | |||||
1-5611 | 4.2 | — | 100th dated as of 3/24/05(Form 8-K filed March 30, 2005) | |||||
1-5611 | 4.2 | — | 102nd dated as of 4/13/05(Form 8-K filed April 13, 2005) | |||||
1-5611 | 4.2 | — | 104th dated as of 8/11/05(Form 8-K filed August 11, 2005) | |||||
1-5611 | 4(b) | — | 105th dated as of 3/30/07 (2007Form 10-K) | |||||
1-5611 | 4(a) | — | 106th dated as of 11/30/07 (2007Form 10-K) | |||||
1-5611 | (4)(a) | — | 107th dated as of 3/1/08 (1st qtr. 2008Form 10-Q) | |||||
1-5611 | 4.1 | — | 108th dated as of 3/14/08(Form 8-K filed March 14, 2008) | |||||
1-5611 | 4.1 | — | 109th dated as of 9/11/08(Form 8-K filed September 16, 2008) | |||||
1-5611 | 4.1 | — | 110th dated as of 9/12/08(Form 8-K filed September 12, 2008) | |||||
(4)(b) | 1-5611 | (4)(b) | — | Indenture dated as of January 1, 1996 between Consumers and The Bank of New York Mellon, as Trustee (1995Form 10-K) | ||||
(4)(c) | 1-5611 | (4)(c) | — | Indenture dated as of February 1, 1998 between Consumers and The Bank of New York Mellon (formerly The Chase Manhattan Bank), as Trustee (1997Form 10-K) |
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Previously Filed | ||||||||
With File | As Exhibit | |||||||
Exhibits | Number | Number | Description | |||||
(4)(d) | 33-47629 | (4)(a)* | — | Indenture dated as of September 15, 1992 between CMS Energy and NBD Bank, as Trustee(Form S-3 filed May 1, 1992) Indentures Supplemental thereto: | ||||
333-58686 | (4)(a)* | — | 11th dated as of 3/29/01(Form S-8 filed April 11, 2001) | |||||
1-9513 | (4)(d)(i)* | — | 15th dated as of 9/29/04 (2004Form 10-K) | |||||
1-9513 | (4)(d)(ii)* | — | 16th dated as of 12/16/04 (2004Form 10-K) | |||||
1-9513 | 4.2* | — | 17th dated as of 12/13/04(Form 8-K filed December 13, 2004) | |||||
1-9513 | 4.2* | — | 18th dated as of 1/19/05(Form 8-K filed January 20, 2005) | |||||
1-9513 | 4.2* | — | 19th dated as of 12/13/05(Form 8-K filed December 15, 2005) | |||||
1-9513 | 4.2* | — | 20th dated as of 7/3/07(Form 8-K filed July 5, 2007) | |||||
1-9513 | 4.3* | — | 21st dated as of 7/3/07(Form 8-K filed July 5, 2007) | |||||
(4)(e) | 1-9513 | (4a)* | — | Indenture dated as of June 1, 1997, between CMS Energy and The Bank of New York Mellon, as trustee(Form 8-K filed July 1, 1997) Indentures Supplemental thereto: | ||||
1-9513 | (4)(b)* | — | 1st dated as of 6/20/97(Form 8-K filed July 1, 1997) | |||||
(4)(f) | — | Certificate of Designation of 4.50% Cumulative Convertible Preferred Stock dated as of December 20, 2004, corrected February 27, 2006 | ||||||
(10)(a) | 1-9513 | 10.2* | — | $300 million Seventh Amended and Restated Credit Agreement dated as of April 2, 2007 among CMS Energy Corporation, the Banks, the Administrative Agent, Collateral Agent, Syndication Agent and Documentation Agents all defined therein(Form 8-K filed April 3, 2007) Amendments thereto: | ||||
1-9513 | 10(a)* | — | Amendment No. 1 dated as of December 19, 2007 (2007Form 10-K) | |||||
(10)(b)* | — | Amendment No. 2 dated as of January 23, 2009 | ||||||
Assumptions thereto: | ||||||||
(10)(c) | 1-9513 | 10.1* | — | Assumption and Acceptance dated January 8, 2008(Form 8-K filed January 11, 2008) | ||||
(10)(d) | 1-9513 | 10(b)* | — | Fourth Amended and Restated Pledge and Security Agreement dated as of April 2, 2007 among CMS Energy and Collateral Agent, as defined therein (2007Form 10-K) | ||||
(10)(e) | 1-9513 | 10(c)* | — | Amended and Restated Cash Collateral Agreement dated as of April 2, 2007, made by CMS Energy to the Administrative Agent for the lenders and Collateral Agent, as defined therein (2007Form 10-K) | ||||
10)(f) | 1-5611 | 10.1 | — | $500 million Fourth Amended and Restated Credit Agreement dated as of March 30, 2007 among Consumers Energy Company, the Banks, the Administrative Agent, the Collateral Agent, the Syndication Agent and the Documentation Agents all as defined therein(Form 8-K filed April 3, 2007) | ||||
