<PAGE>
- -------------------------------------------------------------------------
FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1993
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from to
------- -------
Commission Registrant; State of Incorporation; IRS Employer
File Number Address; and Telephone Number Identification No.
- -------------------------------------------------------------------------
1-9513 CMS ENERGY CORPORATION 38-2726431
(A Michigan Corporation)
Fairlane Plaza South, Suite 1100
330 Town Center Drive
Dearborn, Michigan 48126
(313)436-9261
1-5611 CONSUMERS POWER COMPANY 38-0442310
(A Michigan Corporation)
212 West Michigan Avenue
Jackson, Michigan 49201
(517)788-1030
Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange
Registrant Title of Class on Which Registered
- -------------------------------------------------------------------------
CMS Energy Common Stock, $.01 par value New York Stock Exchange
Corporation
Consumers Power Listed on inside cover
Company
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the Registrants (1) have filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that
the Registrants were required to file such reports), and (2) have been
subject to such filing requirements for the past 90 days.
Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained,
to the best of Registrants' knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ X ]
- -------------------------------------------------------------------------
<PAGE>
<PAGE>
Consumers Power Company securities registered pursuant to Section 12(b) of
the Act:
FIRST MORTGAGE BONDS:
5-7/8% Series due 1996
6-7/8% Series due 1998
6-5/8% Series due 1998
7-1/2% Series due 2001
7-1/2% Series due June 1, 2002
PREFERRED STOCK - Cumulative
$100 par value:
$4.16 Series $7.68 Series
$4.50 Series $7.72 Series
$7.45 Series $7.76 Series
All securities listed above are registered on the New York Stock Exchange.
The aggregate market value of the voting stock of CMS Energy Corporation
held by non-affiliates, was $1,942,392,566 based on the closing sale price
of $22-3/4 per share for the 85,379,893 common shares, $.01 par value,
outstanding on February 28, 1994. CMS Energy held all 84,108,789
outstanding common shares, $10 par value, of Consumers Power Company, and
the market value of the voting preferred stock of Consumers, held by non-
affiliates, was $142,550,827 based on the closing sale price shown below.
Aggregate market value of Consumers' voting stock held by non-affiliates.
Transaction
Number Shares ----------------------
Type of Stock Outstanding Price/Share Date Market Value
- ------------------------------------------------------------------------
(2/28/94)
Preferred:
$4.16 68,451 $58 1/05/94 $ 3,970,158
4.50 373,148 60 2/23/94 22,388,880
7.45 379,549 96-1/2 2/22/94 36,626,479
7.68 207,565 97-1/2 2/23/94 20,237,588
7.72 289,642 99 2/22/94 28,674,558
7.76 308,072 99-1/2 2/28/94 30,653,164
--------- ------------
Total 1,626,427 $142,550,827
========= ============
Documents incorporated by reference:
The Registrants' proxy statements relating to the 1994 annual meetings of
shareholders to be held May 27, 1994, are incorporated by reference in
Part III, except for the organization and compensation committee report
contained therein.
<PAGE>
<PAGE> 3
CMS ENERGY CORPORATION
and
CONSUMERS POWER COMPANY
ANNUAL REPORTS ON FORM 10-K
TO THE SECURITIES AND EXCHANGE COMMISSION
FOR THE YEAR ENDED DECEMBER 31, 1993
This combined Form 10-K is separately filed by CMS Energy Corporation and
Consumers Power Company. Information contained herein relating to each
individual registrant is filed by such registrant on its own behalf.
Accordingly, except for its subsidiaries, Consumers Power Company makes no
representation as to information relating to any other companies
affiliated with CMS Energy Corporation.
TABLE OF CONTENTS
Page
PART I
Item 1. Business 9
Item 2. Properties 32
Item 3. Legal Proceedings 40
Item 4. Submission of Matters to a Vote of Security Holders 46
PART II
Item 5. Market for CMS Energy's and Consumers' Common Equity
and Related Stockholder Matters 47
Item 6. Selected Financial Data 47
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations 47
Item 8. Financial Statements and Supplementary Data 48
Item 9. Changes in and Disagreements With Accountants on
Accounting and Financial Disclosure 144
PART III
Item 10. Directors and Executive Officers of CMS Energy
and Consumers 144
Item 11. Executive Compensation 144
Item 12. Security Ownership of Certain Beneficial Owners and
Management 144
Item 13. Certain Relationships and Related Transactions 144
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports
on Form 8-K 144
<PAGE>
<PAGE> 4
GLOSSARY
Certain terms used in the text and notes are defined below.
