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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED) MARCH 13, 2007
COMMISSION REGISTRANT; STATE OF INCORPORATION; IRS EMPLOYER
FILE NUMBER ADDRESS; AND TELEPHONE NUMBER IDENTIFICATION NO.
----------- ----------------------------------- ------------------
1-9513 CMS ENERGY CORPORATION 38-2726431
(A MICHIGAN CORPORATION)
ONE ENERGY PLAZA
JACKSON, MICHIGAN 49201
(517) 788-0550
1-5611 CONSUMERS ENERGY COMPANY 38-0442310
(A MICHIGAN CORPORATION)
ONE ENERGY PLAZA
JACKSON, MICHIGAN 49201
(517) 788-0550
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions:
[ ] Written communications pursuant to Rule 425 under the Securities Act (17
CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
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ITEM 1.01. ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT.
The disclosures set forth under Item 2.01 hereof are hereby incorporated by
reference in this Item 1.01.
ITEM 2.01. COMPLETION OF ACQUISITION OR DISPOSITION OF ASSETS.
On March 13, 2007, CMS Enterprises Company ("Enterprises"), a wholly owned
subsidiary of CMS Energy Corporation ("CMS Energy"), completed the previously
announced sale of its ownership interest in substantially all of its Argentine
assets and its northern Michigan non-utility gas gathering, processing and
pipeline businesses (the "Assets") together with certain related rights and
interests, for $130 million net to Lucid Energy LLC ("Lucid") whose financial
partners include Sociedad Argentina de Energia S.A., an Argentine company.
The $130 million of net proceeds were realized from a gross sale price of
$156.9 million, netted against approximately $26.9 million in cash which was
retained by one of the sold subsidiaries after receipt from Endesa, S.A.
("Endesa") in connection with Endesa's separate purchase of Enterprises'
ownership interest in the El Chocon plant in Argentina pursuant to a partnership
agreement right of first offer (as further described below). As a result of the
exercise of the right of first offer, the El Chocon plant that was originally
part of the Assets sold to Lucid was instead sold to Endesa. Immediately prior
to completion of the sale of the Assets, Enterprises and Lucid entered into
definitive purchase and sale agreements (the "Agreements") regarding the Assets.
The Agreements contain indemnifications, guarantees, and representations and
warranties that are typical for such sale transactions. The Agreements provide
that Enterprises' liability for breaches of representation and warranties will
be capped at the amount of $25 million for those relating to the Argentine
assets and $5 million for those relating to the Michigan businesses. Copies of
the Agreements are attached hereto as Exhibit 10.1, 10.2 and 10.3. A CMS Energy
News Release announcing the completion of the sale is attached as Exhibit 99.1.
On March 9, 2007, CMS Energy announced that it had sold its interest in El
Chocon, an Argentine hydroelectric generating business to Endesa for $50
million. Of the $50 million, $23.1 million was paid to CMS Enterprises and the
balance was paid to one of the subsidiaries sold to Lucid Energy. Enterprises'
interest in El Chocon was originally part of the asset group that Lucid agreed
to purchase pursuant to a binding letter of intent. The letter of intent was
attached to CMS Energy's form 8-K filed on February 1, 2007 that is incorporated
by reference herein. However, Endesa had a right of first offer on Enterprises'
interest in El Chocon that it exercised. A CMS Energy News Release announcing
Endesa's exercise of its right of first offer for El Chocon is attached as
Exhibit 99.2
As a result of the sales to Endesa and Lucid, CMS Energy realized cash
proceeds of $180 million, and will recognize an after-tax, non-cash loss of
approximately $160 million in the first quarter of 2007. CMS Enterprises will
maintain its interest in the TGN natural gas business in Argentina, which
remains subject to a potential sale to the government of Argentina or other
disposition. In recognition of Enterprises' commitment to sell its 23.5 percent
interest in TGN, CMS Energy expects to record an after-tax impairment charge of
approximately $140 million in the first quarter of 2007 to reflect the fair
value of its TGN ownership interest.
ITEM 9.01. FINANCIAL STATEMENTS AND EXHIBITS.
(B) PRO FORMA FINANCIAL INFORMATION
The accompanying unaudited pro forma condensed consolidated financial statements
reflect adjustments to the historical consolidated financial statements of CMS
Energy to give effect to the sale of interests in
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the Argentine and Michigan Businesses assuming the sale had been effective for
the periods indicated. The sales will be accounted for as discontinued
operations in accordance with Statement of Financial Accounting Standards No.
