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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) November 2, 1998
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 5. OTHER EVENTS
On November 2, 1998, CMS Energy Corporation ("CMS Energy") announced
that it has entered into a definitive Stock Purchase Agreement with
PanEnergy Corp ("PanEnergy"), a wholly owned subsidiary of Duke Energy
Company ("Duke"), to acquire all the stock of Panhandle Eastern Pipe Line
Company and its principal subsidiaries, Trunkline Gas Company and Pan Gas
Storage Company. It is also acquiring the stock of Panhandle Storage
Company and Trunkline LNG Company. (These companies together are
hereinafter referred to as the "Panhandle Companies".) Prior to the
closing, Panhandle Eastern Pipe Line Company's 5.3% interest in Northern
Border Pipeline LP and certain non-operating assets which are not material
in amount or revenue impact will be transferred to other subsidiaries of
Duke. In addition, certain intercompany accounts, including advances,
between the Panhandle Companies and Duke will be eliminated.
The purchase price for the stock of the Panhandle Companies is $1.9
billion in cash. The Panhandle Companies are expected to have
approximately $300 million of debt outstanding at the time of closing
which will become a part of CMS Energy's consolidated indebtedness.
The Panhandle Companies:
Panhandle Eastern Pipe Line Company and Trunkline Gas Company,
together with the two gas storage companies to be acquired, are primarily
engaged in the interstate transportation and storage of natural gas.
Panhandle Eastern Pipe Line Company's transmission system, which consists
of four large-diameter parallel pipelines and 13 mainline compressor
stations, extends a distance of approximately 1,300 miles from producing
areas in the Anadarko Basin of Texas, Oklahoma and Kansas through the
States of Missouri, Illinois, Indiana and Ohio into Michigan. Trunkline
Gas Company's transmission system extends approximately 1,400 miles from
the Gulf Coast area of Texas and Louisiana through the States of Arkansas,
Mississippi, Tennessee, Kentucky, Illinois and Indiana to a point on the
Indiana-Michigan Border. The Trunkline system consists of three large
diameter parallel pipelines and 18 mainline compressor stations. It
connects with the intrastate gas transmission system of Consumers Energy
Company, CMS Energy's wholly-owned electric and gas utility subsidiary.
Consumers Energy is one of the largest gas transmission customers of the
two pipeline companies being acquired.
Trunkline Gas Company owns and operates two offshore Louisiana gas
supply systems consisting of 337 miles of pipeline extending approximately
81 miles into the Gulf of Mexico.
The combined throughput volumes for the two pipelines in 1997 was
1279 Tbtu. Principal customers include 20 utilities located in the Midwest
market area that encompasses large portions of Michigan, Ohio, Indiana,
Illinois, Missouri and Tennessee. A substantial portion of the delivered
volumes represents gas transported to these utilities under firm
agreements but gas is also transported for gas marketers, producers, other
pipelines, electric power generators and a variety of end users. Gas
transmission services are also provided under interruptible agreements.
Transportation service for Consumers Energy and a gas marketing subsidiary
of Duke each accounted for approximately 10% of the combined revenues of
the two pipelines.
The Panhandle Companies own and operate five underground gas storage
fields located in Illinois, Michigan, Kansas, Oklahoma and Louisiana with
a combined maximum working storage gas capacity of 70 bcf.
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.
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 Mmcf per day but has been operated
on a limited basis for a number of years.
The rates and operations of the Panhandle Companies are subject to
regulation by the Federal Energy Regulatory Commission.
Panhandle Eastern Pipe Line Company is subject to the informational
filing requirement of the Securities and Exchange Act of 1934 and, in
accordance therewith, is obligated to file reports and other information
with the Securities and Exchange Commission relating to its business,
financial condition and other matters. These reports contain financial
statements and other important information in addition to the information
provided above and are available through offices of the Commission.
However, the information contained in such reports does not include
information relative to Panhandle Storage Company or Trunkline LNG Company
and does not reflect the transfer of certain assets being retained by
subsidiaries of Duke as described above.
Stock Purchase Agreement
The only regulatory requirement for closing under the Stock Purchase
Agreement (the "Agreement") is compliance with the Hart-Scott- Rodino
Antitrust Improvements Act of 1976.
The Agreement provides that if, as a result of CMS Energy's
continuing due diligence investigation, CMS Energy learns of material
facts not previously disclosed or inconsistent with representations and
warranties made in the Agreement, CMS Energy may, on or prior to November
23, 1998, notify PanEnergy Corp of its intent to terminate the Agreement
and the Agreement will terminate unless PanEnergy corrects the asserted
misrepresentations within 30 days. The Agreement may be terminated by
PanEnergy if CMS Energy fails to provide firm commitment letters from
nationally recognized financial institutions to finance the $1.9 billion
purchase price. Based upon letters received from two major banks
indicating a willingness to provide bridge loan financing, CMS Energy
believes that the financial commitment requirements of the Agreement will
be met. Permanent financing plans are in the process of being formed and
negotiated and CMS Energy currently expects approximately $900 million to
be raised from the sale of common stock and/or securities convertible into
common stock and $1 billion from the issuance of debt securities by CMS
Energy and the Panhandle Companies. If CMS Energy is unable to provide the
appropriate financing commitments by November 23, 1998 or is unable to
close the purchase when it is otherwise would be obligated to close, it
must pay PanEnergy Corp a $75 million termination fee. The closing is
scheduled for January 4, 1999 but may be delayed by mutual agreement.
Item 7. Exhibits
10.1 Stock Purchase Agreement between PanEnergy Corp, Texas Eastern
Corporation and CMS Energy Corporation dated as of October 31, 1998
99.1 Press Release of CMS Energy Corporation dated November 2, 1998
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: November 2, 1998 By: /s/ Alan M. Wright
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Alan M. Wright
Senior Vice President and Chief
Financial Officer