ABATE . . . . . . . . . . . . . Association of Businesses Advocating
Tariff Equity
ALJ . . . . . . . . . . . . . . Administrative Law Judge
AMT . . . . . . . . . . . . . . Alternative minimum tax
ANI . . . . . . . . . . . . . . American Nuclear Insurers
Articles. . . . . . . . . . . . Articles of Incorporation
Attorney General. . . . . . . . The Michigan Attorney General
bcf . . . . . . . . . . . . . . Billion cubic feet
Capacity Charge Order . . . . . A May 7, 1991, Michigan Court of Appeals
order dealing with issues in MPSC Case
No. U-8871, and others, concerning among
other things, the amount of additional
capacity needed by Consumers, the
applicable avoided capacity charges and
the allocation of capacity in Consumers'
electric system
CERCLA. . . . . . . . . . . . . Comprehensive Environmental Response
Compensation and Liability Act
Clean Air Act . . . . . . . . . Federal Clean Air Act as amended on
November 15, 1990
CMS Debentures. . . . . . . . . CMS Energy debentures in the principal
amount of $1.4 billion issued on March
12, 1990 in exchange for the outstanding
capital stock of CMS Midland, MDC and MGL
CMS Energy. . . . . . . . . . . CMS Energy Corporation
CMS Gas Marketing . . . . . . . CMS Gas Marketing Company, a subsidiary
of Enterprises
CMS Gas Transmission. . . . . . CMS Gas Transmission and Storage Company,
a subsidiary of Enterprises
CMS Generation. . . . . . . . . CMS Generation Co., a subsidiary of
Enterprises
CMS Generation S. A.. . . . . . CMS Generation S. A., a subsidiary of
CMS Generation
CMS Holdings. . . . . . . . . . CMS Midland Holdings Company, a
subsidiary of MGL
CMS Midland . . . . . . . . . . CMS Midland Inc., a subsidiary of MGL
Consumers . . . . . . . . . . . Consumers Power Company
Court of Appeals. . . . . . . . Michigan Court of Appeals
Detroit Edison. . . . . . . . . The Detroit Edison Company
DNR . . . . . . . . . . . . . . Michigan Department of Natural Resources
DOE . . . . . . . . . . . . . . U. S. Department of Energy
Dow . . . . . . . . . . . . . . The Dow Chemical Company
DSM . . . . . . . . . . . . . . Demand-side management
EMF . . . . . . . . . . . . . . Electric and magnetic fields
Energy Act. . . . . . . . . . . Energy Policy Act of 1992
Enterprises . . . . . . . . . . CMS Enterprises Company, a subsidiary of
CMS Energy
EPA . . . . . . . . . . . . . . Environmental Protection Agency
FASB. . . . . . . . . . . . . . Financial Accounting Standards Board
FERC. . . . . . . . . . . . . . Federal Energy Regulatory Commission
FMLP. . . . . . . . . . . . . . First Midland Limited Partnership
FPC . . . . . . . . . . . . . . Federal Power Commission
GCR . . . . . . . . . . . . . . Gas cost recovery
Huron . . . . . . . . . . . . . Huron Hydrocarbons, Inc., a subsidiary of
Consumers
Indentures. . . . . . . . . . . Indenture pursuant to which the Notes are
issued, including the First Supplemental
Indenture and Second Supplemental
Indenture thereto
Independent Cogenerators. . . . Ten small power and cogeneration
developers who signed a settlement
proposal on July 7, 1992, as revised in
September 1992
ITC . . . . . . . . . . . . . . Investment tax credit
kW . . . . . . . . . . . . . . Kilowatt
kWh . . . . . . . . . . . . . . Kilowatt-hour
mcf . . . . . . . . . . . . . . Thousand cubic feet
MCV . . . . . . . . . . . . . . Midland Cogeneration Venture