(10)(g) | 1-9513 | (10)(e) | — | 2004 Form of Executive Severance Agreement (2007Form 10-K) | ||||
(10)(h) | 1-9513 | (10)(f) | — | 2004 Form of Officer Severance Agreement (2007Form 10-K) | ||||
(10)(i) | 1-9513 | (10)(g) | — | 2004 Form ofChange-in-Control Agreement (2007Form 10-K) | ||||
(10)(j) | 1-9513 | (10)(h) | — | CMS Energy’s Performance Incentive Stock Plan effective February 3, 1988, as amended June 1, 2004 and as further amended effective November 30, 2007 (2007Form 10-K) | ||||
(10)(k) | 1-9513 | (10)(i) | — | CMS Deferred Salary Savings Plan effective December 1, 1989 and as further amended effective December 1, 2007 (2007Form 10-K) | ||||
(10)(l) | — | Amendment to the Deferred Salary Savings Plan dated December 21, 2008 |
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Previously Filed | ||||||||
With File | As Exhibit | |||||||
Exhibits | Number | Number | Description | |||||
(10)(m) | — | Annual Officer Incentive Compensation Plan for CMS Energy Corporation and its Subsidiaries effective January 1, 2004, amended and restated effective as of January 1, 2008 | ||||||
(10)(n) | — | Amendment to the Officer’s Incentive Compensation Plan dated December 21, 2008 | ||||||
(10)(o) | 1-9513 | (10)(k) | — | Supplemental Executive Retirement Plan for Employees of CMS Energy/Consumers Energy Company effective January 1, 1982, as further amended December 1, 2007 (2007Form 10-K) | ||||
(10)(p) | — | Amendment to the Defined Benefit Supplemental Executive Retirement Plan dated December 21, 2008 | ||||||
(10)(q) | 1-9513 | (10)(l) | — | Defined Contribution Supplemental Executive Retirement Plan effective April 1, 2006 and as further amended effective December 1, 2007 (2007Form 10-K) | ||||
(10)(r) | — | Amendment to the Defined Contribution Supplemental Executive Retirement Plan dated December 21, 2008 | ||||||
(10)(s) | — | 2009 Form of Change in Control Agreement | ||||||
(10)(t) | — | 2009 Form of Officer Separation Agreement | ||||||
(10)(u) | 1-9513 | (10)(v) | — | Amended and Restated Investor Partner Tax Indemnification Agreement dated as of June 1, 1990 among Investor Partners, CMS Midland as Indemnitor and CMS Energy as Guarantor (1990Form 10-K) | ||||
(10)(v) | 1-9513 | (10)(y)* | — | Environmental Agreement dated as of June 1, 1990 made by CMS Energy to The Connecticut National Bank and Others (1990Form 10-K) | ||||
(10)(w) | 1-5611 | (10)(y) | — | Unwind Agreement dated as of December 10, 1991 by and among CMS Energy, Midland Group, Ltd., Consumers, CMS Midland, Inc., MEC Development Corp. and CMS Midland Holdings Company (1991Form 10-K) | ||||
(10)(x) | 1-5611 | (10)(z) | — | Stipulated AGE Release Amount Payment Agreement dated as of June 1, 1990, among CMS Energy, Consumers and The Dow Chemical Company (1991Form 10-K) | ||||
(10)(y) | 1-5611 | (10)(aa)* | — | Parent Guaranty dated as of June 14, 1990 from CMS Energy to MCV, each of the Owner Trustees, the Indenture Trustees, the Owner Participants and the Initial Purchasers of Senior Bonds in the MCV Sale Leaseback transaction, and MEC Development (1991Form 10-K) | ||||
(10)(z) | 1-8157 | 10.41 | — | Contract for Firm Transportation of Natural Gas between Consumers Power Company and Trunkline Gas Company, dated November 1, 1989, and Amendment, dated November 1, 1989 (1989Form 10-K of PanEnergy Corp.) | ||||
(10)(aa) | 1-8157 | 10.41 | — | Contract for Firm Transportation of Natural Gas between Consumers Power Company and Trunkline Gas Company, dated November 1, 1989 (1991Form 10-K of PanEnergy Corp.) | ||||
(10)(bb) | 1-2921 | 10.03 | — | Contract for Firm Transportation of Natural Gas between Consumers Power Company and Trunkline Gas Company, dated September 1, 1993 (1993Form 10-K) | ||||
