8-KMaterial Agreements

CMS ENERGY CORP 8-K Report, Agreement Terminated (Jul 10, 2007)

Filed July 10, 2007For Securities:CMSCMS-PCCMSACMSCCMSD

Summary

CMS Energy Corporation (CMS) filed an 8-K on July 10, 2007, reporting the termination of a material definitive agreement related to the sale of its interests in the GasAtacama project. The agreement, initially announced on June 1, 2007, was terminated on July 3, 2007, due to Empresa Nacional De Electricidad S.A. (Endesa) exercising its right of first offer. This development signifies a setback in CMS Energy's previously announced divestiture plans for its international assets. The GasAtacama project, which includes natural gas pipelines in Argentina and Chile, and a 780 MW gas-fired generation facility in Chile, was slated for sale to AEI Chile Holdings, LTD for $80 million. The termination means CMS Energy will retain its stake in this project for the time being, with potential implications for its financial strategy and asset portfolio.

Key Highlights

  • 1Termination of the GasAtacama Purchase and Sale Agreement on July 3, 2007.
  • 2The termination occurred because Endesa exercised its right of first offer under the agreement.
  • 3The GasAtacama project involves natural gas pipelines and a 780 MW power generation facility in Chile.
  • 4The sale agreement was with AEI Chile Holdings, LTD for $80 million.
  • 5CMS Energy will retain its interest in the GasAtacama project following the termination.
  • 6The filing references forward-looking statements and incorporates risk factors from previous SEC filings.
  • 7The report was signed by Thomas J. Webb, Executive Vice President and Chief Financial Officer, for both CMS Energy Corporation and Consumers Energy Company.

Frequently Asked Questions

This 8-K filing is primarily to report the termination of a material definitive agreement concerning the sale of CMS Energy's interests in the GasAtacama project. The agreement was terminated on July 3, 2007, due to Endesa exercising its right of first offer.

The GasAtacama project consists of natural gas pipelines in Argentina and Chile, and a 780 megawatt combined cycle gas-fired generation facility in Chile. The Chilean power plant had been refitted to operate on oil due to gas supply curtailments from Argentina.

CMS Energy's subsidiaries had an agreement to sell their equity interests in the GasAtacama project to AEI Chile Holdings, LTD (a subsidiary of Ashmore Energy International) for a purchase price of $80 million.

The sale did not proceed because Endesa, another party with rights related to the project, exercised its right of first offer. This allowed Endesa to purchase CMS Energy's interests on the same terms and conditions as offered to AEI Chile Holdings, LTD, which resulted in the termination of the agreement with AEI Chile.