MCV Bonds . . . . . . . . . . . Collectively, senior secured lease
obligation bonds and subordinated secured
lease obligation bonds issued in
connection with the leveraged-lease
financing of the MCV Facility, and tax-
exempt PCRBs
MCV Facility. . . . . . . . . . A natural gas-fueled, combined cycle
cogeneration facility operated by the MCV
Partnership
MCV Partnership . . . . . . . . Midland Cogeneration Venture Limited
Partnership
MDC . . . . . . . . . . . . . . MEC Development Corp., a subsidiary of
MGL
MGL . . . . . . . . . . . . . . Midland Group, Ltd., a subsidiary of
Consumers
Michigan Gas Storage. . . . . . Michigan Gas Storage Company, a
subsidiary of Consumers
MMbbls. . . . . . . . . . . . . Million barrels
MMBtu . . . . . . . . . . . . . Million British thermal unit
MMCG. . . . . . . . . . . . . . Michigan Municipal Cooperative Group
MOAPA . . . . . . . . . . . . . MOAPA Energy Limited Partnership, a
wholly owned affiliate of CMS Generation
MPSC. . . . . . . . . . . . . . Michigan Public Service Commission
MW. . . . . . . . . . . . . . . Megawatts
MWRC. . . . . . . . . . . . . . Michigan Waste Resources Commission
NEIL. . . . . . . . . . . . . . Nuclear Electric Insurance Ltd.
NML . . . . . . . . . . . . . . Nuclear Mutual Ltd.
NOMECO. . . . . . . . . . . . . NOMECO Oil & Gas Co., a wholly owned
subsidiary of Enterprises
North Michigan. . . . . . . . . North Michigan Land & Oil Corporation
Notes . . . . . . . . . . . . . Collectively,
Series A Notes. . . . . . . . Series A Senior Deferred Coupon Notes
of CMS Energy due October 1, 1997
Series B Notes. . . . . . . . Series B Senior Deferred Coupon Notes
of CMS Energy due October 1, 1999
NPDES . . . . . . . . . . . . . National Pollutant Discharge Elimination
System
NRC . . . . . . . . . . . . . . Nuclear Regulatory Commission
O&M . . . . . . . . . . . . . . Other operation and maintenance expense
Order 636 . . . . . . . . . . . Orders affecting interstate gas
pipelines, including Order 636A and 636B
issued by the FERC in 1992, known also as
the Restructuring Rule
Oxford. . . . . . . . . . . . . The Oxford Energy Company
Palisades . . . . . . . . . . . Palisades nuclear plant, owned by
Consumers
Panhandle . . . . . . . . . . . Panhandle Eastern Pipeline Company
PCB . . . . . . . . . . . . . . Polychlorinated biphenyls
PCRB. . . . . . . . . . . . . . Pollution control revenue bond
Pension Plan. . . . . . . . . . The trusteed, non-contributory, defined
benefit pension plan of Consumers and
CMS Energy
PFD . . . . . . . . . . . . . . Proposal for Decision
Plateau . . . . . . . . . . . . Plateau Resources Ltd., a former
subsidiary of Consumers
PPA . . . . . . . . . . . . . . The Power Purchase Agreement between
Consumers and the MCV Partnership with a
35-year term commencing in March 1990
ppm . . . . . . . . . . . . . . Parts per million
PSCR. . . . . . . . . . . . . . Power supply cost recovery
PUHCA . . . . . . . . . . . . . Public Utility Holding Company Act of
1935
PURPA . . . . . . . . . . . . . Public Utility Regulatory Policies Act of
1978
Qualifying Facility . . . . . . A facility that produces electricity or
steam and electricity and meets the
ownership and technical requirements of
PURPA. Electric utilities are required
to purchase the electric capacity and
energy made available by a Qualifying
Facility at the purchasing utility's
avoided cost.