(10)(cc) | 1-5611 | (10)(a) | — | Asset Sale Agreement dated as of July 11, 2006 by and among Consumers Energy Company as Seller and Entergy Nuclear Palisades, LLC as Buyer (2nd qtr. 2006Form 10-Q) | ||||
(10)(dd) | 1-5611 | (10)(b) | — | Palisades Nuclear Power Plant Power Purchase Agreement dated as of July 11, 2006 between Entergy Nuclear Palisades, LLC and Consumers Energy Company (2nd qtr. 2006Form 10-Q) |
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Previously Filed | ||||||||
With File | As Exhibit | |||||||
Exhibits | Number | Number | Description | |||||
(10)(ee) | 1-9513 | 99.2* | — | Letter of Intent dated January 31, 2007 between CMS Enterprises Company and Lucid Energy LLC(Form 8-K filed February 1, 2007) | ||||
(10)(ff) | 1-9513 | 99.2* | — | Agreement of Purchase and Sale, by and between CMS Enterprises Company and Abu Dhabi National Energy Company PJSC dated as of February 3, 2007(Form 8-K filed February 6, 2007) | ||||
(10)(gg) | 1-9513 | 99.2* | — | Memorandum of Understanding dated February 13, 2007 between CMS Energy Corporation and Petroleos de Venezuela, S.A.(Form 8-K filed February 14, 2007) | ||||
(10)(hh) | 1-9513 | 10.1* | — | Common Agreement dated March 12, 2007 between CMS Enterprises Company and Lucid Energy, LLC(Form 8-K filed March 14, 2007) | ||||
(10)(ii) | 1-9513 | 10.2* | — | Agreement of Purchase and Sale dated March 12, 2007 by and among CMS Enterprises Company, CMS Energy Investment, LLC, and Lucid Energy, LLC and Michigan Pipeline and Processing, LLC(Form 8-K filed March 14, 2007) | ||||
(10)(jj) | 1-9513 | 10.3* | — | Agreement of Purchase and Sale dated March 12, 2007 by and among CMS Enterprises Company, CMS Generation Holdings Company, CMS International Ventures, LLC, and Lucid Energy, LLC and New Argentine Generation Company, LLC(Form 8-K filed March 14, 2007) | ||||
(10)(kk) | 1-9513 | 10.1* | — | Agreement of Purchase and Sale dated as of March 30, 2007 between CMS Energy Corporation and Petroleos de Venezuela, S.A.(Form 8-K filed April 5, 2007) | ||||
(10)(ll) | 1-9513 | 10.1* | — | Share Purchase Agreement dated as of April 12, 2007 by and among CMS Electric and Gas, L.L.C., CMS Energy Brasil S.A. and CPFL Energia S.A. together with CMS Energy Corporation (solely for the limited purposes of Section 8.9)(Form 8-K filed April 17, 2007) | ||||
(10)(mm) | 1-5611 | 99.2 | — | Purchase and Sale Agreement by and between Broadway Gen Funding, LLC as Seller and Consumers Energy Company as Buyer dated as of May 24, 2007(Form 8-K filed May 29, 2007) | ||||
(10)(nn) | 1-9513 | 99.2* | — | Amended and Restated Securities Purchase Agreement by and among CMS International Ventures, L.L.C., CMS Capital L.L.C., CMS Gas Argentina Company and CMS Enterprises and AEI Chile Holdings LTD together with Ashmore Energy International (for purposes of the Parent Guarantee) dated as of June 1, 2007(Form 8-K filed June 4, 2007) | ||||
(10)(oo) | 1-9513 | 99.3* | — | Stock Purchase Agreement by and among Hydra-Co Enterprises, Inc., HCO-Jamaica, Inc., and AEI Central America LTD together with Ashmore Energy International dated as of May 31, 2007(Form 8-K filed June 4, 2007) | ||||
(10)(pp) | 1-9513 | 99.1* | — | Securities Purchase Agreement by and among CMS International Ventures, L.L.C., CMS Capital, L.L.C., CMS Gas Argentina Company and CMS Enterprises Company and Pacific Energy LLC together with Empresa Nacional De Electricdad S.A. (for purposes of the Parent Guarantee) dated as of July 11, 2007(Form 8-K filed July 11, 2007) | ||||
(10)(qq) | 1-9513 | (10)(a)* | — | Form of Indemnification Agreement between CMS Energy Corporation and its Directors, effective as of November 1, 2007 (3rd qtr. 2007Form 10-Q) |
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Previously Filed | ||||||||
