UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) | ||||
OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended March 31, 2012 |
OR
¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) | |||
OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period fromto |
Commission | Registrant; State of Incorporation; | IRS Employer | ||||||
File Number | Address; and Telephone Number | Identification No. | ||||||
1-9513 | ||||||||
CMS ENERGY CORPORATION | 38-2726431 | |||||||
(A Michigan Corporation) | ||||||||
One Energy Plaza, Jackson, Michigan 49201 | ||||||||
(517) 788-0550 | ||||||||
1-5611 | ||||||||
CONSUMERS ENERGY COMPANY | 38-0442310 | |||||||
(A Michigan Corporation) | ||||||||
One Energy Plaza, Jackson, Michigan 49201 | ||||||||
(517) 788-0550 |
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
CMS Energy Corporation: Yesþx Noo¨Consumers Energy Company: Yesþx Noo¨
Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data file required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit and post such files).
CMS Energy Corporation: Yesþx Noo¨Consumers Energy Company: Yesþx Noo¨
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
CMS Energy Corporation:
Large accelerated filer x Accelerated filer ¨ Non-Accelerated filer ¨ Smaller reporting company ¨ (Do not check if a smaller reporting company)
| ||||||
Large accelerated filer ¨ Accelerated filer ¨ Non-Accelerated filer x Smaller reporting company ¨
(Do not check if a smaller reporting company)
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
CMS Energy Corporation: Yeso¨ NoþxConsumers Energy Company: Yeso¨ Noþx
Indicate the number of shares outstanding of each of the issuer’s classes of common stock at October 14, 2011:
CMS Energy Corporation:
CMS Energy Common Stock, $0.01 par value | ||||
(including | ||||
Consumers Energy Company: | ||||
Consumers Energy Common Stock, $10 par value, privately held by CMS Energy Corporation | 84,108,789 |
Consumers Energy Company
Quarterly Reports on Form 10-Q to the Securities and Exchange Commission for the Period EndedSeptember 30, 2011
Page | ||||||||
3 | ||||||||
Item 1. | Consolidated Financial Statements (unaudited) | |||||||
CMS Energy | 30 | |||||||
38 | ||||||||
Item 2. | ||||||||
12 | ||||||||
Quantitative and Qualitative Disclosures about Market Risk | ||||||||
Controls and Procedures | ||||||||
Item 1. | Legal Proceedings | 70 | ||||||
Risk Factors | ||||||||
2. | ||||||||
Defaults Upon Senior Securities | ||||||||
Mine Safety Disclosures | ||||||||
Other Information | ||||||||
Exhibits | ||||||||
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2008 Energy Law | Comprehensive energy reform package enacted in Michigan in October 2008 | |
Each of CMS Energy’s and Consumers’ Annual Report on Form 10-K for the year ended December 31, | ||
ABATE | Association of Businesses Advocating Tariff Equity | |
ASU | Financial Accounting Standards Board Accounting Standards Update | |
Bay Harbor | A residential/commercial real estate area located near Petoskey, | |
bcf | Billion cubic feet of gas | |
Big Rock | Big Rock Point nuclear power plant, formerly owned by Consumers | |
CAIR | The Clean Air Interstate Rule | |
Cantera Gas Company | Cantera Gas Company LLC, a non-affiliated company, formerly known as CMS Field Services | |
Cantera Natural Gas, Inc. | Cantera Natural Gas, Inc., a non-affiliated company that purchased CMS Field Services | |
CCB | Coal combustion by-product | |
CEO | Chief Executive Officer | |
CFO | Chief Financial Officer | |
CKD | Cement kiln dust | |
Clean Air Act | Federal Clean Air Act, as amended | |
Clean Water Act | Federal Water Pollution Control Act, as amended | |
CMS Capital | CMS Capital, L.L.C., a wholly owned subsidiary of CMS Energy | |
CMS Energy | CMS Energy Corporation, the parent of Consumers and CMS Enterprises | |
CMS Enterprises | CMS Enterprises Company, a wholly owned subsidiary of CMS Energy |
CMS ERM | CMS Energy Resource Management Company, formerly CMS MST, a wholly owned subsidiary of CMS Enterprises |
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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 CMS Enterprises | ||
CMS Land | CMS Land Company, a wholly owned subsidiary of CMS Capital | ||
CMS MST | CMS Marketing, Services and Trading Company, a wholly owned subsidiary of CMS Enterprises, whose name was changed to CMS ERM effective January 2004 | ||
Consumers | Consumers Energy Company, a wholly owned subsidiary of CMS Energy | ||
CSAPR | The Cross-State Air Pollution Rule, | ||
Customer Choice Act | Customer Choice and Electricity Reliability Act, a Michigan statute | ||
D.C. | District of Columbia | ||
Detroit Edison | The Detroit Edison Company, a non-affiliated company | ||
Dodd-Frank Act | Dodd-Frank Wall Street Reform and Consumer Protection Act, enacted in July 2010 | ||
DOE | U.S. Department of Energy | ||
DOJ | U.S. Department of Justice | ||
EBITDA | Earnings before interest, taxes, depreciation, and amortization | ||
EnerBank | EnerBank USA, a wholly owned subsidiary of CMS Capital | ||
Entergy | Entergy Corporation, a non-affiliated company | ||
EPA | U.S. Environmental Protection Agency | ||
EPS | Earnings per share |
Exchange Act | Securities Exchange Act of 1934, as amended | |
FDIC | Federal Deposit Insurance Corporation |
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FERC | The Federal Energy Regulatory Commission | ||
FLI Liquidating Trust | Trust formed in Missouri bankruptcy court to accomplish the liquidation of Farmland Industries, Inc., a non-affiliated entity | ||
FMB | First mortgage bond | ||
FOV | Finding of Violation | ||
FTR | Financial transmission right | ||
GAAP | U.S. Generally Accepted Accounting Principles | ||
GCR | Gas cost recovery | ||
Health Care Acts | Comprehensive health care reform enacted in March 2010, comprising the Patient Protection and Affordable Care Act and the related Health Care and Education Reconciliation Act | ||
ISFSI | Independent spent fuel storage installation | ||
kWh | Kilowatt-hour, a unit of energy equal to one thousand watt-hours | ||
LIBOR | The London Interbank Offered Rate | ||
Ludington | Ludington pumped-storage plant, jointly owned by Consumers and Detroit Edison | ||
MACT | Maximum Achievable Control Technology, which is the emission control that is achieved in practice by the best-controlled similar source; for existing sources, MACT is the average emission limitation achieved by the best performing 12 percent of existing sources or the average limitation achieved by the best performing five sources, depending on the number of sources in the category | ||
MD&A | Management’s Discussion and Analysis of Financial Condition and Results of Operations | ||
MDEQ | Michigan Department of Environmental Quality | ||
MDL | A pending multi-district litigation case in Nevada |
MGP | Manufactured gas plant |
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Midwest Energy Market | An energy market developed by MISO to provide day-ahead and real-time market information and centralized dispatch for market participants | ||
MISO | The Midwest Independent Transmission System Operator, Inc. | ||
Mothball | To place a generating unit into a state of extended reserve shutdown in which the unit is inactive and unavailable for service for a specified period, during which the unit can be brought back into service after receiving appropriate notification and completing any necessary maintenance or other work; generation owners in MISO must request approval to mothball a unit, and MISO then evaluates the request for reliability impacts | ||
MPSC | Michigan Public Service Commission | ||
MW | Megawatt, a unit of power equal to one million watts | ||
MWh | Megawatt-hour, a unit of energy equal to one million watt-hours | ||
NOV | Notice of Violation | ||
NPDES | National Pollutant Discharge Elimination System, a permit system for regulating point sources of pollution under the Clean Water Act | ||
NREPA | Part 201 of | ||
NSR | New Source Review, a construction-permitting program under the Clean Air Act | ||
NYMEX | The New York Mercantile Exchange | ||
OPEB | Postretirement benefit plans other than pensions | ||
Palisades | Palisades nuclear power plant, sold by Consumers to Entergy in 2007 | ||
Panhandle | Panhandle Eastern Pipe Line Company, including its wholly owned subsidiaries Trunkline Gas Company, LLC, Pan Gas Storage Company, Panhandle Storage Company, and Panhandle Holding Company, a former wholly owned subsidiary of CMS Gas Transmission |
PCB | Polychlorinated biphenyl | ||
Pension Plan | Trusteed, non-contributory, defined benefit pension plan of CMS Energy, Consumers, and Panhandle | ||
PSCR | Power supply cost recovery | ||
PSD | Prevention of Significant Deterioration | ||
REC | Renewable energy credit established under the 2008 Energy Law |
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Renewable Operating Permit | Michigan’s Title V permitting program under the Clean Air Act | ||
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 | ||
SERP | Supplemental Executive Retirement Plan | ||
Sherman Act | Sherman Antitrust Act, enacted in 1890 | ||
Smart Grid | Consumers’ grid modernization project, which includes the installation of smart meters that | ||
Superfund | Comprehensive Environmental Response, Compensation, and Liability Act | ||
Supplemental Environmental Projects | Environmentally beneficial projects that 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 | ||
Title V | A federal program under the Clean Air Act designed to standardize air quality permits and the permitting process for major sources of emissions across the U.S. | ||
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 |
U.S. | United States | |
XBRL | eXtensible Business Reporting Language |
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This combined Form 10-Q is separately filed by CMS Energy and Consumers. Information in this combined Form 10-Q relating to each individual registrant is filed by such registrant on its own behalf. Consumers makes no representation regarding information relating to any other companies affiliated with CMS Energy other than its own subsidiaries. None of CMS Energy, CMS Enterprises, nor any of CMS Energy’s other subsidiaries (other than Consumers) has any obligation in respect of Consumers’ debt securities and holders of such debt securities should not consider the financial resources or results of operations of CMS Energy, CMS Enterprises, nor any of CMS Energy’s other subsidiaries (other than Consumers and its own subsidiaries (in relevant circumstances)) in making a decision with respect to Consumers’ debt securities. Similarly, none of Consumers nor any other subsidiary of CMS Energy has any obligation in respect of debt securities of CMS Energy.
This report should be read in its entirety. No one section of this report deals with all aspects of the subject matter of this report. This report should be read in conjunction with the consolidated financial statements and related notes and with MD&A included in the 20102011 Form 10-K.
This Form 10-Q and other written and oral statements that CMS Energy and Consumers make may contain forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995. The use of “might,” “may,” “could,” “should,” “anticipates,” “believes,” “estimates,” “expects,” “intends,” “plans,” “projects,” “forecasts,” “predicts,” “assumes,” and other similar words is intended to identify forward-looking statements that involve risk and uncertainty. This discussion of potential risks and uncertainties is designed to highlight important factors that may impact CMS Energy’s and Consumers’ businesses and financial outlook. CMS Energy and Consumers have no obligation to update or revise forward-looking statements regardless of whether new information, future events, or any other factors affect the information contained in the statements. These forward-looking statements are subject to various factors that could cause CMS Energy’s and Consumers’ actual results to differ materially from the results anticipated in these statements. These factors include, CMS Energy’s and Consumers’ inabilitybut are not limited to, predict or control the following, all of which are potentially significant:
the impact of regulation by the MPSC or FERC and other applicable governmental proceedings and regulations, including any associated impact on electric or gas rates or rate structures; |
— | potentially adverse regulatory treatment or failure to receive timely regulatory orders affecting Consumers that are or could come before the MPSC, FERC, or other governmental authorities, including the treatment of Consumers’ pilot electric and gas revenue decoupling mechanisms; |
— | changes in applicable laws, rules, regulations, principles, or practices, or in their interpretation, including those related to energy policy, the environment, regulation, health care reforms (including the Health Care Acts), taxes, accounting matters, and other business issues that could have an impact on CMS Energy’s or Consumers’ businesses or financial results, including potential effects of the Dodd-Frank Act and related regulations on CMS Energy, Consumers, or any of their affiliates; |
— | potentially adverse regulatory or legal interpretations or decisions regarding environmental matters, or delayed regulatory treatment or permitting decisions that are or could come before the MDEQ and/or EPA, and potential environmental remediation costs associated with these interpretations or decisions, including those that may affect Bay Harbor or Consumers’ RMRR classification under NSR regulations; |
— | changes in energy markets, including availability of capacity and the timing and extent of changes in commodity prices and availability of coal, natural gas, natural gas liquids, electricity, oil, and certain related products; |
— | the price of CMS Energy common stock, the credit ratings of CMS Energy and Consumers, capital and financial market conditions, and the effect of these market conditions on CMS Energy’s and Consumers’ |
— | the investment performance of the assets of CMS Energy’s and Consumers’ pension and benefit plans and the | ||
the impact of the economy, particularly in Michigan, and potential future volatility in the financial and credit markets on CMS Energy’s, Consumers’, or any of their affiliates’ |
revenues, ability to collect accounts receivable from | |||
customers, or cost | |||
changes in the economic and financial viability of CMS Energy’s and Consumers’ suppliers, customers, and other counterparties and the continued ability of these third parties, including third parties in bankruptcy, to meet their obligations to CMS Energy and Consumers; | |||
population changes in the geographic areas where CMS Energy and Consumers conduct business; |
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national, regional, and local economic, competitive, and regulatory policies, conditions, and developments; | |||
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loss of customer demand for electric generation supply to alternative energy suppliers; | |||
federal regulation of electric sales and transmission of electricity, including periodic re-examination by federal regulators of CMS Energy’s and Consumers’ market-based sales authorizations in wholesale power markets without price restrictions; | |||
the impact of credit markets, economic conditions, and any new banking regulations on EnerBank; | |||
the availability, cost, coverage, and terms of | |||
the effectiveness of CMS Energy’s and Consumers’ risk management policies, procedures, and strategies, including their strategies to hedge risk related to future prices of electricity, natural gas, and other energy-related commodities; | |||
factors affecting development of generation projects and distribution infrastructure replacement and expansion projects, including those related to project site identification, construction material pricing, availability of qualified construction personnel, permitting, and government approvals; | |||
factors affecting operations, such as costs and availability of personnel, equipment, and materials, |
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potential disruption | |||
changes or disruption in fuel supply, including but not limited to rail or vessel transport of coal and pipeline transport of natural gas; |
— | potential costs, lost revenues, or other consequences resulting from misappropriation of assets or sensitive information, corruption of data, or operational disruption in connection with a | ||
technological developments in energy production, delivery, usage, and storage; | |||
the impact of CMS Energy’s and Consumers’ integrated business software system on their operations, including utility customer billing and collections; | |||
adverse consequences resulting from any past or future assertion of indemnity or warranty claims associated with assets and businesses previously owned by CMS Energy or Consumers, including claims resulting from attempts by foreign or domestic governments to assess taxes on past operations or transactions; | |||
the outcome, cost, and other effects of legal or administrative proceedings, settlements, investigations, or claims; | |||
restrictions imposed by various financing arrangements and regulatory requirements on the ability of Consumers and other subsidiaries of CMS Energy to transfer funds to CMS Energy in the form of cash dividends, loans, or advances; |
— | earnings volatility resulting from the application of fair value accounting to certain energy commodity contracts, such as electricity sales agreements and interest rate and foreign currency contracts; | ||
changes in financial or regulatory accounting principles or | |||
policies, including 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; and | |||
other |
For additional details regarding these and other uncertainties, see Part I – Item 1. Consolidated Financial Statements (unaudited) – Notes to the “Outlook” section included in MD&A;Unaudited Consolidated Financial Statements – Note 3,3: Contingencies and Commitments;Commitments and Note 4,4: Regulatory Matters; Part I – Item 2. MD&A – Outlook; and Part II – Item 1A. Risk Factors.
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Consumers Energy Company
MANAGEMENT’S DISCUSSION AND ANALYSIS
This MD&A is a combined report of CMS Energy and Consumers.
EXECUTIVE OVERVIEW
CMS Energy is an energy company operating primarily in Michigan. It is the parent holding company of several subsidiaries, including Consumers, an electric and gas utility, and CMS Enterprises, primarily a domestic independent power producer. Consumers’ electric utility operations include the generation, purchase, distribution, and sale of electricity, and Consumers’ gas utility operations include the purchase, transmission, storage, distribution, and sale of natural gas. Consumers’ customer base consists of a mix of residential, commercial, and diversified industrial customers. CMS Enterprises, through its subsidiaries and equity investments, owns and operates power generation facilities.
CMS Energy and Consumers manage their businesses by the nature of services each provides. CMS Energy operates principally in three business segments: electric utility; gas utility; and enterprises, its non-utility investments and operations. Consumers operates principally in two business segments: electric utility and gas utility.
CMS Energy and Consumers earn revenue and generate cash from operations by providing electric and natural gas utility services; electric distribution and generation; gas transmission, storage, and distribution; and other energy-related services. Their businesses are affected primarily by:
regulation and regulatory matters; | |||
economic conditions; | |||
weather; | |||
energy commodity prices; | |||
interest rates; and | |||
CMS Energy’s and Consumers’ securities’ credit ratings. |
CMS Energy’s business approachstrategy has emphasized the key elements depicted below:
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Safe, Excellent OperationsSAFE, EXCELLENT OPERATIONS
The safety and security of employees, customers, and the general public remainremains a priority of CMS Energy and Consumers. Accordingly, CMS Energy and Consumers have worked to integrate a set of safety principles into their business operations and culture. These principles include complying with applicable safety, health, and security regulations and implementing programs and processes aimed at continually improving safety and security conditions. From 2007 to 2010,2011, Consumers achieved a 6373 percent reduction in the annual number of recordable safety incidents.
Customer ValueCUSTOMER VALUE
Consumers is undertaking a number of initiatives that reflect its intensified customer focus. Consumers’ planned investments in reliability are aimed at improving safety, reducing customer outage frequency, reducing repetitive outages, and increasing customer satisfaction. Consumers’ productivity and efficiency improvements and capital investments are expected to help keep annual base rate increases (excluding PSCR and GCR charges) at or below the average rate of inflation. Consumers considers these and other aspects of its customer value initiative to be important to its success.
Utility InvestmentUTILITY INVESTMENT
Consumers expects to make capital investments of $6.6 billion from 2012 through 2016,2016. Consumers has limited its capital investment program to those investments it believes are needed to provide safe, reliable, and efficient service to its customers. Consumers’ capital investment program is expected to result in annual rate base growth of five to seven percent while allowing Consumers to maintain sustainable customer base rate increases (excluding PSCR and GCR charges) at or below the rate of inflation.
Among the key components of Consumers’ investment program are projects that will enhance customer value. Consumers’ planned distribution investments of $1.7 billion comprise $1.0 billion of electric utility projects to improve reliability and increase capacity and $0.7 billion of gas utility projects to increase capacity and deliverability and enhance pipeline integrity. Consumers also expects to spend $1.5 billion on environmental investments needed to comply with a key aspectstate and federal laws and regulations. An additional $1.2 billion of its strategy beingplanned reliability investments at Consumers are aimed at reducing outages and improving customer satisfaction; these investments comprise $0.8 billion at the balanced energy initiative. The balanced energy initiative is a comprehensive energy resource planelectric utility to meet Consumers’ projected short-termstrengthen circuits and long-term electric power requirements with energy efficiency, demand management, expanded use of renewable energy, development of new power plants, pursuit of additional PPAssubstations, replace poles, and upgrade the Ludington pumped-storage plant, and $0.4 billion at the gas utility to complement existing generating sources, potential retirement or mothballing of older generating units,replace mains and continued operation of other existing units.
Renewable energy projects are aanother major component of Consumers’ planned capital investments. Consumers expects to spend $500 million$0.5 billion on renewable energy investments from 2012 through 2016. The 2008 Energy Law requires that at least ten percent of Consumers’ electric sales volume come from renewable energy sources by 2015, and it includes requirements for specific capacity additions. Consumers has historically included renewable resources as part of its portfolio, with about five percent of its present power supply coming from such renewable sources as hydroelectric, landfill gas, biomass, and wind. In May 2011, the MPSC issued an order approving Consumers’ amended renewable energy plan, with slight modifications. The amended plan reduces the renewable energy surcharge that will be billed to customers in the future by an annual amount of $54 million, reflecting lower-than-anticipated costs to comply with renewable energy requirements. In October 2011, Consumers filed an application for the biennial review and approval of its renewable energy plan. The plan further reducesThis filing proposes to reduce the renewable energy surcharge that will be billed to customers by an annual amount of $3 million.
Consumers’ Smart Grid program, with an estimated total project capital cost of $750 million, also represents a major capital investment. The full-scale deployment of advanced metering infrastructure is planned to begin in the second half of 2012 and to continue through 2019. Consumers will havehas spent $160$140 million through 2011 on its Smart Grid program, and expects to spend an additional $260 million, following a phased approach, from 2012 through 2016.
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REGULATION
|
— | Gas Rate Case:In September 2011, Consumers filed a | ||
Revenue Decoupling Mechanisms: | |||
In April 2012, the Michigan Court of Appeals ruled in an appeal filed by ABATE that disputed the MPSC’s decision to authorize an electric revenue decoupling mechanism for Detroit Edison. The Court concluded that the MPSC lacks statutory authority to approve or direct the use of a revenue decoupling mechanism for electric providers. Consumers cannot predict whether this decision will be appealed to the Michigan Supreme Court or the timing or outcome of any such appeal. As a result, Consumers determined that it no longer met the accounting criteria for recognition of a regulatory asset under an alternative revenue program, and wrote off its $59 million electric revenue decoupling mechanism regulatory asset at March 31, 2012. Although the case before the Court of Appeals related specifically to Detroit Edison, Consumers will continue to pursue all of its legal and regulatory avenues to recover its decoupling revenues, including participating in or supporting any appeal of the Detroit Edison decision.
In September 2011, Consumers filed its first reconciliation of the gas revenue decoupling mechanism, requesting recovery of $16 million from customers for the period June 2010 through May 2011. This mechanism, authorized under the MPSC’s 2010 gas rate case order, allows Consumers to adjust future gas rates to compensate for changes in sales volumes resulting from the difference between the level of average sales per customer adopted in the order and actual average weather-adjusted sales per customer, subject to certain conditions.
— | |||
DOE Settlement:In July 2011, Consumers entered into an agreement with the DOE to settle for $120 million its claims related to the DOE’s failure to accept spent nuclear fuel. In September 2011, Consumers filed an application with the MPSC regarding the allocation of the $120 million settlement amount. |
The 2008 Energy Law limits alternative electric supply to ten percent of Consumers’ weather-adjusted retail sales of the preceding calendar year. At March 31, 2012, Consumers’ electric deliveries under the ROA program were at the ten percent limit. In March 2012, a bill was introduced to the Michigan Senate and House of Representatives that would revise the 2008 Energy Law and immediately allow customers on the ROA program waiting list to switch their service to an alternative electric supplier. Presently, the proportion of Consumers’ electric deliveries under the ROA program and on the ROA waiting list is 22 percent. The revision also proposes an increase in the cap of six percentage points per year from 2013 through 2015. Consumers is unable to predict the outcome of the proposed legislation.
Environmental regulation is another area of importance for CMS Energy and Consumers, and they are monitoring numerous legislative and regulatory initiatives, including initiatives to regulate greenhouse gases, as well as related litigation. The EPA has taken steps to regulate greenhouse gases under the Clean Air Act, and is expected to propose guidelines for states to regulate greenhouse gas emissions from new and existing sources.
In July 2011, the EPA finalized the CSAPR, which requires
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FINANCIAL PERFORMANCEIN 2012AND BEYOND
For the three months ended September 30, 2011,March 31, 2012, CMS Energy’s net income available to common stockholders was $139$67 million, and diluted earnings per shareEPS were $0.53.$0.25. This compares with net income available to common stockholders of $134$135 million and diluted earnings per shareEPS of $0.53$0.52 for the three months ended September 30, 2010. For the nine months ended September 30, 2011, CMS Energy’s net income available to common stockholders was $374 million, and diluted earnings per share were $1.43. This compares with net income available to common stockholders of $299 million and diluted earnings per share of $1.19 for the nine months ended September 30, 2010. Among theMarch 31, 2011. The two main factors contributing to CMS Energy’s improved performance for the nine months ended September 30, 2011decline in earnings in 2012 were benefits frommilder weather, which resulted in lower gas and electric deliveries to customers, and gas rate orders and increased gas deliveries, offset partially by higher depreciation, property taxes, and distribution and service restoration costs. A tax benefit resulting from the enactmentwrite-off of the MCIT in May 2011 was offset by the absence, in 2011, of an insurance settlement recovery recorded in 2010.
A more detailed discussion of the factors affecting CMS Energy’s and Consumers’ performance can be found in the “ResultsResults of Operations”Operations section that follows this Executive Overview.
CMS Energy believesand Consumers believe that economic conditions in Michigan are improving. Although Michigan’s economy continues to be affected by the recession and its impact on the state’s automotive industry and by high unemployment rates, there are indications that the recession has eased in Michigan. Consumers expects its electric sales to increase by more thanabout one percent annually through 2016, driven largely by the continued rise in industrial production. Consumers is projecting that its gas sales will remain stable through 2016, due largely to2016. This outlook reflects growth in gas demand offset by energy efficiency and conservation.
As Consumers seeks to continue to receive fair and timely regulatory treatment, delivering customer value will remain a key strategic priority. To keep costs down for its utility customers, Consumers has set goals to achieve further annual productivity improvements. Additionally, Consumers will strive to give priority to capital investments that increase customer value or lower costs.
Consumers expects to continue to have sufficient capacity to fund its investment-based growth plans. CMS Energy also expects its sources of liquidity to remain sufficient to meet its cash requirements. CMS Energy and Consumers will continue to monitor developments in the financial and credit markets, as well as government policy responses to those developments, for potential implications for their businesses and their future financial needs.