144, "Accounting for the Impairment or Disposal of Long-Lived Assets" and
Emerging Issues Task Force 03-13, "Applying the Conditions in Paragraph 42 of
FASB Statement No. 144 in Determining Whether to Report Discontinued
Operations".
Certain information and notes normally included in consolidated financial
statements prepared in accordance with accounting principles generally accepted
in the United States have been omitted pursuant to the rules and regulations of
the Securities and Exchange Commission governing pro forma information. The
unaudited pro forma condensed consolidated financial statements should be read
in conjunction with the consolidated financial statements of CMS Energy, as
contained in its 2006 Annual Report on Form 10-K.
The Unaudited Pro Forma Condensed Consolidated Balance Sheet assumes the sale of
interests in the Argentine and Michigan Businesses was consummated on December
31, 2006. Therefore, the loss on sale recognized at December 31, 2006 will
ultimately differ from the actual loss that occurred at the March 13, 2007 date
of sale. The Unaudited Pro Forma Condensed Consolidated Statements of Income
(Loss) assume the disposition occurred on January 1, 2004. The unaudited pro
forma condensed consolidated financial statements are presented for purposes of
illustration only, in accordance with the adjustments set forth below, and are
not necessarily indicative of the financial position or results of operations
that would have occurred had the sale been consummated on the dates as of which,
or at the beginning of the period which, the sale is being given effect, nor are
they necessarily indicative of future operating results or financial position of
CMS Energy.
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CMS ENERGY CORPORATION
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF DECEMBER 31, 2006
(In Millions)
HISTORICAL
ADJUSTMENTS
AND SALE PRO FORMA
HISTORICAL TRANSACTION ADJUSTMENTS PRO FORMA
CMS ENERGY (NOTES 1 AND 2) (NOTES 1 AND 2) CMS ENERGY
---------- --------------- --------------- ----------
ASSETS
Plant and property (at cost) $12,642 $(250) $ -- $12,392
Less accumulated depreciation, depletion
and amortization 5,317 (119) -- 5,198
------- ----- ----- -------
7,325 (131) 7,194
Construction work-in-progress 651 -- -- 651
------- ----- ----- -------
Net plant and property 7,976 (131)(a) -- 7,845
Investments 598 (19)(a) -- 579
Cash and cash equivalents at cost, which
approximates market 351 130 (a) (175)(b) 306
Accounts receivable, notes receivable,
and accrued revenue, net 808 (25)(a) -- 783
Inventories at average cost 1,357 (6)(a) -- 1,351
Other current assets 627 (2)(a) -- 625
Non-current assets 3,654 (16)(a) -- 3,638
------- ----- ----- -------
TOTAL ASSETS $15,371 $ (69) $(175) $15,127
======= ===== ===== =======
STOCKHOLDERS' INVESTMENT AND LIABILITIES
Common stockholders' equity $ 2 $ -- $ -- $ 2
Other paid-in capital 4,468 -- -- 4,468
Accumulated other comprehensive loss (318) 127 (c) -- (191)
Retained deficit (1,918) (161)(d) -- (2,079)
Preferred stock 305 -- -- 305
Long-term debt 6,202 -- (175)(b) 6,027
Long-term debt related parties 178 -- -- 178
Non-current portion of capital and
finance lease obligations 42 -- -- 42
------- ----- ----- -------
Total capitalization 8,961 (34) (175) 8,752
Minority interests 91 (3)(e) -- 88
Accounts payable 564 (21)(f) -- 543
Other current liabilities 1,592 (13)(f) -- 1,579
Non-current liabilities 4,163 2 (f) -- 4,165
------- ----- ----- -------
TOTAL STOCKHOLDERS' INVESTMENT AND
LIABILITIES $15,371 $ (69) $(175) $15,127
======= ===== ===== =======
See notes to pro forma condensed consolidated financial statements.