Revised Settlement Proposal . . The request for approval of a settlement
proposal to resolve MCV cost recovery
issues, PURPA issues and court remand as
filed with the MPSC on July 7, 1992 and
amended on September 8, 1992
SEC . . . . . . . . . . . . . . Securities and Exchange Commission
Secured Credit Facility . . . . $220 million Secured Revolving Credit
Facility dated November 30, 1992
SERP. . . . . . . . . . . . . . Supplemental Executive Retirement Plan
Settlement Order. . . . . . . . MPSC Order issued March 31, 1993 in MPSC
Case Nos. U-10127, U-8871 and others, and
the rehearing order issued May 26, 1993
Settlement Parties. . . . . . . The proponents of the Revised Settlement
Proposal: Consumers, the MPSC staff and
the Independent Cogenerators
SFAS. . . . . . . . . . . . . . Statement of Financial Accounting
Standards
Superfund . . . . . . . . . . . Comprehensive Environmental Response,
Compensation and Liability Act
Trunkline . . . . . . . . . . . Trunkline Gas Company
Union . . . . . . . . . . . . . Utility Workers of America, AFL-CIO
UST . . . . . . . . . . . . . . Underground storage tanks
Voluntary Employee Beneficiary
Association . . . . . . . . . A legal entity, established under
guidelines of the Internal Revenue Code,
through which the company can provide
certain benefits for its employees or
retirees
<PAGE>
<PAGE> 8
(This page intentionally left blank)
<PAGE>
<PAGE> 9
PART I
ITEM 1. BUSINESS.
GENERAL
CMS Energy
CMS Energy, incorporated in Michigan in 1987, is the parent holding
company of Consumers and Enterprises. Consumers, a combination electric
and gas utility company serving most of the Lower Peninsula of Michigan,
is the largest subsidiary of CMS Energy. Consumers' customer base
includes a mix of residential, commercial and diversified industrial
customers, the largest of which is the automotive industry. Enterprises
is engaged in several non-utility energy-related businesses including:
1) oil and gas exploration and production, 2) development and operation of
independent power production facilities, 3) gas marketing services to end-
users, and 4) transmission and storage of natural gas. For further
information about subsidiary operations, see Item 1. BUSINESS.
SUBSIDIARIES. CMS Energy is exempt from registration under PUHCA, see
Item 1. BUSINESS. CMS ENERGY AND CONSUMERS REGULATION.
CMS Energy's consolidated operating revenue in 1993 was derived
approximately 61 percent from sales of electric energy, approximately 37
percent from sale, transportation and storage of natural gas, and
approximately 2 percent from oil and gas exploration and production
activities. Consumers' consolidated operations in the electric and gas
businesses account for the major share of CMS Energy's total assets,
revenue and income. CMS Energy's share of unconsolidated non-utility
electric generation and gas transmission revenue for 1993 was $337
million.
Consumers
Consumers was incorporated in Michigan in 1968 and is the successor to a
corporation of the same name which was organized in Maine in 1910 and
which did business in Michigan from 1915 to 1968.
Consumers is a public utility serving almost 6 million of Michigan's 9
million residents in 67 of the 68 counties in Michigan's Lower Peninsula.
Industries in Consumers' service area include automotive, metal, chemical,
food and wood products and a diversified group of other industries.
Consumers' consolidated operating revenue in 1993 was derived
approximately 64 percent from its electric business and approximately
36 percent from its gas business. Consumers' retail rates and certain
other aspects of its business are subject to the jurisdiction of the MPSC.
Consumers has five direct subsidiaries. For further information about
subsidiary operations, see Item 1. BUSINESS. SUBSIDIARIES.
BUSINESS SEGMENTS
CMS Energy conducts its principal operations through the following five
business segments: electric utility operations; gas utility operations;
oil and gas exploration and production operations; independent power
production; and gas transmission and marketing. Consumers or subsidiaries
of Consumers are engaged in two segments: electric operations and gas
operations. Consumers' electric and gas businesses are regulated utility
operations.
Consumers
Electric Utility
Operations Consumers generates, purchases, transmits
and distributes electricity and renders
electric service in 61 of the 68 counties
in the Lower Peninsula of Michigan. Prin-
cipal cities served include Battle Creek,
Flint, Grand Rapids, Jackson, Kalamazoo,
Muskegon, Saginaw and Wyoming.