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CMS Energy’s Consolidated Results of OperationsENERGY CONSOLIDATED RESULTSOF OPERATIONS
In Millions, Except Per Share Amounts | ||||||||||||||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||||||||||||
September 30 | 2011 | 2010 | Change | 2011 | 2010 | Change | ||||||||||||||||||
Net Income Available to Common Stockholders | $ | 139 | $ | 134 | $ | 5 | $ | 374 | $ | 299 | $ | 75 | ||||||||||||
Basic Earnings Per Share | $ | 0.55 | $ | 0.58 | $ | (0.03 | ) | $ | 1.49 | $ | 1.30 | $ | 0.19 | |||||||||||
Diluted Earnings Per Share | $ | 0.53 | $ | 0.53 | $ | — | $ | 1.43 | $ | 1.19 | $ | 0.24 | ||||||||||||
In Millions | ||||||||||||||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||||||||||||
September 30 | 2011 | 2010 | Change | 2011 | 2010 | Change | ||||||||||||||||||
Electric Utility | $ | 159 | $ | 156 | $ | 3 | $ | 309 | $ | 283 | $ | 26 | ||||||||||||
Gas Utility | (5 | ) | 2 | (7 | ) | 88 | 69 | 19 | ||||||||||||||||
Enterprises | 4 | 9 | (5 | ) | 36 | 51 | (15 | ) | ||||||||||||||||
Corporate Interest and Other | (19 | ) | (33 | ) | 14 | (61 | ) | (87 | ) | 26 | ||||||||||||||
Discontinued Operations | — | — | — | 2 | (17 | ) | 19 | |||||||||||||||||
Net Income Available to Common Stockholders | $ | 139 | $ | 134 | $ | 5 | $ | 374 | $ | 299 | $ | 75 | ||||||||||||
In Millions, Except Per Share Amounts | ||||||||||||
| ||||||||||||
Three Months Ended March 31 | 2012 | 2011 | Change | |||||||||
| ||||||||||||
Net Income Available to Common Stockholders | $ | 67 | $ | 135 | $ | (68) | ||||||
Basic Earnings Per Share | $ | 0.26 | $ | 0.54 | $ | (0.28) | ||||||
Diluted Earnings Per Share | $ | 0.25 | $ | 0.52 | $ | (0.27) | ||||||
| ||||||||||||
In Millions | ||||||||||||
| ||||||||||||
Three Months Ended March 31 | 2012 | 2011 | Change | |||||||||
| ||||||||||||
Electric utility | $ | 21 | $ | 65 | $ | (44) | ||||||
Gas utility | 55 | 88 | (33) | |||||||||
Enterprises | 5 | 3 | 2 | |||||||||
Corporate interest and other | (21 | ) | (23 | ) | 2 | |||||||
Discontinued operations | 7 | 2 | 5 | |||||||||
| ||||||||||||
Net Income Available to Common Stockholders | $ | 67 | $ | 135 | $ | (68) | ||||||
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Presented in the following table are specific after-tax changes to net income available to common stockholders for the three and nine months ended September 30, 20112012 versus 2010:
In Millions | ||||||||||||||||
2011 better/(worse) than 2010 | ||||||||||||||||
Three Months Ended September 30 | Nine Months Ended September 30 | |||||||||||||||
Electric and gas rate orders | $ | 7 | $ | 59 | ||||||||||||
Gas sales | — | 34 | ||||||||||||||
Electric sales | 6 | 2 | ||||||||||||||
Distribution and service restoration costs | (11 | ) | (33 | ) | ||||||||||||
Other, including depreciation and property tax | (6 | ) | $ | (4 | ) | (24 | ) | $ | 38 | |||||||
Subsidiary earnings of enterprises segment | (3 | ) | (11 | ) | ||||||||||||
Other, mainly reduced financing costs | 14 | 23 | ||||||||||||||
2010 insurance settlement recovery | — | (31 | ) | |||||||||||||
MCIT enactment | — | 32 | ||||||||||||||
Voluntary separation plan cost in 2010 | — | 7 | ||||||||||||||
Other, including tax adjustments related to previously sold businesses | (2 | ) | (2 | ) | 17 | 25 | ||||||||||
Total change | $ | 5 | $ | 75 | ||||||||||||
16
In Millions | ||||||||
| ||||||||
2012 better/(worse) than 2011 | ||||||||
| ||||||||
Gas sales | $ (37) | |||||||
Electric sales | (21) | |||||||
Electric and gas rate orders | 30 | |||||||
Other, including depreciation and property tax | (13) | $ (41) | ||||||
| ||||||||
Charge to write off electric decoupling regulatory asset | (36) | |||||||
Higher subsidiary earnings of enterprises segment | 3 | |||||||
Lower corporate fixed charges and other | 2 | |||||||
Other, mainly the elimination of a liability related to a previously sold business | 4 | |||||||
| ||||||||
Total change | $ (68) | |||||||
|
CONSUMERS ELECTRIC UTILITY RESULTSOF OPERATIONS
In Millions | ||||||||||||
| ||||||||||||
Three Months Ended March 31 | 2012 | 2011 | Change | |||||||||
| ||||||||||||
Net Income Available to Common Stockholders | $ 21 | $ 65 | $ (44) | |||||||||
| ||||||||||||
Reasons for the change | ||||||||||||
Electric deliveries and rate increases | $ (57) | |||||||||||
Maintenance and other operating expenses | (3) | |||||||||||
Depreciation and amortization | (6) | |||||||||||
General taxes | (1) | |||||||||||
Interest charges | 1 | |||||||||||
Income taxes | 22 | |||||||||||
| ||||||||||||
Total change | $ (44) | |||||||||||
|
Consumers’ Electric Utility Results of Operations
In Millions | ||||||||||||
September 30 | 2011 | 2010 | Change | |||||||||
Net Income Available to CommonStockholders | ||||||||||||
Three months ended | $ | 159 | $ | 156 | $ | 3 | ||||||
Nine months ended | 309 | 283 | 26 | |||||||||
In Millions | ||||||||
2011 better/(worse) than 2010 | ||||||||
Three Months Ended | Nine Months Ended | |||||||
Reasons for the change: | September 30 | September 30 | ||||||
Electric deliveries and rate increases | $ | 3 | $ | 5 | ||||
Power supply costs and related revenue | — | 10 | ||||||
Other income, net of expenses | (5 | ) | (12 | ) | ||||
Maintenance and other operating expenses | (14 | ) | (13 | ) | ||||
Depreciation and amortization | 14 | 38 | ||||||
General taxes | 6 | 1 | ||||||
Interest charges | (1 | ) | 8 | |||||
Income taxes | — | (11 | ) | |||||
Total change | $ | 3 | $ | 26 | ||||
Maintenance and other operating expenses:For the three months ended September 30, 2011,March 31, 2012, maintenance and other operating expenses increased $14$3 million compared with 2010.2011. This variance was due to $6��consisted of a $4 million increase in energy optimization program costs, the absence, in 2012, of higher service restoration costsa $3 million insurance refund recorded in 2011, and $14a $4 million of higher forestry andincrease in other operating expenses. These increases were offset partially by the absence,$8 million in 2011, of $6 million of retirement benefit expenses that were recovered in revenues in 2010.
17
GeneralIncome taxes:For the three months ended September 30, 2011, generalMarch 31, 2012, income taxes decreased $6$22 million compared with 2010,2011, reflecting the impact of a final Michigan single business tax assessment for the years 2004 through 2007 that resulted in a tax deficiency less than the amount previously accrued.
Consumers’ Gas Utility Results of OperationsCONSUMERS GAS UTILITY RESULTSOF OPERATIONS
In Millions | ||||||||||||
September 30 | 2011 | 2010 | Change | |||||||||
Net Income (Loss) Available to Common Stockholders | ||||||||||||
Three months ended | $ | (5 | ) | $ | 2 | $ | (7 | ) | ||||
Nine months ended | 88 | 69 | 19 | |||||||||
In Millions | ||||||||
2011 better/(worse) than 2010 | ||||||||
Three Months Ended | Nine Months Ended | |||||||
Reasons for the change: | September 30 | September 30 | ||||||
Gas deliveries and rate increases | $ | 3 | $ | 55 | ||||
Other income, net of expenses | (2 | ) | (6 | ) | ||||
Maintenance and other operating expenses | (14 | ) | (9 | ) | ||||
Depreciation and amortization | (1 | ) | (6 | ) | ||||
General taxes | 3 | (3 | ) | |||||
Interest charges | (1 | ) | 2 | |||||
Income taxes | 5 | (14 | ) | |||||
Total change | $ | (7 | ) | $ | 19 | |||
In Millions | ||||||||||||
| ||||||||||||
Three Months Ended March 31 | 2012 | 2011 | Change | |||||||||
| ||||||||||||
Net Income Available to Common Stockholders | $ 55 | $ 88 | $ (33) | |||||||||
| ||||||||||||
Reasons for the change | ||||||||||||
Gas deliveries and rate increases | $ (36) | |||||||||||
Maintenance and other operating expenses | (9) | |||||||||||
Depreciation and amortization | (4) | |||||||||||
General taxes | (1) | |||||||||||
Interest charges | 1 | |||||||||||
Income taxes | 16 | |||||||||||
| ||||||||||||
Total change | $ (33) | |||||||||||
|
Gas deliveries and rate increases:For the three months ended September 30, 2011,March 31, 2012, gas delivery revenues increased $3decreased $36 million compared with 2010.2011. This increase wasdecrease reflected $59 million of lower customer deliveries, due primarily to themilder weather in 2012. The decrease was offset partially by additional revenues of $15 million from a May 2011 rate increase.increase and an $8 million increase in other miscellaneous revenues. Gas deliveries, including miscellaneous transportation to end-use customers, were 25.5106.4 bcf in 2011,2012, a decrease of 0.527.5 bcf, or 1.920.5 percent, compared with 2010.
18
Depreciation and amortization:For the ninethree months ended September 30, 2011,March 31, 2012, depreciation and amortization expense increased $6$4 million compared with 2010,2011, due primarily to higher depreciation expense from increased plant in service.
Income taxes:For the three months ended September 30, 2011,March 31, 2012, income taxes decreased $5$16 million compared with 2010,2011, reflecting lower gas utility earnings in 2011.
Enterprises Results of OperationsENTERPRISES RESULTSOF OPERATIONS
In Millions | ||||||||||||
September 30 | 2011 | 2010 | Change | |||||||||
Net Income Available to Common Stockholders | ||||||||||||
Three months ended | $ | 4 | $ | 9 | $ | (5 | ) | |||||
Nine months ended | 36 | 51 | (15 | ) | ||||||||
In Millions | ||||||||||||
| ||||||||||||
Three Months Ended March 31 | 2012 | 2011 | Change | |||||||||
| ||||||||||||
Net Income Available to Common Stockholders | $ 5 | $ 3 | $ 2 | |||||||||
|
For the three months ended September 30, 2011,March 31, 2012, net income of the enterprises segment decreased $5increased $2 million compared with 2010, due primarily to lower after-tax mark-to-market gains of $3 million.
Corporate Interest and Other Results of OperationsCORPORATE INTERESTAND OTHER RESULTSOF OPERATIONS
In Millions | ||||||||||||
September 30 | 2011 | 2010 | Change | |||||||||
Net Loss Available to Common Stockholders | ||||||||||||
Three months ended | $ | (19 | ) | $ | (33 | ) | $ | 14 | ||||
Nine months ended | (61 | ) | (87 | ) | 26 | |||||||
In Millions | ||||||||||||
| ||||||||||||
Three Months Ended March 31 | 2012 | 2011 | Change | |||||||||
| ||||||||||||
Net Loss Available to Common Stockholders | $ (21 | ) | $ (23 | ) | $ 2 | |||||||
|
For the three months ended September 30, 2011,March 31, 2012, corporate interest and other net expenses decreased $14$2 million compared with 2010, due primarily to the absence, in 2011, of an $8 million after-tax charge in 2010 for deferred issuance costs on conversion of preferred stock. Also contributing to the decrease were a $4 million benefit from the impact of a final Michigan single business tax assessment for the years
19
Discontinued OperationsDISCONTINUED OPERATIONS
For the ninethree months ended September 30, 2011,March 31, 2012, income of $2 million was recorded from discontinued operations duewas $7 million, reflecting the elimination of a liability related to a legal settlement,prior asset sale, compared with a lossincome from discontinued operations of $17$2 million in 20102011 as a result of a favorable legal settlement related to prior asset sales.
20a previously sold business.
At September 30, 2011,March 31, 2012, CMS Energy had $623$387 million of consolidated cash and cash equivalents, andwhich included $29 million of restricted cash and cash equivalents. At September 30, 2011,equivalents, and Consumers had $373$201 million of consolidated cash and cash equivalents, andwhich included $28 million of restricted cash and cash equivalents.
Operating ActivitiesOPERATING ACTIVITIES
Presented in the following table are specific components of net cash provided by operating activities for the ninethree months ended September 30, 2011March 31, 2012 and 2010:
In Millions | ||||||||||||
Nine Months Ended September 30 | 2011 | 2010 | Change | |||||||||
CMS Energy, including Consumers | ||||||||||||
Net income | $ | 376 | $ | 318 | $ | 58 | ||||||
Non-cash transactions1 | 742 | 864 | (122 | ) | ||||||||
$ | 1,118 | $ | 1,182 | $ | (64 | ) | ||||||
Sale of gas purchased in the prior year | 514 | 475 | 39 | |||||||||
Purchase of gas in the current year | (623 | ) | (608 | ) | (15 | ) | ||||||
Accounts receivable sales, net | — | (50 | ) | 50 | ||||||||
Change in other core working capital2 | 293 | 325 | (32 | ) | ||||||||
Postretirement benefits contributions | (56 | ) | (171 | ) | 115 | |||||||
Other changes in assets and liabilities, net | (51 | ) | (155 | ) | 104 | |||||||
Net cash provided by operating activities | $ | 1,195 | $ | 998 | $ | 197 | ||||||
Consumers | ||||||||||||
Net income | $ | 400 | $ | 355 | $ | 45 | ||||||
Non-cash transactions1 | 655 | 749 | (94 | ) | ||||||||
$ | 1,055 | $ | 1,104 | $ | (49 | ) | ||||||
Sale of gas purchased in the prior year | 514 | 475 | 39 | |||||||||
Purchase of gas in the current year | (623 | ) | (608 | ) | (15 | ) | ||||||
Accounts receivable sales, net | — | (50 | ) | 50 | ||||||||
Change in other core working capital2 | 295 | 325 | (30 | ) | ||||||||
Postretirement benefits contributions | (53 | ) | (161 | ) | 108 | |||||||
Other changes in assets and liabilities, net | 57 | (185 | ) | 242 | ||||||||
Net cash provided by operating activities | $ | 1,245 | $ | 900 | $ | 345 | ||||||
In Millions | ||||||||||||
| ||||||||||||
Three Months Ended March 31 | 2012 | 2011 | Change | |||||||||
| ||||||||||||
CMS ENERGY,INCLUDING CONSUMERS | ||||||||||||
Net income | $ 67 | $ 135 | $ (68) | |||||||||
Non-cash transactions1 | 280 | 296 | (16) | |||||||||
|
| |||||||||||
$ 347 | $ 431 | $ (84) | ||||||||||
Postretirement benefits contributions | (19 | ) | (19 | ) | - | |||||||
Decrease in core working capital2 | 322 | 462 | (140) | |||||||||
Other changes in assets and liabilities, net | (15 | ) | (33 | ) | 18 | |||||||
| ||||||||||||
Net cash provided by operating activities | $ 635 | $ 841 | $ (206) | |||||||||
| ||||||||||||
CONSUMERS | ||||||||||||
Net income | $ 76 | $ 153 | $ (77) | |||||||||
Non-cash transactions1 | 256 | 256 | - | |||||||||
|
| |||||||||||
$ 332 | $ 409 | $ (77) | ||||||||||
Postretirement benefits contributions | (18 | ) | (19 | ) | 1 | |||||||
Decrease in core working capital2 | 328 | 467 | (139) | |||||||||
Other changes in assets and liabilities, net | 39 | 10 | 29 | |||||||||
| ||||||||||||
Net cash provided by operating activities | $ 681 | $ 867 | $ (186) | |||||||||
|
1 | Non-cash transactions comprise depreciation and amortization, changes in deferred income taxes, postretirement benefits expense, and other non-cash items. |
2 | Changes in core working capital comprise changes in accounts receivable and accrued revenues, inventories, and accounts payable. |
For the ninethree months ended September 30, 2011,March 31, 2012, net cash provided by operating activities at CMS Energy increased $197decreased $206 million compared with 2010. The increase was due primarily to the changes in Consumers’ cash provided by operating activities described in the following paragraph.
21gas inventory.
INVESTING ACTIVITIES
In Millions | ||||||||||||
Nine Months Ended September 30 | 2011 | 2010 | Change | |||||||||
CMS Energy, including Consumers | ||||||||||||
Capital expenditures | $ | (624 | ) | $ | (611 | ) | $ | (13 | ) | |||
Cash effect of deconsolidation of partnerships | — | (10 | ) | 10 | ||||||||
Increase in EnerBank loans receivable | (60 | ) | (75 | ) | 15 | |||||||
Costs to retire property and other | (68 | ) | (30 | ) | (38 | ) | ||||||
Net cash used in investing activities | $ | (752 | ) | $ | (726 | ) | $ | (26 | ) | |||
Consumers | ||||||||||||
Capital expenditures | $ | (618 | ) | $ | (608 | ) | $ | (10 | ) | |||
Costs to retire property and other | (65 | ) | (32 | ) | (33 | ) | ||||||
Net cash used in investing activities | $ | (683 | ) | $ | (640 | ) | $ | (43 | ) | |||
In Millions | ||||||||||||
| ||||||||||||
Three Months Ended March 31 | 2012 | 2011 | Change | |||||||||
| ||||||||||||
CMS ENERGY,INCLUDING CONSUMERS | ||||||||||||
Capital expenditures | $ (294) | $ (191) | $ (103) | |||||||||
Costs to retire property and other | (19) | (37) | 18 | |||||||||
| ||||||||||||
Net cash used in investing activities | $ (313) | $ (228) | $ (85) | |||||||||
| ||||||||||||
CONSUMERS | ||||||||||||
Capital expenditures | $ (294) | $ (186) | $ (108) | |||||||||
Costs to retire property and other | (18) | (42) | 24 | |||||||||
| ||||||||||||
Net cash used in investing activities | $ (312) | $ (228) | $ (84) | |||||||||
|
For the ninethree months ended September 30, 2011,March 31, 2012, net cash used in investing activities increased $26 million at CMS Energy increased $85 million compared with 2010. This variance was due to an increase in capital expenditures2011, and other investing activities, including CMS Energy’s contribution of $27 million to its SERP fund. These changes were offset partially by the absence, in 2011, of the cash effect of deconsolidating certain partnerships in 2010.
Financing ActivitiesFINANCING ACTIVITIES
Presented in the following table are specific components of net cash (used in) provided by financing activities for the ninethree months ended September 30, 2011March 31, 2012 and 2010:
In Millions | ||||||||||||
Nine Months Ended September 30 | 2011 | 2010 | Change | |||||||||
CMS Energy, including Consumers | ||||||||||||
Issuance of FMBs, senior notes, and other debt | $ | 375 | $ | 850 | $ | (475 | ) | |||||
Proceeds from EnerBank notes, net | 58 | 105 | (47 | ) | ||||||||
Retirement of long-term debt | (300 | ) | (436 | ) | 136 | |||||||
Payment of net DOE liability | (43 | ) | — | (43 | ) | |||||||
Payment of common and preferred dividends | (159 | ) | (111 | ) | (48 | ) | ||||||
Other financing activities | — | (73 | ) | 73 | ||||||||
Net cash (used in) provided by financing activities | $ | (69 | ) | $ | 335 | $ | (404 | ) | ||||
Consumers | ||||||||||||
Issuance of FMBs | $ | — | $ | 300 | $ | (300 | ) | |||||
Retirement of debt and other debt maturity payments | (27 | ) | (335 | ) | 308 | |||||||
Payment of net DOE liability | (43 | ) | — | (43 | ) | |||||||
Payments of common and preferred dividends | (294 | ) | (261 | ) | (33 | ) | ||||||
Stockholder’s contribution from CMS Energy | 125 | 250 | (125 | ) | ||||||||
Other financing activities | (21 | ) | (20 | ) | (1 | ) | ||||||
Net cash used in financing activities | $ | (260 | ) | $ | (66 | ) | $ | (194 | ) | |||
In Millions | ||||||||||||
| ||||||||||||
Three Months Ended March 31 | 2012 | 2011 | Change | |||||||||
| ||||||||||||
CMS ENERGY,INCLUDING CONSUMERS | ||||||||||||
Issuance of FMBs, senior notes, and other debt | $ 405 | $ 13 | $ 392 | |||||||||
Retirement of debt and other debt maturity payments | (459) | (13) | (446) | |||||||||
Payments of common stock dividends | (62) | (53) | (9) | |||||||||
Other financing activities | (9) | (8) | (1) | |||||||||
| ||||||||||||
Net cash used in financing activities | $ (125) | $ (61) | $ (64) | |||||||||
| ||||||||||||
CONSUMERS | ||||||||||||
Retirement of debt and other debt maturity payments | $ (310) | $ (9) | $ (301) | |||||||||
Payments of common stock dividends | (115) | (104) | (11) | |||||||||
Stockholder contribution from CMS Energy | 150 | 125 | 25 | |||||||||
Other financing activities | (6) | (9) | 3 | |||||||||
| ||||||||||||
Net cash (used in) provided by financing activities | $ (281) | $ 3 | $ (284) | |||||||||
|
For the ninethree months ended September 30, 2011,March 31, 2012, net cash used in financing activities at CMS Energy increased $404$64 million compared with 2011, due primarily to 2010. The change was due to a decreasean increase in net proceeds from borrowings and higher dividend payments in 2011.
22
CAPITAL RESOURCES AND LIQUIDITY
CMS Energy uses dividends from its subsidiaries and external financing and capital transactions to invest in its utility and non-utility businesses, retire debt, pay dividends, and fund its other obligations. The ability of CMS Energy’s subsidiaries, including Consumers, to pay dividends to CMS Energy depends upon each subsidiary’s revenues, earnings, cash needs, and other factors. In addition, Consumers’ ability to pay dividends may beis restricted by certain terms included in its articles of incorporation and potentially by provisions under the Federal Power Act and the Natural Gas Act and by FERC requirements. For additional details on Consumers’ dividend restrictions, see Note 5,5: Financings “Dividend– Dividend Restrictions.” For the ninethree months ended September 30, 2011,March 31, 2012, Consumers paid $292$115 million in common stock dividends to CMS Energy.
In June 2011, CMS Energy entered into a continuous equity offering program under which CMS Energy may sell, from time to time in “at the market” offerings, common stock having an aggregate sales price of up to $50 million. In 2011, under this program, CMS Energy issued 762,925 shares of common stock at an average price of $19.66 per share, resulting in net proceeds of $15 million. CMS Energy did not issue any common stock under this program during the three months ended March 31, 2012.
Consumers uses cash flows generated from operations and external financing transactions, as well as stockholder’sstockholder contributions from CMS Energy, to fund capital expenditures, retire debt, pay dividends, contribute to its employee benefit plans, and fund its other obligations.
CMS Energy’s and Consumers’ access to the financial and capital markets depends on their credit ratings and on market conditions. As evidenced by past financing transactions, CMS Energy and Consumers have had ready access to these markets and, barring major market dislocations or disruptions, they expect to continue to have such access. If access to these markets were to become diminished or otherwise restricted, however, CMS Energy and Consumers would implement contingency plans to address debt maturities, which could include reduced capital spending. CMS Energy and Consumers had the following secured revolving credit facilities available at September 30, 2011:
In Millions | ||||||||||||||||||||
Letters of Credit | ||||||||||||||||||||
Amount of Facility | Amount Borrowed | Outstanding | Amount Available | Expiration Date | ||||||||||||||||
CMSEnergy | ||||||||||||||||||||
Revolving credit facility1 | $ | 550 | $ | — | $ | 3 | $ | 547 | March 2016 | |||||||||||
Consumers | ||||||||||||||||||||
Revolving credit facility2,3 | $ | 500 | $ | — | $ | 1 | $ | 499 | March 2016 | |||||||||||
Revolving credit facility3 | 150 | — | — | 150 | August 2013 | |||||||||||||||
Revolving credit facility3,4 | 30 | — | 30 | — | September 2014 | |||||||||||||||
In Millions | ||||||||||||||||||
| ||||||||||||||||||
Amount of Facility | Amount Borrowed | Letters of Credit Outstanding | Amount Available | Expiration Date | ||||||||||||||
| ||||||||||||||||||
CMS ENERGY | ||||||||||||||||||
Revolving credit facility1 | $ 550 | $ - | $ 3 | $ 547 | March 2016 | |||||||||||||
| ||||||||||||||||||
CONSUMERS | ||||||||||||||||||
Revolving credit facility2 | $ 500 | $ - | $ 1 | $ 499 | March 2016 | |||||||||||||
Revolving credit facility2,3 | 150 | - | - | 150 | August 2013 | |||||||||||||
Revolving credit facility2 | 30 | - | 30 | - | September 2014 | |||||||||||||
|
1 | Obligations under this facility are secured by Consumers common stock. |
2 | Obligations under this facility are secured by FMBs of Consumers. |
3 | In April 2012, the expiration date was extended to April 2017. |
CMS Energy and Consumers use these credit facilities for general working capital purposes and to issue letters of credit. An additional source of liquidity is Consumers’ revolving accounts receivable sales program, which allows it to transfer up to $250 million of accounts receivable as a secured borrowing. At September 30, 2011,March 31, 2012, $250 million of accounts receivable were eligible for transfer under this program.
23
Description | March 31, 2012 | |||||||||||
CMS ENERGY | ||||||||||||
$550 million revolving credit agreement and $180 million term loan credit agreement | Debt to EBITDA | £ 6.0 to 1.0 | 5.0 to 1.0 | |||||||||
Senior notes indenture | Interest Coverage | > 1.6 to 1.0 | 3.6 to 1.0 | |||||||||
$180 million term loan credit agreement | Interest Coverage | > 2.0 to 1.0 | ||||||||||
3.6 to 1.0 | ||||||||||||
CONSUMERS | ||||||||||||
$500 million and $30 million revolving credit | Debt to Capital | £0.65 to 1.0 | ||||||||||
$150 million revolving credit agreement and $250 million accounts receivable purchase agreement | Debt to Capital | £ 0.70 to 1.0 | 0.46 to 1.0 | |||||||||
Components of CMS Energy’s and Consumers’ cash management plan include controlling operating expenses and capital expenditures and evaluating market conditions for financing and refinancing opportunities. CMS Energy and Consumers believe that their present level of cash and their expected cash flows from operating activities, together with their access to sources of liquidity, will be sufficient to fund their contractual obligations for 20112012 and beyond.
Off-Balance-Sheet ArrangementsOFF-BALANCE-SHEET ARRANGEMENTS
CMS Energy, Consumers, and certain of their subsidiaries also enter into various arrangements in the normal course of business to facilitate commercial transactions with third parties. These arrangements include indemnities, surety bonds, letters of credit, and financial and performance guarantees. Indemnities are usually agreements to reimburse a counterparty that may incur losses due to outside claims or breach of contract terms. The maximum payment that could be required under a number of these indemnity obligations is not estimable.estimable; the maximum obligation under indemnities for which such amounts were estimable was $512 million at March 31, 2012. While CMS Energy and Consumers believe it is unlikely that they will incur any material losses related to indemnities they have not recorded as liabilities, they cannot predict the impact of these contingent obligations on their liquidity and financial condition. For additional details on these and other guarantee arrangements, see Note 3,3: Contingencies and Commitments “Guarantees.”
24
CONSUMERS ELECTRIC UTILITY BUSINESS OUTLOOKAND UNCERTAINTIES
Balanced Energy Initiative:Consumers’ balanced energy initiative is a comprehensive energy resource plan designed to meet the short-term and long-term energyelectricity needs of its customers through:
energy efficiency; | |||
demand management; | |||
expanded use of renewable energy; | |||
development of new power plants; | |||
power or generating asset purchases to complement existing generating sources; | |||
continued operation or upgrade of existing units; and | |||
potential retirement or mothballing of older generating units. |
In 2010,December 2011, Consumers announcedformally canceled its plans to defer the development of its proposedbuild an 830-MW coal-fueled plant at its Karn/Weadock generating complex. This decision reflects reduced customer usagepresent and demand for electricity due to the recession, forecasted lower natural gas prices due to recent developments in shale gas recovery technology, and projected surplus generating capacity in the MISO market. Consumers has been monitoring customer usage and demand, fuel and power prices, and otheranticipated market conditions, new environmental standards, and has not set a timetable for a future decision about the project. Although the likelihood that the plant will be constructed has diminished significantly, in July 2011 the MDEQ granted Consumers an extensionConsumers’ expectations of the project’s air permit,generation sources that will provide the best energy value to customers. Consumers also plans to mothball seven of its smaller coal-fueled units in 2015. Consumers will continue to evaluate its options for the plants, which is being challenged by two environmental groups. Consumers’ alternatives to constructing the proposed coal-fueled plant include constructing new gas-fueled generation, relying on additional market purchases, and continued operation of several existing generating units.
