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CMS to Launch Value Enhancement Program

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."

Alex Steis

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