Consumers Energy, the major subsidiary of CMS Energy (CMS – Analyst Report) has got into an agreement to purchase the total renewable energy output produced by the Fremont Community Digester ("FCD"). The contract is in line with the utility's commitment to increase spending in Michigan following the launch of new Pure Michigan Business Connect initiative in early June by the Michigan Economic Development Corporation.
CMS Energy will purchase approximately 380,000 megawatt-hours (MWh), or 19,000 MWh per year, of electricity from the FCD over the next 20 years at a cost of $55 million. The FCD's electric output is estimated at 3.1 megawatts.
The $22 million digester and electric generator of FCD is being built by NOVI Energy, Indus Energy and North Central Cooperative, and is expected to begin commercial operation in the summer of 2012. Agricultural waste products for the FCD will be supplied by Gerber Products, Fremont Cooperative Produce Company and other agricultural companies.
Consumers Energy is already into a five-year, $6 billion capital investment plan for Michigan. CMS Energy's regulated electric power operations in Michigan generate a relatively stable earnings stream. Thus growth prospects look robust for CMS Energy with a constructive regulatory environment along with steady recovery in the Michigan economy.
CMS Energy reaffirmed its guidance at adjusted earnings of $1.44 per share for fiscal 2011. That's an increase of about 6% from fiscal 2010 adjusted earnings of $1.36. This is consistent with the company's long-term plan of 5%–7% annual earnings growth.
CMS Energy is making substantial investments in renewable energy, environmental quality, energy efficiency and other areas to continue to provide customers with safe, reliable and affordable service. The company also recently updated its renewable energy plan asserting the company's commitment to meet Michigan's 10% renewable energy standard.
Consumers Energy is moving forward with its renewable energy plan to procure 10% of the power provided to its 1.8 million customers from Michigan renewable energy projects by 2015, as required by the state's energy reform law.
The company already is the largest supplier of renewable energy in Michigan. As of now 5% of the power supplied to its 1.8 million electric customers comes from renewable sources. Going forward the company plans to invest more than $6 billion in its utility operations through 2015, making it one of the largest investors in Michigan.
We maintain our Neutral rating on CMS Energy. The quantitative Zacks #3 Rank (short-term Hold rating) for the company indicates no directional pressure on the shares over the near term. In the near-term we would advise investors to focus on its Zacks #2 Rank (short-term Buy rating) peers like Avista Corporation (AVA – Snapshot Report) and The AES Corporation (AES – Analyst Report)