— | installing more environmental equipment on the units to reduce emissions further in order to meet new environmental standards and continue to operate the units; |
— | converting the units to natural gas instead of coal; |
— | decommissioning the units; and |
— | a combination of these three options, depending on customer needs and market conditions. |
Renewable Energy Plan:Consumers’ renewable energy plan details how Consumers will meet REC and capacity standards prescribed by the 2008 Energy Law. This law requires Consumers to obtain RECs in an amount equal to at least ten percent of its electric sales volume (estimated to be 3.5 million RECs annually) by 2015. RECs represent proof that the associated electricity was generated from a renewable energy resource. Under its renewable energy plan, Consumers expects to secure its renewable energy requirement each year with a combination of newly generated RECs and previously generated RECs carried over from prior years. At September 30, 2011,March 31, 2012, the combination of these sources represented 84100 percent of Consumers’ 2015 REC requirement.
The 2008 Energy Law also requires Consumers to obtain 500 MW of capacity from renewable energy resources by 2015, either through generation resources owned by Consumers or through agreements to purchase capacity from other parties. To meet its renewable capacity requirements, Consumers expects to add more than 500 MW of owned or contracted renewable capacity by 2015. Through September 2011,March 2012, Consumers has contracted for the purchase of 297 MW of nameplate capacity from renewable energy suppliers, which represents 59 percent of the 2015 renewable capacity requirement.
Consumers has secured more than 81,00083,000 acres of land easements in Michigan’s Huron, Mason, and Tuscola Counties for the potential development of wind generation, and is now collecting wind speed and other meteorological data at those sites. Consumers has entered into construction and supply contracts as well as a contract to purchase wind turbine generators for the construction of Lake Winds Energy Park, a 100-MW wind park in Mason County, which Consumers expects to be operational in late 2012. In July 2011, the Mason County Planning Commission voted in favor of granting a special land use permit
25
Electric Customer Deliveries and Revenue:Consumers’ electric customer deliveries are largely dependent on Michigan’s economy, which has suffered from economic and financial instability in the automotive and real estate sectors. Consumers believes economic conditions in Michigan are improving, and expects weather-adjusted electric deliveries to increase in 20112012 by 1.5two percent compared with 2010.
Consumers expects average electric delivery growth of more thanabout one percent annually over the next five years. This increase reflects growth in electric demand, offset partially by the predicted effects of energy efficiency programs and appliance efficiency standards. Actual deliveries will depend on:
energy conservation measures and results of energy efficiency programs; | |||
fluctuations in weather; and | |||
changes in economic conditions, including utilization, expansion, or contraction of manufacturing facilities, population trends, and housing activity. |
Electric ROA:The Customer Choice Act allows all of Consumers’ electric customers to buy electric generation service from Consumers or from an alternative electric supplier. The 2008 Energy Law revised the Customer Choice Act by limiting alternative electric supply to ten percent of Consumers’ weather-adjusted retail sales of the preceding calendar year. At September 30, 2011,March 31, 2012, electric deliveries under the ROA program were at the ten percent limit and alternative electric suppliers were providing 792786 MW of generation service to ROA customers. Based on 20102011 weather-adjusted retail sales, Consumers expects 20112012 electric deliveries under the ROA program to be at a similar level to 2010.
In March 2012, a bill was introduced to the Michigan Senate and House of Representatives that would revise the 2008 Energy Law and immediately allow customers on the ROA program waiting list to switch their service to an alternative electric supplier. Presently, the proportion of Consumers’ electric deliveries under the ROA program and on the ROA waiting list is 22 percent. The revision also proposes an increase in the cap of six percentage points per year from 2013 through 2015. Consumers is unable to predict the outcome of the proposed legislation.
Electric Transmission:In July 2011, FERC issued an order in a rulemaking proceeding concerning regional electric transmission planning and cost allocations. In August 2011, Consumers and several other electric utilities filed a joint petition seeking clarification/rehearing of FERC’s July order and opposing the allocation methodology.
In a related matter, in July 2010, MISO filed and FERC approved a tariff revision with FERC proposing a cost allocation methodology for a new category of transmission projects. In December 2010, FERC approved MISO’s cost allocation proposal. Under this tariff revision, the cost of these new transmission projects will be spread proportionally across the Midwest Energy Market. Consumers believes that Michigan customers will bear additional costs under MISO’s tariff without receiving comparable benefits from these projects. In JanuaryDecember 2011, Consumers, along with the Michigan Attorney General, ABATE, Detroit Edison, the Michigan Municipal Electric Association, and the Michigan Public Power Agency, filed a petition for review of FERC’s order with the U.S. Court of Appeals for the Seventh Circuit following FERC’s denial of their request for rehearing with FERC, opposing the allocation methodology in the MISO tariff revision. In October 2011, FERC deniedRegardless of the outcome of this request for rehearing.appeal, Consumers expects to continue to recover transmission expenses, including those associated with the MISO tariff revision, through the PSCR process.
26
Electric Depreciation:In June 2011, the MPSC approved a settlement agreement in Consumers’ electric depreciation case, authorizing a $19 million increase in annual depreciation expense. The new depreciation rates will go into effect with a final order in Consumers’ next electric rate case.
Electric Environmental Estimates:Consumers’ operations are subject to various state and federal environmental laws and regulations. Consumers estimates that it will incur expenditures of $1.6$1.5 billion from 20112012 through 2018 to continue to comply with the Clean Air Act, Clean Water Act, and numerous state and federal environmental regulations. Consumers expects to recover these costs in customer rates, but cannot guarantee this result. Consumers’ primary environmental compliance focus includes, but is not limited to, the following matters:
Air Quality:In December 2008, a court decision remanded CAIR back to the EPA. Until the EPA finalized a new rule, CAIR remained in effect. In July 2011, the EPA released CSAPR, a final replacement rule for CAIR, which requires Michigan and 2627 other states to improve air quality by reducing power plant emissions that allegedly contribute to ground levelground-level ozone and fine particle pollution in other downwind states. This rule mandateshad mandated emission reductions beginning in 2012.2012, which CMS Energy and Consumers were prepared to meet through fuel blend changes. In December 2011, due to litigation surrounding CSAPR, the U.S. Court of Appeals for the D.C. Circuit issued a separatestay of CSAPR, stating that CAIR would remain in place while the court considers the issues. The court heard oral arguments in April 2012, but related regulatory action,there is no timeline for a decision or order from the court.
In February 2012, the EPA also issued a supplemental notice of proposed rulemaking requiring certain states, including Michigan, to reduce nitrogen oxides emissions during the summer months under the CSAPR ozone-season control program. If this supplemental proposal were finalized, it would bring the total number of states covered under CSAPR to 28.
Presently, Consumers’ strategy to comply with CAIR, CSAPR, and with MACT emission standards for electric generating units in its proposed form,MATS involves the installation of state-of-the-art emission control equipment;equipment at some facilities and the suspension of operations at others; however, Consumers continues to evaluate CSAPR and MACT emission standards for electric generating unitsMATS in conjunction with other EPA rulemakings, litigation, and congressional action. These rulesThis evaluation could result in:
additional or accelerated environmental compliance costs related to Consumers’ coal-fueled | |||
a change in the fuel mix at coal-fueled and oil-fueled power plants; | |||
changes in how certain plants are used; and | |||
the retirement, mothballing, or repowering with an alternative fuel of some or all of Consumers’ older, smaller generating |
The MDEQ renewed and issued the B.C. Cobb Renewable Operating Permit in August 2011 after an extensive review and a public comment period. In October 2011, the Sierra Club and the Natural Resources Defense Council filed a petition with the EPA to object to the MDEQ’s issuance of the state Renewable Operating Permit, alleging that the facility is not in compliance with certain provisions of the
27
Greenhouse Gases:There are In the recent past, there have been numerous legislative and regulatory initiatives at the state, regional, and national levels that involve the regulation of greenhouse gases. Consumers monitorscontinues to monitor and commentscomment on these initiatives and also follows litigation involving greenhouse gases. Consumers believes Congress may eventually pass greenhouse gas legislation, but is unable to predict the form and timing of any final legislation.
In 2010, the EPA released its Prevention of Significant Deterioration and Title V Greenhouse Gas Tailoring Rule, which sets limits for greenhouse gas emissions limits that define when permits are required for new and existing industrial facilities under NSR PSD and Title V Operating Permit programs. Numerous parties have challenged this rule in the U.SU.S. Court of Appeals for the D.C. Circuit, and Consumers is monitoring this litigation. Consumers does not expect to incur significant expenditures to comply with this rule.
In December 2010,March 2012, the EPA entered into a settlement agreement with certain states and environmental groups wherein in September 2011 the EPA was to propose new source performance standardsreleased its proposed “Standards of Performance for greenhouse gases at new and modified power plantsGreenhouse Gas Emissions for New Stationary Sources: Electric Utility Generating Units” pursuant to Section 111(b)111 of the Clean Air Act. This proposed rule applies only to new fossil-fuel-fired steam electric generating units. The EPA didstandard would require that carbon dioxide emissions not meet the September 2011 deadline and has not yet announcedexceed those of a new schedule for issuancemodern, efficient natural gas combined-cycle plant, regardless of the standards.fuel type. Consumers is analyzing this newly proposed rule. The
EPA is also expected to propose emissions guidelines for the states to regulate greenhouse gas emissions from existing generating units under Section 111(d) of the Clean Air Act. Under the expected schedule, states will needbe required to submit plans to the EPA within nine months of issuance of the final rule and guidelines. Consumers will continue to monitor activity from this settlement andregarding any proposed regulations involving new source performance standards regulations.
Litigation, as well as federal laws, EPA regulations regarding greenhouse gases, or similar treaties, state laws, or rules, if enacted or ratified, could require Consumers to replace equipment, install additional emission control equipment, purchase emission allowances, curtail operations, arrange for alternative sources of supply, or take other steps to manage or lower the emission of greenhouse gases. Although associated capital or operating costs relating to greenhouse gas regulation or legislation could be material and cost recovery cannot be assured, Consumers expects to recover these costs and capital expenditures in rates consistent with the recovery of other reasonable costs of complying with environmental laws and regulations.
Coal Combustion By-Products:CCBs:In June 2010, the EPA proposed rules regulating CCBs, such as coal ash, under the Resource Conservation and Recovery Act. Michigan already regulates CCBs as low-hazard industrial waste. The EPA proposed a range of alternatives for regulating CCBs, including regulation as either a non-hazardous waste or a hazardous waste. If coal ash were regulated as a hazardous waste, Consumers would likely cease the beneficial re-use of this product, which would result in a significant increase in the amount of coal ash requiring costly disposal. Additionally, if the cost of upgrading existing coal ash disposal areas to meet hazardous waste landfill standards were to become economically prohibitive, existing coal ash disposal areas could close, requiring Consumers to find costly alternative arrangements for disposal. Consumers is unable to predict the impacts from this wide range of possible outcomes, but significant expenditures are likely.
Water:In March 2011, the EPA issued a proposed rule to regulate existing electric generating plant cooling water intake systems under Section 316(b) of the Clean Water Act aimed at reducing alleged harmful impacts on fish and shellfish. Consumers is evaluatingcontinues to evaluate this proposed rule and its potential impacts on Consumers’ plants. A final rule is expected in July 2012.
PCBs:In April 2010, the EPA issued an Advance Notice of Proposed Rulemaking, indicating that it is considering a variety of regulatory actions with respect to PCBs. One proposal aims to phase out
28
Other electric environmental matters could have a major impact on Consumers’ outlook. For additional details on other electric environmental matters, see Note 3,3: Contingencies and Commitments “Consumers’– Consumers Electric Utility Contingencies —– Electric Environmental Matters.”
Consumers’ Gas Utility Business Outlook and UncertaintiesCONSUMERS GAS UTILITY BUSINESS OUTLOOKAND UNCERTAINTIES
Gas Deliveries:Consumers believes economic conditions in Michigan are improving, and expects weather-adjusted gas deliveries in 2012 to increase in 2011 by three percent compared with 2010.remain unchanged from 2011. Over the next five years, Consumers expects average gas deliveries to remain stable. This outlook reflects modest growth in gas demand offset by the predicted effects of energy efficiency and conservation. Actual delivery levels from year to year may vary from this trend due to:
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 |
A decoupling mechanism was authorized by the MPSC in Consumers’ 2009 gas rate case, subject to certain conditions. This mechanism, which was extended in the MPSC’s 2010 gas rate case order, allows Consumers to adjust future gas rates to compensate for changes in sales volumes resulting from the difference between the level of average sales per customer adopted in the order and actual average weather-adjusted sales per customer. The mechanism does not provide rate adjustments for changes in sales volumes arising from weather fluctuations. This mechanism mitigatesis intended to mitigate the impacts of energy efficiency programs, conservation, and changes in economic conditions on Consumers’ gas utility revenue.
Gas Rate Matters:Rate matters are critical to Consumers’ gas utility business. See Note 4, Regulatory Matters, “Consumers’ Gas Utility” forFor additional details on Consumers’ gas rate case, GCR,matters, see Note 4: Regulatory Matters.
Pending Gas Rate Case: In September 2011, Consumers filed an application with the MPSC seeking an annual rate increase of $49 million based on a 10.7 percent authorized return on equity, in order to recover investments made to enhance safety, system reliability, and gas revenue decoupling mechanism.
Presented in the following table are the components of the rate reduction recommended by the MPSC Staff and Consumers’ self-implemented rate increase:
In Millions | ||||||||||||
| ||||||||||||
Components of the Rate Increase | Rate Reduction Recommended by the MPSC Staff | Consumers’ Self-Implemented Increase | Difference | |||||||||
| ||||||||||||
Investment in rate base | $ 17 | $ 22 | $ (5) | |||||||||
Uncollectible accounts | 3 | 15 | (12) | |||||||||
Cost of capital | (11) | 1 | (12) | |||||||||
Gross margin | (18) | (11) | (7) | |||||||||
Operating and maintenance costs | (13) | (4) | (9) | |||||||||
| ||||||||||||
Total | $ (22) | $ 23 | $ (45) | |||||||||
|
Gas Pipeline Safety:In response toJanuary 2012, President Obama signed the natural gasPipeline Safety, Regulatory Certainty, and Job Creation Act of 2011. The law reauthorizes existing federal pipeline explosion that occurred in San Bruno, California in September 2010safety programs of the Pipeline and other recent events, the U.S. House of RepresentativesHazardous Materials Safety Administration through 2015 and the U.S. Senate have proposed bills stipulating stricter regulation of natural gas pipelines nationwide. These proposed bills affect both transmission and distribution pipelines. The proposed bills containit contains provisions mandating:
an increase in the | |||
an increase in the number of pipeline inspectors; |
— | a study regarding application of integrity management requirements outside of “high consequence | ||
a survey regarding existing plans for safe management and replacement of cast iron pipelines; | |||
prescribed notification and on-site incident response times; | |||
installation of automatic or remotely controlled shut-off valves on new or replaced pipelines where feasible; |
— | verification of maximum allowable operating pressure of | ||
pressure testing (or equivalent) of previously untested pipelines. |
Consumers continues to comply with laws and regulations governing natural gas pipeline safety. If these proposedThese laws are put into effect,and regulations could cause Consumers couldto incur significant additional costs related to its natural
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Gas Environmental Estimates:Consumers expects to incur response activity costs at a number of sites, including 23 former MGP sites. For additional details, see Note 3,3: Contingencies and Commitments “Consumers’– Consumers Gas Utility Contingencies —– Gas Environmental Matters.”
Consumers’ Other Outlook and UncertaintiesCONSUMERS OTHER OUTLOOKAND UNCERTAINTIES
Smart Grid:Consumers’ grid modernization effort continues, with the recent selection of a vendor that will provide smart electric meters and a cellular communications network to allow Consumers to transmit and receive electric usage information from customers’ homes and businesses. Smart meters are designed to allow customers to monitor and manage their energy usage, which should help reduce demand during critical peak times, resulting in lower peak capacity requirements. The installation of smart meters should also provide operational benefits to Consumers. Consumers intends to use a phased implementation approach, beginning deployment in the second half of 2012 and continuing through 2019. Consumers is also considering installingplans to install communication modules on gas meters in areas where Consumers provides both electricity and natural gas to customers.
Enterprises Outlook and UncertaintiesENTERPRISES OUTLOOKAND UNCERTAINTIES
The primary focus with respect to CMS Energy’s remaining non-utility businesses is to optimize cash flow and maximize the value of their assets.
Trends, uncertainties, and other matters that could have a material impact on CMS Energy’s consolidated income, cash flows, or financial position include:
indemnity and environmental remediation obligations at Bay Harbor; | |||
obligations related to a tax claim from the government of Equatorial Guinea; |
— | the outcome of certain legal proceedings; | ||
impacts of declines in electricity prices on the profitability of the enterprises segment’s generating units; | |||
representations, warranties, and indemnities provided by CMS Energy or its subsidiaries in connection with previous sales of assets; | |||
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; | |||
changes in various environmental laws, regulations, principles, or practices, or in their interpretation; and | |||
economic conditions in Michigan, including population trends and housing activity. |
For additional details regarding the enterprises segment’s uncertainties, see Note 3,3: Contingencies and Commitments.
Other Outlook and UncertaintiesOTHER OUTLOOKAND UNCERTAINTIES
EnerBank:EnerBank, a wholly owned subsidiary of CMS Capital, is a Utah state-chartered, FDIC-insured industrial bank providing unsecured home improvement loans. EnerBank represented onetwo percent of CMS Energy’s net assets at September 30, 2011,March 31, 2012, and twoseven percent of CMS Energy’s net income available to common stockholders for the ninethree months ended September 30, 2011.March 31, 2012. The carrying value of EnerBank’s loan portfolio was $439$477 million at September 30, 2011.March 31, 2012. Its loan portfolio was funded
primarily by deposit liabilities of $422$476 million. Twelve-month rolling average default rates on loans held by EnerBank have declined from 1.41.3 percent at DecemberMarch 31, 20102011 to 1.00.8 percent at September 30, 2011.March 31, 2012. CMS Energy is required both by law and by contract to provide financial support, including infusing additional capital, to ensure that EnerBank remains well capitalized.
30
NEW ACCOUNTING STANDARDS
For details regarding the implementation of new accounting standards and new accounting standards issued that are not yet effective,during the three months ended March 31, 2012, see Note 1,1: New Accounting Standards.
31
Consolidated Statements of Income
(Unaudited)
In Millions | ||||||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30 | 2011 | 2010 | 2011 | 2010 | ||||||||||||
Operating Revenue | $ | 1,464 | $ | 1,443 | $ | 4,883 | $ | 4,750 | ||||||||
Operating Expenses | ||||||||||||||||
Fuel for electric generation | 199 | 183 | 504 | 472 | ||||||||||||
Purchased and interchange power | 365 | 363 | 968 | 955 | ||||||||||||
Purchased power — related parties | 23 | 21 | 64 | 63 | ||||||||||||
Cost of gas sold | 107 | 104 | 1,095 | 1,060 | ||||||||||||
Maintenance and other operating expenses | 301 | 273 | 868 | 844 | ||||||||||||
Depreciation and amortization | 120 | 133 | 404 | 436 | ||||||||||||
General taxes | 33 | 49 | 151 | 156 | ||||||||||||
Insurance settlement | — | — | — | (50 | ) | |||||||||||
Gain on asset sales, net | — | (2 | ) | — | (6 | ) | ||||||||||
Total operating expenses | 1,148 | 1,124 | 4,054 | 3,930 | ||||||||||||
Operating Income | 316 | 319 | 829 | 820 | ||||||||||||
Other Income (Expense) | ||||||||||||||||
Interest income | 4 | 5 | 8 | 14 | ||||||||||||
Allowance for equity funds used during construction | 1 | 1 | 4 | 4 | ||||||||||||
Income from equity method investees | 4 | 3 | 10 | 8 | ||||||||||||
Other income | 3 | 9 | 12 | 27 | ||||||||||||
Other expense | (3 | ) | (2 | ) | (8 | ) | (7 | ) | ||||||||
Total other income | 9 | 16 | 26 | 46 | ||||||||||||
Interest Charges | ||||||||||||||||
Interest on long-term debt | 99 | 97 | 298 | 293 | ||||||||||||
Other interest expense | 6 | 6 | 18 | 34 | ||||||||||||
Allowance for borrowed funds used during construction | (1 | ) | (1 | ) | (3 | ) | (3 | ) | ||||||||
Total interest charges | 104 | 102 | 313 | 324 | ||||||||||||
Income Before Income Taxes | 221 | 233 | 542 | 542 | ||||||||||||
Income Tax Expense | 81 | 87 | 168 | 207 | ||||||||||||
Income From Continuing Operations | 140 | 146 | 374 | 335 | ||||||||||||
Income (Loss) From Discontinued Operations, Net of Tax | ||||||||||||||||
Expense of $-, $-, $1 and $5 | — | — | 2 | (17 | ) | |||||||||||
Net Income | 140 | 146 | 376 | 318 | ||||||||||||
Income Attributable to Noncontrolling Interests | 1 | 1 | 2 | 3 | ||||||||||||
Net Income Attributable to CMS Energy | 139 | 145 | 374 | 315 | ||||||||||||
Charge for Deferred Issuance Costs on Preferred Stock | — | 8 | — | 8 | ||||||||||||
Preferred Stock Dividends | — | 3 | — | 8 | ||||||||||||
Net Income Available to Common Stockholders | $ | 139 | $ | 134 | $ | 374 | $ | 299 | ||||||||
In Millions | ||||||||
| ||||||||
Three Months Ended March 31 | 2012 | 2011 | ||||||
| ||||||||
Operating Revenue | $ 1,743 | $ 2,055 | ||||||
Operating Expenses | ||||||||
Fuel for electric generation | 130 | 152 | ||||||
Purchased and interchange power | 317 | 300 | ||||||
Purchased power – related parties | 22 | 21 | ||||||
Cost of gas sold | 550 | 768 | ||||||
Maintenance and other operating expenses | 295 | 279 | ||||||
Depreciation and amortization | 172 | 162 | ||||||
General taxes | 69 | 67 | ||||||
|
| |||||||
Total operating expenses | 1,555 | 1,749 | ||||||
| ||||||||
Operating Income | 188 | 306 | ||||||
Other Income (Expense) | ||||||||
Interest income | 1 | 2 | ||||||
Allowance for equity funds used during construction | 2 | 1 | ||||||
Income from equity method investees | 5 | 4 | ||||||
Other income | 3 | 4 | ||||||
Other expense | (2) | (2) | ||||||
|
| |||||||
Total other income | 9 | 9 | ||||||
| ||||||||
Interest Charges | ||||||||
Interest on long-term debt | 94 | 100 | ||||||
Other interest expense | 6 | 6 | ||||||
Allowance for borrowed funds used during construction | (1) | (1) | ||||||
|
| |||||||
Total interest charges | 99 | 105 | ||||||
| ||||||||
Income Before Income Taxes | 98 | 210 | ||||||
Income Tax Expense | 38 | 77 | ||||||
|
| |||||||
Income From Continuing Operations | 60 | 133 | ||||||
Income From Discontinued Operations, | ||||||||
Net of Tax Expense of $4 and $1 | 7 | 2 | ||||||
|
| |||||||
Net Income Available to Common Stockholders | $ 67 | $ 135 | ||||||
|
Net Income Attributable to Common Stockholders Amounts attributable to continuing operations Amounts attributable to discontinued operations Net income available to common stockholders Basic Earnings Per Average Common Share Basic earnings from continuing operations Basic earnings from discontinued operations Basic earnings attributable to common stock Diluted Earnings Per Average Common Share Diluted earnings from continuing operations Diluted earnings from discontinued operations Diluted earnings attributable to common stock Dividends Declared Per Common Share In Millions, Except Per Share Amounts Three Months Ended March 31 2012 2011 $ 60 $ 133 7 2 $ 67 $ 135 $ 0.23 $ 0.53 0.03 0.01 $ 0.26 $ 0.54 $ 0.22 $ 0.51 0.03 0.01 $ 0.25 $ 0.52 $ 0.24 $ 0.21
The accompanying notes are an integral part of these statements.
32
In Millions, Except Per Share Amounts | ||||||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30 | 2011 | 2010 | 2011 | 2010 | ||||||||||||
Net Income Attributable to Common Stockholders | ||||||||||||||||
Amounts Attributable to Continuing Operations | $ | 139 | $ | 134 | $ | 372 | $ | 316 | ||||||||
Amounts Attributable to Discontinued Operations | — | — | 2 | (17 | ) | |||||||||||
Net Income Available to Common Stockholders | $ | 139 | $ | 134 | $ | 374 | $ | 299 | ||||||||
Income Attributable to Noncontrolling Interests | ||||||||||||||||
Amounts Attributable to Continuing Operations | $ | 1 | $ | 1 | $ | 2 | $ | 3 | ||||||||
Amounts Attributable to Discontinued Operations | — | — | — | — | ||||||||||||
Income Attributable to Noncontrolling Interests | $ | 1 | $ | 1 | $ | 2 | $ | 3 | ||||||||
Basic Earnings Per Average Common Share | ||||||||||||||||
Basic Earnings from Continuing Operations | $ | 0.55 | $ | 0.58 | $ | 1.48 | $ | 1.38 | ||||||||
Basic Earnings (Loss) from Discontinued Operations | — | — | 0.01 | (0.08 | ) | |||||||||||
Basic Earnings Attributable to Common Stock | $ | 0.55 | $ | 0.58 | $ | 1.49 | $ | 1.30 | ||||||||
Diluted Earnings Per Average Common Share | ||||||||||||||||
Diluted Earnings from Continuing Operations | $ | 0.53 | $ | 0.53 | $ | 1.42 | $ | 1.26 | ||||||||
Diluted Earnings (Loss) from Discontinued Operations | — | — | 0.01 | (0.07 | ) | |||||||||||
Diluted Earnings Attributable to Common Stock | $ | 0.53 | $ | 0.53 | $ | 1.43 | $ | 1.19 | ||||||||
Dividends Declared Per Common Share | $ | 0.21 | $ | 0.15 | $ | 0.63 | $ | 0.45 | ||||||||
33
34
Consolidated Statements of Cash Flows
Comprehensive Income
(Unaudited)
In Millions | ||||||||
Nine months ended September 30 | 2011 | 2010 | ||||||
Cash Flows from Operating Activities | ||||||||
Net Income | $ | 376 | $ | 318 | ||||
Adjustments to reconcile net income to net cash provided by operating activities | ||||||||
Depreciation and amortization | 404 | 436 | ||||||
Deferred income taxes and investment tax credit | 149 | 205 | ||||||
Postretirement benefits expense | 124 | 169 | ||||||
Other non-cash operating activities | 65 | 54 | ||||||
Postretirement benefits contributions | (56 | ) | (171 | ) | ||||
Changes in other assets and liabilities: | ||||||||
Decrease in accounts receivable, notes receivable, and accrued revenue | 280 | 239 | ||||||
Decrease in accrued power supply revenue | 15 | 2 | ||||||
Increase in inventories | (106 | ) | (88 | ) | ||||
Decrease in deferred property taxes | 133 | 127 | ||||||
Increase (decrease) in accounts payable | 10 | (9 | ) | |||||
Decrease in accrued expenses | (227 | ) | (187 | ) | ||||
Increase in other current and non-current assets | (23 | ) | (12 | ) | ||||
Increase (decrease) in other current and non-current liabilities | 51 | (85 | ) | |||||
Net cash provided by operating activities | 1,195 | 998 | ||||||
Cash Flows from Investing Activities | ||||||||
Capital expenditures (excludes assets placed under capital lease) | (624 | ) | (611 | ) | ||||
Cost to retire property | (43 | ) | (31 | ) | ||||
Cash effect of deconsolidation of partnerships | — | (10 | ) | |||||
Increase in EnerBank loans receivable | (60 | ) | (75 | ) | ||||
Other investing activities | (25 | ) | 1 | |||||
Net cash used in investing activities | (752 | ) | (726 | ) | ||||
Cash Flows from Financing Activities | ||||||||
Proceeds from issuance of long-term debt | 375 | 850 | ||||||
Proceeds from EnerBank notes, net | 58 | 105 | ||||||
Issuance of common stock | 26 | 7 | ||||||
Retirement of long-term debt | (300 | ) | (436 | ) | ||||
Payment of net DOE liability | (43 | ) | — | |||||
Payment of common stock dividends | (159 | ) | (103 | ) | ||||
Payment of preferred stock dividends | — | (8 | ) | |||||
Redemption of preferred stock | — | (13 | ) | |||||
Payment of capital and finance lease obligations | (18 | ) | (18 | ) | ||||
Other financing costs | (8 | ) | (49 | ) | ||||
Net cash (used in) provided by financing activities | (69 | ) | 335 | |||||
Net Increase in Cash and Cash Equivalents, Including Assets Held for Sale | 374 | 607 | ||||||
Decrease (Increase) in Cash and Cash Equivalents Included in Assets Held for Sale | 2 | (1 | ) | |||||
Net Increase in Cash and Cash Equivalents | 376 | 606 | ||||||
Cash and Cash Equivalents, Beginning of Period | 247 | 90 | ||||||
Cash and Cash Equivalents, End of Period | $ | 623 | $ | 696 | ||||
In Millions | ||||||||
| ||||||||
Three Months Ended March 31 | 2012 | 2011 | ||||||
| ||||||||
Net Income | $ 67 | $ 135 | ||||||
Retirement benefits liability | ||||||||
Retirement benefits liability adjustments, net of tax of $ - in 2012 and 2011 | 1 | - | ||||||
Investments | ||||||||
Unrealized gain on investments, net of tax of $ - in 2012 and 2011 | 1 | - | ||||||
|
| |||||||
Other Comprehensive Income | 2 | - | ||||||
| ||||||||
Total Comprehensive Income | $ 69 | $ 135 | ||||||
|
The accompanying notes are an integral part of these statements.
