By the OGJ Online Staff
HOUSTON, Oct. 26 -- Taking a $613 million charge to third quarter earnings, CMS Energy Corp. said it is exiting South America and will concentrate its business in North America.
The change in business strategy was announced Friday. The Dearborn, Mich., company reported a third quarter loss of $569 million on $2.9 billion in revenue, compared to income of $53 million, on $2.3 billion in revenue, for the comparable period last year.
The company charged off $183 million to its energy distribution businesses in South America, which it plans to sell. CMS attributed the balance to writing down other over valued assets, including other international investments, a power supply contract, and higher than expected operating costs at the Michigan utility.
CMS said it had significant increases in power supply costs at its utility and also had to pay more to service a power supply contract with Ford Motor Co., Dearborn. CMS charged $130 million to earnings because of the Ford power supply contract.
Purchased power costs were also higher at Consumers Energy, CMS's utility, because of an unplanned outage at the 730 Mw Palisades nuclear plant starting in June 2001. The nuclear plant was taken out of service because of a steam leak on a control rod drive assembly. CMS is replacing the defective parts, but the plant is not expected to return to service until January 2002.
Operating income before the write-down for the unregulated segment of the company was $145 million, compared to $109 million for the third quarter 2000. Oil and gas exploration and production had operating income of $34 million, before a write-down of $32 million. CMS Energy said it is negotiating a definitive agreement to sell its oil and gas interests in Equatorial Guinea and a power plant in Australia for $1.2 billion but did not disclose the buyers.
The marketing services and trading business, one of the bright spots at CMS, reported operating income of $20 million, up from a loss of $2 million in the third quarter last year. The company attributed the solid performance of this business to long-term power contracts and wholesale gas and power trading activity.
Thursday, CMS said it would divest its utility-owned electric transmission system for $290 million to an independent transmission company -- the first such transaction of its kind in the US.
