CMS Energy (CMS) sold $300 million of senior unsecured notes, due 2020 at a coupon rate of 6.25%. The company plans to use the proceeds to retire existing long-term debt.
 
CMS Energy has a strong balance sheet among its peers with a low debt-to-capitalization of 70.4% (Zacks industry average was 79.3%) for the first nine months of fiscal 2009. The company continues to be a strong cash generator with annual operating cash flow of approximately $559 million during fiscal 2008. CMS Energy had $980 million of liquidity, including $797 million under secured credit facilities, and $183 million in cash and cash equivalents as of Sept 30, 2009.
 
CMS Energy plans to spend $6.3 billion between 2009 and 2013 on base capital investments. This includes maintenance capital expenditures and environmental upgrades, construction of an 830 MW clean coal plant, investments to meet renewable energy regulations and automated metering infrastructure (AMI).
 
CMS Energy is a diversified energy company operating in the United States and around the world. The company’s two principal subsidiaries are Consumers Energy Company and CMS Enterprises Company. Consumers Energy Company is a public utility that provides natural gas or electricity to residents in Michigan ‘s Lower Peninsula.  CMS Enterprises Company, through its subsidiaries, is engaged in several domestic and international diversified energy businesses.
 
Going forward, stable regulated utility operations, beneficial regulatory policies in Michigan, higher rates, strong balance sheet, incremental dividend and a relatively cheap earnings-based valuation support our bullish outlook for CMS Energy.
 
Also, based on forward earnings estimates, CMS Energy is trading at a discount to its peers like Calpine Corp. (CPN), Nisource Inc. (NI), and Empresa Nacional de Electricidad S.A. (EOC). However, the present unfavorable macro backdrop, lower demand for electricity, the dismal Michigan economy, and pending regulatory cases continue to restrain valuation. We maintain our market Neutral recommendation on the shares.
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