35
Consolidated Balance Sheets
Statements of Cash Flows
(Unaudited)
In Millions | ||||||||
September 30 | December 31 | |||||||
ASSETS | 2011 | 2010 | ||||||
Current Assets | ||||||||
Cash and cash equivalents | $ | 623 | $ | 247 | ||||
Restricted cash and cash equivalents | 29 | 23 | ||||||
Accounts receivable and accrued revenue, less allowances of $25 in 2011 and 2010 | 690 | 981 | ||||||
Notes receivable | 62 | 70 | ||||||
Accounts receivable — related parties | 10 | 10 | ||||||
Accrued power supply revenue | — | 15 | ||||||
Inventories at average cost | ||||||||
Gas in underground storage | 1,050 | 946 | ||||||
Materials and supplies | 102 | 104 | ||||||
Generating plant fuel stock | 127 | 125 | ||||||
Deferred property taxes | 116 | 180 | ||||||
Regulatory assets | 2 | 19 | ||||||
Assets held for sale | — | 2 | ||||||
Prepayments and other current assets | 49 | 37 | ||||||
Total current assets | 2,860 | 2,759 | ||||||
Plant, Property, and Equipment (at cost) | ||||||||
Plant, property, and equipment, gross | 14,607 | 14,145 | ||||||
Less accumulated depreciation, depletion, and amortization | 4,869 | 4,646 | ||||||
Plant, property, and equipment, net | 9,738 | 9,499 | ||||||
Construction work in progress | 672 | 570 | ||||||
Total plant, property, and equipment | 10,410 | 10,069 | ||||||
Non-current Assets | ||||||||
Regulatory assets | 2,002 | 2,093 | ||||||
Accounts and notes receivable, less allowances of $5 in 2011 and 2010 | 430 | 397 | ||||||
Investments | 53 | 49 | ||||||
Assets held for sale | — | 4 | ||||||
Other non-current assets | 203 | 245 | ||||||
Total non-current assets | 2,688 | 2,788 | ||||||
Total Assets | $ | 15,958 | $ | 15,616 | ||||
In Millions | ||||||||
| ||||||||
Three Months Ended March 31 | 2012 | 2011 | ||||||
| ||||||||
Cash Flows from Operating Activities | ||||||||
Net income | $ 67 | $ 135 | ||||||
Adjustments to reconcile net income to net cash provided by operating activities | ||||||||
Depreciation and amortization | 172 | 162 | ||||||
Deferred income taxes and investment tax credit | 42 | 73 | ||||||
Postretirement benefits expense | 47 | 40 | ||||||
Other non-cash operating activities | 19 | 21 | ||||||
Postretirement benefits contributions | (19) | (19) | ||||||
Changes in other assets and liabilities: | ||||||||
Decrease in accounts receivable, notes receivable, and accrued revenue | 99 | 9 | ||||||
Decrease in accrued power supply revenue | - | 15 | ||||||
Decrease in inventories | 312 | 462 | ||||||
Decrease in accounts payable | (89) | (9) | ||||||
Decrease in accrued expenses | (109) | (89) | ||||||
Decrease in other current and non-current assets | 113 | 29 | ||||||
Increase (decrease) in other current and non-current liabilities | (19) | 12 | ||||||
|
| |||||||
Net cash provided by operating activities | 635 | 841 | ||||||
| ||||||||
Cash Flows from Investing Activities | ||||||||
Capital expenditures (excludes assets placed under capital lease) | (294) | (191) | ||||||
Cost to retire property | (7) | (17) | ||||||
Other investing activities | (12) | (20) | ||||||
|
| |||||||
Net cash used in investing activities | (313) | (228) | ||||||
| ||||||||
Cash Flows from Financing Activities | ||||||||
Proceeds from issuance of long-term debt | 390 | - | ||||||
Proceeds from EnerBank notes, net | 15 | 13 | ||||||
Retirement of long-term debt | (459) | (13) | ||||||
Payment of common stock dividends | (62) | (53) | ||||||
Payment of capital and finance lease obligations | (6) | (6) | ||||||
Other financing costs | (3) | (2) | ||||||
|
| |||||||
Net cash used in financing activities | (125) | (61) | ||||||
| ||||||||
Net Increase in Cash and Cash Equivalents, Including Assets Held for Sale | 197 | 552 | ||||||
Decrease in Cash and Cash Equivalents Included in Assets Held for Sale | - | 2 | ||||||
|
| |||||||
Net Increase in Cash and Cash Equivalents | 197 | 554 | ||||||
Cash and Cash Equivalents, Beginning of Period | 161 | 247 | ||||||
|
| |||||||
Cash and Cash Equivalents, End of Period | $ 358 | $ 801 | ||||||
|
The accompanying notes are an integral part of these statements.
36
In Millions | ||||||||
September 30 | December 31 | |||||||
LIABILITIES AND EQUITY | 2011 | 2010 | ||||||
Current Liabilities | ||||||||
Current portion of long-term debt, capital and finance lease obligations | $ | 1,140 | $ | 750 | ||||
Accounts payable | 484 | 492 | ||||||
Accounts payable — related parties | 9 | 9 | ||||||
Accrued rate refunds | 24 | 19 | ||||||
Accrued interest | 70 | 102 | ||||||
Accrued taxes | 103 | 302 | ||||||
Deferred income taxes | 132 | 180 | ||||||
Regulatory liabilities | 121 | 22 | ||||||
Liabilities held for sale | — | 1 | ||||||
Other current liabilities | 131 | 144 | ||||||
Total current liabilities | 2,214 | 2,021 | ||||||
Non-current Liabilities | ||||||||
Long-term debt | 6,037 | 6,448 | ||||||
Non-current portion of capital and finance lease obligations | 171 | 188 | ||||||
Regulatory liabilities | 1,874 | 1,988 | ||||||
Postretirement benefits | 1,139 | 1,135 | ||||||
Asset retirement obligations | 254 | 245 | ||||||
Deferred investment tax credit | 47 | 49 | ||||||
Deferred income taxes | 870 | 438 | ||||||
Other non-current liabilities | 265 | 267 | ||||||
Total non-current liabilities | 10,657 | 10,758 | ||||||
Commitments and Contingencies(Notes 3, 4, 5, 7, and 8) | ||||||||
Equity | ||||||||
Common stockholders’ equity | ||||||||
Common stock, authorized 350.0 shares; outstanding 252.0 shares in 2011 and 249.6 shares in 2010 | 3 | 2 | ||||||
Other paid-in capital | 4,622 | 4,588 | ||||||
Accumulated other comprehensive loss | (40 | ) | (40 | ) | ||||
Accumulated deficit | (1,542 | ) | (1,757 | ) | ||||
Total common stockholders’ equity | 3,043 | 2,793 | ||||||
Noncontrolling interests | 44 | 44 | ||||||
Total equity | 3,087 | 2,837 | ||||||
Total Liabilities and Equity | $ | 15,958 | $ | 15,616 | ||||
37
Consolidated Statements of Changes in Equity(Unaudited)
In Millions | ||||||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30 | 2011 | 2010 | 2011 | 2010 | ||||||||||||
Common Stock | ||||||||||||||||
At beginning of period | $ | 3 | $ | 2 | $ | 2 | $ | 2 | ||||||||
Common stock issued | — | — | 1 | — | ||||||||||||
At end of period | 3 | 2 | 3 | 2 | ||||||||||||
Other Paid-in Capital | ||||||||||||||||
At beginning of period | 4,621 | 4,569 | 4,588 | 4,560 | ||||||||||||
Common stock issued | 7 | 5 | 35 | 15 | ||||||||||||
Common stock reissued | — | — | 5 | — | ||||||||||||
Common stock repurchased | (6 | ) | (1 | ) | (6 | ) | (2 | ) | ||||||||
Charge for deferred issuance costs | — | 8 | — | 8 | ||||||||||||
At end of period | 4,622 | 4,581 | 4,622 | 4,581 | ||||||||||||
Accumulated Other Comprehensive Loss | ||||||||||||||||
Retirement benefits liability | ||||||||||||||||
At beginning of period | (38 | ) | (30 | ) | (39 | ) | (32 | ) | ||||||||
Retirement benefits liability adjustments1 | — | — | 1 | 2 | ||||||||||||
At end of period | (38 | ) | (30 | ) | (38 | ) | (30 | ) | ||||||||
Investments | ||||||||||||||||
At beginning of period | 1 | — | — | — | ||||||||||||
Unrealized loss on investments1 | (2 | ) | — | (1 | ) | — | ||||||||||
At end of period | (1 | ) | — | (1 | ) | — | ||||||||||
Derivative instruments | ||||||||||||||||
At beginning and end of period | (1 | ) | (1 | ) | (1 | ) | (1 | ) | ||||||||
At end of period | (40 | ) | (31 | ) | (40 | ) | (31 | ) | ||||||||
Accumulated Deficit | ||||||||||||||||
At beginning of period | (1,628 | ) | (1,831 | ) | (1,757 | ) | (1,927 | ) | ||||||||
Net income attributable to CMS Energy1 | 139 | 145 | 374 | 315 | ||||||||||||
Common stock dividends declared | (53 | ) | (34 | ) | (159 | ) | (103 | ) | ||||||||
Preferred stock dividends declared | — | (3 | ) | — | (8 | ) | ||||||||||
Charge for deferred issuance costs | — | (8 | ) | — | (8 | ) | ||||||||||
At end of period | (1,542 | ) | (1,731 | ) | (1,542 | ) | (1,731 | ) | ||||||||
Preferred Stock | ||||||||||||||||
At beginning of period | — | 239 | — | 239 | ||||||||||||
Conversion of preferred stock | — | (239 | ) | — | (239 | ) | ||||||||||
At end of period | — | — | — | — | ||||||||||||
Noncontrolling Interests | ||||||||||||||||
At beginning of period | 44 | 45 | 44 | 97 | ||||||||||||
Income attributable to noncontrolling interests1 | 1 | 1 | 2 | 3 | ||||||||||||
Distributions and other changes in noncontrolling interests | (1 | ) | (1 | ) | (2 | ) | (55 | ) | ||||||||
At end of period | 44 | 45 | 44 | 45 | ||||||||||||
Total Equity | $ | 3,087 | $ | 2,866 | $ | 3,087 | $ | 2,866 | ||||||||
38
ASSETS
In Millions | ||||||||
| ||||||||
March 31 2012 | December 31 2011 | |||||||
| ||||||||
Current Assets | ||||||||
Cash and cash equivalents | $ 358 | $ 161 | ||||||
Restricted cash and cash equivalents | 29 | 27 | ||||||
Accounts receivable and accrued revenue, less allowances of $35 in 2012 and 2011 | 750 | 869 | ||||||
Notes receivable | 25 | 49 | ||||||
Accounts receivable – related parties | 10 | 10 | ||||||
Inventories at average cost | ||||||||
Gas in underground storage | 610 | 929 | ||||||
Materials and supplies | 96 | 92 | ||||||
Generating plant fuel stock | 182 | 166 | ||||||
Deferred income taxes | 3 | 24 | ||||||
Deferred property taxes | 155 | 187 | ||||||
Regulatory assets | - | 1 | ||||||
Prepayments and other current assets | 50 | 50 | ||||||
|
| |||||||
Total current assets | 2,268 | 2,565 | ||||||
| ||||||||
Plant, Property, and Equipment | ||||||||
Plant, property, and equipment, gross | 14,864 | 14,751 | ||||||
Less accumulated depreciation and amortization | 5,008 | 4,901 | ||||||
|
| |||||||
Plant, property, and equipment, net | 9,856 | 9,850 | ||||||
Construction work in progress | 899 | 783 | ||||||
|
| |||||||
Total plant, property, and equipment | 10,755 | 10,633 | ||||||
| ||||||||
Other Non-current Assets | ||||||||
Regulatory assets | 2,362 | 2,466 | ||||||
Accounts and notes receivable, less allowances of $5 in 2012 and 2011 | 454 | 462 | ||||||
Investments | 53 | 50 | ||||||
Other | 268 | 276 | ||||||
|
| |||||||
Total other non-current assets | 3,137 | 3,254 | ||||||
| ||||||||
Total Assets | $ 16,160 | $ 16,452 | ||||||
|
In Millions | ||||||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30 | 2011 | 2010 | 2011 | 2010 | ||||||||||||
1 Disclosure of Comprehensive Income: | ||||||||||||||||
Net income | $ | 140 | $ | 146 | $ | 376 | $ | 318 | ||||||||
Income attributable to noncontrolling interests | 1 | 1 | 2 | 3 | ||||||||||||
Net income attributable to CMS Energy | $ | 139 | $ | 145 | $ | 374 | $ | 315 | ||||||||
Retirement benefits liability: | ||||||||||||||||
Retirement benefits liability adjustments, net of tax of $1, $-, $1, and $1 respectively | — | — | 1 | 2 | ||||||||||||
Investments: | ||||||||||||||||
Unrealized loss on investments, net of tax of $- , $- , $- , and $- respectively | (2 | ) | — | (1 | ) | — | ||||||||||
Total Comprehensive Income | $ | 137 | $ | 145 | $ | 374 | $ | 317 | ||||||||
LIABILITIES AND EQUITY
In Millions | ||||||||
| ||||||||
March 31 2012 | December 31 2011 | |||||||
| ||||||||
Current Liabilities | ||||||||
Current portion of long-term debt, capital and finance lease obligations | $ 837 | $ 1,057 | ||||||
Accounts payable | 409 | 575 | ||||||
Accounts payable – related parties | 8 | 9 | ||||||
Accrued rate refunds | 34 | 30 | ||||||
Accrued interest | 66 | 101 | ||||||
Accrued taxes | 206 | 282 | ||||||
Regulatory liabilities | 120 | 125 | ||||||
Other current liabilities | 139 | 159 | ||||||
|
| |||||||
Total current liabilities | 1,819 | 2,338 | ||||||
| ||||||||
Non-current Liabilities | ||||||||
Long-term debt | 6,193 | 6,040 | ||||||
Non-current portion of capital and finance lease obligations | 162 | 167 | ||||||
Regulatory liabilities | 1,919 | 1,875 | ||||||
Postretirement benefits | 1,288 | 1,289 | ||||||
Asset retirement obligations | 257 | 254 | ||||||
Deferred investment tax credit | 45 | 46 | ||||||
Deferred income taxes | 1,056 | 1,035 | ||||||
Other non-current liabilities | 328 | 336 | ||||||
|
| |||||||
Total non-current liabilities | 11,248 | 11,042 | ||||||
| ||||||||
Commitments and Contingencies (Notes 3, 4, 5, 7, and 8) | ||||||||
Equity | ||||||||
Common stockholders equity | ||||||||
Common stock, authorized 350.0 shares; outstanding 257.4 shares in 2012 and 254.1 shares in 2011 | 3 | 3 | ||||||
Other paid-in capital | 4,641 | 4,627 | ||||||
Accumulated other comprehensive loss | (47) | (49) | ||||||
Accumulated deficit | (1,548) | (1,553) | ||||||
|
| |||||||
Total common stockholders equity | 3,049 | 3,028 | ||||||
Noncontrolling interests | 44 | 44 | ||||||
|
| |||||||
Total equity | 3,093 | 3,072 | ||||||
| ||||||||
Total Liabilities and Equity | $ 16,160 | $ 16,452 | ||||||
|
The accompanying notes are an integral part of these statements.
39
CMS Energy Corporation
(Unaudited)
In Millions | ||||||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30 | 2011 | 2010 | 2011 | 2010 | ||||||||||||
Operating Revenue | $ | 1,397 | $ | 1,370 | $ | 4,688 | $ | 4,536 | ||||||||
Operating Expenses | ||||||||||||||||
Fuel for electric generation | 175 | 157 | 442 | 407 | ||||||||||||
Purchased and interchange power | 362 | 359 | 954 | 946 | ||||||||||||
Purchased power — related parties | 24 | 22 | 64 | 63 | ||||||||||||
Cost of gas sold | 88 | 92 | 1,038 | 1,001 | ||||||||||||
Maintenance and other operating expenses | 286 | 258 | 824 | 801 | ||||||||||||
Depreciation and amortization | 119 | 131 | 401 | 432 | ||||||||||||
General taxes | 38 | 47 | 153 | 151 | ||||||||||||
Total operating expenses | 1,092 | 1,066 | 3,876 | 3,801 | ||||||||||||
Operating Income | 305 | 304 | 812 | 735 | ||||||||||||
Other Income (Expense) | ||||||||||||||||
Interest income | 2 | 4 | 6 | 13 | ||||||||||||
Interest and dividend income — related parties | 1 | — | 1 | — | ||||||||||||
Allowance for equity funds used during construction | 1 | 1 | 4 | 4 | ||||||||||||
Other income | 3 | 9 | 16 | 27 | ||||||||||||
Other expense | (3 | ) | (2 | ) | (8 | ) | (7 | ) | ||||||||
Total other income | 4 | 12 | 19 | 37 | ||||||||||||
Interest Charges | ||||||||||||||||
Interest on long-term debt | 62 | 60 | 188 | 183 | ||||||||||||
Other interest expense | 5 | 5 | 14 | 30 | ||||||||||||
Allowance for borrowed funds used during construction | (1 | ) | (1 | ) | (3 | ) | (3 | ) | ||||||||
Total interest charges | 66 | 64 | 199 | 210 | ||||||||||||
Income Before Income Taxes | 243 | 252 | 632 | 562 | ||||||||||||
Income Tax Expense | 88 | 92 | 232 | 207 | ||||||||||||
Net Income | 155 | 160 | 400 | 355 | ||||||||||||
Preferred Stock Dividends | 1 | 1 | 2 | 2 | ||||||||||||
Net Income Available to Common Stockholder | $ | 154 | $ | 159 | $ | 398 | $ | 353 | ||||||||
In Millions | ||||||||
| ||||||||
Three Months Ended March 31 | 2012 | 2011 | ||||||
| ||||||||
Common Stock | ||||||||
At beginning of period | $ 3 | $ 2 | ||||||
Common stock issued | - | 1 | ||||||
|
| |||||||
At end of period | 3 | 3 | ||||||
| ||||||||
Other Paid-in Capital | ||||||||
At beginning of period | 4,627 | 4,588 | ||||||
Common stock issued | 8 | 6 | ||||||
Common stock reissued | 6 | 5 | ||||||
|
| |||||||
At end of period | 4,641 | 4,599 | ||||||
| ||||||||
Accumulated Other Comprehensive Loss | ||||||||
Retirement benefits liability | ||||||||
At beginning of period | (48) | (39) | ||||||
Retirement benefits liability adjustments | 1 | - | ||||||
|
| |||||||
At end of period | (47) | (39) | ||||||
|
| |||||||
Investments | ||||||||
At beginning of period | - | - | ||||||
Unrealized gain on investments | 1 | - | ||||||
|
| |||||||
At end of period | 1 | - | ||||||
|
| |||||||
Derivative instruments | ||||||||
At beginning and end of period | (1) | (1) | ||||||
|
| |||||||
At end of period | (47) | (40) | ||||||
| ||||||||
Accumulated Deficit | ||||||||
At beginning of period | (1,553) | (1,757) | ||||||
Net income | 67 | 135 | ||||||
Common stock dividends declared | (62) | (53) | ||||||
|
| |||||||
At end of period | (1,548) | (1,675) | ||||||
| ||||||||
Noncontrolling Interests | ||||||||
At beginning and end of period | 44 | 44 | ||||||
| ||||||||
Total Equity | $ 3,093 | $ 2,931 | ||||||
|
The accompanying notes are an integral part of these statements.
40
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Consolidated Statements of Cash Flows
Income
(Unaudited)
In Millions | ||||||||
Nine months ended September 30 | 2011 | 2010 | ||||||
Cash Flows from Operating Activities | ||||||||
Net Income | $ | 400 | $ | 355 | ||||
Adjustments to reconcile net income to net cash provided by operating activities | ||||||||
Depreciation and amortization | 401 | 432 | ||||||
Deferred income taxes and investment tax credit | 85 | 107 | ||||||
Postretirement benefits expense | 117 | 166 | ||||||
Other non-cash operating activities | 52 | 44 | ||||||
Postretirement benefits contributions | (53 | ) | (161 | ) | ||||
Changes in other assets and liabilities: | ||||||||
Decrease in accounts receivable, notes receivable, and accrued revenue | 268 | 241 | ||||||
Decrease in accrued power supply revenue | 15 | 2 | ||||||
Increase in inventories | (109 | ) | (90 | ) | ||||
Decrease in deferred property taxes | 133 | 127 | ||||||
Increase (decrease) in accounts payable | 27 | (9 | ) | |||||
Decrease in accrued expenses | (126 | ) | (195 | ) | ||||
Increase in other current and non-current assets | (25 | ) | (9 | ) | ||||
Increase (decrease) in other current and non-current liabilities | 60 | (110 | ) | |||||
Net cash provided by operating activities | 1,245 | 900 | ||||||
Cash Flows from Investing Activities | ||||||||
Capital expenditures (excludes assets placed under capital lease) | (618 | ) | (608 | ) | ||||
Cost to retire property | (43 | ) | (31 | ) | ||||
Other investing activities | (22 | ) | (1 | ) | ||||
Net cash used in investing activities | (683 | ) | (640 | ) | ||||
Cash Flows from Financing Activities | ||||||||
Proceeds from issuance of long-term debt | — | 300 | ||||||
Retirement of long-term debt | (27 | ) | (335 | ) | ||||
Payment of net DOE liability | (43 | ) | — | |||||
Payment of common stock dividends | (292 | ) | (259 | ) | ||||
Payment of preferred stock dividends | (2 | ) | (2 | ) | ||||
Stockholder’s contribution | 125 | 250 | ||||||
Payment of capital and finance lease obligations | (18 | ) | (18 | ) | ||||
Other financing costs | (3 | ) | (2 | ) | ||||
Net cash used in financing activities | (260 | ) | (66 | ) | ||||
Net Increase in Cash and Cash Equivalents | 302 | 194 | ||||||
Cash and Cash Equivalents, Beginning of Period | 71 | 39 | ||||||
Cash and Cash Equivalents, End of Period | $ | 373 | $ | 233 | ||||
In Millions | ||||||||
| ||||||||
Three Months Ended March 31 | 2012 | 2011 | ||||||
| ||||||||
Operating Revenue | $ 1,675 | $ 1,988 | ||||||
Operating Expenses | ||||||||
Fuel for electric generation | 106 | 129 | ||||||
Purchased and interchange power | 313 | 293 | ||||||
Purchased power – related parties | 21 | 21 | ||||||
Cost of gas sold | 536 | 753 | ||||||
Maintenance and other operating expenses | 277 | 265 | ||||||
Depreciation and amortization | 171 | 161 | ||||||
General taxes | 68 | 66 | ||||||
|
| |||||||
Total operating expenses | 1,492 | 1,688 | ||||||
| ||||||||
Operating Income | 183 | 300 | ||||||
Other Income (Expense) | ||||||||
Interest income | 1 | 2 | ||||||
Allowance for equity funds used during construction | 2 | 1 | ||||||
Other income | 8 | 8 | ||||||
Other expense | (2) | (2) | ||||||
|
| |||||||
Total other income | 9 | 9 | ||||||
| ||||||||
Interest Charges | ||||||||
Interest on long-term debt | 61 | 63 | ||||||
Other interest expense | 4 | 4 | ||||||
Allowance for borrowed funds used during construction | (1) | (1) | ||||||
|
| |||||||
Total interest charges | 64 | 66 | ||||||
| ||||||||
Income Before Income Taxes | 128 | 243 | ||||||
Income Tax Expense | 52 | 90 | ||||||
|
| |||||||
Net Income Available to Common Stockholder | $ 76 | $ 153 | ||||||
|
The accompanying notes are an integral part of these statements.
41
Consolidated Balance Sheets
Statements of Comprehensive Income
(Unaudited)
In Millions | ||||||||
September 30 | December 31 | |||||||
ASSETS | 2011 | 2010 | ||||||
Current Assets | ||||||||
Cash and cash equivalents | $ | 373 | $ | 71 | ||||
Restricted cash and cash equivalents | 28 | 23 | ||||||
Accounts receivable and accrued revenue, less allowances of $23 in 2011 and 2010 | 683 | 963 | ||||||
Notes receivable | 43 | 55 | ||||||
Accrued power supply revenue | — | 15 | ||||||
Accounts receivable — related parties | 2 | 1 | ||||||
Inventories at average cost | ||||||||
Gas in underground storage | 1,050 | 941 | ||||||
Materials and supplies | 98 | 100 | ||||||
Generating plant fuel stock | 125 | 124 | ||||||
Deferred property taxes | 116 | 180 | ||||||
Regulatory assets | 2 | 19 | ||||||
Prepayments and other current assets | 43 | 27 | ||||||
Total current assets | 2,563 | 2,519 | ||||||
Plant, Property, and Equipment (at cost) | ||||||||
Plant, property, and equipment, gross | 14,475 | 14,022 | ||||||
Less accumulated depreciation, depletion, and amortization | 4,814 | 4,593 | ||||||
Plant, property, and equipment, net | 9,661 | 9,429 | ||||||
Construction work in progress | 671 | 566 | ||||||
Total plant, property, and equipment | 10,332 | 9,995 | ||||||
Non-current Assets | ||||||||
Regulatory assets | 2,002 | 2,093 | ||||||
Accounts and notes receivable | 7 | 22 | ||||||
Investments | 31 | 34 | ||||||
Other non-current assets | 123 | 176 | ||||||
Total non-current assets | 2,163 | 2,325 | ||||||
Total Assets | $ | 15,058 | $ | 14,839 | ||||
In Millions | ||||||||
| ||||||||
Three Months Ended March 31 | 2012 | 2011 | ||||||
| ||||||||
Net Income | $ 76 | $ 153 | ||||||
Retirement benefits liability | ||||||||
Retirement benefits liability adjustments, net of tax of $- in 2012 and 2011 | 1 | 1 | ||||||
Investments | ||||||||
Unrealized loss on investments, net of tax benefit of $(2) in 2012 and $(1) in 2011 | (3) | (1) | ||||||
|
| |||||||
Other Comprehensive Loss | (2) | - | ||||||
| ||||||||
Total Comprehensive Income | $ 74 | $ 153 | ||||||
|
The accompanying notes are an integral part of these statements.
