Increased power purchase costs due to a six month unplanned outage at its Palisades nuclear plant, which is now back in service, as well as near-record warm weather in the fourth quarter and the impact of the economic slowdown on electric and gas sales, hammered CMS Energy financials. The Michigan-based utility and pipeline company reported a net loss of $1.03 per share or a loss of $138 million for the fourth quarter and a net loss of $545 million, or $4.17 loss per share, for the year. In comparison, the company reported a $1.44 loss per share, or a loss of $171 million, in the fourth quarter of 2000 and net income of $36 million, or $0.32 per share, in 2000.

“The year 2001 entailed significant financial and strategic restructuring of the company, resulting in disappointing earnings, but it also greatly improved the focus of the company and positioned it for future growth,” said CMS Energy Chairman William T. McCormick Jr. “Most notably, with the sale in January of CMS Energy’s assets in Equatorial Guinea for approximately $1 billion, we have reduced the company’s debt to capitalization from approximately 71% debt at year-end to approximately 66% currently, consistent with our plan to achieve less than 60% debt by year-end.”

CMS also reaffirmed its outlook of $2.00 to $2.05 per share for net operating earnings in 2002, excluding uncertain impacts related to recent developments in Argentina.

Net operating earnings for the fourth quarter of 2001 totaled a loss of $0.13 per share, or a net loss of $17 million, compared to fourth quarter 2000 net operating earnings of $0.79 per share, or $94 million. For the entire year, the company had much lower operating earnings of $1.41 per share or $185 million, compared to 2000 net operating earnings of $2.21 per share or $246 million.

There was a long list of special charges, many of which were taken in the third quarter. Total special charges reduced earnings by $730 million. The items include the effects of loss contracts ($212 million), reduced asset valuations ($249 million), asset sales ($37 million), discontinued operations ($185 million), early debt retirement ($18 million), Argentina-related charge ($18 million) and the cumulative effect of a change in accounting for purchased power options ($11 million). Items that were excluded from 2000 net operating earnings reduced earnings by $210 million.

For the year, operating income from non-utility energy businesses was up 13%. But for the fourth quarter, operating income was down 30% from the same period in 2000. Operating income was flat in the gas transmission business for the year, but down 31% for the fourth quarter due to reduced LNG shipments and lower processing plant earnings, caused by lower natural gas prices and lower gas liquids prices.

Independent power production operating income for 2001 was down about 35%, excluding write-downs, due to lower earnings from the Midland Cogeneration Venture (MCV). For the quarter, independent power operating income totaled $21 million, down from $55 million from the same period in 2000. Energy marketing, services and trading operating income for 2001 was up more than 400% to $71 million, from $14 million in 2000, due to increased long term power sales contracts and wholesale gas and power trading activity. However, for the fourth quarter, the business showed a loss of $7 million, down from operating income of $12 million during the same period last year, due primarily to lower wholesale gas trading revenues and increased operating expenses, partially offset by increased long-term power sales.

The company’s E&P business showed an increase in operating income, excluding $49 million of write-downs, to $74 million, up from $31 million the year before, due to higher oil and gas prices and increased production from domestic and international operations.

In addition, operating income of CMS Energy’s principal subsidiary, Consumers Energy, excluding $143 million of write-downs, totaled $454 million in 2001, down from $579 million in 2000, due to increased power supply costs related to the downed Palisades nuke. For the fourth quarter, the utility reported a 61% drop in operating income. Electric sales for the year totaled 40 billion kilowatt-hours, down 3.5% from the previous year. Natural gas deliveries were 367 Bcf, down 10.4%.

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