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) MAY 1, 2002
COMMISSION REGISTRANT; STATE OF INCORPORATION; IRS EMPLOYER
FILE NUMBER ADDRESS; AND TELEPHONE NUMBER IDENTIFICATION NO.
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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
1-5611 CONSUMERS ENERGY COMPANY 38-0442310
(A Michigan Corporation)
212 West Michigan Avenue
Jackson, Michigan
(517) 788-1030
ITEM 5. OTHER EVENTS
CMS ENERGY REPORTS FIRST QUARTER
NET INCOME
CMS Energy Corporation today announced first quarter operating net income of $96
million or $0.72 per share, compared to first quarter 2001 operating net income
of $108 million or $0.84 per share. The operating net income excludes the effect
of changes in law in Argentina and gains or losses on asset sales. Consolidated
reported net income for the first quarter was $399 million or $2.92 per share,
compared to $109 million or $0.85 per share in the first quarter of 2001, with
the increase due principally to a gain on the sale of oil and gas reserves and
production in Equatorial Guinea in January 2002. The lower operating net income
was primarily due to unusually warm first quarter weather, increased electric
utility power supply costs related to the Palisades nuclear plant outage that
ended in January, and continued weak economic conditions.
The Company indicated that the actions of the Argentine government negatively
affected reported first quarter earnings by $0.15 per share, and estimated an
additional impact for the remainder of 2002 of $0.13-to-$0.18 per share.
CMS Energy also announced that, as a result of the actions of the Argentine
government, the Company has, effective April 30, 2002, changed its functional
currency for accounting purposes for its TGN pipeline and Argentine generating
assets from the U.S. dollar to the Argentine peso. This change results in a
reduction of equity on the balance sheet of approximately $400 million as a
result of a currency translation adjustment, which in combination with the loss
of related income amounts to approximately $440 million. The Company expects
that this non-cash write down, which represents about 80 percent of the book
value of these investments, combined with anticipated proceeds from
international arbitration, political risk insurance and sale of these assets,
will substantially eliminate the risk of future material balance sheet impacts
associated with the Argentine investments.
First quarter operating revenue totaled $2.5 billion, versus $2.9 billion in the
first quarter of 2001, due to decreased electric and natural gas utility sales
and natural gas transmission revenues resulting from near record warm winter
weather and continued weak economic conditions.
Operating net income of CMS Energy's utility business, Consumers Energy Company,
was $77 million for the first quarter, down from $88 million in the first
quarter of 2001, resulting from decreased sales due to continuing weak economic
conditions and warmer weather and higher purchased power costs from the
Palisades outage. First quarter total electricity deliveries were 9.2 billion
megawatt-hours, down from 10 billion megawatt-hours during the same period last
year. Natural gas deliveries were 149 billion cubic feet, down from 160 billion
cubic feet in the first quarter last year. The benefit of interim natural gas
rate relief received in December 2001 was offset by first quarter temperatures
that were 11 percent warmer than last year's first quarter.
First quarter operating net income of the natural gas transmission business was
$33 million, down from $45 million in the same period last year, due to lower
earnings from the liquefied natural gas (LNG) business than last year and
decreased gas transmission earnings due to warmer winter weather.
Energy marketing, services and trading operating net income in the first quarter
totaled $7 million, up from $4 million in the same period last year, with $3
million of increased earnings from its CMS Viron energy performance contracting
business.
Independent power production operating net income in the first quarter totaled
$42 million, up from $27 million in the same period last year, due to higher
earnings from its Jorf Lasfar power plant in Morocco and lower steam costs at
its Dearborn Industrial Generation plant.
After deducting a $310 million net gain on the sale of CMS' Equatorial Guinea
oil and gas reserves, its oil and gas exploration and production business broke
even for the first quarter, a decrease from $3 million of operating net income
during the same period last year. Increased gas prices were offset by lower oil
prices and reduced production due to the sale of CMS' Equatorial Guinea oil and
gas reserves. Increased gas prices were offset by lower oil prices and reduced
production due to the sale.