42
(This page intentionally left blank)
In Millions | ||||||||
September 30 | December 31 | |||||||
LIABILITIES AND EQUITY | 2011 | 2010 | ||||||
Current Liabilities | ||||||||
Current portion of long-term debt, capital and finance lease obligations | $ | 362 | $ | 61 | ||||
Accounts payable | 473 | 471 | ||||||
Accounts payable — related parties | 12 | 11 | ||||||
Accrued rate refunds | 24 | 19 | ||||||
Accrued interest | 41 | 74 | ||||||
Accrued taxes | 102 | 199 | ||||||
Deferred income taxes | 154 | 209 | ||||||
Regulatory liabilities | 121 | 22 | ||||||
Other current liabilities | 94 | 95 | ||||||
Total current liabilities | 1,383 | 1,161 | ||||||
Non-current Liabilities | ||||||||
Long-term debt | 3,997 | 4,488 | ||||||
Non-current portion of capital and finance lease obligations | 171 | 188 | ||||||
Regulatory liabilities | 1,874 | 1,988 | ||||||
Postretirement benefits | 1,081 | 1,076 | ||||||
Asset retirement obligations | 253 | 244 | ||||||
Deferred investment tax credit | 47 | 49 | ||||||
Deferred income taxes | 1,663 | 1,289 | ||||||
Other non-current liabilities | 178 | 176 | ||||||
Total non-current liabilities | 9,264 | 9,498 | ||||||
Commitments and Contingencies(Notes 3, 4, 5, 7, and 8) | ||||||||
Equity | ||||||||
Common stockholder’s equity | ||||||||
Common stock, authorized 125.0 shares; outstanding 84.1 shares for both periods | 841 | 841 | ||||||
Other paid-in capital | 2,957 | 2,832 | ||||||
Retained earnings | 569 | 463 | ||||||
Total common stockholder’s equity | 4,367 | 4,136 | ||||||
Preferred stock | 44 | 44 | ||||||
Total equity | 4,411 | 4,180 | ||||||
Total Liabilities and Equity | $ | 15,058 | $ | 14,839 | ||||
43
Consolidated Statements of Changes in Equity
Cash Flows
(Unaudited)
In Millions | ||||||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30 | 2011 | 2010 | 2011 | 2010 | ||||||||||||
Common Stock | ||||||||||||||||
At beginning and end of period | $ | 841 | $ | 841 | $ | 841 | $ | 841 | ||||||||
Other Paid-in Capital | ||||||||||||||||
At beginning of period | 2,957 | 2,832 | 2,832 | 2,582 | ||||||||||||
Stockholder’s contribution | — | — | 125 | 250 | ||||||||||||
At end of period | 2,957 | 2,832 | 2,957 | 2,832 | ||||||||||||
Accumulated Other Comprehensive Income | ||||||||||||||||
Retirement benefits liability | ||||||||||||||||
At beginning of period | (15 | ) | (11 | ) | (16 | ) | (11 | ) | ||||||||
Retirement benefits liability adjustments1 | — | — | 1 | — | ||||||||||||
At end of period | (15 | ) | (11 | ) | (15 | ) | (11 | ) | ||||||||
Investments | ||||||||||||||||
At beginning of period | 15 | 11 | 16 | 13 | ||||||||||||
Unrealized gain (loss) on investments1 | — | 6 | (1 | ) | 4 | |||||||||||
At end of period | 15 | 17 | 15 | 17 | ||||||||||||
At end of period | — | 6 | — | 6 | ||||||||||||
Retained Earnings | ||||||||||||||||
At beginning of period | 511 | 415 | 463 | 389 | ||||||||||||
Net income1 | 155 | 160 | 400 | 355 | ||||||||||||
Common stock dividends declared | (96 | ) | (91 | ) | (292 | ) | (259 | ) | ||||||||
Preferred stock dividends declared | (1 | ) | (1 | ) | (2 | ) | (2 | ) | ||||||||
At end of period | 569 | 483 | 569 | 483 | ||||||||||||
Preferred Stock | ||||||||||||||||
At beginning and end of period | 44 | 44 | 44 | 44 | ||||||||||||
Total Equity | $ | 4,411 | $ | 4,206 | $ | 4,411 | $ | 4,206 | ||||||||
In Millions | ||||||||
| ||||||||
Three Months Ended March 31 | 2012 | 2011 | ||||||
| ||||||||
Cash Flows from Operating Activities | ||||||||
Net income | $ 76 | $ 153 | ||||||
Adjustments to reconcile net income to net cash provided by operating activities | ||||||||
Depreciation and amortization | 171 | 161 | ||||||
Deferred income taxes and investment tax credit | 20 | 39 | ||||||
Postretirement benefits expense | 46 | 39 | ||||||
Other non-cash operating activities | 19 | 17 | ||||||
Postretirement benefits contributions | (18) | (19) | ||||||
Changes in other assets and liabilities: | ||||||||
Decrease in accounts receivable, notes receivable, and accrued revenue | 100 | 6 | ||||||
Decrease in accrued power supply revenue | - | 15 | ||||||
Decrease in inventories | 302 | 458 | ||||||
Increase (decrease) in accounts payable | (74) | 3 | ||||||
Decrease in accrued expenses | (69) | (49) | ||||||
Decrease in other current and non-current assets | 112 | 30 | ||||||
Increase (decrease) in other current and non-current liabilities | (4) | 14 | ||||||
|
| |||||||
Net cash provided by operating activities | 681 | 867 | ||||||
| ||||||||
Cash Flows from Investing Activities | ||||||||
Capital expenditures (excludes assets placed under capital lease) | (294) | (186) | ||||||
Cost to retire property | (7) | (17) | ||||||
Other investing activities | (11) | (25) | ||||||
|
| |||||||
Net cash used in investing activities | (312) | (228) | ||||||
| ||||||||
Cash Flows from Financing Activities | ||||||||
Retirement of long-term debt | (310) | (9) | ||||||
Payment of common stock dividends | (115) | (104) | ||||||
Stockholder’s contribution | 150 | 125 | ||||||
Payment of capital and finance lease obligations | (6) | (6) | ||||||
Other financing costs | - | (3) | ||||||
|
| |||||||
Net cash (used in) provided by financing activities | (281) | 3 | ||||||
| ||||||||
Net Increase in Cash and Cash Equivalents | 88 | 642 | ||||||
Cash and Cash Equivalents, Beginning of Period | 85 | 71 | ||||||
|
| |||||||
Cash and Cash Equivalents, End of Period | $ 173 | $ 713 | ||||||
|
The accompanying notes are an integral part of these statements.
44
Consumers Energy Company
Consolidated Balance Sheets
In Millions | ||||||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30 | 2011 | 2010 | 2011 | 2010 | ||||||||||||
1 Disclosure of Comprehensive Income: | ||||||||||||||||
Net income | $ | 155 | $ | 160 | $ | 400 | $ | 355 | ||||||||
Retirement benefits liability: | ||||||||||||||||
Retirement benefits liability adjustments, net of tax of $-, $- , $-, and $-, respectively | — | — | 1 | — | ||||||||||||
Investments: | ||||||||||||||||
Unrealized gain (loss) on investments, net of tax benefit of $-, $(1) , $(1), and $(1), respectively | — | 6 | (1 | ) | 4 | |||||||||||
Total Comprehensive Income | $ | 155 | $ | 166 | $ | 400 | $ | 359 | ||||||||
45
In Millions | ||||||||
| ||||||||
March 31 2012 | December 31 2011 | |||||||
| ||||||||
Current Assets | ||||||||
Cash and cash equivalents | $ 173 | $ 85 | ||||||
Restricted cash and cash equivalents | 28 | 26 | ||||||
Accounts receivable and accrued revenue, less allowances of $33 in 2012 and 2011 | 737 | 860 | ||||||
Notes receivable | - | 23 | ||||||
Accounts receivable – related parties | 1 | 1 | ||||||
Inventories at average cost | ||||||||
Gas in underground storage | 607 | 929 | ||||||
Materials and supplies | 93 | 88 | ||||||
Generating plant fuel stock | 180 | 164 | ||||||
Deferred property taxes | 155 | 187 | ||||||
Regulatory assets | - | 1 | ||||||
Prepayments and other current assets | 42 | 43 | ||||||
|
| |||||||
Total current assets | 2,016 | 2,407 | ||||||
| ||||||||
Plant, Property, and Equipment | ||||||||
Plant, property, and equipment, gross | 14,733 | 14,621 | ||||||
Less accumulated depreciation and amortization | 4,952 | 4,846 | ||||||
|
| |||||||
Plant, property, and equipment, net | 9,781 | 9,775 | ||||||
Construction work in progress | 899 | 782 | ||||||
|
| |||||||
Total plant, property, and equipment | 10,680 | 10,557 | ||||||
| ||||||||
Other Non-current Assets | ||||||||
Regulatory assets | 2,362 | 2,466 | ||||||
Accounts and notes receivable | 1 | 1 | ||||||
Investments | 29 | 35 | ||||||
Other | 179 | 196 | ||||||
|
| |||||||
Total other non-current assets | 2,571 | 2,698 | ||||||
| ||||||||
Total Assets | $ 15,267 | $ 15,662 | ||||||
|
LIABILITIES AND EQUITY
In Millions | ||||||||
| ||||||||
March 31 2012 | December 31 2011 | |||||||
| ||||||||
Current Liabilities | ||||||||
Current portion of long-term debt, capital and finance lease obligations | $ 63 | $ 363 | ||||||
Accounts payable | 396 | 561 | ||||||
Accounts payable – related parties | 11 | 11 | ||||||
Accrued rate refunds | 34 | 30 | ||||||
Accrued interest | 39 | 73 | ||||||
Accrued taxes | 250 | 287 | ||||||
Deferred income taxes | 74 | 73 | ||||||
Regulatory liabilities | 120 | 125 | ||||||
Other current liabilities | 103 | 119 | ||||||
|
| |||||||
Total current liabilities | 1,090 | 1,642 | ||||||
| ||||||||
Non-current Liabilities | ||||||||
Long-term debt | 3,977 | 3,987 | ||||||
Non-current portion of capital and finance lease obligations | 162 | 167 | ||||||
Regulatory liabilities | 1,919 | 1,875 | ||||||
Postretirement benefits | 1,225 | 1,225 | ||||||
Asset retirement obligations | 257 | 253 | ||||||
Deferred investment tax credit | 45 | 46 | ||||||
Deferred income taxes | 1,835 | 1,817 | ||||||
Other non-current liabilities | 254 | 256 | ||||||
|
| |||||||
Total non-current liabilities | 9,674 | 9,626 | ||||||
| ||||||||
Commitments and Contingencies (Notes 3, 4, 5, 7, and 8) | ||||||||
Equity | ||||||||
Common stockholder equity | ||||||||
Common stock, authorized 125.0 shares; outstanding 84.1 shares for both periods | 841 | 841 | ||||||
Other paid-in capital | 3,107 | 2,957 | ||||||
Accumulated other comprehensive loss | (4) | (2) | ||||||
Retained earnings | 515 | 554 | ||||||
|
| |||||||
Total common stockholder equity | 4,459 | 4,350 | ||||||
Preferred stock | 44 | 44 | ||||||
|
| |||||||
Total equity | 4,503 | 4,394 | ||||||
| ||||||||
Total Liabilities and Equity | $ 15,267 | $ 15,662 | ||||||
|
The accompanying notes are an integral part of these statements.
46
(Unaudited)
In Millions | ||||||||
| ||||||||
Three Months Ended March 31 | 2012 | 2011 | ||||||
| ||||||||
Common Stock | ||||||||
At beginning and end of period | $ 841 | $ 841 | ||||||
| ||||||||
Other Paid-in Capital | ||||||||
At beginning of period | 2,957 | 2,832 | ||||||
Stockholder contribution | 150 | 125 | ||||||
|
| |||||||
At end of period | 3,107 | 2,957 | ||||||
| ||||||||
Accumulated Other Comprehensive Loss | ||||||||
Retirement benefits liability | ||||||||
At beginning of period | (19) | (16) | ||||||
Retirement benefits liability adjustments | 1 | 1 | ||||||
|
| |||||||
At end of period | (18) | (15) | ||||||
|
| |||||||
Investments | ||||||||
At beginning of period | 17 | 16 | ||||||
Unrealized loss on investments | (3) | (1) | ||||||
|
| |||||||
At end of period | 14 | 15 | ||||||
|
| |||||||
At end of period | (4) | - | ||||||
| ||||||||
Retained Earnings | ||||||||
At beginning of period | 554 | 463 | ||||||
Net income | 76 | 153 | ||||||
Common stock dividends declared | (115) | (104) | ||||||
|
| |||||||
At end of period | 515 | 512 | ||||||
| ||||||||
Preferred Stock | ||||||||
At beginning and end of period | 44 | 44 | ||||||
| ||||||||
Total Equity | $ 4,503 | $ 4,354 | ||||||
|
The accompanying notes are an integral part of these statements.
Consumers Energy Company
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
These interim consolidated financial statements have been prepared by CMS Energy and Consumers in accordance with GAAP for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. As a result, CMS Energy and Consumers have condensed or omitted certain information and note disclosures normally included in consolidated financial statements prepared in accordance with GAAP. CMS Energy and Consumers have reclassified certain prior period amounts to conform to the presentation in the current period. In management’s opinion, the unaudited information contained in this report reflects all adjustments of a normal recurring nature necessary to ensure the fair presentation of financial position, results of operations, and cash flows for the periods presented. The notes to the consolidated financial statements and the related consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes contained in the 20102011 Form 10-K. Due to the seasonal nature of CMS Energy’s and Consumers’ operations, the results presented for this interim period are not necessarily indicative of results to be achieved for the fiscal year.
1: | NEW ACCOUNTING STANDARDS |
1: NEW ACCOUNTING STANDARDSIMPLEMENTATIONOF NEW ACCOUNTING STANDARDS
New Accounting Standards Not Yet Effective
ASU 2011-04, Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs:This standard, which became effective January 1, 2012 for CMS Energy and Consumers, is the result of a joint project of the Financial Accounting Standards Board and the International Accounting Standards Board. The primary objective of the standard is to ensure that fair value has the same meaning under GAAP and International Financial Reporting Standards and to establish common fair value measurement guidance in the two sets of standards. The standard does not change the overall fair value model in GAAP, but it amends various fair value principles and establishes additional disclosure requirements. This standard did not impact CMS Energy and Consumers are evaluating this standard,Energy’s or Consumers’ consolidated income, cash flows, or financial position, but they do not expect it to have a significant impact on their consolidated financial statements.
2: | FAIR VALUE MEASUREMENTS |
Accounting standards define fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. When measuring fair value, CMS Energy and Consumers are required to incorporate all assumptions that market participants would use in pricing an asset or liability, including assumptions about risk. A fair value hierarchy prioritizes inputs used to measure fair value according to their observability in the market. The three levels of the fair value hierarchy are as follows:
47
Level 1 inputs are unadjusted quoted prices in active markets for identical assets or liabilities. |
— | 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 CMS Energy’s or Consumers’ own assumptions about how market participants would value their assets and liabilities. |
To the extent possible, CMS Energy and Consumers use quoted market prices or other observable market pricing data in valuing assets and liabilities measured at fair value. If this information is unavailable, they use market-corroborated data or reasonable estimates about market participant assumptions. CMS Energy and Consumers classify fair value measurements within the fair value hierarchy based on the lowest level of input that is significant to the fair value measurement in its entirety.
Assets and Liabilities Measured at Fair Value on a Recurring BasisASSETSAND LIABILITIES MEASUREDAT FAIR VALUEONA RECURRING BASIS
Presented in the following tabletables are CMS Energy’s and Consumers’ assets and liabilities, by level within the fair value hierarchy, reported at fair value on a recurring basis at September 30, 2011:
In Millions | ||||||||||||||||
Total | Level 1 | Level 2 | Level 3 | |||||||||||||
CMS Energy, including Consumers | ||||||||||||||||
Assets | ||||||||||||||||
Cash equivalents | $ | 512 | $ | 512 | $ | — | $ | — | ||||||||
Restricted cash equivalents | 14 | 14 | — | — | ||||||||||||
Nonqualified deferred compensation plan assets | 4 | 4 | — | — | ||||||||||||
SERP | ||||||||||||||||
Cash equivalents | 1 | 1 | — | — | ||||||||||||
Mutual fund | 87 | 87 | — | — | ||||||||||||
State and municipal bonds | 26 | — | 26 | — | ||||||||||||
Derivative instruments | ||||||||||||||||
Commodity contracts1 | 2 | — | — | 2 | ||||||||||||
Total2 | $ | 646 | $ | 618 | $ | 26 | $ | 2 | ||||||||
Liabilities | ||||||||||||||||
Nonqualified deferred compensation plan liabilities | $ | 4 | $ | 4 | $ | — | $ | — | ||||||||
Derivative instruments | ||||||||||||||||
Commodity contracts3 | 3 | — | — | 3 | ||||||||||||
Total4 | $ | 7 | $ | 4 | $ | — | $ | 3 | ||||||||
Consumers | ||||||||||||||||
Assets | ||||||||||||||||
Cash equivalents | $ | 282 | $ | 282 | $ | — | $ | — | ||||||||
Restricted cash equivalents | 13 | 13 | — | — | ||||||||||||
CMS Energy common stock | 31 | 31 | — | — | ||||||||||||
Nonqualified deferred compensation plan assets | 3 | 3 | — | — | ||||||||||||
SERP | ||||||||||||||||
Cash equivalents | 1 | 1 | — | — | ||||||||||||
Mutual fund | 57 | 57 | — | — | ||||||||||||
State and municipal bonds | 17 | — | 17 | — | ||||||||||||
Derivative instruments | ||||||||||||||||
Commodity contracts | 2 | — | — | 2 | ||||||||||||
Total5 | $ | 406 | $ | 387 | $ | 17 | $ | 2 | ||||||||
Liabilities | ||||||||||||||||
Nonqualified deferred compensation plan liabilities | $ | 3 | $ | 3 | $ | — | $ | — | ||||||||
Total | $ | 3 | $ | 3 | $ | — | $ | — | ||||||||
48
In Millions | ||||||||||||||||
| ||||||||||||||||
March 31, 2012 | Total | Level 1 | Level 2 | Level 3 | ||||||||||||
| ||||||||||||||||
CMS ENERGY,INCLUDING CONSUMERS | ||||||||||||||||
Assets | ||||||||||||||||
Cash equivalents | $ 271 | $ 271 | $ - | $ - | ||||||||||||
Restricted cash equivalents | 14 | 14 | - | - | ||||||||||||
Nonqualified deferred compensation plan assets | 5 | 5 | - | - | ||||||||||||
SERP | ||||||||||||||||
Mutual funds | 126 | 126 | - | - | ||||||||||||
Derivative instruments | ||||||||||||||||
Commodity contracts | 3 | 1 | 1 | 1 | ||||||||||||
| ||||||||||||||||
Total | $ 419 | $ 417 | $ 1 | $ 1 | ||||||||||||
| ||||||||||||||||
Liabilities | ||||||||||||||||
Nonqualified deferred compensation plan liabilities | $ 5 | $ 5 | $ - | $ - | ||||||||||||
Derivative instruments | ||||||||||||||||
Commodity contracts | 7 | - | 5 | 2 | ||||||||||||
| ||||||||||||||||
Total | $ 12 | $ 5 | $ 5 | $ 2 | ||||||||||||
| ||||||||||||||||
CONSUMERS | ||||||||||||||||
Assets | ||||||||||||||||
Cash equivalents | $ 122 | $ 122 | $ - | $ - | ||||||||||||
Restricted cash equivalents | 13 | 13 | - | - | ||||||||||||
CMS Energy common stock | 29 | 29 | - | - | ||||||||||||
Nonqualified deferred compensation plan assets | 3 | 3 | - | - | ||||||||||||
SERP | ||||||||||||||||
Mutual funds | 85 | 85 | - | - | ||||||||||||
Derivative instruments | ||||||||||||||||
Commodity contracts | 1 | - | - | 1 | ||||||||||||
| ||||||||||||||||
Total | $ 253 | $ 252 | $ - | $ 1 | ||||||||||||
| ||||||||||||||||
Liabilities | ||||||||||||||||
Nonqualified deferred compensation plan liabilities | $ 3 | $ 3 | $ - | $ - | ||||||||||||
| ||||||||||||||||
Total | $ 3 | $ 3 | $ - | $ - | ||||||||||||
|
In Millions | ||||||||||||||||
| ||||||||||||||||
December 31, 2011 | Total | Level 1 | Level 2 | Level 3 | ||||||||||||
| ||||||||||||||||
CMS ENERGY,INCLUDING CONSUMERS | ||||||||||||||||
Assets | ||||||||||||||||
Cash equivalents | $ 109 | $ 109 | $ - | $ - | ||||||||||||
Restricted cash equivalents | 15 | 15 | - | - | ||||||||||||
Nonqualified deferred compensation plan assets | 4 | 4 | - | - | ||||||||||||
SERP | ||||||||||||||||
Cash equivalents | 1 | 1 | - | - | ||||||||||||
Mutual funds | 113 | 113 | - | - | ||||||||||||
Derivative instruments | ||||||||||||||||
Commodity contracts | 3 | 1 | - | 2 | ||||||||||||
| ||||||||||||||||
Total | $ 245 | $ 243 | $ - | $ 2 | ||||||||||||
| ||||||||||||||||
Liabilities | ||||||||||||||||
Nonqualified deferred compensation plan liabilities | $ 4 | $ 4 | $ - | $ - | ||||||||||||
Derivative instruments | ||||||||||||||||
Commodity contracts | 7 | - | 3 | 4 | ||||||||||||
| ||||||||||||||||
Total | $ 11 | $ 4 | $ 3 | $ 4 | ||||||||||||
| ||||||||||||||||
CONSUMERS | ||||||||||||||||
Assets | ||||||||||||||||
Cash equivalents | $ 56 | $ 56 | $ - | $ - | ||||||||||||
Restricted cash equivalents | 14 | 14 | - | - | ||||||||||||
CMS Energy common stock | 35 | 35 | - | - | ||||||||||||
Nonqualified deferred compensation plan assets | 3 | 3 | - | - | ||||||||||||
SERP | ||||||||||||||||
Cash equivalents | 1 | 1 | - | - | ||||||||||||
Mutual funds | 74 | 74 | - | - | ||||||||||||
Derivative instruments | ||||||||||||||||
Commodity contracts | 2 | - | - | 2 | ||||||||||||
| ||||||||||||||||
Total | $ 185 | $ 183 | $ - | $ 2 | ||||||||||||
| ||||||||||||||||
Liabilities | ||||||||||||||||
Nonqualified deferred compensation plan liabilities | $ 3 | $ 3 | $ - | $ - | ||||||||||||
| ||||||||||||||||
Total | $ 3 | $ 3 | $ - | $ - | ||||||||||||
|
In Millions | ||||||||||||||||
Total | Level 1 | Level 2 | Level 3 | |||||||||||||
CMS Energy, including Consumers | ||||||||||||||||
Assets | ||||||||||||||||
Cash equivalents | $ | 183 | $ | 183 | $ | — | $ | — | ||||||||
Restricted cash equivalents | 6 | 6 | — | — | ||||||||||||
Nonqualified deferred compensation plan assets | 6 | 6 | — | — | ||||||||||||
SERP | ||||||||||||||||
Cash equivalents | 1 | 1 | — | — | ||||||||||||
Mutual fund | 62 | 62 | — | — | ||||||||||||
State and municipal bonds | 28 | — | 28 | — | ||||||||||||
Derivative instruments | ||||||||||||||||
Commodity contracts1 | 1 | — | — | 1 | ||||||||||||
Total2 | $ | 287 | $ | 258 | $ | 28 | $ | 1 | ||||||||
Liabilities | ||||||||||||||||
Nonqualified deferred compensation plan liabilities | $ | 6 | $ | 6 | $ | — | $ | — | ||||||||
Derivative instruments | ||||||||||||||||
Commodity contracts3 | 4 | — | — | 4 | ||||||||||||
Total4 | $ | 10 | $ | 6 | $ | — | $ | 4 | ||||||||
Consumers | ||||||||||||||||
Assets | ||||||||||||||||
Cash equivalents | $ | 19 | $ | 19 | $ | — | $ | — | ||||||||
Restricted cash equivalents | 6 | 6 | — | — | ||||||||||||
CMS Energy common stock | 34 | 34 | — | — | ||||||||||||
Nonqualified deferred compensation plan assets | 4 | 4 | — | — | ||||||||||||
SERP | ||||||||||||||||
Cash equivalents | 1 | 1 | — | — | ||||||||||||
Mutual fund | 39 | 39 | — | — | ||||||||||||
State and municipal bonds | 17 | — | 17 | — | ||||||||||||
Derivative instruments | ||||||||||||||||
Commodity contracts | 1 | — | — | 1 | ||||||||||||
Total5 | $ | 121 | $ | 103 | $ | 17 | $ | 1 | ||||||||
Liabilities | ||||||||||||||||
Nonqualified deferred compensation plan liabilities | $ | 4 | $ | 4 | $ | — | $ | — | ||||||||
Total | $ | 4 | $ | 4 | $ | — | $ | — | ||||||||
49
Nonqualified Deferred Compensation Plan Assets:CMS Energy’s and Consumers’ The nonqualified deferred compensation plan assets are invested inconsist of various mutual funds.funds that are valued using a market approach. CMS Energy and Consumers value these assets using a market approach, using the daily quoted net asset values provided by the fund managers that are the basis for transactions to buy or sell shares in each fund. CMS Energy and Consumers report these assets in other non-current assets on their consolidated balance sheets.
SERP Assets:CMS Energy and Consumers value their SERP assets using a market approach, incorporating prices and other relevant information from market transactions. The SERP cash equivalents consist of a money market fund with daily liquidity, which invests in state and municipal securities.
Nonqualified Deferred Compensation Plan Liabilities:CMS Energy and Consumers value their non-qualifiednonqualified deferred compensation plan liabilities based on the fair values of the plan assets, as they reflect what is owed to the plan participants in accordance with their investment elections. CMS Energy and Consumers report these liabilities in other non-current liabilities on their consolidated balance sheets.
