NGI The Weekly Gas Market Report
CMS Energy Corp. announced it intends to implement a programthat will strengthen its balance sheet while maintaining itsforecasted earnings per share for 2001. The company also plans toretain the goal of a 10% per year growth rate thereafter.
During the first quarter of 2001, the company plans to hold anIPO for “up to 50% of its ownership” in its oil and explorationsubsidiary. The company also plans to accelerate the issuance of$300 million of CMS Energy common stock, which had previously beenplanned for mid-year 2001.
“The successful execution of this additional program will bringCMS Energy Corp.’s financial ratios to investment grade levels bythe end of the first quarter next year by reducing its debt tocapitalization percentage to the low 60s and increasing cash flowinterest coverages to more than three times,” said Alan M. Wright,senior vice president for CMS. “In addition, these actions will notbe dilutive to previously forecasted 2001 earnings per share andwill provide a stronger balance sheet to facilitate the company’scontinued growth without the need for any additional near-termcommon share offerings.”
CMS expects the actions to generate about $800 million in cashand approximately $450 million in equity. The cash will go to helpreduce debt, and will supplement the $1.4 billion asset divestitureprogram currently under way. The company has already succeeded indivesting $900 million in assets to help reach that goal.
“We are trying to pay down debt and develop a better balancesheet because currently our debt to capitalization ratio is 70%debt, 30% capitalization,” said CMS spokesman John P. Barnett. “Ourgoal in conjunction with both the asset sale program as well theIPO and issuance of additional common stock is to lower that debtratio to about 65% by the end of next year, and lower 60s by 2002.”
In accordance with CMS’s divestiture program, CMS has unloadednon-strategic assets, including Michigan Oil and Gas holdings, a49% ownership in the Bighorn Gas Gathering Pipeline project inWyoming, an 80% ownership in a 236 MW Lakewood cogeneration plantin New Jersey, and a distribution company in Brazil. Although thereis no firm deadline for the program’s completion, Barnett said thecompany expects to finish the asset divestiture by the end of thisyear, or early next year.
“We are going to be concentrating on areas of the world where wehave existing businesses that offer opportunities to bring in otherCMS business units in order to create synergies to grow thosebusinesses,” Barnett said. “We’d be looking for growthopportunities where we could increase the size of our footprint inthat particular country.”
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