Reiterating his company’s “back-to-basics” strategy, which has become a staple of most energy companies in today’s current marketplace, CMS Energy Corp. President David W. Joos said that through asset sales his company has become closer to being “safer, smaller and stronger.”
Speaking at the Edison Electric Institute Financial Conference last week, Joos said CMS Energy is continuing to revert focus to its utility operations under Michigan’s Consumers Energy, which ranks as the sixth largest U.S. gas utility serving 1.6 million customers and thirteenth largest investor-owned electric U.S. utility serving 1.7 million customers. Joos said Consumers Energy currently grows by approximately 40,000 customers a year.
“Things have certainly changed a lot in the last year,” said Joos. “I think [things] have become a little less exciting and from our perspective, that is good.”
As a sign of the company’s changes, Joos pointed to the company’s asset breakout over time. As of Dec. 31, 2001, CMS’ Consumers Energy division had $8.3 billion in assets, compared to CMS Enterprises, the company’s non-utility business, which had $8.5 billion in assets. As of June 30, 2003, Consumers Energy’s assets went up to $9.3 billion, while CMS Enterprises fell to $3.7 billion.
With $17 billion in assets in January 2001, 46% of the company’s portfolio focused on utility operations, with 64% dedicated to non-utility functions, resulting in a return on assets of less than 5%. After the proposed asset sales are completed, CMS Energy believes it will have $12 billion in assets, constituting an 80% to 20% split in favor of utility operations, equalling a return on assets of greater than 6%.
The fall-off in non-utility holdings can be attributed to CMS Energy’s aggressive 2003 non-core asset liquidation strategy. To date in 2003, the company has closed on $810 million in sales, including the Centennial Pipeline, MST Gas Book, MST Power Book, the Guardian Pipeline, the Atacama transmission lines, CMS Panhandle and CMS Field Services.
The company has also entered into agreements to sell its Loy Yang power plant in Australia and its Marysville and Arcadia Land assets. Joos said the company is still planning to sell its Australian Pipelines and CPEE utility in Brazil before year-end, but noted that some closings may trail into early 2004. All told, the executive said the company expects to exceed its $900 million asset sales goal.
“Our back to basics strategy is on track,” said Joos. “A lot of people a year ago were skeptical on whether or not we could pull off all of the things we had on our agenda. It certainly was challenging, but we were able to do that…and made significant progress in reducing our business risk and shoring up our financials, getting us in the position so that we can focus on the future, rather than immediate issues.”
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