Derivative Instruments:CMS Energy and Consumers value their derivative instruments using either a market approach that incorporates information from market transactions, or an income approach that discounts future expected cash flows to a present value amount. They use various inputs to value the derivatives depending on the type of contract and the availability of market data. CMS Energy has exchange-traded derivative contracts that are valued based on Level 1 quoted prices, in actively traded
50
The most significant derivatives classified as Level 3 are an electricity sales agreement helda power option sold by CMS ERM and FTRs held by Consumers. At December 31, 2010 and in prior periods, quoted electricity prices were not available for the entire term of the electricity sales agreement heldThe power option sold by CMS ERM is valued using unobservable assumptions about price volatility and a proprietary forward pricing model was used to determine fair value. At September 30, 2011, quoted prices at the nearest active market were available for the entire term of the agreement. The agreement, however, remains classified as Level 3 since the pricing differential between the delivery point and the nearest active market in Ohio andmarket. Due to the delivery point in Michigan cannot be confirmed with observable market transactions. There is nolack of quoted pricing information, for FTRs held by Consumers. Consumers determines the fair value of its FTRs based on Consumers’ average historical settlements.
There were no significant changes in the fair values of Level 3 assets and liabilities at CMS Energy and Consumers:
In Millions | ||||||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30 | 2011 | 2010 | 2011 | 2010 | ||||||||||||
CMS Energy, including Consumers | ||||||||||||||||
Balance at beginning of period | $ | — | $ | (5 | ) | $ | (3 | ) | $ | (8 | ) | |||||
Total gains (losses) included in earnings1 | (1 | ) | 2 | (1 | ) | 4 | ||||||||||
Total gains (losses) offset through regulatory accounting | (1 | ) | 3 | 2 | 4 | |||||||||||
Settlements | 1 | (3 | ) | 1 | (3 | ) | ||||||||||
Balance at end of period | $ | (1 | ) | $ | (3 | ) | $ | (1 | ) | $ | (3 | ) | ||||
Unrealized gains (losses) included in earnings relating to assets and liabilities still held at end of period1 | $ | (1 | ) | $ | 2 | $ | — | $ | 4 | |||||||
Consumers | ||||||||||||||||
Balance at beginning of period | $ | 3 | $ | — | $ | 1 | $ | — | ||||||||
Total gains (losses) offset through regulatory accounting | (1 | ) | 3 | 2 | 4 | |||||||||||
Settlements | — | (2 | ) | (1 | ) | (3 | ) | |||||||||
Balance at end of period | $ | 2 | $ | 1 | $ | 2 | $ | 1 | ||||||||
51
In Millions | ||||||||||||||||
Level 1 | Level 2 | Level 3 | Losses | |||||||||||||
CMS Energy, including Consumers | ||||||||||||||||
Assets held for sale | $ | — | $ | — | $ | 7 | $ | (4 | ) | |||||||
3: | CONTINGENCIES AND COMMITMENTS |
CMS Energy and Consumers are involved in various matters that give rise to contingent liabilities. Depending on the specific issues, the resolution of these contingencies could have a material effect on CMS Energy’s and Consumers’ liquidity, financial condition, and results of operations. In their disclosures of these matters, CMS Energy and Consumers provide an estimate of the possible loss or range of loss when such an estimate can be made. Disclosures that state that CMS Energy or Consumers cannot predict the outcome of a matter indicate that they are unable to estimate a possible loss or range of loss for the matter.
CMS Energy ContingenciesENERGY CONTINGENCIES
Gas Index Price Reporting Investigation:In 2002, CMS Energy notified appropriate regulatory and governmental agencies that some employees at CMS MST and CMS Field Services appeared to have provided inaccurate information regarding natural gas trades to various energy industry publications which compile and report index prices. CMS Energy cooperated with an investigation by the DOJ regarding this matter. Although CMS Energy has not received any formal notification that the DOJ has completed its investigation, the DOJ’s last request for information occurred in 2003, and CMS Energy completed its response to this request in 2004. CMS Energy is unable to predict the outcome of the DOJ investigation and what effect, if any, the investigation will have on CMS Energy.
Gas Index Price Reporting Litigation:CMS Energy, along with CMS MST, CMS Field Services, Cantera Natural Gas, Inc., and Cantera Gas Company, are named as defendants in various lawsuits arising as a result of alleged inaccurate natural gas price reporting to publications that report trade information. Allegations include manipulation of NYMEX natural gas futures and options prices, price-fixing conspiracies, restraint of trade, and artificial inflation of natural gas retail prices in Colorado, Kansas, Missouri, and Wisconsin. The following provides more detail on these proceedings:
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In 2005, CMS Energy, CMS MST, and CMS Field Services were named as defendants in a putative class action filed in Kansas state court, Learjet, Inc., et al. v. Oneok, Inc., et al. The |
complaint alleges that during the putative class period, January 1, 2000 through October 31, 2002, the defendants engaged in a scheme to violate the Kansas Restraint of Trade Act. The plaintiffs are seeking statutory full consideration damages consisting of the full consideration paid by plaintiffs for natural gas allegedly purchased from defendants. |
— | In 2007, a class action complaint, Heartland Regional Medical Center, et al. v. Oneok, Inc. et al., was filed in Missouri state court alleging violations of Missouri antitrust laws. Defendants, including CMS Energy, CMS Field Services, and CMS MST, are alleged to have violated the Missouri antitrust | ||
Breckenridge Brewery of Colorado, LLC and BBD Acquisition Co. v. Oneok, Inc., et al., a class action complaint brought on behalf of retail direct purchasers of natural gas in Colorado, was filed in Colorado state court in 2006. Defendants, including CMS Energy, CMS Field Services, and CMS MST, are alleged to have violated the Colorado Antitrust Act of | |||
A class action complaint, Arandell Corp., et al. v. XCEL Energy Inc., et al., was filed in 2006 in Wisconsin state court on behalf of Wisconsin commercial | |||
Another class action complaint, Newpage Wisconsin System v. CMS ERM, et al., was filed in 2009 in circuit court in Wood County, Wisconsin, against CMS Energy, CMS ERM, Cantera Gas Company, and others. The plaintiff is seeking full consideration damages, treble damages, costs, interest, and attorneys’ fees. | |||
In 2005, J.P. Morgan Trust Company, in its capacity as Trustee of the FLI Liquidating Trust, filed an action in Kansas state court against CMS Energy, CMS MST, CMS Field Services, and others. The complaint alleges various claims under the Kansas Restraint of Trade Act. The plaintiff is seeking statutory full consideration damages for its purchases of natural gas in 2000 and 2001. |
After removal to federal court, all of the cases described above were transferred to the MDL. CMS Energy was dismissed from the Learjet, Heartland, and J.P. Morgan cases in 2009, but other CMS Energy defendants remained parties. All CMS Energy defendants were dismissed from the Breckenridge case in 2009. In 2010, CMS Energy and Cantera Gas Company were dismissed from the Newpage case and the Arandell (Wisconsin) case was reinstated against CMS ERM. In July 2011, all claims against remaining CMS Energy defendants in the MDL cases were dismissed based on FERC preemption. Plaintiffs have filed appeals in all of the cases.
These cases involve complex facts, a large number of similarly situated defendants with different factual positions, and multiple jurisdictions. Presently, any estimate of liability would be highly speculative; the amount of CMS Energy’s possible loss would be based on widely varying models previously untested in this context. If the outcome after appeals is unfavorable, these cases could have a material adverse impact on CMS Energy’s liquidity, financial condition, and results of operations.
Bay Harbor:As part of the development of Bay Harbor by certain subsidiaries of CMS Energy, and under an agreement with the MDEQ, third parties constructed a golf course and park over several abandoned CKD piles left over from the former cement plant operations on the Bay Harbor site. The third parties also undertook a series of response activities, including constructing a leachate collection system in one area where CKD-impacted groundwater was entering Little Traverse Bay. Leachate is produced when water enters into the CKD piles. In 2002, CMS Energy sold its interest in Bay Harbor, but retained its obligations under environmental indemnities entered into at the start of the project.
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In May 2011, CMS Energy received approval from the EPA on a revised scope of remedies that CMS Energy had submitted in December 2010. CMS Energy is presently in negotiationsreached a tentative agreement with the MDEQ to finalize an agreementin December 2011 that will identifyidentifies the remaining final remedies at the site. The EPA notified the MDEQ in March 2012 that it had no objections, and the parties are now in negotiations to finalize the agreement. In December 2010, the MDEQ issued an NPDES permit that authorizes CMS Land to discharge treated leachate into Little Traverse Bay. This permit requires renewal every five years. Discharge of treated leachate under the permit commenced at the East Park portion of the Bay Harbor site in October 2011.has commenced. Additionally, CMS Land has committed to investigate the potential for a deep injection well on the Bay Harbor site as an alternative long-term solution to the leachate disposal issue. In 2008, the MDEQ and the EPA granted permits for CMS Land or its wholly owned subsidiary, Beeland Group LLC, to construct and operate an off-site deep injection well in Antrim County, Michigan, to dispose of leachate from Bay Harbor. Certain environmental groups, a local township, and a local county filed lawsuits appealing the permits.permits and seeking an injunction. A temporary restraining order was issued by the trial court. The legal proceeding was stayed in 2009 and can be renewed by either party at any time.
Various claims have been brought against CMS Land or its affiliates, including CMS Energy, alleging environmental damage to property, loss of property value, insufficient disclosure of environmental matters, breach of agreement relating to access, or other matters. In October 2010, CMS Land and other parties received a demand for payment from the EPA in the amount of $7 million, plus interest, whereby the EPA is seeking recovery, as allowed under Superfund, of the EPA’s response costs incurred at the Bay Harbor site. CMS Land communicated to the EPA in November 2010 that it does not believe that this is a valid claim.
CMS Land and CMS Capital, the MDEQ, the EPA, and other parties continue to negotiate the long-term remedy for the Bay Harbor site, including:
the disposal of leachate; | |||
the location and design of collection lines and upstream water diversion systems; | |||
application of criteria for various substances such as mercury; and | |||
other matters that are likely to affect the scope of response activities that CMS Land and CMS Capital may be obligated to undertake. |
CMS Energy has recorded a cumulative charge related to Bay Harbor of $224$225 million, which includes accretion expense. At September 30, 2011,March 31, 2012, CMS Energy had a recorded liability of $82$71 million for its remaining obligations. CMS Energy calculated this liability based on discounted projected costs, using a discount rate of 4.34 percent and an inflation rate of one percent on annual operating and maintenance costs. CMS Energy based the discount rate on the interest rate for 30-year U.S. Treasury securities at December 31, 2010. The undiscounted amount of the remaining obligation is $103$95 million. CMS Energy
expects to pay $8$16 million during the remainder of 2011, $18 million in 2012, $8 million in 2013, $5$4 million in 2014, $4 million in 2015, $5 million in 2016, and the remaining amount thereafter on long-term liquid disposal and operating and maintenance costs.
CMS Energy’s estimate of response activity costs and the timing of expenditures could change if there are additional major changes in circumstances or assumptions, including but not limited to:
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inability to complete the present long-term water disposal | |||
requirements to alter the present long-term water disposal strategy upon expiration of the NPDES permit if the MDEQ or EPA identify a more suitable alternative; | |||
an increase in the number of contamination areas; | |||
different remediation techniques; | |||
the nature and extent of contamination; | |||
inability to reach agreement with the MDEQ or the EPA over additional response activities; | |||
delays in the receipt of requested permits; | |||
delays following the receipt of any requested permits due to legal appeals of third parties; | |||
additional or new legal or regulatory requirements; or | |||
new or different landowner claims. |
Depending on the size of any indemnity obligation or liability under environmental laws, an adverse outcome of this matter could have a material adverse effect on CMS Energy’s liquidity and financial condition and could negatively affect CMS Energy’s financial results. Although a liability for its present estimate of remaining response activity costs has been recorded, CMS Energy cannot predict the ultimate financial impact or outcome of this matter.
Equatorial Guinea Tax Claim:In 2004,January 2002, CMS Energy received a request for indemnification from the purchaser of CMS Oil and Gas. The indemnity claim relates to the 2002 sale of CMS Energy’ssold its oil, gas, and methanol projectsinvestments in Equatorial Guinea and the claim of theGuinea. The government of Equatorial Guinea claims that CMS Energy owes $142 million in taxes, plus interest, in connection with thatthe sale. CMS Energy has concluded that the government’s tax claim is without merit and the purchaser of CMS Oil and Gas submitted a response to the government rejecting the claim.merit. The government of Equatorial Guinea indicated through a request for arbitration in October 2011 that it still intends to pursue its claim. CMS Energy is evaluating this requestvigorously contesting the claim, and cannot predict the financial impact or outcome of this matter.
Consumers’ Electric Utility ContingenciesPanhandle Tax Indemnification: CMS Energy recorded a liability in 2003 for an indemnification provided in conjunction with the sale of Panhandle. As of March 31, 2012, the statute of limitations had expired for this indemnification. Accordingly, CMS Energy eliminated the liability and recognized an after-tax benefit of $7 million in discontinued operations for the three months ended March 31, 2012.
CONSUMERS ELECTRIC UTILITY CONTINGENCIES
Electric Environmental Matters:Consumers’ operations are subject to environmental laws and regulations. Historically, Consumers has generally been able to recover, in customer rates, the costs to operate its facilities in compliance with these laws and regulations.
Cleanup and Solid Waste:Consumers expects to incur remediation and other response activity costs at a number of sites under NREPA. Consumers believes that these costs should be recoverable in rates, but cannot guarantee that outcome. Consumers estimates that its liability for NREPA sites will be between $1 million and $4 million. At September 30, 2011,March 31, 2012, Consumers had a recorded liability of $2$1 million, the minimum amount in the range of its estimated probable NREPA liability.
Consumers is a potentially responsible party at a number of contaminated sites administered under the Superfund. Superfund liability is joint and several. In addition to Consumers, many other creditworthy parties with substantial assets are potentially responsible with respect to the individual sites. In November 2010, Consumers received official notification from the EPA that identified Consumers as a
potentially responsible party at the Kalamazoo River Superfund site. The notification claimed that the EPA has reason to believe Consumers disposed of PCBs and arranged for the disposal and treatment of PCB-containing materials at portions of the site. Consumers responded to the EPA in December 2010, stating that it has no information showing that it disposed of PCBs or arranged for disposal or treatment of PCB-containing material at portions of the site and requesting further information from the EPA before Consumers would commit to perform or finance cleanup activities at the site. In April 2011, Consumers received a follow-up letter from the EPA requesting that Consumers, as a potentially responsible party at the Kalamazoo River Superfund site, agree to participate in a removal action plan along with several other companies for an area of lower Portage Creek. The letter also indicated that under Sections 106 and 107 of Superfund, Consumers may be liable for reimbursement of the EPA’s costs and potential penalties for noncompliance with any unilateral order that the EPA may issue requiring performance under the removal
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Based on its experience, Consumers estimates that its share of the total liability for other known Superfund sites will be between $2 million and $8 million. Various factors, including the number of potentially responsible parties involved with each site, affect Consumers’ share of the total liability. At September 30, 2011,March 31, 2012, Consumers had a recorded liability of $2 million for its share of the total liability at these sites, the minimum amount in the range of its estimated probable Superfund liability.
The timing of payments related to Consumers’ remediation and other response activities at its Superfund and NREPA sites is uncertain. Consumers periodically reviews these cost estimates. Any significant change in the underlying assumptions, such as an increase in the number of sites, different remediation techniques, the nature and extent of contamination, and legal and regulatory requirements, could affect its estimates of NREPA and Superfund liability.
Ludington PCB:In 1998, during routine maintenance activities, Consumers identified PCB as a component in certain paint, grout, and sealant materials at Ludington. Consumers removed and replaced part of the PCB material with non-PCB material. Since proposing a plan to take action with respect to the remaining materials, Consumers has had several communications with the EPA. Consumers is not able to predict when the EPA will issue a final ruling and cannot predict the financial impact or outcome of this matter.
Electric Utility Plant Air Permit Issues and Notices of Violation:In 2007, Consumers received an NOV/FOV from the EPA alleging that fourteen utility boilers exceeded the visible emission limits in their associated air permits. Consumers has responded formally to the NOV/FOV denying the allegations. In addition, in 2008, Consumers received an NOV for three of its coal-fueled facilities alleging, among other things, violations of NSR PSD regulations relating to ten projects from 1986 to 1998 allegedly subject to review under the NSR. The EPA has alleged that some utilities have classified incorrectly major plant modifications as RMRR rather than seeking permits from the EPA or state regulatory agencies to modify their plants. Consumers responded to the information requests from the EPA on this subject in the past. Consumers believes that it has properly interpreted the requirements of RMRR.
Consumers is engaged in discussions with the EPA on all of these matters. Depending upon the outcome of these discussions, the EPA could bring legal action against Consumers and/or Consumers could be required to install additional pollution control equipment at some or all of its coal-fueled electric generating plants, surrender emission allowances, engage in Supplemental Environmental Projects, and/or
pay fines. Additionally, Consumers would need to assess the viability of continuing operations at certain plants. The potential costs relating to these matters could be material and the extent of cost recovery cannot be reasonably estimated. Although Consumers cannot predict the financial impact or outcome of these matters, Consumers expects that it would be able to recover some or all of the costs in rates, consistent with the recovery of other reasonable costs of complying with environmental laws and regulations.
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In 1997, a U.S. Court of Appeals decision confirmed that the DOE was to begin accepting deliveries of spent nuclear fuel for disposal by January 1998. Subsequent U.S. Court of Appeals litigation, in which Consumers and other utilities participated, hashad not been successful in producing more specific relief for the DOE’s failure to accept the spent nuclear fuel. A number of court decisions supporthave supported the right of utilities to pursue damage claims in the U.S. Court of Claims against the DOE for failure to take delivery of spent nuclear fuel. Consumers filed a complaint in 2002.
In July 2011, Consumers entered into an agreement with the DOE to settle its claims for $120 million. In September 2011, Consumers filed an application with the MPSC regarding the regulatory treatment of the settlement amount. For further information, see Note 4,4: Regulatory Matters, “Consumers’ Electric Utility — Big Rock Decommissioning.”
As part of the agreement with the DOE, Consumers settled its liability to the DOE to fund the disposal of spent nuclear fuel used at Palisades and Big Rock before 1983. This liability, which totaled $163 million, comprised $44 million collected from customers for spent nuclear fuel disposal fees and $119 million of interest accrued on those fees, and was to be paid no later than when the DOE began accepting delivery of spent nuclear fuel. CMS Energy and Consumers classified the liability as long-term debt inon their consolidated balance sheets.
Following the settlement, Consumers terminated its letter of credit to Entergy, which Consumers had provided as security for its retained obligation to the DOE in connection with its sale of Palisades and the Big Rock ISFSI to Entergy in 2007.
In its November 2010 electric rate case order, the MPSC had directed Consumers to establish an independent trust fund for the amount payable to the DOE. Following its settlement with the DOE, Consumers petitioned the MPSC to relieve it of the obligation to fund the trust.
Consumers’ Gas Utility ContingenciesCONSUMERS GAS UTILITY CONTINGENCIES
Gas Environmental Matters:Consumers expects to incur remediation and other response activity costs at a number of sites under the NREPA. These sites include 23 former MGP facilities. Consumers operated the facilities on these sites for some part of their operating lives. For some of these sites, Consumers has no present ownership interest or may own only a portion of the original site.
At September 30, 2011,March 31, 2012, Consumers estimatedhad a recorded liability of $128 million for its remaining obligations for these sites. This amount represents the present value of long-term projected costs, using a discount rate of 2.57 percent and an inflation rate of 2.5 percent. Consumers based the discount rate on the interest rate for 20-year U.S. Treasury securities at December 31, 2011. The undiscounted amount of the remaining obligation is $141 million. Consumers expects to incur remediation and other response activity costs to be between $28 millionduring the remainder of 2012 and $42 million. Generally, Consumers has been able to recover mostin each of its costs to date through proceeds from insurance settlements and customer rates.
In Millions | ||||||||||||||||||||
| ||||||||||||||||||||
2012 | 2013 | 2014 | 2015 | 2016 | ||||||||||||||||
| ||||||||||||||||||||
CONSUMERS | ||||||||||||||||||||
Remediation and other response activity costs | $ 11 | $ 11 | $ 11 | $ 20 | $ 11 | |||||||||||||||
|
Consumers periodically reviews these cost estimates. Any significant change in the underlying assumptions, such as an increase in the number of sites, changes in remediation techniques, or legal and regulatory requirements, could affect Consumers’ estimates of annual response activity costs and the MGP liability.
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CONSUMERS OTHER CONTINGENCIES
GUARANTEES
Presented in the following table are CMS Energy’s and Consumers’ guarantees at September 30, 2011:
In Millions | ||||||||||||||||
Issue | Expiration | Maximum | Carrying | |||||||||||||
Guarantee Description | Date | Date | Obligation | Amount | ||||||||||||
CMS Energy, including Consumers | ||||||||||||||||
Indemnity obligations from asset sales and other agreements | Various | Various through September 2029 | $ | 512 | 1 | $ | 21 | |||||||||
Guarantees and put options2 | Various | Various through March 2021 | 63 | 1 | ||||||||||||
Consumers | ||||||||||||||||
Guarantees and indemnity obligations | Various | Various through September 2029 | $ | 30 | $ | 1 | ||||||||||
In Millions | ||||||||||||
| ||||||||||||
Guarantee Description | Issue Date | Expiration Date | Maximum Obligation | Carrying Amount | ||||||||
| ||||||||||||
CMS ENERGY,INCLUDING CONSUMERS | ||||||||||||
Indemnity obligations from asset sales and other agreements | Various | Various through September 2029 | $ 512 | 1 | $ 16 | |||||||
Guarantees and put options2 | Various | Various through March 2021 | 60 | 1 | ||||||||
| ||||||||||||
CONSUMERS | ||||||||||||
Indemnity obligations and other guarantees | Various | Various through September 2029 | $ 30 | $ 1 | ||||||||
|
1 | The majority of this amount arises from stock and asset sale agreements under which CMS Energy or a subsidiary of CMS Energy, other than Consumers, indemnified the purchaser for losses resulting from various matters, including claims related to tax disputes, claims related to power purchase agreements, and defects in title to the assets or stock sold to the purchaser by CMS Energy subsidiaries. Except for items described elsewhere in this Note, CMS Energy believes the likelihood of material loss to be remote for the indemnity obligations not recorded as liabilities. |
2 | At March 31, 2012, the carrying amount of CMS Land’s put option agreements with certain Bay Harbor property owners was $1 million. If CMS Land is required to purchase a Bay Harbor property under a put option agreement, it may sell the property to recover the amount paid under the put option agreement. |
Presented in the following table is additional information regarding CMS Energy’s and Consumers’ guarantees:
Guarantee Description | How Guarantee Arose | Events That Would Require Performance | ||
CMS | ||||
Indemnity obligations from asset sales and other agreements | Stock and asset sale agreements | Findings of misrepresentation, breach of warranties, tax claims, and other specific events or circumstances | ||
Guarantees | Normal operating activity | |||
Nonperformance or non-payment by a subsidiary under a related contract | ||||
Put options | Bay Harbor remediation efforts | |||
Owners exercising put options requiring CMS Land to purchase property | ||||
| ||||
Guarantees and indemnity obligations | Normal operating activity | Nonperformance or claims made by party under a related contract | ||
CMS Energy, Consumers, and certain other subsidiaries of CMS Energy also enter into various agreements containing tax and other indemnity provisions for which they are unable to estimate the maximum potential obligation. These factors include unspecified exposure under certain agreements. CMS Energy and Consumers consider the likelihood that they would be required to perform or incur substantial losses related to these indemnities to be remote.
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4: | REGULATORY MATTERS |
Rate matters are critical to Consumers. The Michigan Attorney General, ABATE, the MPSC Staff, and certain other parties typically participate in MPSC proceedings concerning Consumers and often appeal significant MPSC orders. Depending upon the specific issues, the outcomes of rate cases and proceedings, including judicial proceedings challenging MPSC orders or other actions, could have a material adverse effect on CMS Energy’s and Consumers’ liquidity, financial condition, and results of operations. Consumers cannot predict the outcome of these proceedings.
Consumers’ Electric Utility
In November 2011, Consumers filed testimony and exhibits with the MPSC in support of a self-implemented annual rate increase of $147 million. In December 2011, the following table are the componentsMPSC issued an order stating that it found good cause to prevent implementation of the requestedany amount over $118 million. Accordingly, Consumers self-implemented an annual rate increase:
In Millions | ||||
Components of the rate increase | ||||
Investment in rate base | $ | 81 | ||
Depreciation and property taxes | 70 | |||
Impact of sales declines | 50 | |||
Impact of reduced funding for customer assistance programs1 | 13 | |||
Reduced operating and maintenance costs | (17 | ) | ||
Cost of capital | (2 | ) | ||
Total | $ | 195 | ||
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Big Rock Nuclear Decommissioning:The MPSC and FERC regulate the recovery of Consumers’ costs to decommission Big Rock. Subsequent to 2000, Consumers stopped funding a Big Rock decommissioning trust fund because the collection period for an MPSC-authorized decommissioning surcharge expired.
In 2010, the MPSC concluded that certain revenues collected during a statutory rate freeze from 2001 through 2003 should have been deposited in the Big Rock decommissioning trust fund and ordered Consumers to refund $85 million of revenue collected in excess of decommissioning costs plus interest. Consumers completed this refund in 2011. Consumers filed an appeal with the Michigan Court of Appeals in 2010 to dispute the MPSC’s conclusion that the collections received during the rate freeze should be subject to refund. In January 2012, the Michigan Court of Appeals rejected Consumers’ appeal. In March 2012, Consumers filed an appeal with the Michigan Supreme Court to dispute this decision.
Consumers has an $85 million regulatory asset recorded for $30 million it paid to Entergy to assume ownership responsibility for the Big Rock ISFSI and for $55 million of nuclear fuel storage costs it incurred as a result of the DOE’s failure to accept nuclear fuel. Consumers filed a complaint against the DOE in 2002 for this failure. In July 2011, PSCR Plan,Consumers entered into an agreement with minor exceptions.
Electric and Gas Revenue Decoupling Mechanism:Mechanisms:The MPSC’s 2009 electric rate case order authorized Consumers to implement an electric revenue decoupling mechanism, subject to certain conditions. This decoupling mechanism, which was extended through November 2011 in the 2010 electric rate case order, allowsallowed Consumers to adjust future electric rates to compensate for changes in sales volumes resulting from the difference between the level of average sales per customer adopted in the order and actual average sales per customer. Various parties have filed appeals concerning theConsumers’ electric revenue decoupling mechanism.
In March 2011, Consumers filed its first reconciliation of the electric revenue decoupling mechanism with the MPSC, requesting recovery of $27 million from customers for the period December 2009 through November 2010. The MPSC Staff and intervenors are opposing this recovery.
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In Millions | ||||||||||||
Increase Originally | ||||||||||||
Increase Authorized | Requested by | |||||||||||
Components of the rate increase | by the MPSC | Consumers | Difference | |||||||||
Investment in rate base | $ | 29 | $ | 30 | $ | (1 | ) | |||||
Impact of sales declines | 15 | 4 | 11 | |||||||||
Operating and maintenance costs | 2 | 16 | (14 | ) | ||||||||
Cost of capital | (15 | ) | 5 | (20 | ) | |||||||
Total | $ | 31 | $ | 55 | $ | (24 | ) | |||||
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In Millions | ||||
Components of the rate increase | ||||
Investment in rate base | $ | 22 | ||
Impact of reduced funding for customer assistance programs1 | 19 | |||
Cost of capital | 10 | |||
Impact of sales declines | 2 | |||
Reduced operating and maintenance costs | (4 | ) | ||
Total | $ | 49 | ||
In March 2012, Consumers filed its second reconciliation of the electric revenue decoupling mechanism, requesting recovery of $32 million from customers for the period December 2010 through November 2011.
