Using its back-to-basics approach, and a little help from good weather, CMS Energy reported Thursday that it managed to improve earnings in the first quarter, reaching $79 million (51 cents a share) compared with last year’s quarterly earnings of $42 million (32 cents).

Ongoing net income (under non-Generally Accepted Accounting Principles) was $78 million (50 cents a share), compared to ongoing net income of $79 million (60 cents) in the first quarter of 2002. CMS noted that the ongoing earnings provide a “key measure of the company’s present operating financial performance, unaffected by discontinued operations, accounting changes, net asset gains or losses or other items.”

The 10 cent decrease in ongoing earnings compared with 2002 came despite stronger utility earnings of 30 cents and a 25 cent gain from favorable foreign exchange rates. These improvements were, however, more than offset by 33 cents per share of 2002 savings not repeated in 2003 and share dilution, as well as the absence of earnings of 32 cents from businesses that have been sold.

Favorable weather and excellent power cost management improved first quarter results at CMS Energy’s principal subsidiary, Consumers Energy. The utility delivered 16.4% more natural gas and 5.6% more electricity in the first quarter than a year earlier.

Based on the first quarter results and the current outlook for the year, CMS reaffirmed its earnings guidance for 2003 and expects to see reported net income roughly break even, dependent largely on the timing and proceeds from planned asset sales. Ongoing net income is forecast to be in the range of 80-90 cents a share.

“The focus over the past year has been to increase our financial flexibility and liquidity and implement our back-to-basics strategy,” said CEO Ken Whipple. “We’re selling underperforming and non-core assets. Our goal is to be a smaller, stronger company with less business risk and more predictable earnings. The record shows we’re making good progress, but there are still many challenges ahead.”

Whipple noted that CMS Energy and Consumers Energy had completed $2.1 billion in financings in recent weeks, which among another things addressed the company’s debt maturities through 2004 at the parent and “well into” 2004 for the utility. CMS Energy’s liquidity also is strong, he said, “in excess of the company’s cash balance goal of about $400 million, split between the parent and the utility.”

The Dearborn, MI-based company also has continued its efforts to significantly reduce operating expenses, cutting its capital budget nearly 40% between 2001 and 2002. Whipple said it will be cut another 35-40% this year. Asset sales also remain on track, with about $3.7 billion completed or announced in 2002 and so far in 2003.

Looking ahead, Whipple noted that Consumers Energy has an “important regulatory agenda,” with several key items before the Michigan Public Service Commission. Those items include a request to securitize federal Clean Air Act expenses and other costs, a gas rate increase case and recovery of stranded costs linked to the state’s electric restructuring law.

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