With File | As Exhibit | |||||||
Exhibits | Number | Number | Description | |||||
(10)(rr) | 1-5611 | (10)(b) | — | Form of Indemnification Agreement between Consumers Energy Company and its Directors, effective as of November 1, 2007 (3rd qtr. 2007Form 10-Q) | ||||
(10)(ss) | 1-5611 | 10.1 | — | $200 million Letter of Credit Reimbursement Agreement dated as of November 30, 2007 between Consumers Energy Company and the Bank of Nova Scotia(Form 8-K filed December 6, 2007) | ||||
(10)(tt) | — | First Amendment to Reimbursement Agreement dated as of September 25, 2008 | ||||||
(10)(uu) | 1-5611 | 10.1 | — | $150 million Revolving Credit Agreement dated as of September 11, 2008 among Consumers Energy Company, the Banks, Agent and an LC Issuer, Co-Syndication Agents, and Documentation Agent all as defined therein(Form 8-K filed September 16, 2008) | ||||
(10)(vv) | 1-5611 | 10(a) | — | Settlement Agreement and Amended and Restated Power Purchase Agreement between Consumers Energy Company and Midland Cogeneration Venture Limited Partnership (2nd qtr. 2008Form 10-Q) | ||||
(10)(ww) | — | Receivables Purchase Agreement dated as of May 22, 2003 among Consumers Receivables Funding II, LLC, Consumers Energy Company, Falcon Asset Securitization Corporation, The Financial Institutions from time to time parties hereto, as Financial Institutions, and Bank One, NA, as Administrative Agent, as amended by Amendment No. 1 dated as of August 18, 2003, Amendment No. 2 dated, as of October 10, 2003, Amendment No. 3 dated as of May 20, 2004, Amendment No. 4 dated, as of September 28, 2004, Amendment No. 5 dated as of May 19, 2005, Amendment No. 6 dated as of September 8, 2005, Amendment No. 7 dated as of December 22, 2005, Amendment No. 8 dated as of March 13, 2006, Amendment No. 9 dated as of May 18, 2006, Amendment No. 10 dated as of August 15, 2006, Amendment No. 11 dated as of May 18, 2007, Amendment No. 12 dated as of August 14, 2007, Amendment No. 13 dated as of August 12, 2008, Amendment No. 14 dated as of November 5, 2008, and Amendment No. 15 dated as of February 12, 2009 | ||||||
(10)(xx) | — | Receivables Sale Agreement, dated as of May 22, 2003, between Consumers Energy Company, as Originator and Consumers Receivables Funding II, LLC, as Buyer, as amended by Amendment No. 1 dated as of May 20, 2004 and as amended by Amendment No. 2 dated as of August 15, 2006 | ||||||
(12)(a) | — | Statement regarding computation of CMS Energy’s Ratio of Earnings to Fixed Charges and Combined Fixed Charges and Preferred Dividends | ||||||
(12)(b) | — | Statement regarding computation of Consumers’ Ratio of Earnings to Fixed Charges and Combined Fixed Charges and Preferred Dividends | ||||||
(16)(a) | 1-9513 | 16.1 | — | Letter from Ernst & Young to the Securities and Exchange Commission dated January 25, 2007(Form 8-K filed January 25, 2007) | ||||
(16)(b) | 1-9513 | 16.1 | — | Letter from Ernst & Young to the Securities and Exchange Commission dated February 28, 2007(Form 8-K filed February 28, 2007) | ||||
(21) | — | Subsidiaries of CMS Energy and Consumers |
CO-10
Table of Contents
Previously Filed | ||||||||
With File | As Exhibit | |||||||
Exhibits | Number | Number | Description | |||||
(23)(a) | — | Consent of PricewaterhouseCoopers LLP for CMS Energy | ||||||
(23)(b) | — | Consent of Ernst & Young LLP for CMS Energy | ||||||
(23)(c) | — | Consent of PricewaterhouseCoopers LLP for CMS Energy re: MCV | ||||||
(23)(d) | — | Consent of PricewaterhouseCoopers LLP for Consumers Energy | ||||||
(23)(e) | — | Consent of Ernst & Young LLP for Consumers Energy | ||||||
(23)(f) | — | Consent of PricewaterhouseCoopers LLP for Consumers Energy re: MCV | ||||||
(24)(a) | — | Power of Attorney for CMS Energy | ||||||
