May 15, 2002 – CMS Energy Corp. on Wednesday reported the preliminary results of an internal review indicating its energy marketing unit, CMS Marketing, Services and Trading (CMS-MST), entered into “round trip” electricity trades involving simultaneous purchases and sales with the same counter-parties at the same price from May 2000 through mid-January 2002.
Thirteen of the trades accounted for about 98 percent of the volume. All such CMS trades were with either Dynegy Power Marketing, Inc. or Reliant Energy Services, Inc. These simultaneous transactions, in which electricity was sold and re-purchased without profit, loss or cash flow impact to CMS Energy, had the effect of increasing trading volumes. After internally concluding that the cessation of such trades was in the company’s best interests, CMS stopped such trades in January 2002.
CMS-MST has not participated in any electricity trading in California’s energy market, accordingly none of the round trip trades involved California.
CMS Energy decided after the third quarter of 2001 that not recording these trades in either revenue or expense was a more appropriate representation of the nature of these transactions. Therefore, no revenue or expense was recorded in its financial statements in the fourth quarter of 2001 from such trades. Revenue and expense were re-stated for the first three quarters of 2001 to eliminate $3.4 billion of previously reported revenue and expense.
The company’s Annual Report on Form10-K for 2001, issued in March, reflects only $5 million revenue and expense from such trades, which was inadvertently included. For 2000, these trades represented $1.0 billion of revenue and expense. The trades had no effect on the company’s earnings, cash flow or balance sheet for 2001 or 2000.
CMS’s internal review found that these trades included 79.3 million megawatt-hours in 2001 and 29.6 million megawatt-hours in 2000. With these trades subtracted, electric trading volumes for 2001 totaled 31 million megawatt-hours and for 2000 totaled 8.3 million megawatt-hours.
CMS Energy said furthermore that unlike some of the nation’s current energy marketing and trading companies, CMS-MST is a small component of CMS Energy’s total business, expected to account in 2002 for less than 15 percent of CMS Energy’s operating net income.
CMS Energy is primarily an asset-based company with a long history of providing affordable and reliable energy. CMS-MST has and continues to be primarily focused on optimizing CMS Energy’s assets and growing its customer base.
The company reiterated that it is cooperating with an informal inquiry by the Securities and Exchange Commission and is also cooperating with the Commodity Futures Trading Commission, which has requested that the company furnish information on the same general subject.
CMS Energy Corp. has annual sales of $10 billion and assets of $16 billion throughout the U.S. and in selected foreign markets.
CMS Energy, which has 85 percent of its assets in the United States, owns and operates an electric and natural gas distribution company with 1.7 million electric customers and 1.6 million gas customers; a 15,000 mile natural gas pipeline system and associated storage facilities; interest in the nation’s largest LNG import facility; approximately 8,000 megawatts of power plants; a midstream natural gas gathering and processing company with 700 million cubic feet per day of capacity; an oil and gas exploration and production company with significant domestic gas reserves; and a energy marketing, trading and services company marketing 750 billion cubic feet of natural gas and 31 million megawatt-hours of electricity annually.
For more information on CMS Energy, please visit their web site at: www.cmsenergy.com/