10-QPeriod: Q3 FY2001

CMS ENERGY CORP Quarterly Report for Q3 Ended Sep 30, 2001

Filed November 14, 2001For Securities:CMSCMS-PCCMSACMSCCMSD

Summary

CMS Energy Corporation reported a significant net loss of $569 million ($4.29 per share) for the third quarter of 2001, a stark contrast to the $53 million profit in the same period last year. This substantial loss is primarily attributed to substantial write-downs totaling $613 million after-tax, related to a strategic shift towards focusing on North American operations and the divestiture of non-strategic assets. These charges include a $183 million loss from discontinuing the South American energy distribution unit, $218 million for reduced asset valuations on international investments and energy projects, and a $130 million charge for loss contracts at the Dearborn Industrial Generation plant. Excluding these significant one-time charges, "earnings before reconciling items" were $46 million ($0.35 per share), a slight decrease from $46 million ($0.43 per share) in the prior year, impacted by higher power supply costs at Consumers Energy due to an unplanned outage at the Palisades nuclear plant. The nine-month period ending September 30, 2001, also reflects a net loss of $407 million, compared to a net income of $207 million in the prior year, largely due to the same aforementioned write-downs. The "earnings before reconciling items" for the nine months increased to $202 million ($1.55 per share) from $152 million ($1.40 per share) in the prior year, driven by improved performance in diversified energy businesses and the gas utility segment, though offset by increased power supply costs at the electric utility. Investors should note the company's strategic pivot and the significant impact of asset impairments and restructuring charges on the current quarter's financial results.

Key Highlights

  • 1CMS Energy reported a net loss of $569 million ($4.29/share) for Q3 2001, compared to a net income of $53 million ($0.49/share) in Q3 2000.
  • 2The significant loss was driven by $613 million in after-tax write-downs related to a strategic shift, including discontinuation of international operations and reduced asset valuations.
  • 3Excluding these one-time charges, "earnings before reconciling items" were $46 million ($0.35/share) for Q3 2001, compared to $46 million ($0.43/share) in Q3 2000.
  • 4Consumers Energy's electric utility segment experienced a pretax operating loss of $62 million for the quarter, a significant decline from $118 million in pretax operating income in the prior year, due to a $126 million loss related to the MCV Power Purchase Agreement and higher power supply costs from the Palisades nuclear plant outage.
  • 5The company is executing a strategy to strengthen its balance sheet and focus on North America, planning to sell non-strategic international assets.
  • 6Capital expenditures are projected to be $1.365 billion for 2001, $1.025 billion for 2002, and $930 million for 2003.

Frequently Asked Questions

The significant net loss of $569 million was primarily caused by substantial after-tax write-downs totaling $613 million. These charges relate to a change in business strategy to focus on North America, including the discontinuation of the South American energy distribution unit ($183 million charge), reduced asset valuations on international investments ($218 million charge), and a loss contract at the Dearborn Industrial Generation plant ($130 million charge).

Consumers Energy's electric utility segment reported a pretax operating loss of $62 million, a sharp decrease from the $118 million in pretax operating income during the same period in 2000. This decline was mainly due to a $126 million loss related to the MCV Power Purchase Agreement and increased power supply costs resulting from an unplanned outage at the Palisades nuclear plant.

CMS Energy announced a strategic shift in October 2001 to strengthen its balance sheet, provide more transparent and predictable earnings, and lower business risk by focusing future growth primarily in North America. This involves selling non-strategic international assets, discontinuing its international energy distribution business, and focusing on domestic operations.

CMS Energy estimates capital expenditures of approximately $1.365 billion for 2001, $1.025 billion for 2002, and $930 million for 2003, covering its various utility and diversified energy businesses.