CMS to Launch Value Enhancement Program
CMS Energy Corp. announced it intends to implement a program
that will strengthen its balance sheet while maintaining its
forecasted earnings per share for 2001. The company also plans to
retain the goal of a 10% per year growth rate thereafter.
During the first quarter of 2001, the company plans to hold an
IPO for "up to 50% of its ownership" in its oil and exploration
subsidiary. The company also plans to accelerate the issuance of
$300 million of CMS Energy common stock, which had previously been
planned for mid-year 2001.
"The successful execution of this additional program will bring
CMS Energy Corp.'s financial ratios to investment grade levels by
the end of the first quarter next year by reducing its debt to
capitalization percentage to the low 60s and increasing cash flow
interest coverages to more than three times," said Alan M. Wright,
senior vice president for CMS. "In addition, these actions will not
be dilutive to previously forecasted 2001 earnings per share and
will provide a stronger balance sheet to facilitate the company's
continued growth without the need for any additional near-term
common share offerings."
CMS expects the actions to generate about $800 million in cash
and approximately $450 million in equity. The cash will go to help
reduce debt, and will supplement the $1.4 billion asset divestiture
program currently under way. The company has already succeeded in
divesting $900 million in assets to help reach that goal.
"We are trying to pay down debt and develop a better balance
sheet because currently our debt to capitalization ratio is 70%
debt, 30% capitalization," said CMS spokesman John P. Barnett. "Our
goal in conjunction with both the asset sale program as well the
IPO and issuance of additional common stock is to lower that debt
ratio to about 65% by the end of next year, and lower 60s by 2002."
In accordance with CMS's divestiture program, CMS has unloaded
non-strategic assets, including Michigan Oil and Gas holdings, a
49% ownership in the Bighorn Gas Gathering Pipeline project in
Wyoming, an 80% ownership in a 236 MW Lakewood cogeneration plant
in New Jersey, and a distribution company in Brazil. Although there
is no firm deadline for the program's completion, Barnett said the
company expects to finish the asset divestiture by the end of this
year, or early next year.
"We are going to be concentrating on areas of the world where we
have existing businesses that offer opportunities to bring in other
CMS business units in order to create synergies to grow those
businesses," Barnett said. "We'd be looking for growth
opportunities where we could increase the size of our footprint in
that particular country."
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