A special committee of directors that has been probing the extent of CMS Energy Corp.’s involvement in questionable round-trip energy trading activity is expected to disclose its findings to the company’s full board of directors on Oct. 31, said CFO Thomas J. Webb Tuesday. The company’s outside auditor, Ernst and Young, will review the work of the special committee and its corporate financial re-audit in November, and will report the results to the Securities and Exchange Commission (SEC) probably in December.

This marked the first time that Dearborn, MI-based CMS Energy has provided any public update on the progress of its nearly five-month investigation into its role in round-trip, or “wash,” trading transactions and the re-auditing of its past financial statements. Both reviews are critical to the embattled energy company’s efforts to restore its “credibility” in the marketplace, Webb told executives and analysts at the 37th annual Edison Electric Institute Financial Conference in Palm Desert, CA.

CMS Energy reported last summer that it engaged in more than $3 billion in bogus energy trades, which prompted the resignations of then-Chairman William T. McCormick and other top management. The company remains the target of investigations being carried out by a number of federal agencies, including the SEC, Federal Energy Regulatory Commission and the Justice Department.

As a result of its activities, the company told the SEC in August that it could not certify the accuracy of its 2000-2001 financial statements until it had completed its internal investigation into the sham energy trades and its re-audit.

CMS Energy’s focus is on the “here and now,” Webb told the conference, adding that “I don’t spend a lot of time looking back.” The energy company, which has been under siege from federal regulators and Wall Street since June, is trying to “right our ship” and “take control of our destiny in every way we can.”

In the meantime, Webb said CMS Energy is moving to create a smaller, less riskier company with better returns. Specifically, it is reducing its capital expenditures, operational expenses and debt, in an effort to increase liquidity and cash flow. And the company is limiting its dependence on the capital markets for funding, he noted, because of their uncertainty and unpredictability.

CMS Energy said it plans to cut its capital expenditures, which were $1.5 billion during 2000-2001 on a consolidated basis, by one-third next year. The company expects to net about $50 million through operational efficiencies. It has received a cash infusion of more than $2.6 billion so far this year through the sales of energy assets, Webb noted, adding that CMS Energy closed on the last piece of the sale of the Columbia Energy oil and natural gas assets Monday. That transaction alone added $19 million to the company’s coffers.

With these and other “practical” and “realistic” cost-cutting moves, Webb said CMS Energy hopes to reduce its overall debt load of $8 billion to below $5 billion in the future.

CMS Energy had “reasonably good cash flow” of about $109 million at the end of September, he noted. He projects the parent’s cash position will grow to $140 million by the end of 2002. As for subsidiary Consumers Energy, the largest utility in Michigan, he put cash flow at about $88 million, and estimated it would reach $180 million by year-end.

President and COO David W. Joos reported there has been a “fair amount of interest” shown in the industry to purchase CMS Energy’s Panhandle Eastern and Trunkline gas pipelines, CMS Field Services’ gas gathering and processing assets, and the liquefied natural gas (LNG) terminal in Lake Charles, LA. CMS Energy has received “indicative” bids for the facilities, he said, adding that final bids are due by mid-November.

Responding to questions, Webb said the company still believes LNG is a “good business” to be in, and for that reason “we have not actually committed to selling those units.” At the same time, CMS Energy realizes “there are others who are potentially in a better position to invest additional growth capital in…the LNG business.” But if the company does not get the “right kind of price for that [LNG] business that we think is reasonable…then it’s not something we would go forward with,” he noted.

“We have looked at other alternatives besides the outright sale” of the LNG assets, Webb said.

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