Original Source: FD (FAIR DISCLOSURE) WIRE
. Laura Mountcastle, CMS Energy Corp., VP & Treasurer . Dave Joos, CMS Energy Corp., President & CEO . Tom Webb, CMS Energy Corp., CFO
. John Kiani, Deutsche Bank, Analyst . Brian Russon, Ladenburg Thalmann, Analyst . Steve Fleishman, Catapult, Analyst . Robert Petrosino, Barclays Capital, Analyst . John Alli, Zimmer Lucas, Analyst
Management reported that for 1Q07, non-GAAP adjusted earnings, including the effects of mark-to-market, were $0.43 a share. CMS reported a loss of $0.97 a share for 1Q07. Co. continues to forecast adjusted earnings at $0.80 a share for 2007 and $1.20 for 2008.
A. Key Data From Call 1. 1Q07 non-GAAP adjusted earnings, including the effects of mark-to-market = $0.43 a share. 2. 1Q07 loss per share = $0.97. 3. 2008 adjusted earnings guidance = $1.20 a share.
4. 2007 adjusted earnings guidance = $0.80 a share.
S1. Opening Comments (L.M.) 1. Earnings: 1. Anticipates 2007 and possibly 2008 reported earnings to be substantially lower than adjusted earnings due to the expected effect of asset sales.
1. Co. is not providing reported earnings guidance reconciliation because of the uncertainties associated with those factors.
S2. 1Q07 Business Review (D.J.) 1. Highlights: 1. Closed on the sale of Middle-East, Africa, and India investments on 05/02/07.
2. Operating results were solid. 3. Non-GAAP adjusted earnings, including the effects of mark-to-market, were $0.43 a share, up from a loss of $0.15 last year. 1. Full-year guidance for adjusted earnings remains unchanged at $0.80 for 2007 and $1.20 for 2008. 4. Sold its interest in the Midland Cogeneration Venture, Co.'s mark-to-market exposure is much less than it has been in recent years. 1. Doesn't intend to continue providing adjusted earnings without the effect of mark-to-market. 2. Last year's $0.15 loss included $0.34 loss due to mark-to-market and also $0.03 in earnings from businesses that are now considered discontinued operations. 3. 1Q06 reported adjusted earnings were $0.22 a share, excluding the effects of mark-to-market. 2. Regulatory:
1. Michigan Public Service Commission (MPSC) approved the
Palisades power purchase agreement (PPA) in March paving the
way to close the sale of Palisades to Entergy for $380m. 1. Bulk of the net sale proceeds will be used to reduce debt, order for borrowing at the utility. 2. $66m of the proceeds along with released decommissioning trust funds of $189m or total of $255m will be refunded to customers over 18 months. 3. The commission has yet to decide how approx. $127m of additional funds, mostly from excess decommissioning will be used for the benefit of customers.
4. Pleased with the outcome of this transaction and the improvement in the Co.'s risk profile that comes with it. 2. Filed a gas rate case in Feb. 9, requesting $88m base rate increase. 1. A schedule has been set that allows for proposal for a decision in late Oct. 3. Filed an electric rate case on March 30, requesting $157m revenue increase based on a 2008 test year. 1. The case reflects the removal of Palisades from base rates, the inclusion of the Palisades PPA, and an improved capital structure. 2. Prehearing conference is set for May 10. 4. On 05/01/07, Consumers Energy filed with the MPSC a long-term resource plan called the balanced energy initiative. 1. Aligned with the MPSC Chairman's 21st century energy plan, proposing a mix of energy efficiency, renewable generation, and new conventional generation to meet the future needs of electric customers. 5. Electric Rate Case: 1. Increased sales and return of customers from retail open access more than offset increased operating and maintenance costs. 2. Capital investment to comply with clean air and invest in infrastructure resulted in an increase in rate base to $5.1b. 3. Contribution of $400m of equity which Co. plans to make on 05/03/07 on the heels of the closing of Middle East, Africa, and India transaction brings its capital structure to target level of roughly 50% on a financial basis or 41.5% on a regulatory basis. 1. These capital changes represent the lion share of the rate increase about $117m. 4. The other major factors are removal of Palisades' costs from base rates, which is offset by inclusion of the Palisades PPA in Co.'s power purchase cost. 1. If approved as requested, customer rates would increase by
an avg. of about 5%; however, taking into consideration, the $255m refund from the Palisades sale, avg. rates will actually be slightly lower in 2008. 5. Despite significant rate-based growth, since 1996, driven in large part by new environmental requirements, electric rates since that time have grown at less than the rate of
inflation, about 2.2% compounded. 6. Believes it can continue to grow the utility rate base while keeping future rate increases close to the rate of inflation. 6. On 05/01/07, CMS filed its …