Consumers
Gas Utility
Operations Consumers purchases, transports, stores,
and distributes gas and renders gas
service in 40 of the 68 counties in the
Lower Peninsula of Michigan. Principal
cities served include Bay City, Flint,
Jackson, Kalamazoo, Lansing, Pontiac and
Saginaw, as well as the suburban Detroit
area. Consumers' wholly owned subsidiary,
Michigan Gas Storage, is engaged in the
transportation and storage of natural gas
in interstate commerce.
CMS Enterprises
CMS Generation
Independent Power
Production CMS Generation, a wholly owned subsidiary
of Enterprises, invests in, develops,
converts and/or constructs and operates
non-utility power generation plants both
domestically and internationally.
CMS Generation currently has ownership in-
terests in power plants in Michigan, Cali-
fornia, Connecticut, New York and
Argentina.
CMS Enterprises
NOMECO
Oil and Gas Exploration
and Production NOMECO, a wholly owned subsidiary of
Enterprises, and subsidiaries of NOMECO
are engaged in the exploration for and
production of oil and natural gas in
Michigan and 12 other states, the Gulf of
Mexico, Australia, Colombia, Ecuador,
Equatorial Guinea, New Zealand, Papua New
Guinea, Thailand and Yemen. NOMECO has 11
active wholly owned subsidiaries which are
engaged in the exploration, development
and operation of oil and gas interests and
rights.
CMS Enterprises
Gas Transmission
and Storage Enterprises has two subsidiaries which
participate in non-utility natural gas
businesses, including transportation,
treating, storage and marketing.
FINANCIAL INFORMATION
CMS Energy
For information with respect to operating revenue, net operating income
(loss) and assets and liabilities attributable to all of CMS Energy's
business segments, refer to its Consolidated Financial Statements and to
the Notes to Consolidated Financial Statements for the year ended
December 31, 1993, in Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA,
which is incorporated herein by reference.
Consumers
For information with respect to the operating revenue, net operating
income (loss) and assets and liabilities attributable only to Consumers'
business segments, refer to its Consolidated Financial Statements and to
the Notes to Consolidated Financial Statements for the year ended Decem-
ber 31, 1993, in Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA,
which is incorporated herein by reference.
EMPLOYEES
CMS Energy
As of February 28, 1994, CMS Energy and its subsidiaries had 9,874 full-
time employees and 294 part-time employees for a total of 10,168
employees.
Consumers
As of February 28, 1994, Consumers and its subsidiaries had 9,434 full-
time employees and 277 part-time employees for a total of 9,711 employees.
This total includes 4,212 full-time operating, maintenance and
construction employees of Consumers who are represented by the Union. A
new collective bargaining agreement was negotiated between Consumers and
the Union which became effective on June 1, 1992 and, by its terms, will
continue in full force and effect until June 1, 1995.
SIGNIFICANT DEVELOPMENTS CONCERNING MCV COST RECOVERY ISSUES
The MCV Partnership was formed in January 1987 by subsidiaries of
Consumers and Dow to convert a portion of Consumers' abandoned Midland
Nuclear Plant into a natural gas-fueled, combined cycle cogeneration
facility. The MCV Facility has been certified as a Qualifying Facility
under PURPA. CMS Energy, certain other affiliates and the other partners
in the MCV Partnership made certain contingent undertakings related to the
MCV Partnership's sale and leaseback transaction. These included, but
were not limited to, indemnifications related to tax matters and a
commitment to extend a $10 million standby working capital facility to the
MCV Partnership. In addition, CMS Energy and certain of its affiliates
undertook certain indemnifications related to environmental matters
regarding the site. Consumers' current interests in the MCV Partnership
and the MCV Facility are discussed more fully in Note 3 of the Notes to
Consolidated Financial Statements.
