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CMS ENERGY CORP 8-K Report, Material Agreement (Jun 23, 2021)

Filed June 23, 2021For Securities:CMSCMS-PCCMSACMSCCMSD

Summary

CMS Energy Corporation (CMS) and its subsidiary Consumers Energy Company announced significant strategic moves via an 8-K filing on June 23, 2021. The company entered into two material definitive agreements for the acquisition of several natural gas-fired power generation facilities. The first agreement involves the purchase of the New Covert Generating Facility for $810 million, a 1,176-megawatt plant, with a targeted closing in Q2 2023. The second agreement is for the acquisition of three additional plants—Dearborn Industrial Generation, Kalamazoo River Generating Station, and Livingston Generating Station—totaling 901 megawatts, for $515 million, with a targeted closing in April 2025. These acquisitions represent a substantial investment in natural gas generation capacity. In addition to the power plant acquisitions, Consumers Energy also unveiled an updated Integrated Resource Plan, which includes a commitment to cease coal usage by 2025. This dual announcement signals a strategic shift towards natural gas infrastructure while simultaneously accelerating the transition away from coal, underscoring a complex energy transition strategy. Investors should note that both acquisition agreements are subject to customary closing conditions, including regulatory approvals, and their consummation is not guaranteed.

Key Highlights

  • 1Consumers Energy to acquire New Covert Generating Facility (1,176 MW natural gas-fired) for $810 million.
  • 2Consumers Energy to acquire three additional Michigan natural gas-fired plants (Dearborn, Kalamazoo, Livingston) totaling 901 MW for $515 million.
  • 3Acquisitions significantly expand natural gas generation capacity for CMS Energy.
  • 4Closing for Covert facility targeted for Q2 2023; closing for the other three facilities targeted for April 2025.
  • 5Both acquisition agreements are subject to customary closing conditions, including FERC and MPSC approvals.
  • 6Consumers Energy announced an updated Integrated Resource Plan, including a plan to end coal use by 2025.
  • 7The company is pursuing a strategic transition, expanding natural gas while phasing out coal.

Frequently Asked Questions

CMS Energy, through its subsidiary Consumers Energy, is acquiring four natural gas-fired power generation facilities. These include the New Covert Generating Facility (1,176 MW) and three other plants in Michigan (Dearborn Industrial Generation, Kalamazoo River Generating Station, and Livingston Generating Station) totaling 901 MW.

The purchase price for the New Covert Generating Facility is $810 million, and the combined purchase price for the other three plants is $515 million. These prices are subject to post-closing working capital and other adjustments.

The closing for the New Covert Generating Facility is targeted for the second quarter of 2023, with a termination date of September 30, 2023, if not closed. The closing for the Dearborn, Kalamazoo, and Livingston facilities is targeted for April 2025, with a termination date of May 2027.

Yes, both acquisition agreements are subject to several customary closing conditions, including approvals from the Federal Energy Regulatory Commission (FERC) and the Michigan Public Service Commission (MPSC), as well as antitrust waiting periods. The company cannot guarantee that these conditions will be met or that the transactions will be consummated.

These acquisitions represent a significant expansion of CMS Energy's natural gas generation capacity. This strategy is coupled with the company's announced plan to end its use of coal by 2025, indicating a transition towards cleaner natural gas as a bridge fuel while moving away from coal.