CMS Energy to spin off 50% of E&P subsidiary
CMS Energy Corp. will spin off up to 50% of its exploration and production subsidiary, CMS Oil & Gas Co., and issue $300 million in CMS Energy common stock to raise cash, reduce corporate debt and maintain its goal of 10% growth per year.
In a move to raise cash, reduce corporate debt, and maintain its 10%/year growth goal, CMS Energy Corp., Dearborn, Mich., said Monday it would spin off through an initial public offering (IPO) up to 50% of its oil and natural gas exploration and production subsidiary, CMS Oil & Gas Co., during first quarter 2001.
CMS' plans to strengthen its balance sheet also include issuing $300 million of CMS common stock sooner than planned. It originally planned to issue those shares in mid-2001.
CMS expects both moves to raise $800 million in cash and $450 million in equity for the company. It will use the $800 million to pay off debt and supplement its $1.4 billion asset sale program. About $900 million of that program has been completed.
Strong oil and gas commodity prices should bolster the prices for shares spun out in the IPO and those retained by the company. CMS expects to lower its debt capitalization percentage to the low 60%-range from its current level of around 70%.
The moves also will significantly lower the interest charges its pays on its debt, said Alan M. Wright, senior vice president and chief financial officer of CMS Energy. The moves would not weaken CMS's per-share profits for 2001.
Much of CMS Energy's corporate debt came from acquisitions, a CMS spokesman said. In recent years, the company expanded operations overseas to South America, the Middle East, and India as well as domestic acquisitions, such as its purchase of Panhandle Eastern Pipeline and Trunkline Gas Co. Now, CMS Energy is refocusing its growth and development into projects where it can utilize several of its subsidiaries on the same project.