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CMS ENERGY CORPORATION
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)
FOR THE YEAR ENDED DECEMBER 31, 2006
(In Millions, except per share amounts)
HISTORICAL PRO FORMA
HISTORICAL ADJUSTMENTS ADJUSTMENTS PRO FORMA
CMS ENERGY (NOTES 1 AND 2) (NOTES 1 AND 2) CMS ENERGY
---------- --------------- --------------- ----------
OPERATING REVENUE $6,810 $(199)(g) $ -- $6,611
EARNINGS FROM EQUITY METHOD INVESTEES 89 (3)(h) -- 86
OPERATING EXPENSES --
Fuel for electric generation 984 (59)(i) -- 925
Fuel costs mark-to-market at the MCV
Partnership 204 -- -- 204
Purchased and interchange power 829 (50)(i) -- 779
Cost of gas sold 2,131 -- -- 2,131
Other operating expense 1,225 (18)(i) -- 1,207
Maintenance 326 (15)(i) -- 311
Depreciation, depletion, and
amortization 576 (13)(i) -- 563
General taxes 198 (1)(i) -- 197
Asset impairment charges 459 -- -- 459
------ ----- ----- ------
6,932 (156) -- 6,776
------ ----- ----- ------
OPERATING INCOME (LOSS) (33) (46) -- (79)
OTHER INCOME --
Gain on asset sales, net 79 -- -- 79
Interest and dividends 86 (5)(j) -- 81
Other income 36 -- -- 36
------ ----- ----- ------
201 (5) 196
FIXED CHARGES 511 (10)(k) (12)(l) 489
------ ----- ----- ------
INCOME (LOSS) BEFORE INCOME TAXES AND
MINORITY INTERESTS (343) (41) 12 (372)
MINORITY INTEREST (OBLIGATIONS), NET (100) (1)(m) -- (101)
INCOME TAX EXPENSE (BENEFIT) (158) (19)(n) 4(o) (173)
------ ----- ----- ------
INCOME (LOSS) FROM CONTINUING OPERATIONS
BEFORE PREFERRED DIVIDENDS (85) (21) 8 (98)
PREFERRED DIVIDENDS 11 -- -- 11
------ ----- ----- ------
INCOME (LOSS) FROM CONTINUING OPERATIONS
AFTER PREFERRED DIVIDENDS $ (96) $ (21) $ 8 $ (109)
====== ===== ===== ======
INCOME (LOSS) FROM CONTINUING OPERATIONS
PER SHARE:
Basic - Average Common Shares
Outstanding 219.9 219.9
- Income (Loss) Per Average
Common Share $(0.44) $(0.50)
Diluted - Average Common Shares
Outstanding 219.9 219.9
- Income (Loss) Per Average
Common Share $(0.44) $(0.50)
See notes to pro forma condensed consolidated financial statements.
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CMS ENERGY CORPORATION
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)
FOR THE YEAR ENDED DECEMBER 31, 2005
(In Millions, except per share amounts)
HISTORICAL PRO FORMA
HISTORICAL ADJUSTMENTS ADJUSTMENTS PRO FORMA
CMS ENERGY (NOTES 1) (NOTES 1 AND 2) CMS ENERGY
---------- ----------- --------------- ----------
OPERATING REVENUE $6,288 $(142) (g) $ -- $6,146
EARNINGS FROM EQUITY METHOD INVESTEES 125 (4) (h) -- 121
OPERATING EXPENSES --
Fuel for electric generation 720 (40) (i) -- 680
Fuel costs mark-to-market at the MCV Partnership (200) -- -- (200)
Purchased and interchange power 546 (38) (i) -- 508
Cost of gas sold 2,297 -- -- 2,297
Other operating expense 1,105 (13) (i) -- 1,092
Maintenance 249 (10) (i) -- 239
Depreciation, depletion, and amortization 525 (11) (i) -- 514
General taxes 261 (1) (i) -- 260
Asset impairment charges 1,184 -- -- 1,184
------ ----- ---- ------
6,687 (113) -- 6,574
------ ----- ---- ------
OPERATING INCOME (LOSS) (274) (33) -- (307)
OTHER INCOME (DEDUCTIONS)
Gain on asset sales, net 6 -- -- 6
Interest and dividends 66 (2) (j) -- 64
Other deductions (15) -- -- (15)
------ ----- ---- ------
57 (2) 55
FIXED CHARGES 489 (8) (k) (12) (l) 469
------ ----- ---- ------
INCOME (LOSS) BEFORE INCOME TAXES AND
MINORITY INTERESTS (706) (27) 12 (721)
MINORITY INTEREST (OBLIGATIONS), NET (440) (1) (m) -- (441)
INCOME TAX EXPENSE (BENEFIT) (168) (16) (n) 4 (o) (180)
------ ----- ---- ------
INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE
PREFERRED DIVIDENDS (98) (10) 8 (100)
PREFERRED DIVIDENDS 10 -- -- 10
------ ----- ---- ------
INCOME (LOSS) FROM CONTINUING OPERATIONS AFTER
PREFERRED DIVIDENDS $ (108) $ (10) $ 8 $ (110)
====== ===== ==== ======
INCOME (LOSS) FROM CONTINUING OPERATIONS PER SHARE:
Basic - Average Common Shares Outstanding 211.8 211.8
- Income (Loss) Per Average Common Share $(0.51) $(0.52)
Diluted - Average Common Shares Outstanding 211.8 211.8
- Income (Loss) Per Average Common Share $(0.51) $(0.52)
See notes to pro forma condensed consolidated financial statements.
