CMS Energy to Spend $10 Billion Over Five Years on Renewables, Infrastructure

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Researched by Industrial Info Resources (Sugar Land, Texas)--CMS Energy (NYSE:CMS) (Jackson, Michigan), which manages Michigan's electric and natural gas utility, Consumers Energy, enjoyed stronger revenues and profits in 2017, despite mild temperatures and heavy storm activity throughout the year, and is upping its capital-spending plans for the coming years to further develop renewable energy and improve the company's extensive natural gas facilities. Industrial Info is tracking $1.12 billion in active projects involving CMS, most of which are set to begin or finish construction in 2018.

CMS executives forecast a five-year capital spending program of about $10 billion, citing the recently passed tax reform bill as a major influence. Last year alone saw $1.9 billion of investment at the utility, an annual record. In a recent earnings-related conference call, one CMS executive said the utility has a robust capital investment backlog, with plans to upgrade its large and aging electric and gas systems, and boost investments in renewable generation.

"Though the amount and the pace at which the tax savings will be provided to customers in 2018 have yet to be determined, we believe the rate reduction could be up to 4%, which clearly facilitates our self-funding strategy by creating meaningful headroom for future capital investments," said Rejji Hayes, the chief financial officer of CMS. He noted that "every 1% reduction in customer rates equates to approximately $400 million of incremental capital investment capacity."

CMS has $453 million in renewable-energy projects set to begin or finish construction in 2018, covering wind and solar farms and hydropower facilities. The company expects to begin construction in the coming months on a $152 million expansion of the Cross Winds Energy Park Windfarm in Fairgrove, Michigan, which will add 76 megawatts (MW) of generation through the construction of 33 wind turbines from General Electric (NYSE:GE), bringing the site's total capacity to 110 MW. The $90 million Cross Winds Phase II went online earlier this year, and added 44 MW. For more information, see Industrial Info's project reports on the Phase III expansion and the completed Phase II.

On the other side of the state, on the coast of Lake Michigan, CMS is in the final stages of its $134 million uprate of Unit 1 at its pumped-storage hydropower station in Ludington, which involves replacing a turbine and boosting capacity to 329 MW. The same hydropower station is preparing to begin construction on a $134 million uprate of Unit 3, which would bring capacity to 362 MW, for an overall increase of 50 MW. For more information, see Industrial Info's reports on the Unit 1 and Unit 3 projects.

CMS also has a renewable project planned for the capital city: the $33 million Delta Solar Farm in Lansing. The complex is expected to generate 24 MW from 60,000 photovoltaic panels after it wraps up this summer. For more information, see Industrial Info's project report.

Executives said that CMS has the fourth-highest number of miles of natural gas pipelines of any U.S. utility--"nearly 1,700 miles of large transmission pipe and 27,000 miles of distribution mains," said Patti Poppe, the chief executive officer of CMS, in the company's earnings call, noting that "it will take decades to replace all of it" as it inevitably ages. Hayes said that much of the $10 billion, five-year plan will be dedicated to improving the company's natural gas infrastructure, including near-term projects such as the proposed, $200 million repowering project at the TES cogeneration plant in Filer City and the $10 million unit addition at the Freedom Natural Gas Compressor Station in Manchester.

The Filer City project involves installing a 198-MW combustion turbine, with a heat-recovery steam generator, or constructing four combustion turbines to extend the plant's service life. The Manchester project involves installing five generators to maintain the field pressure for the natural gas to be processed. For more information, see Industrial Info's reports on the Filer City and Manchester projects.

CMS reported revenues of $3.58 billion for 2017, a 2.9% increase from 2016, and net income of $551 million, compared with a net loss of $91 million in 2016.

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