In April 2012, the Michigan Court of Appeals ruled in an appeal filed by ABATE that disputed the MPSC’s decision to authorize an electric revenue decoupling mechanism for Detroit Edison. The Court concluded that the MPSC lacks statutory authority to approve or direct the use of a revenue decoupling mechanism for electric providers. Consumers cannot predict whether this decision will be appealed to the Michigan Supreme Court or the timing or outcome of any such appeal. As a result, Consumers determined that it no longer met the accounting criteria for recognition of a regulatory asset under an
alternative revenue program, and wrote off its fixed-price purchase guidelines.
The MPSC’s 2009 gas rate case order authorized Consumers to implement a gas revenue decoupling mechanism, subject to certain conditions. This decoupling mechanism, which was extended in the 2010 gas rate case order, allows Consumers to adjust future gas rates to compensate for changes in sales volumes resulting from the difference between the level of average sales per customer adopted in the order and actual average weather-adjusted sales per customer. In September 2011, Consumers filed its first reconciliation of the gas revenue decoupling mechanism with the MPSC, requesting recovery of $16 million from customers for the period June 2010 through May 2011.
At September 30, 2011,March 31, 2012, Consumers had a $16$28 million non-current regulatory asset recorded for gas revenue decoupling.
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In October 2011, Consumers filed an application for the biennial review and approval of its renewable energy plan. In March 2012, Consumers filed a settlement agreement with the MPSC, proposing to reduce the renewable energy surcharge by an annual amount of $3 million, to $20 million, reflecting a reduction in expected costs to comply with renewable energy requirements.
For exceeding savings targets under its gas and electric energy optimization plans during 2011, Consumers will request the MPSC’s approval to collect $15 million, the maximum incentive, in the energy optimization reconciliation to be filed in April 2012.
5: | FINANCINGS |
Presented in the following table is a summary of major long-term debt transactions during the ninethree months ended September 30, 2011:
Principal | Issue/Retirement | |||||||||||||||
(In Millions) | Interest Rate | Date | Maturity Date | |||||||||||||
Debt Issuances | ||||||||||||||||
CMS Energy | ||||||||||||||||
Senior notes | $ | 250 | 2.75 | % | May 2011 | May 2014 | ||||||||||
Consumers | ||||||||||||||||
Tax-exempt bonds1 | 68 | Variable | May 2011 | April 2018 | ||||||||||||
Tax-exempt bonds1 | 35 | Variable | May 2011 | April 2035 | ||||||||||||
Total | $ | 353 | ||||||||||||||
Debt Retirements | ||||||||||||||||
CMS Energy | ||||||||||||||||
Senior notes | $ | 146 | 8.5 | % | April 2011 | April 2011 | ||||||||||
Consumers | ||||||||||||||||
Nuclear fuel disposal liability2 | 163 | Variable | July 2011 | — | ||||||||||||
Tax-exempt bonds1 | 68 | Variable | May 2011 | April 2018 | ||||||||||||
Tax-exempt bonds1 | 35 | Variable | May 2011 | April 2035 | ||||||||||||
Total | $ | 412 | ||||||||||||||
| ||||||||||||||||
Principal (In Millions) | Interest Rate | Issue/Retirement Date | Maturity Date | |||||||||||||
| ||||||||||||||||
Debt Issuances | ||||||||||||||||
CMS ENERGY | ||||||||||||||||
Senior notes | $ | 300 | 5.05% | March 2012 | March 2022 | |||||||||||
Term loan facility1,3 | 30 | variable | February 2012 | December 2016 | ||||||||||||
| ||||||||||||||||
Total | $ | 330 | ||||||||||||||
| ||||||||||||||||
Debt Retirements | ||||||||||||||||
CMS ENERGY | ||||||||||||||||
Contingently convertible senior notes2 | $ | 73 | 2.875% | January 2012 | December 2024 | |||||||||||
Trust Preferred Securities4 | 29 | 7.75% | February 2012 | July 2027 | ||||||||||||
CONSUMERS | ||||||||||||||||
FMB | 300 | 5.00% | February 2012 | February 2012 | ||||||||||||
| ||||||||||||||||
Total | $ | 402 | ||||||||||||||
|
1 | In December 2011, CMS Energy entered into a $180 million term loan credit agreement that provides for delayed draws through July 20, 2012. Outstanding borrowings will bear interest at an annual interest rate of LIBOR plus 2.5 percent. |
2 | CMS Energy’s contingently convertible notes. See the “Contingently Convertible Securities” section in this Note for further discussion of the conversions. |
3 | CMS Energy used these proceeds to retire the 7.75 percent Trust Preferred Securities. |
4 | In January 2012, CMS Energy called all of its outstanding Trust Preferred Securities. |
Revolving Credit Facilities:The following secured revolving credit facilities with banks were available at September 30, 2011:
In Millions | ||||||||||||||||
Letters of Credit | ||||||||||||||||
Expiration Date | Amount of Facility | Amount Borrowed | Outstanding | Amount Available | ||||||||||||
CMS Energy | ||||||||||||||||
March 31, 20161 | $ | 550 | $ | — | $ | 3 | $ | 547 | ||||||||
Consumers | ||||||||||||||||
March 31, 20162, 3 | $ | 500 | $ | — | $ | 1 | $ | 499 | ||||||||
August 9, 20133 | 150 | — | — | 150 | ||||||||||||
September 9, 20143,4 | 30 | — | 30 | — | ||||||||||||
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In Millions | ||||||||||||||||
| ||||||||||||||||
Expiration Date | Amount of Facility | Amount Borrowed | Letters of Credit Outstanding | Amount Available | ||||||||||||
| ||||||||||||||||
CMS ENERGY | ||||||||||||||||
March 31, 20161 | $ | 550 | $ | - | $ | 3 | $ | 547 | ||||||||
| ||||||||||||||||
CONSUMERS | ||||||||||||||||
March 31, 20162 | $ | 500 | $ | - | $ | 1 | $ | 499 | ||||||||
August 9, 20132,3 | 150 | - | - | 150 | ||||||||||||
September 9, 20142 | 30 | - | 30 | - | ||||||||||||
|
1 | Obligations under this facility are secured by Consumers common stock. CMS Energy’s average borrowings during the three months ended March 31, 2012 totaled $20 million, with a weighted-average annual interest rate of 2.28 percent, representing LIBOR plus 2.00 percent. |
2 | Obligations under this facility are secured by FMBs of Consumers. |
3 | In April 2012, the expiration date was extended to April 2017. |
Short-term Borrowings:Under Consumers’ revolving accounts receivable sales program, Consumers may transfer up to $250 million of accounts receivable, subject to certain eligibility requirements. These transactions are accounted for as short-term secured borrowings. At September 30, 2011,March 31, 2012, $250 million of
accounts receivable were eligible for transfer, and no accounts receivable had been transferred under the program. During the ninethree months ended September 30, 2011, Consumers had noMarch 31, 2012, Consumers’ average short-term borrowings under this program.
Contingently Convertible Securities:Presented in the following table are the significant terms of CMS Energy’s contingently convertible securities at September 30, 2011:
Outstanding | Adjusted Conversion | Adjusted | ||||||||||||||
Security | Maturity | (In Millions) | Price | Trigger Price | ||||||||||||
2.875% senior notes | 2024 | $ | 288 | $ | 12.67 | $ | 15.20 | |||||||||
5.50% senior notes | 2029 | 172 | 14.26 | 18.54 | ||||||||||||
| ||||||||||||||||
Security | Maturity | Outstanding (In Millions) | Adjusted Conversion Price | Adjusted Trigger Price | ||||||||||||
| ||||||||||||||||
2.875% senior notes | 2024 | $ | 153 | $ | 12.40 | $ | 14.88 | |||||||||
5.50% senior notes | 2029 | 172 | 14.08 | 18.31 | ||||||||||||
|
During 20 of the last 30 trading days ended September 30, 2011,March 31, 2012, the adjusted trigger-price contingencies were met for both series of the contingently convertible senior notes, and as a result, the senior notes are convertible at the option of the securitynote holders for the three months ending December 31, 2011.
Presented in the following table are details about conversions of contingently convertible securities during the ninethree months ended September 30, 2011:
3.375%contingently | Conversion Value | Cash Paid on | ||||||||||||||||
convertible senior | Principal Converted | per $1,000 of | Common Stock Issued | Settlement | ||||||||||||||
notes due 2023 | Conversion Date | (In Millions) | principal | on Settlement | (In Millions) | |||||||||||||
Voluntary conversion | January 2011 | $ | 4 | $ | 1,994.21 | 197,472 | $ | 4 |
| ||||||||||||||||||||
Series | Conversion Date | Principal Converted (In Millions) | Conversion Value per $1,000 of principal | Shares of Common Stock Issued on Settlement | Cash Paid on Settlement (In Millions) | |||||||||||||||
| ||||||||||||||||||||
2.875% senior notes due 2024 | January 2012 | 73 | 1,738.99 | 2,464,138 | 73 | |||||||||||||||
|
In March 2012, CMS Energy called all of its outstanding 2.875 percent contingently convertible senior notes. In April, holders tendered for conversion the remaining outstanding notes with a principal amount of $153 million. Notes settled as of April 25, 2012, with a principal amount of $102 million, had an average conversion value of $1,771.76 per $1,000 principal amount of convertible note. CMS Energy issued 3,584,558 shares of its common stock and paid $102 million cash on settlement of these conversions. The remaining tendered notes with a principal amount of $51 million will be settled in late April 2012.
Dividend Restrictions:Under provisions of CMS Energy’s senior notes indenture, at September 30, 2011,March 31, 2012, payment of common stock dividends by CMS Energy was limited to $1.2 billion.
Under the provisions of its articles of incorporation, at September 30, 2011,March 31, 2012, Consumers had $510$454 million of unrestricted retained earnings available to pay common stock dividends to CMS Energy. Provisions of the Federal Power Act and the Natural Gas Act appear to restrict dividends payable by Consumers to the amount of Consumers’ retained earnings. Several decisions from FERC suggest that under a variety of circumstances common stock dividends from Consumers would not be limited to amounts in Consumers’ retained earnings. Any decision by Consumers to pay common stock dividends in excess of retained earnings would be based on specific facts and circumstances and would result only after a formal regulatory filing process.
For the ninethree months ended September 30, 2011,March 31, 2012, CMS Energy received $292$115 million of common stock dividends from Consumers.
65
6: | EARNINGS PER SHARE – CMS ENERGY |
In Millions, Except Per Share Amounts | ||||||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30 | 2011 | 2010 | 2011 | 2010 | ||||||||||||
Income Available to Common Stockholders | ||||||||||||||||
Income from continuing operations | $ | 140 | $ | 146 | $ | 374 | $ | 335 | ||||||||
Less income attributable to noncontrolling interests | 1 | 1 | 2 | 3 | ||||||||||||
Less charge for deferred issuance costs on preferred stock | — | 8 | — | 8 | ||||||||||||
Less preferred stock dividends | — | 3 | — | 8 | ||||||||||||
Income from Continuing Operations Available to Common Stockholders — Basic and Diluted | $ | 139 | $ | 134 | $ | 372 | $ | 316 | ||||||||
Average Common Shares Outstanding | ||||||||||||||||
Weighted average shares — basic | 251.3 | 229.0 | 250.5 | 228.4 | ||||||||||||
Add dilutive contingently convertible securities | 11.3 | 24.9 | 11.4 | 21.3 | ||||||||||||
Add dilutive non-vested stock awards and options | 0.6 | 0.2 | 0.4 | 0.1 | ||||||||||||
Add dilutive convertible debentures | 0.7 | 0.6 | — | — | ||||||||||||
Weighted average shares — diluted | 263.9 | 254.7 | 262.3 | 249.8 | ||||||||||||
Income from Continuing Operations per Average Common Share Available to Common Stockholders | ||||||||||||||||
Basic | $ | 0.55 | $ | 0.58 | $ | 1.48 | $ | 1.38 | ||||||||
Diluted | 0.53 | 0.53 | 1.42 | 1.26 | ||||||||||||
In Millions, Except Per Share Amounts | ||||||||
| ||||||||
Three Months Ended March 31 | 2012 | 2011 | ||||||
| ||||||||
Income Available to Common Stockholders | ||||||||
Income from Continuing Operations Available to Common Stockholders – Basic and Diluted | $ | 60 | $ | 133 | ||||
| ||||||||
Average Common Shares Outstanding | ||||||||
Weighted average shares – basic | 255.6 | 250.0 | ||||||
Add dilutive contingently convertible securities | 10.4 | 10.7 | ||||||
Add dilutive non-vested stock awards and options | 0.8 | 0.3 | ||||||
Add dilutive convertible debentures | - | 0.7 | ||||||
| ||||||||
Weighted average shares – diluted | 266.8 | 261.7 | ||||||
| ||||||||
Income from Continuing Operations per Average Common Share Available to Common Stockholders | ||||||||
Basic | $ | 0.23 | $ | 0.53 | ||||
Diluted | 0.22 | 0.51 | ||||||
|
Contingently Convertible SecuritiesCONTINGENTLY CONVERTIBLE SECURITIES
When CMS Energy has earnings from continuing operations, its contingently convertible securities dilute EPS to the extent that the conversion value of a security, which is based on the average market price of CMS Energy common stock, exceeds the principal value of that security.
Stock Options and WarrantsNON-VESTED STOCK AWARDS
CMS Energy’s non-vested stock awards are composed of participating and non-participating securities. The participating securities accrue cash dividends when common stockholders receive dividends. Since the recipient is not required to return the dividends to CMS Energy if the recipient forfeits the award, the non-vested stock awards are considered participating securities. As such, the participating non-vested stock awards were included in the computation of basic EPS. The non-participating securities accrue stock dividends that vest concurrently with the stock award. If the recipient forfeits the award, the stock dividends accrued on the non-participating securities are also forfeited. Accordingly, the non-participating awards and stock dividends were included in the computation of diluted EPS, but not basic EPS.
Convertible DebenturesCONVERTIBLE DEBENTURES
For the ninethree months ended September 30, 2011 and the nine months ended September 30, 2010,March 31, 2012, CMS Energy’s 7.75 percent convertible subordinated debenturesTrust Preferred Securities would have increased diluted earnings
66
In Millions | ||||||||
Nine Months Ended | ||||||||
September 30 | 2011 | 2010 | ||||||
Increase to numerator from assumed reduction in interest expense | $ | 1 | $ | 1 | ||||
Increase to denominator from assumed conversion of debentures into common shares | 0.7 | 0.7 | ||||||
In Millions | ||||
Three Months Ended March 31 | 2012 | |||
Increase to numerator from assumed reduction in interest expense | $ | 1 | ||
Increase to denominator from assumed conversion of debentures into common shares | 0.5 | |||
7: | FINANCIAL INSTRUMENTS |
The carrying amounts of CMS Energy’s and Consumers’ cash, cash equivalents, current accounts and notes receivable, short-term investments, and current liabilities approximate their fair values because of their short-term nature. Presented in the following table are the cost or carrying amounts and fair values, by level within the fair value hierarchy, of CMS Energy’s and Consumers’ long-term financial instruments:
In Millions | ||||||||||||||||
September 30, 2011 | December 31, 2010 | |||||||||||||||
Cost or | Cost or | |||||||||||||||
Carrying | Carrying | |||||||||||||||
Amount | Fair Value | Amount | Fair Value | |||||||||||||
CMS Energy, including Consumers | ||||||||||||||||
Securities held to maturity | $ | 7 | $ | 8 | $ | 5 | $ | 6 | ||||||||
Securities available for sale | 113 | 113 | 90 | 90 | ||||||||||||
Notes receivable1 | 439 | 459 | 386 | 407 | ||||||||||||
Long-term debt2 | 7,153 | 8,093 | 7,174 | 7,861 | ||||||||||||
Consumers | ||||||||||||||||
Securities available for sale | $ | 81 | $ | 105 | $ | 64 | $ | 90 | ||||||||
Long-term debt3 | 4,335 | 4,901 | 4,525 | 4,891 | ||||||||||||
In Millions | ||||||||||||||||||||||||||||
| ||||||||||||||||||||||||||||
March 31, 2012 | December 31, 2011 | |||||||||||||||||||||||||||
| ||||||||||||||||||||||||||||
Cost or | Fair Value | Cost or | ||||||||||||||||||||||||||
Carrying Amount | Total | Level 1 | Level 2 | Level 3 | Carrying Amount | Fair Value | ||||||||||||||||||||||
| ||||||||||||||||||||||||||||
CMS ENERGY,INCLUDING CONSUMERS | ||||||||||||||||||||||||||||
Securities held to maturity | $ | 8 | $ | 9 | $ | - | $ | 9 | $ | - | $ | 7 | $ | 7 | ||||||||||||||
Securities available for sale | 126 | 126 | 126 | - | - | 113 | 113 | |||||||||||||||||||||
Notes receivable1 | 477 | 504 | - | - | 504 | 480 | 504 | |||||||||||||||||||||
Long-term debt2 | 7,007 | 7,972 | - | 7,972 | - | 7,073 | 8,025 | |||||||||||||||||||||
| ||||||||||||||||||||||||||||
CONSUMERS | ||||||||||||||||||||||||||||
Securities available for sale | $ | 90 | $ | 114 | $ | 114 | $ | - | $ | - | $ | 81 | $ | 109 | ||||||||||||||
Long-term debt3 | 4,016 | 4,576 | - | 4,576 | - | 4,326 | 4,882 | |||||||||||||||||||||
|
1 | Includes current portion of notes receivable of $24 million at March 31, 2012 and $19 million at December 31, 2011. |
2 | Includes current portion of long-term debt of $814 million at March 31, 2012 and $1,033 million at December 31, 2011. |
3 | Includes current portion of long-term debt of $39 million at March 31, 2012 and $339 million at December 31, 2011. |
Notes receivable consist of EnerBank’s fixed-rate installment loans. EnerBank estimates the fair value of these loans using a discounted cash flows technique that incorporates market interest rates as well as assumptions about the remaining life of the loans and credit risk. Fair values for impaired loans are estimated using discounted cash flows or underlying collateral values.
CMS Energy and Consumers estimate the fair value of their long-term debt using quoted prices from market trades of the debt, if available. In the absence of quoted prices, CMS Energy and Consumers calculate market yields and prices for the debt using a matrix method that incorporates market data for similarly rated debt. Depending on the information available, other valuation techniques may be used that rely on internal assumptions and models. CMS Energy includes the value of the conversion features in estimating the fair value of its convertible debt, and incorporates, as appropriate, information on the market prices of CMS Energy common stock.
67
Presented in the following table are CMS Energy’s and Consumers’ investment securities:
In Millions | ||||||||||||||||||||||||||||||||
September 30, 2011 | December 31, 2010 | |||||||||||||||||||||||||||||||
Unrealized | Unrealized | Unrealized | Unrealized | |||||||||||||||||||||||||||||
Cost | Gains | Losses | Fair Value | Cost | Gains | Losses | Fair Value | |||||||||||||||||||||||||
CMS Energy, including consumers | ||||||||||||||||||||||||||||||||
Available for sale | ||||||||||||||||||||||||||||||||
SERP | ||||||||||||||||||||||||||||||||
Mutual fund | $ | 88 | $ | — | $ | 1 | $ | 87 | $ | 62 | $ | — | $ | — | $ | 62 | ||||||||||||||||
State and municipal bonds | 25 | 1 | — | 26 | 28 | — | — | 28 | ||||||||||||||||||||||||
Held to maturity | ||||||||||||||||||||||||||||||||
Debt securities | 7 | 1 | — | 8 | 5 | 1 | — | 6 | ||||||||||||||||||||||||
Consumers | ||||||||||||||||||||||||||||||||
Available for sale | ||||||||||||||||||||||||||||||||
SERP | ||||||||||||||||||||||||||||||||
Mutual fund | $ | 57 | $ | — | $ | — | $ | 57 | $ | 39 | $ | — | $ | — | $ | 39 | ||||||||||||||||
State and municipal bonds | 17 | — | — | 17 | 17 | — | — | 17 | ||||||||||||||||||||||||
CMS Energy common stock | 7 | 24 | — | 31 | 8 | 26 | — | 34 | ||||||||||||||||||||||||
In Millions | ||||||||||||||||||||||||||||||||
| ||||||||||||||||||||||||||||||||
March 31, 2012 | December 31, 2011 | |||||||||||||||||||||||||||||||
| ||||||||||||||||||||||||||||||||
Cost | Unrealized Gains | Unrealized Losses | Fair Value | Cost | Unrealized Gains | Unrealized Losses | Fair Value | |||||||||||||||||||||||||
| ||||||||||||||||||||||||||||||||
CMS ENERGY,INCLUDING CONSUMERS |
| |||||||||||||||||||||||||||||||
Available for sale | ||||||||||||||||||||||||||||||||
SERP | ||||||||||||||||||||||||||||||||
Mutual funds | $ 126 | $ - | $ - | $ 126 | $ 113 | $ - | $ - | $ 113 | ||||||||||||||||||||||||
Held to maturity | ||||||||||||||||||||||||||||||||
Debt securities | 8 | 1 | - | 9 | 7 | - | - | 7 | ||||||||||||||||||||||||
| ||||||||||||||||||||||||||||||||
CONSUMERS | ||||||||||||||||||||||||||||||||
Available for sale | ||||||||||||||||||||||||||||||||
SERP | ||||||||||||||||||||||||||||||||
Mutual funds | $ 85 | $ - | $ - | $ 85 | $ 74 | $ - | $ - | $ 74 | ||||||||||||||||||||||||
CMS Energy common stock | 5 | 24 | - | 29 | 7 | 28 | - | 35 | ||||||||||||||||||||||||
|
The mutual fundfunds classified as available for sale is a short-term,are fixed-income fund.funds of varying maturities. During the ninethree months ended September 30, 2011,March 31, 2012, CMS Energy contributed $27$13 million to the SERP, which included a contribution of $20$9 million by Consumers. The contributions were used to acquire additional shares in the mutual fund. State and municipal bonds classified as available for sale consist of investment grade state and municipal bonds.funds. Debt securities classified as held to maturity consist primarily of mortgage-backed securities held by EnerBank, as well as state and municipal bonds held by EnerBank.
In Millions | ||||||||||||||
Three months ended | Nine months ended | |||||||||||||
September 30 | 2011 | 2010 | 2011 | 2010 | ||||||||||
CMS Energy, including Consumers | ||||||||||||||
Proceeds from sales of investment securities1 | $ | 1 | $ — | $ | 2 | $ | 1 | |||||||
Consumers | ||||||||||||||
Proceeds from sales of investment securities1 | $ | 1 | $ — | $ | 1 | $ | — | |||||||
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8: | DERIVATIVE INSTRUMENTS |
In Millions | ||||||||
CMS Energy, | ||||||||
including Consumers | Consumers | |||||||
Due one year or less | $ | 2 | $ | 1 | ||||
Due after one year through five years | 9 | 6 | ||||||
Due after five years through ten years | 12 | 8 | ||||||
Due after ten years | 3 | 2 | ||||||
Total | $ | 26 | $ | 17 | ||||
Commodity Price Risk: In order to support ongoing operations, CMS Energy and Consumers enter into contracts for the future purchase and sale of various commodities, such as electricity, natural gas, and coal. These forward contracts are generally long-term in nature and result in physical delivery of the commodity at a contracted price. Most of these contracts are not subject to derivative accounting because:
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. |
Consumers’ coal purchase contracts are not derivatives because there is not an active market for the coal they purchase.it purchases. If an active market for coal develops in the future, some of these contracts may qualify as derivatives. Since Consumers is subject to regulatory accounting, the resulting fair value gains and losses would be deferred as regulatory assets or liabilities and would not affect net income.
Consumers also uses FTRs to manage price risk related to electricity transmission congestion. An FTR is a financial instrument that entitles its holder to receive compensation or requires its holder to remit payment for congestion-related transmission charges. FTRs are accounted for as derivatives. Under regulatory accounting, all changes in fair value associated with these instruments are deferred as regulatory assets or liabilities until the instruments are settled.
69
The fair valuesvalue of CMS Energy’s commodity contracts not designated as hedging instruments and recorded in other assets was $3 million at March 31, 2012 and December 31, 2011. The fair value of Consumers’ derivative instruments:
In Millions | ||||||||||||||||||||||||
Derivative Assets | Derivative Liabilities | |||||||||||||||||||||||
Balance | Fair Value at | Balance | Fair Value at | |||||||||||||||||||||
Sheet | September 30, | December 31, | Sheet | September 30, | December 31, | |||||||||||||||||||
Location | 2011 | 2010 | Location | 2011 | 2010 | |||||||||||||||||||
CMS Energy, including Consumers | ||||||||||||||||||||||||
Derivatives not designated as hedging instruments | ||||||||||||||||||||||||
Commodity contracts1 | Other assets | $ | 2 | $ | 1 | Other liabilities2 | $ | 3 | $ | 4 | ||||||||||||||
Consumers | ||||||||||||||||||||||||
Derivatives not designated as hedging instruments | ||||||||||||||||||||||||
Commodity contracts | Other assets | $ | 2 | $ | 1 | Other liabilities | $ | — | $ | — | ||||||||||||||
Presented in the following table is the effect on CMS Energy’s consolidated statements of income of its derivatives not designated as hedging instruments:
In Millions | ||||||||||||||||
Amount of Gain (Loss) on Derivatives Recognized in Income | ||||||||||||||||
Three Months Ended September 30 | Nine Months Ended September 30 | |||||||||||||||
Location of Gain (Loss) on Derivatives Recognized in Income | 2011 | 2010 | 2011 | 2010 | ||||||||||||
CMS Energy | ||||||||||||||||
Commodity contracts | ||||||||||||||||
Operating revenue | $ | (1 | ) | $ | 2 | $ | (1 | ) | $ | 5 | ||||||
Fuel for electric generation | — | 1 | — | 3 | ||||||||||||
Purchased and interchange power | — | 1 | — | 2 | ||||||||||||
Total CMS Energy | $ | (1 | ) | $ | 4 | $ | (1 | ) | $ | 10 | ||||||
In Millions | ||||||||||||
| ||||||||||||
Location of Gain (Loss) on Derivatives Recognized in Income | Amount of Gain (Loss) on Derivatives Recognized in Income | |||||||||||
| ||||||||||||
Three Months Ended March 31 | 2012 | 2011 | ||||||||||
| ||||||||||||
CMS ENERGY | ||||||||||||
Commodity contracts | ||||||||||||
Operating revenue | $ 4 | $ 1 | ||||||||||
Fuel for electric generation | (2 | ) | - | |||||||||
Purchased and interchange power | (1 | ) | - | |||||||||
| ||||||||||||
Total CMS Energy | $ 1 | $ 1 | ||||||||||
|
Consumers’ losses on FTRs deferred as regulatory assets were $1$2 million for the three months ended September 30, 2011 and its gains on FTRs deferred as regulatory liabilities were $3 million for the three months ended September 30, 2010. Consumers’ gains on FTRs deferred as regulatory liabilities were
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9: | NOTES RECEIVABLE |
EnerBank provides unsecured consumer installment loans for financing home improvements. These loans totaled $439$477 million, net of an allowance for loan losses of $5 million, at September 30, 2011,March 31, 2012, and $386$480 million, net of an allowance for loan losses of $5 million, at December 31, 2010.2011. At September 30, 2011, $16March 31, 2012, $24 million of EnerBank’s loans were classified as current notes receivable and $423$453 million were classified as non-current notes receivable on CMS Energy’s consolidated balance sheets. At December 31, 2010, $112011, $19 million of EnerBank’s loans were classified as current notes receivable and $375$461 million were classified as non-current notes receivable on CMS Energy’s consolidated balance sheets.