6
CMS ENERGY CORPORATION
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)
FOR THE YEAR ENDED DECEMBER 31, 2004
(In Millions, except per share amounts)
HISTORICAL PRO FORMA
HISTORICAL ADJUSTMENTS ADJUSTMENTS PRO FORMA
CMS ENERGY (NOTES 1) (NOTES 1 AND 2) CMS ENERGY
---------- ----------- --------------- ----------
OPERATING REVENUE $5,472 $(103) (g) $ -- $5,369
EARNINGS FROM EQUITY METHOD INVESTEES 115 (1) (h) -- 114
OPERATING EXPENSES --
Fuel for electric generation 774 (29) (i) -- 745
Fuel costs mark-to-market at the MCV Partnership 19 -- -- 19
Purchased and interchange power 344 (17) (i) -- 327
Cost of gas sold 1,786 -- -- 1,786
Other operating expense 954 (10) (i) -- 944
Maintenance 256 (10) (i) -- 246
Depreciation, depletion, and amortization 431 (12) (i) -- 419
General taxes 270 (1) (i) -- 269
Asset impairment charges 160 -- -- 160
------ ----- ---- ------
4,994 (79) -- 4,915
------ ----- ---- ------
OPERATING INCOME (LOSS) 593 (25) -- 568
OTHER INCOME
Gain on asset sales, net 52 -- -- 52
Interest and dividends 27 -- -- 27
Other income 99 (2) (j) -- 97
------ ----- ---- ------
178 (2) 176
FIXED CHARGES 634 (11) (k) (12) (l) 611
------ ----- ---- ------
INCOME (LOSS) BEFORE INCOME TAXES AND
MINORITY INTERESTS 137 (16) 12 133
MINORITY INTEREST (OBLIGATIONS), NET 15 (1) (m) -- 14
INCOME TAX EXPENSE (BENEFIT) (5) (6) (n) 4 (o) (7)
------ ----- ---- ------
INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE
PREFERRED DIVIDENDS 127 (9) 8 126
PREFERRED DIVIDENDS 11 -- -- 11
------ ----- ---- ------
INCOME (LOSS) FROM CONTINUING OPERATIONS AFTER
PREFERRED DIVIDENDS $ 116 $ (9) $ 8 $ 115
====== ===== ==== ======
INCOME (LOSS) FROM CONTINUING OPERATIONS PER SHARE:
Basic - Average Common Shares Outstanding 168.6 168.6
- Income (Loss) Per Average Common Share $ 0.68 $ 0.68
Diluted - Average Common Shares Outstanding 172.1 172.1
- Income (Loss) Per Average Common Share $ 0.67 $ 0.67
See notes to pro forma condensed consolidated financial statements.
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NOTE 1 - SALE OF INTERESTS IN THE ARGENTINE BUSINESSES AND THE MICHIGAN
BUSINESSES
As discussed in Item 2.01, CMS Energy has reflected, in the accompanying
unaudited pro forma condensed consolidated financial statements, that the sale
yielded CMS Energy total cash consideration of $180 million. The proceeds from
the sale will be used to reduce debt. The sale resulted in an after-tax loss of
$161 million calculated as of December 31, 2006 and reflected in retained
deficit in the accompanying Unaudited Pro Forma Condensed Consolidated Balance
Sheet as of December 31, 2006. The loss was calculated as follows:
In Millions
-----------
Total cash consideration $ 180
Net book value of assets sold (202)
Recognition of cumulative foreign currency translation adjustments (195)
Fair value liability (a) (25)
Selling expenses (5)
-----
Loss on Sale Before Taxes (247)
Tax benefit 86
-----
Net Loss on Sale $(161)
=====
(a) Relates to the recognition of an estimated $25 million fair value of a
liability related to claims on Gas Transmission and Generation assets in
Argentina.
The Unaudited Pro Forma Condensed Consolidated Statements of Income (Loss) for
the years ended December 31, 2005 and December 31, 2004 present the elimination
of historical values to be reclassified as discontinued operations that were not
required to be reflected in discontinued operations as of December 31, 2006. The
Unaudited Pro Forma Condensed Consolidated Statements of Income (Loss) include
the elimination of allocated parent interest of $7 million in 2006, $6 million
in 2005, and $9 million in 2004. The after-tax loss resulting from this
transaction has not been reflected in the accompanying Unaudited Pro Forma
Condensed Consolidated Statements of Income (Loss).