(24)(b) | — | Power of Attorney for Consumers | ||||||
(31)(a) | — | CMS Energy’s certification of the CEO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | ||||||
(31)(b) | — | CMS Energy’s certification of the CFO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | ||||||
(31)(c) | — | Consumers’ certification of the CEO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | ||||||
(31)(d) | — | Consumers’ certification of the CFO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | ||||||
(32)(a) | — | CMS Energy’s certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | ||||||
(32)(b) | — | Consumers’ certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
* | Obligations of only CMS Energy but not of Consumers. |
CO-11
Table of Contents
Years Ended December 31 | 2008 | 2007 | 2006 | |||||||||
In Millions | ||||||||||||
Dividends from Consolidated Subsidiaries | $ | 1,247 | $ | 251 | $ | 147 | ||||||
Operating Expenses | ||||||||||||
Depreciation and amortization | (3 | ) | (3 | ) | (3 | ) | ||||||
Gain on asset sales, net | — | 81 | — | |||||||||
Shareholder class action settlement | — | — | (125 | ) | ||||||||
Other operating income (deductions) | (5 | ) | (10 | ) | 13 | |||||||
(8 | ) | 68 | (115 | ) | ||||||||
Total Operating Income | 1,239 | 319 | 32 | |||||||||
Other Income (Deductions) | ||||||||||||
Equity in undistributed earnings of subsidiaries | (814 | ) | (393 | ) | (55 | ) | ||||||
Interest income | 1 | 3 | — | |||||||||
Other deductions | (4 | ) | (24 | ) | (6 | ) | ||||||
(817 | ) | (414 | ) | (61 | ) | |||||||
Fixed Charges | ||||||||||||
Interest on long-term debt | 119 | 144 | 156 | |||||||||
Interest on preferred securities | 14 | 14 | 14 | |||||||||
Intercompany interest expense and other | 48 | 70 | 24 | |||||||||
181 | 228 | 194 | ||||||||||
Income (Loss) Before Income Taxes | 241 | (323 | ) | (223 | ) | |||||||
Income Tax Benefit | (59 | ) | (138 | ) | (155 | ) | ||||||
Income (Loss) From Continuing Operations | 300 | (185 | ) | (68 | ) | |||||||
Loss From Discontinued Operations | — | (30 | ) | (11 | ) | |||||||
Net Income (Loss) | 300 | (215 | ) | (79 | ) | |||||||
Preferred Dividends | 11 | 11 | 11 | |||||||||
Redemption Premium on Preferred Stock | — | 1 | — | |||||||||
Net Income (Loss) Available to Common Stockholders | $ | 289 | $ | (227 | ) | $ | (90 | ) | ||||
CO-12
Table of Contents
Years Ended December 31 | 2008 | 2007 | 2006 | |||||||||
In Millions | ||||||||||||
Cash Flows From Operating Activities | ||||||||||||
Net income (loss) | $ | 300 | $ | (215 | ) | $ | (79 | ) | ||||
Adjustments to reconcile net income (loss) to net cash provided by operating activities: | ||||||||||||
Loss (earnings) of equity method subsidiaries | (433 | ) | 142 | (92 | ) | |||||||
Dividends received from subsidiaries | 1,247 | 251 | 147 | |||||||||
Depreciation and amortization | 3 | 3 | 3 | |||||||||
Gain on sale of assets | — | (81 | ) | — | ||||||||
Shareholder class action settlement expense | — | — | 125 | |||||||||
Decrease (increase) in accounts receivable | — | 11 | (2 | ) | ||||||||
Increase (decrease) in accounts payable | (2 | ) | (3 | ) | 2 | |||||||
Shareholder class action settlement payment | — | (125 | ) | — | ||||||||
Change in other assets and liabilities | (60 | ) | (58 | ) | 2 | |||||||
Net cash provided by (used in) operating activities | 1,055 | (75 | ) | 106 | ||||||||
Cash Flows From Investing Activities | ||||||||||||
Investment in subsidiaries | (22 | ) | (660 | ) | (216 | ) | ||||||
Changes in notes receivable, net | — | 42 | (15 | ) | ||||||||
Net cash used in investing activities | (22 | ) | (618 | ) | (231 | ) | ||||||
Cash Flows From Financing Activities | ||||||||||||
Proceeds from bank loans and notes | 665 | 400 | — | |||||||||
Proceeds from issuance of common stock | 9 | 15 | 8 | |||||||||