The allowance for loan losses is a valuation allowance to reflect estimated credit losses. The allowance is increased by the provision for loan losses and decreased by loan charge-offs net of recoveries. Management estimates the allowance balance required by taking into consideration historical loan loss experience, the nature and volume of the portfolio, economic conditions, and other factors. Loan losses are charged against the allowance when the loss is confirmed, but no later than the point at which a loan becomes 120 days past due.
Presented in the following table are the changes in the allowance for loan losses:
In Millions | ||||||||
Three months ended | Nine months ended | |||||||
September 30 | 2011 | 2011 | ||||||
Allowance for loan losses, at beginning of period | $ | 5 | $ | 5 | ||||
Charge-offs | (1 | ) | (4 | ) | ||||
Recoveries | — | 1 | ||||||
Provision for loan losses | 1 | 3 | ||||||
Allowance for loan losses, at end of period | $ | 5 | $ | 5 | ||||
71
In Millions | ||||||||||||
| ||||||||||||
Three Months Ended March 31 | 2012 | 2011 | ||||||||||
| ||||||||||||
Balance at beginning of period | $ 5 | $ 5 | ||||||||||
Charge-offs | (1) | (1) | ||||||||||
Recoveries | - | - | ||||||||||
Provision for loan losses | 1 | 1 | ||||||||||
| ||||||||||||
Balance at end of period | $ 5 | $ 5 | ||||||||||
|
In Millions | ||||||||||||||||||||||||
| ||||||||||||||||||||||||
Past Due 30-59 Days | Past Due 60-89 Days | Past Due Over 90 Days | Total Delinquent | Current | Total Outstanding | |||||||||||||||||||
| ||||||||||||||||||||||||
March 31, 2012 | $ 1 | $ - | $ 1 | $ 2 | $ 475 | $ 477 | ||||||||||||||||||
December 31, 2011 | 1 | - | 1 | 2 | 478 | 480 | ||||||||||||||||||
|
At March 31, 2012 and December 31, 2011, $1 million of Enerbank’s loans at September 30, 2011:
In Millions | ||||||||||||||||||||
Past Due | Past Due | Past Due | Total | Total | ||||||||||||||||
30-59 Days | 60-89 Days | Over 90 Days | Delinquent | Current | Outstanding | |||||||||||||||
$ 1 | $ | 1 | $ | — | $ | 2 | $ | 437 | $ | 439 | ||||||||||
72
10: | RETIREMENT BENEFITS |
Presented in the following tables are the costs and other changes in plan assets and benefit obligations incurred in CMS Energy’s and Consumers’ retirement benefits plans:
In Millions | ||||||||||||||||
Pension | ||||||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30 | 2011 | 2010 | 2011 | 2010 | ||||||||||||
CMS Energy, including Consumers | ||||||||||||||||
Net periodic pension cost | ||||||||||||||||
Service cost | $ | 12 | $ | 11 | $ | 36 | $ | 33 | ||||||||
Interest expense | 25 | 25 | 75 | 74 | ||||||||||||
Expected return on plan assets | (28 | ) | (24 | ) | (84 | ) | (70 | ) | ||||||||
Amortization of: | ||||||||||||||||
Net loss | 16 | 13 | 47 | 39 | ||||||||||||
Prior service cost | 1 | 1 | 4 | 4 | ||||||||||||
Net periodic pension cost | $ | 26 | $ | 26 | $ | 78 | $ | 80 | ||||||||
Regulatory adjustment1 | — | 7 | — | 30 | ||||||||||||
Net periodic pension cost after regulatory adjustment | $ | 26 | $ | 33 | $ | 78 | $ | 110 | ||||||||
Consumers | ||||||||||||||||
Net periodic pension cost | ||||||||||||||||
Service cost | $ | 12 | $ | 11 | $ | 35 | $ | 32 | ||||||||
Interest expense | 24 | 23 | 73 | 71 | ||||||||||||
Expected return on plan assets | (27 | ) | (22 | ) | (82 | ) | (67 | ) | ||||||||
Amortization of: | ||||||||||||||||
Net loss | 15 | 13 | 46 | 38 | ||||||||||||
Prior service cost | 1 | 1 | 4 | 4 | ||||||||||||
Net periodic pension cost | $ | 25 | $ | 26 | $ | 76 | $ | 78 | ||||||||
Regulatory adjustment1 | — | 7 | — | 30 | ||||||||||||
Net periodic pension cost after regulatory adjustment | $ | 25 | $ | 33 | $ | 76 | $ | 108 | ||||||||
In Millions | ||||||||||||
| ||||||||||||
Pension | ||||||||||||
Three Months Ended March 31 | 2012 | 2011 | ||||||||||
| ||||||||||||
CMS ENERGY,INCLUDING CONSUMERS | ||||||||||||
Net periodic pension cost | ||||||||||||
Service cost | $ 12 | $ 12 | ||||||||||
Interest expense | 25 | 25 | ||||||||||
Expected return on plan assets | (31) | (28) | ||||||||||
Amortization of: | ||||||||||||
Net loss | 19 | 16 | ||||||||||
Prior service cost | 1 | 1 | ||||||||||
| ||||||||||||
Net periodic pension cost | $ 26 | $ 26 | ||||||||||
| ||||||||||||
CONSUMERS | ||||||||||||
Net periodic pension cost | ||||||||||||
Service cost | $ 12 | $ 12 | ||||||||||
Interest expense | 24 | 24 | ||||||||||
Expected return on plan assets | (30) | (27) | ||||||||||
Amortization of: | ||||||||||||
Net loss | 18 | 15 | ||||||||||
Prior service cost | 1 | 1 | ||||||||||
| ||||||||||||
Net periodic pension cost | $ 25 | $ 25 | ||||||||||
|
CMS Energy’s and Consumers’ expected long-term rate of return on Pension Plan assets is eight7.75 percent. For the twelve months ended September 30, 2011,March 31, 2012, the actual return on Pension Plan assets was 2.07.4 percent, and for the twelve months ended September 30, 2010,March 31, 2011, the actual return was 11.613.1 percent. The expected rate of return is an assumption about long-term asset performance that CMS Energy and Consumers review annually for reasonableness and appropriateness.
73
In Millions | ||||||||||||
| ||||||||||||
OPEB | ||||||||||||
Three Months Ended March 31 | 2012 | 2011 | ||||||||||
| ||||||||||||
CMS ENERGY,INCLUDING CONSUMERS | ||||||||||||
Net periodic OPEB cost | ||||||||||||
Service cost | $ 8 | $ 7 | ||||||||||
Interest expense | 21 | 19 | ||||||||||
Expected return on plan assets | (17) | (17) | ||||||||||
Amortization of: | ||||||||||||
Net loss | 11 | 8 | ||||||||||
Prior service credit | (5) | (5) | ||||||||||
| ||||||||||||
Net periodic OPEB cost | $ 18 | $ 12 | ||||||||||
| ||||||||||||
CONSUMERS | ||||||||||||
Net periodic OPEB cost | ||||||||||||
Service cost | $ 8 | $ 6 | ||||||||||
Interest expense | 20 | 18 | ||||||||||
Expected return on plan assets | (15) | (15) | ||||||||||
Amortization of: | ||||||||||||
Net loss | 11 | 8 | ||||||||||
Prior service credit | (5) | (5) | ||||||||||
| ||||||||||||
Net periodic OPEB cost | $ 19 | $ 12 | ||||||||||
|
11: | INCOME TAXES |
In Millions | ||||||||||||||||
OPEB | ||||||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30 | 2011 | 2010 | 2011 | 2010 | ||||||||||||
CMS Energy, including Consumers | ||||||||||||||||
Net periodic OPEB cost | ||||||||||||||||
Service cost | $ | 7 | $ | 7 | $ | 20 | $ | 20 | ||||||||
Interest expense | 20 | 20 | 58 | 61 | ||||||||||||
Expected return on plan assets | (17 | ) | (16 | ) | (50 | ) | (45 | ) | ||||||||
Amortization of: | ||||||||||||||||
Net loss | 7 | 8 | 23 | 24 | ||||||||||||
Prior service cost | (5 | ) | (5 | ) | (15 | ) | (12 | ) | ||||||||
Net periodic OBEB cost | $ | 12 | $ | 14 | $ | 36 | $ | 48 | ||||||||
Regulatory adjustment1 | — | (1 | ) | — | 5 | |||||||||||
Net periodic OPEB cost after regulatory adjustment | $ | 12 | $ | 13 | $ | 36 | $ | 53 | ||||||||
Consumers | ||||||||||||||||
Net periodic OPEB cost | ||||||||||||||||
Service cost | $ | 7 | $ | 6 | $ | 20 | $ | 19 | ||||||||
Interest expense | 19 | 19 | 56 | 59 | ||||||||||||
Expected return on plan assets | (15 | ) | (14 | ) | (46 | ) | (42 | ) | ||||||||
Amortization of: | ||||||||||||||||
Net loss | 7 | 8 | 23 | 24 | ||||||||||||
Prior service cost | (5 | ) | (5 | ) | (15 | ) | (11 | ) | ||||||||
Net periodic OPEB cost | $ | 13 | $ | 14 | $ | 38 | $ | 49 | ||||||||
Regulatory adjustment1 | — | (1 | ) | — | 5 | |||||||||||
Net periodic OPEB cost after regulatory adjustment | $ | 13 | $ | 13 | $ | 38 | $ | 54 | ||||||||
Nine Months Ended September 30 | 2011 | 2010 | ||||||
CMS Energy, Including Consumers | ||||||||
U.S. federal income tax rate | 35.0 | % | 35.0 | % | ||||
Increase (decrease) in income taxes from: | ||||||||
MCIT law change, net of federal expense | (5.9 | ) | — | |||||
State and local income taxes, net of federal benefit | 3.4 | 4.0 | ||||||
Medicare Part D exempt income, net of law change | (0.9 | ) | (0.9 | ) | ||||
Income tax credit amortization | (0.6 | ) | (0.6 | ) | ||||
Other, net | 0.1 | 0.9 | ||||||
Effective income tax rate | 31.1 | % | 38.4 | % | ||||
Consumers | ||||||||
U.S. federal income tax rate | 35.0 | % | 35.0 | % | ||||
Increase (decrease) in income taxes from: | ||||||||
State and local income taxes, net of federal benefit | 3.1 | 3.5 | ||||||
Medicare Part D exempt income, net of law change | (0.8 | ) | (1.3 | ) | ||||
Plant basis differences | 0.2 | 0.3 | ||||||
Income tax credit amortization | (0.5 | ) | (0.5 | ) | ||||
Other, net | (0.3 | ) | (0.2 | ) | ||||
Effective income tax rate | 36.7 | % | 36.8 | % | ||||
74
| ||||||||||||
Three Months Ended March 31 | 2012 | 2011 | ||||||||||
| ||||||||||||
CMS ENERGY,INCLUDING CONSUMERS | ||||||||||||
U.S. federal income tax rate | 35.0% | 35.0% | ||||||||||
Increase (decrease) in income taxes from: | ||||||||||||
State and local income taxes, net of federal benefit | 4.2 | 3.4 | ||||||||||
Medicare Part D exempt income | 0.1 | (1.2) | ||||||||||
Income tax credit amortization | (0.5) | (0.6) | ||||||||||
Other, net | - | 0.1 | ||||||||||
| ||||||||||||
Effective income tax rate | 38.8% | 36.7% | ||||||||||
| ||||||||||||
CONSUMERS | ||||||||||||
U.S. federal income tax rate | 35.0% | 35.0% | ||||||||||
Increase (decrease) in income taxes from: | ||||||||||||
State and local income taxes, net of federal benefit | 5.6 | 3.5 | ||||||||||
Medicare Part D exempt income | 0.5 | (0.9) | ||||||||||
Plant basis differences | (0.8) | (0.2) | ||||||||||
Income tax credit amortization | (0.4) | (0.4) | ||||||||||
Other, net | 0.7 | 0.2 | ||||||||||
| ||||||||||||
Effective income tax rate | 40.6% | 37.2% | ||||||||||
|
12: | REPORTABLE SEGMENTS |
CMS Energy:
electric utility, consisting of regulated activities associated with the generation and distribution of electricity in Michigan;
gas utility, consisting of regulated activities associated with the transportation, storage, and distribution of natural gas in Michigan;
enterprises, consisting of various subsidiaries engaging primarily in domestic independent power production; and
other, including EnerBank, corporate interest and other expenses, and discontinued operations.
75Consumers:
electric utility, consisting of regulated activities associated with the generation and distribution of electricity in Michigan;
gas utility, consisting of regulated activities associated with the transportation, storage, and distribution of natural gas in Michigan; and
other, including a consolidated special-purpose entity for the sale of accounts receivable.
Presented in the following tables is financial information by reportable segment:
In Millions | ||||||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30 | 2011 | 2010 | 2011 | 2010 | ||||||||||||
Operating Revenue | ||||||||||||||||
CMS Energy, including Consumers | ||||||||||||||||
Electric utility | $ | 1,180 | $ | 1,154 | $ | 3,026 | $ | 2,967 | ||||||||
Gas utility | 217 | 216 | 1,662 | 1,569 | ||||||||||||
Enterprises | 56 | 63 | 161 | 186 | ||||||||||||
Other | 11 | 10 | 34 | 28 | ||||||||||||
Total Operating Revenue — CMS Energy | $ | 1,464 | $ | 1,443 | $ | 4,883 | $ | 4,750 | ||||||||
Consumers | ||||||||||||||||
Electric utility | $ | 1,180 | $ | 1,154 | $ | 3,026 | $ | 2,967 | ||||||||
Gas utility | 217 | 216 | 1,662 | 1,569 | ||||||||||||
Total Operating Revenue — Consumers | $ | 1,397 | $ | 1,370 | $ | 4,688 | $ | 4,536 | ||||||||
Net Income Available to Common Stockholders | ||||||||||||||||
CMS Energy, including Consumers | ||||||||||||||||
Electric utility | $ | 159 | $ | 156 | $ | 309 | $ | 283 | ||||||||
Gas utility | (5 | ) | 2 | 88 | 69 | |||||||||||
Enterprises | 4 | 9 | 36 | 51 | ||||||||||||
Discontinued operations | — | — | 2 | (17 | ) | |||||||||||
Other | (19 | ) | (33 | ) | (61 | ) | (87 | ) | ||||||||
Total Net Income Available to Common Stockholders — CMS Energy | $ | 139 | $ | 134 | $ | 374 | $ | 299 | ||||||||
Consumers | ||||||||||||||||
Electric utility | $ | 159 | $ | 156 | $ | 309 | $ | 283 | ||||||||
Gas utility | (5 | ) | 2 | 88 | 69 | |||||||||||
Other | — | 1 | 1 | 1 | ||||||||||||
Total Net Income Available to Common Stockholder — Consumers | $ | 154 | $ | 159 | $ | 398 | $ | 353 | ||||||||
76
In Millions | ||||||||
| ||||||||
Three Months Ended March 31 | 2012 | 2011 | ||||||
| ||||||||
CMS ENERGY,INCLUDING CONSUMERS | ||||||||
Operating Revenue | ||||||||
Electric utility | $ | 836 | $ | 897 | ||||
Gas utility | 839 | 1,091 | ||||||
Enterprises | 54 | 55 | ||||||
Other | 14 | 12 | ||||||
| ||||||||
Total Operating Revenue – CMS Energy | $ | 1,743 | $ | 2,055 | ||||
| ||||||||
CONSUMERS | ||||||||
Operating Revenue | ||||||||
Electric utility | $ | 836 | $ | 897 | ||||
Gas utility | 839 | 1,091 | ||||||
| ||||||||
Total Operating Revenue – Consumers | $ | 1,675 | $ | 1,988 | ||||
| ||||||||
CMS ENERGY,INCLUDING CONSUMERS | ||||||||
Net Income (Loss) Available to Common Stockholders | ||||||||
Electric utility | $ | 21 | $ | 65 | ||||
Gas utility | 55 | 88 | ||||||
Enterprises | �� | 5 | 3 | |||||
Discontinued operations | 7 | 2 | ||||||
Other | (21 | ) | (23) | |||||
| ||||||||
Total Net Income Available to Common Stockholders – CMS Energy | $ | 67 | $ | 135 | ||||
| ||||||||
CONSUMERS | ||||||||
Net Income Available to Common Stockholder | ||||||||
Electric utility | $ | 21 | $ | 65 | ||||
Gas utility | 55 | 88 | ||||||
| ||||||||
Total Net Income Available to Common Stockholder – Consumers | $ | 76 | $ | 153 | ||||
|
CMS ENERGY,INCLUDING CONSUMERS Plant, Property, and Equipment, Gross Electric utility Gas utility Enterprises Other Total Plant, Property, and Equipment, Gross – CMS Energy CONSUMERS Plant, Property, and Equipment, Gross Electric utility Gas utility Other Total Plant, Property, and Equipment, Gross – Consumers CMS ENERGY,INCLUDING CONSUMERS Total Assets Electric utility1 Gas utility1 Enterprises Other Total Assets – CMS Energy CONSUMERS Total Assets Electric utility1 Gas utility1 Other Total Assets – Consumers In Millions March 31, 2012 December 31, 2011 $ 10,495 $ 10,400 4,223 4,206 109 109 37 36 $ 14,864 $ 14,751 $ 10,495 $ 10,400 4,223 4,206 15 15 $ 14,733 $ 14,621 $ 9,966 $ 9,938 4,609 4,956 224 242 1,361 1,316 $ 16,160 $ 16,452 $ 9,966 $ 9,938 4,609 4,956 692 768 $ 15,267 $ 15,662
1 | Amounts include a portion of Consumers’ other common assets attributable to both the electric and gas utility businesses. |
In Millions | ||||||||
September 30, 2011 | December 31, 2010 | |||||||
Plant, Property, and Equipment, Gross | ||||||||
CMS Energy, including Consumers | ||||||||
Electric utility1 | $ | 10,311 | $ | 9,944 | ||||
Gas utility1 | 4,149 | 4,063 | ||||||
Enterprises | 109 | 102 | ||||||
Other | 38 | 36 | ||||||
Total Plant, Property, and Equipment, Gross — CMS Energy | $ | 14,607 | $ | 14,145 | ||||
Consumers | ||||||||
Electric utility1 | $ | 10,311 | $ | 9,944 | ||||
Gas utility1 | 4,149 | 4,063 | ||||||
Other | 15 | 15 | ||||||
Total Plant, Property, and Equipment, Gross — Consumers | $ | 14,475 | $ | 14,022 | ||||
Assets | ||||||||
CMS Energy, including Consumers | ||||||||
Electric utility1 | $ | 9,607 | $ | 9,321 | ||||
Gas utility1 | 4,852 | 4,614 | ||||||
Enterprises | 170 | 191 | ||||||
Other | 1,329 | 1,490 | ||||||
Total Assets — CMS Energy | $ | 15,958 | $ | 15,616 | ||||
Consumers | ||||||||
Electric utility1 | $ | 9,607 | $ | 9,321 | ||||
Gas utility1 | 4,852 | 4,614 | ||||||
Other | 599 | 904 | ||||||
Total Assets — Consumers | $ | 15,058 | $ | 14,839 | ||||
77
78
MARKET RISK
There have been no material changes to market risk as previously disclosed in Part II – Item 7A. Quantitative and Qualitative Disclosures About Market Risk, in the 20102011 Form 10-K.
CONSUMERS
Disclosure Controls and Procedures:CMS Energy’s management, with the participation of its CEO and CFO, has evaluated the effectiveness of its disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this report. Based on such evaluation, CMS Energy’s CEO and CFO have concluded that, as of the end of such period, its disclosure controls and procedures are effective.
Internal Control Over Financial Reporting:There have not been any changes in CMS Energy’s internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the last fiscal quarter that have materially affected, or are reasonably likely to materially affect, its internal control over financial reporting.
Disclosure Controls and Procedures:Consumers’ management, with the participation of its CEO and CFO, has evaluated the effectiveness of its disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this report. Based on such evaluation, Consumers’ CEO and CFO have concluded that, as of the end of such period, its disclosure controls and procedures are effective.
Internal Control Over Financial Reporting:There have not been any changes in Consumers’ internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the last fiscal quarter that have materially affected, or are reasonably likely to materially affect, its internal control over financial reporting.
79
CMS Energy and Consumers are parties to various lawsuits and regulatory matters in the ordinary course of business. For information regarding material legal proceedings, including updates to information reported under Part I – Item 3 of Part I of the 20102011 Form 10-K, see Part I – Item 1 – Note 3,3: Contingencies and Commitments, and Note 4,4: Regulatory Matters.
There have been no material changes to the Risk Factors as previously disclosed in Part I – Item 1A. Risk Factors, in the 20102011 Form 10-K.
PROCEEDS
(a) |
None.
(c) | Issuer Repurchases of Equity Securities |
Presented in the following table are CMS Energy’s repurchases of equity securities for the three months ended September 30,March 31, 2011:
Total Number of | Total Number of Shares Purchased as | Maximum Number of Shares that May | ||||||||||||||
Shares | Average Price Paid | Part of Publicly Announced Plans or | Yet Be Purchased Under Publicly | |||||||||||||
Period | Purchased1 | per Share | Programs | Announced Plans or Programs | ||||||||||||
July 1 — 31, 2011 | — | $ | — | — | — | |||||||||||
August 1 — 31, 2011 | 223,836 | 18.27 | — | — | ||||||||||||
September 1 — 30, 2011 | 2,536 | 19.56 | — | — | ||||||||||||
Total | 226,372 | $ | 18.28 | — | — | |||||||||||
80
| ||||||||||||||||
Period | Total Number of Shares Purchased1 | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | Maximum Number of Shares that May Yet Be | ||||||||||||
| ||||||||||||||||
January 1, 2012 to January 31, 2012 | 27,774 | $ 21.48 | - | - | ||||||||||||
February 1, 2012 to February 29, 2012 | 178 | 22.03 | - | - | ||||||||||||
March 1, 2011 to March 31, 2011 | - | - | - | - | ||||||||||||
| ||||||||||||||||
Total | 27,952 | $ 21.48 | - | - | ||||||||||||
|
1 | Common shares were purchased to satisfy CMS Energy’s minimum statutory income tax withholding obligation for common shares that have vested under the Performance Incentive Stock Plan. Shares repurchased have a value based on the market price on the vesting date. |
None.
81
The agreements included as exhibits to this Form 10-Q filing are included solely to provide information regarding the terms of the agreements and are not intended to provide any other factual or disclosure information about CMS Energy, Consumers, or other parties to the agreements. The agreements may contain representations and warranties made by each of the parties to each of the agreements that were made exclusively for the benefit of the parties involved in each of the agreements and should not be treated as statements of fact. The representations and warranties were made as a way to allocate risk if one or more of those statements prove to be incorrect. The statements were qualified by disclosures of the parties to each of the agreements that may not be reflected in each of the agreements. The agreements may apply standards of materiality that are different than standards applied to other investors. Additionally, the statements were made as of the date of the agreements or as specified in the agreements and have not been updated. The representations and warranties may not describe the actual state of affairs of the parties to each agreement.
Additional information about CMS Energy and Consumers may be found in this filing, at www.cmsenergy.com, at www.consumersenergy.com, and through the SEC’s website at www.sec.gov.
Exhibits | ||||
Description | ||||
4.1 | — | |||
(Exhibit 4.1 to Form 8-K filed March 12, 2012 and incorporated herein by reference) | ||||
10.1 | — | |||
10.2 | — | Form of Change in Control Agreement as of March 2012 | ||
10.3 | — | CMS Incentive Compensation Plan for CMS Energy | ||
10.4 | — | $150 million Third Amended and Restated Revolving Credit Agreement dated as of April 18, 2012 among Consumers, the Banks, Agent, Co-Syndication Agents, and Documentation Agent all as defined therein (Exhibit 10.1 to Form 8-K filed April 24, 2012 and incorporated herein by reference) | ||
12.1 | — | Statement regarding computation of CMS Energy’s Ratios of Earnings to Fixed Charges and Combined Fixed Charges and Preferred Dividends | ||
12.2 | — | Statement regarding computation of Consumers’ Ratios of Earnings to Fixed Charges and Combined Fixed Charges and Preferred Dividends | ||
31.1 | — | CMS Energy’s certification of the CEO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | ||
31.2 | — | CMS Energy’s certification of the CFO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | ||
31.3 | — | Consumers’ certification of the CEO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | ||
31.4 | — | Consumers’ certification of the CFO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | ||
32.1 | — | CMS Energy’s certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | ||
32.2 | — | Consumers’ certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | ||
101.INS1 | — | XBRL Instance Document | ||
101.SCH1 | — | XBRL Taxonomy Extension Schema | ||
101.CAL1 | — | XBRL Taxonomy Extension Calculation Linkbase | ||
101.DEF1 | — | XBRL Taxonomy Extension Definition Linkbase | ||
101.LAB1 | — | XBRL Taxonomy Extension Labels Linkbase | ||
101.PRE1 | — | XBRL Taxonomy Extension Presentation Linkbase |
82
1 | In accordance with Regulation S-T, the XBRL-related information in Exhibit 101 shall be deemed to be “furnished” and not “filed.” The financial information contained in the XBRL-related information is “unaudited” and “unreviewed.” |
83
84
(Registrant) | ||||||
Dated: April 26, 2012 | By: | /s/ Thomas J. Webb | ||||
Thomas J. Webb | ||||||
Executive Vice President and | ||||||
Chief Financial Officer | ||||||
CONSUMERS ENERGY COMPANY | ||||||
(Registrant) | ||||||
Dated: April 26, 2012 | By: | /s/ Thomas J. Webb | ||||
Thomas J. Webb | ||||||
Executive Vice President and | ||||||
Chief Financial Officer |
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EXHIBITS
CMS ENERGY’S AND CONSUMERS’ EXHIBIT INDEX
Exhibits | Description | |||||
10.1 | — | 2012 Form of Officer Separation Agreement | ||||
10.2 | — | Form of Change in Control Agreement as of March 2012 | ||||
10.3 | — | CMS Incentive Compensation Plan for CMS Energy and its Subsidiaries, amended and restated effective as of March 16, 2012 | ||||
12.1 | — | Statement regarding computation of CMS Energy’s Ratios of Earnings to Fixed Charges and Combined Fixed Charges and Preferred Dividends | ||||
12.2 | — | |||||
Statement regarding computation of Consumers’ Ratios of Earnings to Fixed Charges and Combined Fixed Charges and Preferred Dividends | ||||||
31.1 | — | |||||
CMS Energy’s certification of the CEO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | ||||||
31.2 | — | |||||
CMS Energy’s certification of the CFO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | ||||||
31.3 | — | |||||
Consumers’ certification of the CEO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | ||||||
31.4 | — | |||||
Consumers’ certification of the CFO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | ||||||
32.1 | — | |||||
CMS Energy’s certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | ||||||
32.2 | — | |||||
Consumers’ certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | ||||||
101.INS1 | — | |||||
XBRL Instance Document | ||||||
101.SCH1 | — | |||||
XBRL Taxonomy Extension Schema | ||||||
101.CAL1 | — | |||||
XBRL Taxonomy Extension Calculation Linkbase | ||||||
101.DEF1 | — | |||||
XBRL Taxonomy Extension Definition Linkbase | ||||||
101.LAB1 | — | |||||
XBRL Taxonomy Extension Labels Linkbase | ||||||
101.PRE1 | — | |||||
XBRL Taxonomy Extension Presentation Linkbase |
1 | In accordance with Regulation S-T, the XBRL-related information in Exhibit 101 shall be deemed to be “furnished” and not “filed.” The financial information contained in the XBRL-related information is “unaudited” and “unreviewed.” |