NOTE 2 - PRO FORMA ADJUSTMENTS
The following is a summary of the adjustments:
Condensed Consolidated Balance Sheets:
(a) To reflect the removal of the interests in the Argentine Businesses'
and the Michigan Businesses' assets and the receipt of $180 million in
cash consideration.
(b) To reflect the use of the net cash proceeds of $175 million to retire
long-term debt, excluding any premiums assessed to retire long-term
debt.
(c) To reflect the reversal of $127 million, net of taxes, of certain
cumulative amounts of the Argentine Businesses related foreign
currency translation adjustments from Accumulated other comprehensive
loss into earnings.
(d) To reflect the earnings impact, net of tax, of the loss on the sale of
our interests in the Argentine Businesses and the Michigan Businesses
and the reclassification of cumulative foreign currency translation
adjustments.
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(e) To reflect the removal of Minority interests.
(f) To reflect the removal of the interests in the Argentine Businesses'
and the Michigan Businesses' liabilities.
Condensed Consolidated Statements of Income (Loss):
(g) To reflect the elimination of historical Operating Revenue for the
Argentine Businesses and the Michigan Businesses, assuming the
disposition occurred as of January 1, 2004.
(h) To reflect the elimination of historical Earnings from Equity Method
Investees for the Argentine Businesses, assuming the disposition
occurred as of January 1, 2004.
(i) To reflect the elimination of historical Operating Expenses for the
Argentine Businesses and the Michigan Businesses, assuming the
disposition occurred as of January 1, 2004.
(j) To reflect the elimination of historical Other Income (Loss) for the
Argentine Businesses and the Michigan Businesses, assuming the
disposition occurred as of January 1, 2004.
(k) To reflect the elimination of historical Fixed Charges and allocated
parent interest in the Argentine Businesses and the Michigan
Businesses, assuming the disposition occurred as of January 1, 2004.
(l) To reflect reduced interest expense at an average interest rate of 7.0
percent from the use of $175 million of net proceeds to reduce
long-term debt outstanding assuming the disposition occurred as of
January 1, 2004.
(m) To reflect the elimination of Minority Interest (Obligations) in the
Argentine Businesses.
(n) To reflect the elimination of income tax expense applicable to CMS
Enterprises' interest in the Argentine Businesses and the Michigan
Businesses, assuming the disposition occurred as of January 1, 2004.
(o) To reflect the income tax effects of the pro forma adjustments,
assuming the disposition occurred as of January 1, 2004.
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(D) EXHIBITS.
10.1 Common Agreement dated March 12, 2007 between CMS Enterprises Company and
Lucid Energy, LLC.
10.2 Agreement of Purchase and Sale dated March 12, 2007 by and among CMS
Enterprises Company, CMS Energy Investment, LLC, and Lucid Energy, LLC and
Michigan Pipeline and Processing, LLC.
10.3 Agreement of Purchase and Sale dated March 12, 2007 by and among CMS
Enterprises Company, CMS Generation Holdings Company, CMS International
Ventures, LLC, and Lucid Energy, LLC and New Argentine Generation
Company, LLC.
99.1 CMS Energy's News Release dated March 14, 2007.
99.2 CMS Energy's News Release dated March 9, 2007.
This Form 8-K contains "forward-looking statements" as defined in Rule 3b-6 of
the Securities Exchange Act of 1934, as amended, Rule 175 of the Securities Act
of 1933, as amended, and relevant legal decisions. The forward-looking
statements are subject to risks and uncertainties. They should be read in
conjunction with "FORWARD-LOOKING STATEMENTS AND INFORMATION" and "RISK FACTORS"
each found in the MANAGEMENT'S DISCUSSION AND ANALYSIS sections of CMS Energy's
Form 10-K and Consumers' Form 10-K for the Year Ended December 31, 2006 (CMS
Energy's and Consumers' "FORWARD-LOOKING STATEMENTS AND INFORMATION" and "RISK
FACTORS" sections are incorporated herein by reference), that discuss important
factors that could cause CMS Energy's and Consumers' results to differ
materially from those anticipated in such statements.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
CMS ENERGY CORPORATION
Dated: March 14, 2007
By: /s/ Thomas J. Webb
------------------------------------
Thomas J. Webb
Executive Vice President and
Chief Financial Officer
CONSUMERS ENERGY COMPANY
Dated: March 14, 2007
By: /s/ Thomas J. Webb
------------------------------------
Thomas J. Webb
Executive Vice President and
Chief Financial Officer
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