Retirement of bank loans and notes | (570 | ) | (958 | ) | (75 | ) | ||||||
Redemption of preferred stock | (1 | ) | (1 | ) | — | |||||||
Payment of common stock dividends | (82 | ) | (45 | ) | — | |||||||
Payment of preferred stock dividends | (11 | ) | (11 | ) | (11 | ) | ||||||
Debt issuance costs and financing fees | — | (1 | ) | (5 | ) | |||||||
Changes in notes payable, net | (1,043 | ) | 1,294 | 208 | ||||||||
Net cash provided by (used in) financing activities | (1,033 | ) | 693 | 125 | ||||||||
Net Change in Cash and Temporary Cash Investments | $ | — | $ | — | $ | — | ||||||
Cash and Temporary Cash Investments, Beginning of Period | $ | — | $ | — | $ | — | ||||||
Cash and Temporary Cash Investments, End of Period | $ | — | $ | — | $ | — | ||||||
CO-13
Table of Contents
December 31 | 2008 | 2007 | ||||||
In Millions | ||||||||
Assets | ||||||||
Property, Plant and Equipment, at cost | $ | 16 | $ | 16 | ||||
Less accumulated depreciation | (15 | ) | (12 | ) | ||||
1 | 4 | |||||||
Investment in Subsidiaries | 4,913 | 5,593 | ||||||
Current Assets | ||||||||
Cash and temporary cash investments | — | — | ||||||
Notes and accrued interest receivable | 1 | 1 | ||||||
Accrued taxes receivable | 41 | — | ||||||
Accounts receivable, including intercompany and related parties | 4 | 4 | ||||||
Deferred income taxes | 5 | 61 | ||||||
51 | 66 | |||||||
Non-current Assets | ||||||||
Deferred income taxes | 348 | 320 | ||||||
Other investment — SERP | 16 | 22 | ||||||
Other | 40 | 81 | ||||||
404 | 423 | |||||||
Total Assets | $ | 5,369 | $ | 6,086 | ||||
CO-14
Table of Contents
December 31 | 2008 | 2007 | ||||||
In Millions | ||||||||
Stockholders’ Investment and Liabilities | ||||||||
Capitalization | ||||||||
Common stockholders’ equity | $ | 2,463 | $ | 2,130 | ||||
Nonredeemable preferred stock | 243 | 250 | ||||||
Long-term debt | ||||||||
Senior Notes | 1,808 | 1,564 | ||||||
Related Party | 178 | 178 | ||||||
Unamortized Discount | (4 | ) | (5 | ) | ||||
4,688 | 4,117 | |||||||
Current Liabilities | ||||||||
Current portion of long-term debt | — | 150 | ||||||
Accounts and notes payable, including intercompany and related parties | 615 | 1,660 | ||||||
Accrued interest, including intercompany | 34 | 36 | ||||||
Accrued taxes | — | 97 | ||||||
Other | 11 | 5 | ||||||
660 | 1,948 | |||||||
Non-Current Liabilities | ||||||||
Postretirement benefits | 21 | 21 | ||||||
Total Stockholders’ Investment and Liabilities | $ | 5,369 | $ | 6,086 | ||||
CO-15
Table of Contents
1: | Summary of Significant Accounting Policies |
2: | Contingencies |
3: | Financings |
Payments Due | ||||||||||||||||||||
2009 | 2010 | 2011 | 2012 | 2013 | ||||||||||||||||
(In Millions) | ||||||||||||||||||||
Long-term debt and long-term debt — related parties | $ | — | $ | 300 | $ | 300 | $ | 255 | $ | 150 |
CO-16
Table of Contents
4: | Related Party Transactions |
2008 | 2007 | 2006 | ||||||||||
(In Millions) | ||||||||||||
Dividends: | ||||||||||||
Consumers Energy | $ | 297 | $ | 251 | $ | 147 | ||||||
Enterprises | 950 | — | — | |||||||||
Total | $ | 1,247 | $ | 251 | $ | 147 | ||||||
5: | Guaranty |
CO-17
Table of Contents
SCHEDULE II — VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
YEARS ENDED DECEMBER 31, 2008, 2007 AND 2006
Balance at | Charged | Charged/Accrued | Balance | |||||||||||||||||
Beginning | to | to other | at End | |||||||||||||||||
Description | of Period | Expense | Accounts | Deductions | of Period | |||||||||||||||
(In Millions) | ||||||||||||||||||||
Accumulated provision for uncollectible accounts: | ||||||||||||||||||||
2008 | $ | 21 | $ | 51 | $ | — | $ | 46 | $ | 26 | ||||||||||
2007 | $ | 25 | $ | 37 | $ | 7 | $ | 34 | $ | 21 | ||||||||||
2006 | $ | 25 | $ | 30 | $ | — | $ | 30 | $ | 25 | ||||||||||
Deferred tax valuation allowance: | ||||||||||||||||||||
