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CMS' Nat Gas Price Lowest in a Decade - Analyst Blog

Posted
3/27/2013 8:24:00 AM
By: Zacks.com
Referenced Stocks:AES;CMS;CNP;DTE

Consumers Energy, a subsidiary of CMS Energy Corporation ( CMS ), has declared that it will curtail its natural gas fuel costs by 15% with effect from Apr 1, 2013. The declaration comes on the heels of the company's promise to deliver the best energy value to its customers.

Since Feb 2012, the company has reduced natural gas prices by 26%. The latest cut marks the largest price reduction in the company's recent history. In fact, the company indicated that the prices it charges for nat gas have hit a 10-year low. These efforts to trim gas fuel costs will assist Michigan families and businesses to save approximately $200 million by 2014.

Albeit natural gas prices have trended down in recent times, the cuts employed by CMS are impressive by any standard. This has only been possible as Consumers Energy is uniquely positioned to take advantage of lower-priced natural gas due to its massive storage system. This huge storage system facilitates the company to purchase gas in bulk when it is priced lower, and share the advantage with its customers.

Also, the company continues to invest in its natural gas infrastructure to take advantage of lower-cost supplies, benefiting customers now and in the future. Its projects include expansion of gas compressor stations and replacement of natural gas pipelines.

In Dec 2012, Consumers Energy announced that it plans to build a 700 megawatt new natural gas-fired power plant in Genesee County. Located in Thetford Township, about 20 miles northeast of Flint, this new natural gas-fired power plant is estimated to cost $750 million.

Through 2017, Consumers Energy expects to make capital expenditure of approximately $7.0 billion. It expects base capital investments of $3.2 billion that includes $2.1 billion of electric utility projects to improve reliability and increase capacity and $1.1 billion of gas utility projects to increase capacity and deliverability and enhance pipeline integrity.

The company expects to spend an additional $1.4 billion of planned reliability investments to reduce outages and improve customer satisfaction. It plans to spend $1.1 billion on environmental investments needed to comply with state and federal laws and regulations.

Overall, these infrastructure investments and the company's massive storage system will aid CMS Energy to achieve its target of providing the best energy value to the state of Michigan. Moreover, it will add to the goodwill of the company, thereby attracting more customers.

The defensive nature of this energy company is also evident from its regular dividend increase policy. In Jan this year, CMS Energy increased its dividend by 14%, bringing the annualized dividend to 96 cents per share from the previous payout of 84 cents per share. The increase in the annual dividend reflects successful execution of the company's business strategy.

Based in Jackson, Michigan, CMS Energy Corporation, through its subsidiaries, operates as an energy company primarily in Michigan. The company is engaged in the generation, purchase, distribution, and sale of electricity and natural gas to residential, commercial, and diversified industrial customers.

Key growth drivers of the company are Michigan's balanced and constructive regulatory environment, the company's execution track record, and a solid management team. However, volatility in fuel prices and regulatory matters remain an overhang on the company's stock. The company presently retains a short-term Zacks Rank #3 (Hold).

Other energy stocks worth considering are The AES Corporation ( AES ), CenterPoint Energy, Inc. ( CNP ) and DTE Energy Company ( DTE ), all with a Zacks Rank #2 (Buy).



AES CORP (AES): Free Stock Analysis Report

CMS ENERGY (CMS): Free Stock Analysis Report

CENTERPOINT EGY (CNP): Free Stock Analysis Report

DTE ENERGY CO (DTE): Free Stock Analysis Report

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