10-QPeriod: Q2 FY2001

CMS ENERGY CORP Quarterly Report for Q2 Ended Jun 30, 2001

Filed August 14, 2001For Securities:CMSCMS-PCCMSACMSCCMSD

Summary

CMS Energy Corporation reported a net income of $53 million, or $0.40 per diluted share, for the second quarter of 2001, a decrease from $79 million, or $0.71 per diluted share, in the same period of 2000. This decline was primarily driven by a significant reduction in gains from asset sales compared to the prior year. However, the company saw improved earnings from its diversified energy businesses, particularly in marketing, services, and trading, as well as oil and gas exploration and production, which partially offset the lower asset sale gains. For the first six months of 2001, net income rose slightly to $162 million from $154 million in the comparable period of 2000, largely due to increased earnings from utility operations and diversified businesses, despite a lower asset sale gain. The company's utility segment, Consumers Energy, experienced a decrease in electric pretax operating income due to higher replacement power costs and reduced electric deliveries, linked to plant outages and an economic slowdown. Conversely, the gas utility segment showed improved pretax operating income, primarily due to the absence of a significant regulatory obligation recorded in the prior year. Panhandle Eastern Pipe Line Company reported a net income increase for both the quarter and year-to-date periods, benefiting from higher LNG terminalling revenues and the inclusion of Sea Robin pipeline operations.

Key Highlights

  • 1Consolidated net income for Q2 2001 was $53 million, down from $79 million in Q2 2000, mainly due to lower asset sale gains.
  • 2Year-to-date net income increased slightly to $162 million from $154 million, driven by stronger performance in utility and diversified energy segments.
  • 3Consumers Energy's electric utility segment saw a $26 million decrease in pretax operating income for the quarter due to higher power costs and lower deliveries.
  • 4Consumers Energy's gas utility segment's pretax operating income improved significantly by $45 million for the quarter, largely due to the absence of a prior year regulatory charge.
  • 5Panhandle Eastern Pipe Line Company reported increased net income for the quarter and year-to-date, boosted by LNG terminalling revenues and Sea Robin operations.
  • 6CMS Energy maintained its capital expenditure plans, estimating $1.305 billion for 2001, with significant investments in Consumers' electric and gas operations.
  • 7The company continues to manage market risk through various derivative instruments, with sensitivity analyses indicating a potential but not material impact on financial position or results from a 10% adverse shift in key market rates.

Frequently Asked Questions

The primary reason for the decrease in net income for the second quarter of 2001 was the timing of asset sales. Gains from asset sales in Q2 2001 were significantly lower ($0.05 per share) compared to Q2 2000 ($0.43 per share).

Consumers Energy's electric utility segment experienced a $26 million decrease in pretax operating income due to higher replacement power costs and reduced electric deliveries. In contrast, the gas utility segment saw a $45 million increase in pretax operating income, mainly because a $45 million regulatory obligation from the prior year was absent.

CMS Energy estimates capital expenditures of approximately $1.305 billion for 2001, $1.225 billion for 2002, and $1.055 billion for 2003. These expenditures are planned across its various business segments, with substantial investments allocated to Consumers' electric and gas operations.

CMS Energy manages market risks, including commodity prices, interest rates, and currency exchange rates, through established policies and procedures, often utilizing derivative instruments such as futures, swaps, options, and forward contracts. The company aims to hedge these risks to minimize adverse price changes and believes that any losses on these instruments would be offset by movements in the hedged risk.