2008 | $ | 32 | $ | — | $ | 7 | $ | 7 | $ | 32 | ||||||||||
2007 | $ | 72 | $ | — | $ | 81 | $ | 121 | $ | 32 | ||||||||||
2006 | $ | 10 | $ | 31 | $ | 42 | $ | 11 | $ | 72 | ||||||||||
Allowance for notes receivable, including related parties: | ||||||||||||||||||||
2008 | $ | 33 | $ | — | $ | 1 | $ | — | $ | 34 | ||||||||||
2007 | $ | 101 | $ | — | $ | 1 | $ | 69 | $ | 33 | ||||||||||
2006 | $ | 49 | $ | 55 | $ | 1 | $ | 4 | $ | 101 |
Balance at | Charged | Charged/Accrued | Balance | |||||||||||||||||
Beginning | to | to other | at End | |||||||||||||||||
Description | of Period | Expense | Accounts | Deductions | of Period | |||||||||||||||
(In Millions) | ||||||||||||||||||||
Accumulated provision for uncollectible accounts: | ||||||||||||||||||||
2008 | $ | 16 | $ | 47 | $ | — | $ | 39 | $ | 24 | ||||||||||
2007 | $ | 14 | $ | 33 | $ | — | $ | 31 | $ | 16 | ||||||||||
2006 | $ | 13 | $ | 30 | $ | — | $ | 29 | $ | 14 | ||||||||||
Deferred tax valuation allowance: | ||||||||||||||||||||
2008 | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||
2007 | $ | 15 | $ | — | $ | 8 | $ | 23 | $ | — | ||||||||||
2006 | $ | — | $ | 16 | $ | — | $ | 1 | $ | 15 |
CO-18
Table of Contents
CO-19
Table of Contents
By | /s/ David W. Joos |
Signature | Title | |||
(i) | Principal executive officer: | |||
/s/ David W. Joos David W. Joos | President and Chief Executive Officer | |||
(ii) | Principal financial officer: | |||
/s/ Thomas J. Webb Thomas J. Webb | Executive Vice President and Chief Financial Officer | |||
(iii) | Controller or principal accounting officer: | |||
/s/ Glenn P. Barba Glenn P. Barba | Vice President, Controller and Chief Accounting Officer | |||
(iv) | A majority of the Directors: | |||
* Merribel S. Ayres | Director | |||
* Jon E. Barfield | Director | |||
* Richard M. Gabrys | Director | |||
* David W. Joos | Director | |||
* Philip R. Lochner, Jr. | Director | |||
* Michael T. Monahan | Director |
CO-20
Table of Contents
Signature | Title | |||
* Joseph F. Paquette, Jr. | Director | |||
* Percy A. Pierre | Director | |||
* Kenneth L. Way | Director | |||
* Kenneth Whipple | Director | |||
* John B. Yasinsky | Director | |||
*By | /s/ Thomas J. Webb Thomas J. Webb, Attorney-in-Fact |
CO-21
Table of Contents
By | /s/ David W. Joos |
Signature | Title | |||
(i) | Principal executive officer: | |||
/s/ David W. Joos David W. Joos | Chief Executive Officer | |||
(ii) | Principal financial officer: | |||
/s/ Thomas J. Webb Thomas J. Webb | Executive Vice President and Chief Financial Officer | |||
(iii) | Controller or principal accounting officer: | |||
/s/ Glenn P. Barba Glenn P. Barba | Vice President, Controller and Chief Accounting Officer | |||
(iv) | A majority of the Directors: | |||
* Merribel S. Ayres | Director | |||
* Jon E. Barfield | Director | |||
* Richard M. Gabrys | Director | |||
* David W. Joos | Director | |||
* Philip R. Lochner, Jr. | Director | |||
* Michael T. Monahan | Director | |||
* Joseph F. Paquette, Jr. | Director |
CO-22
Table of Contents
Signature | Title | |||
* Percy A. Pierre | Director | |||
* Kenneth L. Way | Director | |||
* Kenneth Whipple | Director | |||
* John B. Yasinsky | Director | |||
*By | /s/ Thomas J. Webb Thomas J. Webb, Attorney-in-Fact |
CO-23
Table of Contents
CO-24
Table of Contents
Exhibits | Description | |||||
(3)(b) | — | CMS Energy Corporation Bylaws, amended and restated as of January 22, 2009 | ||||
(3)(d) | — | Consumers Energy Company Bylaws, amended and restated as of January 22, 2009 | ||||
(4)(f) | — | Certificate of Designation of 4.50% Cumulative Convertible Preferred Stock dated as of December 20, 2004, corrected February 27, 2006 | ||||
(10)(b) | — | Amendment No. 2 dated as of January 23, 2009 to $300 million CMS Energy Seventh Amended and Restated Credit Agreement | ||||
