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FORM 8-K
CURRENT REPORT
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED) MARCH 29, 1999
Commission Registrant; State of Incorporation; IRS Employer
File Number Address; and Telephone Number Identification No
1-9513 CMS ENERGY CORPORATION 38-2726431
(A Michigan Corporation)
Fairlane Plaza South, Suite 1100
330 Town Center Drive
Dearborn, Michigan 48126
(313) 436-9261
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ITEM 2. ACQUISITION OF ASSETS
On March 29, 1999, CMS Energy Corporation ("CMS Energy") announced that it had
closed on its previously announced acquisition of all the stock of Panhandle
Eastern Pipe Line Company ("Panhandle") and its principal subsidiaries,
Trunkline Gas Company and Pan Gas Storage Company, from subsidiaries of Duke
Energy Corporation ("Duke"). It also acquired the stock of Panhandle Storage
Company and Trunkline LNG Company. (These companies together with their
subsidiaries Panhandle Eastern Resources, Inc., Trunkline Field Services
Company, Trunkline Gas Resources, Inc., and Trunkline Pipeline Holdings, Inc.
are hereinafter referred to as the "Panhandle Companies".)
The purchase price for the stock of the Panhandle Companies was $1.9 billion in
cash and existing Panhandle debt of approximately $300 million. Concurrent with
the closing, CMS Panhandle Holding Company ("CMS Holding"), a newly formed
interim holding company for the Panhandle Companies, issued $800 million of
senior unsecured notes which were guaranteed by Panhandle. The CMS Holding notes
were issued in a 144A offering in three tranches: $300 million of 6.125% senior
notes due 2004; $200 million of 6.500% senior notes due 2009; and $300 million
of 7.000% senior notes due 2029. CMS Energy intends to merge CMS Holding into
Panhandle during the second quarter of 1999, at which time Panhandle will
replace CMS Holding as the obligor on the CMS Holding notes. CMS Holding's and
Panhandle's combined $1.1 billion of long-term senior notes as well as
approximately an additional $1.1 billion of CMS Energy unsecured bridge and
revolving credit loans became a part of CMS Energy's consolidated indebtedness
as of March 29, 1999. The $600 million CMS Energy bridge loan has a weighted
average interest rate of 5.94% and a term of six months, and the approximately
$500 million CMS Energy revolver loan has a weighted average interest rate of
6.22%. The bridge loan was provided by Barclays Bank PLC, Nationsbank, N.A.,
and Union Bank of California, N.A., and the revolver loan is with a consortium
of banks for which The Chase Manhattan Bank serves as administrative agent. CMS
Energy expects to complete permanent financing of the acquisition with the sale
of approximately $600 million of CMS Energy Common Stock.
Panhandle and Trunkline Gas Company, together with the two gas storage companies
acquired, are primarily engaged in the interstate transportation and storage of
natural gas. The acquired assets include 10,400 miles of mainline natural gas
pipeline extending from the Texas Gulf Coast to Michigan and from the
Kansas/Oklahoma mid-continent region to Michigan with a combined capacity of 4.4
billion cubic feet per day, and 70 billion cubic feet of underground working gas
storage facilities. The Trunkline and Panhandle transmission systems connect
directly with the intrastate gas transmission system of Consumers Energy
Company, CMS Energy's Michigan electric and gas utility subsidiary. Consumers
Energy Company is one of the largest gas transmission customers of the two
acquired pipeline companies.
Trunkline LNG Company owns a liquified natural gas ("LNG") regasification plant
and related LNG tanker port, unloading facilities and LNG and gas storage
facilities located at Lake Charles, Louisiana. The LNG plant has the capacity to
deliver 700 million cubic feet per day but has been operated on a limited basis
for a number of years.
The Panhandle Companies compete with a number of interstate and intrastate
pipeline companies in the transportation and storage of natural gas. The
principal elements of competition among pipelines are rates, terms of service
and flexibility and reliability of service. The rates and conditions of service
of the principal Panhandle Companies are subject to regulation by the Federal
Energy Regulatory Commission.
Although Panhandle is subject to the informational filing requirements of the
Securities Exchange Act of 1934 and Panhandle's Consolidated Financial
Statements and Notes thereto are filed as an exhibit to this report, readers
should review such historic Panhandle information in light of the changes
reflected in the CMS Energy Unaudited Pro Forma Financial Information filed as
an exhibit to this report. Readers should note in particular that prior to the
closing of the acquisition, Panhandle's interest in Northern Border Partners LP
and certain non-operating assets which were not material in amount or revenue
impact were transferred from the Panhandle Companies to other subsidiaries of
Duke. In addition, certain intercompany accounts, including advances, between
the Panhandle Companies and Duke were eliminated. Also, contemporaneous with
the acquisition, the stock of Panhandle Storage Company and Trunkline LNG
Company was contributed by CMS Holding to Panhandle so that they became
subsidiaries of Panhandle. Finally, readers should be aware of the pending
merger of CMS Holding into Panhandle and the impact of that merger on
Panhandle's financial information.
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ITEM 7. EXHIBITS
(a) Financial Statements of Business Acquired - Attached as Exhibit 99(a)
are the Panhandle Consolidated Financial Statements and Notes to
Consolidated Financial Statements for the Years Ended December 31, 1998,
1997 and 1996 as well as audit reports from each of Deloitte & Touche
LLP and KPMG LLP.
(b) Pro Forma Financial Information - Attached as Exhibit 99(b) is the CMS
Energy Unaudited Pro Forma Financial Information reflecting the
acquisition of the Panhandle Companies.
(c) Exhibits -
(23)(a) - Consent of Deloitte & Touche LLP, independent auditors.
(23)(b) - Consent of KPMG LLP, independent certified public accountants.
(99)(a) - Panhandle Consolidated Financial Statements and Notes to
Consolidated Financial Statements for the Years Ended
December 31, 1998, 1997 and 1996.
(99)(b) - CMS Energy Unaudited Pro Forma Financial Information
reflecting the acquisition of the Panhandle Companies.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
CMS ENERGY CORPORATION
Dated: April 6, 1999 By: /s/ Alan M. Wright
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Alan M. Wright
Senior Vice President and
Chief Financial Officer
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EXHIBIT INDEX
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Exhibit No. Description
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(23)(a) - Consent of Deloitte & Touche LLP, independent auditors.
(23)(b) - Consent of KPMG LLP, independent certified public accountants.
(99)(a) - Panhandle Consolidated Financial Statements and Notes to Consolidated
Financial Statements for the Years Ended December 31, 1998, 1997 and
1996.
(99)(b) - CMS Energy Unaudited Pro Forma Financial Information reflecting the
acquisition of the Panhandle Companies.