Amid the merger frenzy that gripped the energy industry lastweek, CMS Energy Chairman and CEO William McCormick said he didn’tenvision his company falling prey to a takeover as it strives tobecome the third largest energy concern in the world. Instead, hesees CMS Energy continuing in an aggressor role – being the buyer,not the buyee.

“Up until now, we have been the acquirer,” he said, referring tothe company’s purchases this year of Panhandle Eastern Pipeline,Trunkline Gas, midstream gas companies and assets, and oil andnatural gas reserves in the U.S. “And we would expect that thatwould continue. We don’t rule out a major acquisition.” But, heconceded, “one never knows in the future what will happen.”

Looking ahead, McCormick said “we’re going to continue to lookat opportunities for expanding our pipeline system, for buyingadditional midstream assets…as well as on the exploration side.I’m sure you’ll see over the coming months there’ll be additionalannouncements.”

In the past three years, CMS Energy has more than doubled itsenergy asset base in U.S. and foreign markets to $15 billion from$7 billion, and has set its sights on reaching $18 billion by 2003.”We’re not trying to become big just to become big. We’re trying tobecome bigger to become better,” McCormick said, adding that hiscompany was “pretty selective” in its choice of acquisitions. “Wefeel today we’re already competitive with the biggest and best inthe world.”

CMS Energy has grown from a Michigan-based electric and gasutility into a global diversified energy concern – whose assetportfolio now includes, in addition to the utilities, gaspipelines, storage facilities, midstream operations, explorationand production, energy marketing and trading, power generation andinternational operations. Apart from the U.S. and Canada, it hasenergy properties in South America, Europe, Africa, the MiddleEast, Asia and Australia.

Domestically, CMS Energy is counting on the 3.1 Bcf/dPanhandle/Trunkline system – which McCormick referred to as a”terrific asset” – to provide a “platform” for growth in its gasand power operations in the years ahead. President and COO VictorFryling called it the “spinal cord” that connects the company’sassets in its Michigan market area with production and gathering inOklahoma and Texas, provides it with the ability to supplygas-fired generation up and down the pipeline’s system, makes”low-cost” Michigan storage accessible to new markets, and opens upnew markets for its marketing and trading services.

“…[W]e think that it’s a great thing to kind of hang ornamentson as we grow going forward with power production and marketing,”Fryling told energy reporters during a press briefing in WashingtonD.C. last Wednesday. CMS Energy purchased the 10,400-milePanhandle/Trunkline system from Duke Energy last March for $2.2billion. McCormick was particularly optimistic that the pipelinesystem would be a “key supplier” of gas to the new generationfacilities that are being planned for the constrained Midwestmarket.

He further said CMS Energy is looking to the TriState Pipelineand Guardian Pipeline projects to further augment its growth. TheTriState project, in which CMS owns a 67% interest, would supplybetween 300 MMcf/d-1 Bcf/d to the U.S. Northeast market via aChicago-to-Canada route. The Guardian project, where CMS has aone-third interest, would deliver 750 MMcf/d into thecapacity-constrained Wisconsin market.

The TriState project has run into problems at the Federal EnergyRegulatory Commission, causing it to lag behind competitor VectorPipeline in the race to serve Northeast gas loads. But McCormickremains undeterred. “First of all, we think TriState will getbuilt. We have had a disagreement with the FERC on some proceduraland technical matters. The fact of the matter is that we believethat FERC should continue to act to allow a marketplace todetermine which project is best. And that means that our projectought to be allowed to go forward. We think FERC will allow it…”

The estimated cost of the two pipeline projects is $630 million.But that’s only a fraction of the $10 billion worth of energyprojects in which CMS Energy is currently involved, according tothe company. It put the company’s share of the funding for theprojects at $5.7 billion.

On the electric front, McCormick said that even though CMSEnergy and Detroit Edison plan to bring on an additional 900 MWs ofgeneration capacity, “it’s still going to be a really…tightsituation in the Midwest this summer.” And, he expects the bleakscenario to continue at least for another two to three years.

He’s equally pessimistic about the availability of transmissioncapacity. “One of the biggest problems we’ve got in my judgment isthe fact that transmission needs expansion. Everybody’s focusing onRTOs, ISOs, transcos and all that. But the mere fact that you havethose is not going to change the transmission capacity one iota.”

He said federal lawmakers need to enact transmission sitinglegislation that would enable utility companies to buildtransmission lines more quickly. Also, he noted there needs to be”proper incentives” for people to invest in transmission projects.”My own personal feeling is that our regulators at the federallevel particularly aren’t really focusing on these two issues,”McCormick told reporters.

Susan Parker

©Copyright 1999 Intelligence Press, Inc. All rightsreserved. The preceding news report may not be republished orredistributed in whole or in part without prior written consent ofIntelligence Press, Inc.