CMS ENERGY CORPORATION
Digest of Consolidated Earnings
(Millions, Except Per Share Amounts)
Three Months Ended March 31 (unaudited) 2002 2001
--------------------------------------- ---- ----
Operating Revenue 2,536 $ 2,859
Consolidated Net Income (Loss) 399 $ 109
Operating Net Income Before Reconciling Items $ 96 $ 108
Asset Sales 325 -
Argentine Devaluation and Expropriation (21) -
Extraordinary Item and Discontinued Operations (1) 1
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Consolidated Net Income $ 399 $ 109
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Average Number of Common Shares Outstanding
Basic 133 125
Diluted 137 130
Basic Earnings Per Average Common Share of CMS Energy
Earnings Per Share Before Reconciling Items $ 0.72 $ 0.86
Asset Sales 2.44 -
Argentine Devaluation and Expropriation (0.16) -
Extraordinary Item and Discontinued Operations (0.01) 0.01
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Earnings (Loss) Per Share $ 2.99 $ 0.87
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Diluted Earnings Per Average Common Share of CMS Energy
Earnings Per Share Before Reconciling Items $ 0.72 $ 0.84
Asset Sales 2.36 -
Argentine Devaluation and Expropriation (0.15) -
Extraordinary Item and Discontinued Operations (0.01) 0.01
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Earnings (Loss) Per Share $ 2.92 $ 0.85
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Dividends Declared Per Common Share $ 0.365 $ 0.365
CLOSING OF $290 MILLION SALE
OF CONSUMERS' ELECTRIC TRANSMISSION SYSTEM
CMS Energy also announced today that Consumers has closed on the sale of its
electric transmission system for approximately $290 million in cash to a limited
partnership whose general partner is Washington, D.C.-based Trans-Elect, Inc.
In January 2001, the Federal Energy Regulatory Commission (FERC) granted
Consumers' application to transfer ownership and control of its electric
transmission facilities to Michigan Electric Transmission Company (METC), a
wholly owned subsidiary of Consumers, and in April 2001, the transfer took
place. Trans-Elect submitted the winning bid to purchase METC through a
competitive bidding process, and various federal agencies approved the
transaction. Consumers is not providing any financial or credit support to
Trans-Elect in connection with the purchase of METC. Certain of Trans-Elect's
officers and directors are former officers and directors of CMS Energy,
Consumers and certain of their subsidiaries, but all had left the employment of
such affiliates prior to the period when the transaction was discussed
internally and negotiated with purchasers. After selling its transmission
facilities, Consumers anticipates a reduction in after-tax earnings of
approximately $6 million and $14 million in 2002 and 2003, respectively, as a
result of the loss in revenue associated with wholesale and retail open access
customers that would buy services directly from METC and the loss of a return on
the transmission assets upon the sale of METC. Under the agreement with
Trans-Elect and subject to certain additional RTO surcharges, transmission rates
charged to Consumers will be fixed at current levels until December 2005, and
will be subject to FERC ratemaking thereafter.
SALE OF COALBED METHANE HOLDINGS IN POWDER RIVER BASIN
CMS Energy also today announced its exploration and production unit, CMS Oil and
Gas Company, closed on the previously announced sale of the company's coalbed
methane holdings in the Powder River Basin of Wyoming and Montana to XTO Energy
of Fort Worth, Texas, for $101 million.
ASSETS OPTIMIZATION UPDATE
With the closing of these sales, CMS Energy will have received approximately
$2.4 billion of cash from asset sales, securitization proceeds and proceeds from
LNG monetization out of its $2.9 billion program to improve its balance sheet.
FORWARD-LOOKING STATEMENTS
This Form 8-K contains "forward-looking statements" that are subject to risks
and uncertainties. They should be read in conjunction with the "Forward-Looking
Statement Cautionary Factors" in CMS Energy's and Consumers' Form 10-K, Item 1
(incorporated by reference herein) that discusses important factors that could
cause CMS Energy's and Consumers' results to differ materially from those
anticipated in such statements.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrants have duly caused this report to be signed on their behalf by the
undersigned hereunto duly authorized.
CMS ENERGY CORPORATION
Dated: May 1, 2002 By: /s/ Alan M. Wright
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Alan M. Wright
Executive Vice President, Chief Financial
Officer and Chief Administrative Officer
CONSUMERS ENERGY COMPANY
Dated: May 1, 2002 By: /s/ Alan M. Wright
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Alan M. Wright
Executive Vice President, Chief Financial
Officer and Chief Administrative Officer