(10)(l) | — | Amendment to the Deferred Salary Savings Plan dated December 21, 2008 | ||||
(10)(m) | — | Annual Officer Incentive Compensation Plan for CMS Energy Corporation and its Subsidiaries effective January 1, 2004, amended and restated effective as of January 1, 2008 | ||||
(10)(n) | — | Amendment to the Officer’s Incentive Compensation Plan dated December 21, 2008 | ||||
(10)(p) | — | Amendment to the Defined Benefit Supplemental Executive Retirement Plan dated December 21, 2008 | ||||
(10)(r) | — | Amendment to the Defined Contribution Supplemental Executive Retirement Plan dated December 21, 2008 | ||||
(10)(s) | — | 2009 Form of Change in Control Agreement | ||||
(10)(t) | — | 2009 Form of Officer Separation Agreement | ||||
(10)(tt) | — | First Amendment to Reimbursement Agreement dated as of September 25, 2008 | ||||
(10)(ww) | — | Receivables Purchase Agreement dated as of May 22, 2003 among Consumers Receivables Funding II, LLC, Consumers Energy Company, Falcon Asset Securitization Corporation, The Financial Institutions from time to time parties hereto, as Financial Institutions, and Bank One, NA, as Administrative Agent, as amended by Amendment No. 1 dated as of August 18, 2003, Amendment No. 2 dated, as of October 10, 2003, Amendment No. 3 dated as of May 20, 2004, Amendment No. 4 dated, as of September 28, 2004, Amendment No. 5 dated as of May 19, 2005, Amendment No. 6 dated as of September 8, 2005, Amendment No. 7 dated as of December 22, 2005, Amendment No. 8 dated as of March 13, 2006, Amendment No. 9 dated as of May 18, 2006, Amendment No. 10 dated as of August 15, 2006, Amendment No. 11 dated as of May 18, 2007, Amendment No. 12 dated as of August 14, 2007, Amendment No. 13 dated as of August 12, 2008, Amendment No. 14 dated as of November 5, 2008, and Amendment No. 15 dated as of February 12, 2009 | ||||
(10)(xx) | — | Receivables Sale Agreement, dated as of May 22, 2003, between Consumers Energy Company, as Originator and Consumers Receivables Funding II, LLC, as Buyer, as amended by Amendment No. 1 dated as of May 20, 2004 and as amended by Amendment No. 2 dated as of August 15, 2006 | ||||
(12)(a) | — | Statement regarding computation of CMS Energy’s Ratio of Earnings to Fixed Charges and Combined Fixed Charges and Preferred Dividends | ||||
(12)(b) | — | Statement regarding computation of Consumers’ Ratio of Earnings to Fixed Charges and Combined Fixed Charges and Preferred Dividends | ||||
(21) | — | Subsidiaries of CMS Energy and Consumers | ||||
(23)(a) | — | Consent of PricewaterhouseCoopers LLP for CMS Energy | ||||
(23)(b) | — | Consent of Ernst & Young LLP for CMS Energy | ||||
(23)(c) | — | Consent of PricewaterhouseCoopers LLP for CMS Energy re: MCV | ||||
(23)(d) | — | Consent of PricewaterhouseCoopers LLP for Consumers Energy | ||||
(23)(e) | — | Consent of Ernst & Young LLP for Consumers Energy | ||||
(23)(f) | — | Consent of PricewaterhouseCoopers LLP for Consumers Energy re: MCV | ||||
(24)(a) | — | Power of Attorney for CMS Energy | ||||
(24)(b) | — | Power of Attorney for Consumers | ||||
(31)(a) | — | CMS Energy’s certification of the CEO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | ||||
(31)(b) | — | CMS Energy’s certification of the CFO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | ||||
(31)(c) | — | Consumers’ certification of the CEO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
CO-25
Table of Contents
Exhibits | Description | |||||
(31)(d) | — | Consumers’ certification of the CFO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | ||||
(32)(a) | — | CMS Energy’s certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | ||||
(32)(b) | — | Consumers’ certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
CO-26