In 1987, Consumers signed a PPA with the MCV Partnership for the purchase
of up to 1,240 megawatts of capacity for a 35-year period beginning with
the MCV Facility's commercial operation in March 1990. Consumers' cost
recovery from its electric customers for the amount of capacity purchased
by Consumers from the MCV Partnership, the price paid by Consumers for
that capacity and associated energy, and the method of rate recovery for
those purchases had been at issue before the MPSC and the Michigan
appellate courts since Consumers' first attempt to recover those costs in
its annual power supply cost recovery proceedings. Because the MPSC
consistently denied Consumers full recovery of the costs it incurred for
its purchases from the MCV Partnership, Consumers incurred significant
ongoing annual losses. On March 31, 1993, the MPSC issued an Opinion and
Order on a Revised Settlement Proposal, which had been submitted by
Consumers, CMS Energy, the MPSC Staff, and ten qualifying facility
developers, approving it with certain modifications. For a discussion of
the Revised Settlement Proposal as approved by the MPSC's March 31, 1993
Order, see Note 3 of the Notes to Consolidated Financial Statements, which
is incorporated by reference herein. With Consumers' acceptance of the
MPSC's decision on the Revised Settlement Proposal, the uncertainties
surrounding Consumers' cost recoveries related to its purchases from the
MCV Partnership were resolved to a sufficient degree that Consumers
effected a quasi-reorganization as of December 31, 1992 in which
Consumers' accumulated deficit was eliminated against other paid-in
capital. Following this quasi-reorganization Consumers resumed paying
dividends in 1993. The quasi-reorganization is more fully described in
Note 7 of the Notes to Consolidated Financial Statements.
A dispute has arisen between the MCV Partnership and Consumers relating to
the impact of the order on the fixed energy charge payment, currently approx-
imately 7 percent of the charges for capacity and energy, called for in the
PPA and Consumers' ability to exercise its rights under the regulatory out
provision based on the issuance of the Settlement Order. In accordance
with the dispute resolution provisions set out in the PPA, an arbitrator
acceptable to both parties has been selected and the arbitration of this
dispute has commenced. Consumers is unable to predict the outcome of such
arbitration proceedings or of any possible settlement of the issues
underlying this dispute. On March 4, 1994, the lessors of the MCV
Facility filed a lawsuit in federal district court against CMS Energy,
Consumers and CMS Holdings relating to the MCV Partnership's failure to
object to the Settlement Order in light of Consumers' interpretation of
the Settlement Order, which is the subject of the arbitration between the
MCV Partnership and Consumers. While CMS Energy and Consumers believe
this lawsuit to be without merit, they are unable to predict the outcome
of this action. For a discussion of the arbitration proceedings and the
lawsuit filed by the lessors, see Note 3 of the Notes to Consolidated
Financial Statements and Item 3. LEGAL PROCEEDINGS, which are
incorporated by reference herein.
CONSUMERS ELECTRIC UTILITY OPERATIONS
Consumers had approximately 1.5 million electric customers at December 31,
1993. Electric system energy sales by Consumers in 1993 totaled 31.66
billion kWh, a 3.8 percent increase from 1992. Electric operating revenue
in 1993 was $2.077 billion, an increase of 11.5 percent from 1992. A peak
demand of 6,226 MW was achieved in August 1993, representing an increase of
4.8 percent from the peak achieved in 1992 predominantly as a result of
warmer than normal weather and improved industrial sales. Consumers'
reserve margin was approximately 21 percent in 1993 and 19 percent in
1992, based on weather adjusted peaks.
Including the Ludington pumped storage facility, in which it has a 51
percent ownership and capacity entitlement, Consumers owns and operates 28
electric generating plants with an aggregate net demonstrated capability
available to Consumers, as of 1993 for summer conditions, of 6,299 MW.
See Item 2. PROPERTIES, CONSUMERS ELECTRIC UTILITY PROPERTIES.
Consumers' electric generating plants are interconnected by a transmission
system which is itself interconnected at a number of locations with
transmission facilities of unaffiliated systems, including those of other
utilities in Michigan, Ohio, Indiana and Canada. These interconnections
permit a sharing of the reserve capacity of the systems. This allows
mutual assistance during emergencies and substantially reduces investment
in utility plant facilities. Consumers also contracts to purchase power
from a number of other agencies and companies for future years. The most
significant of these contracts currently is the PPA.
Consumers' customer base includes a mix of residential, commercial, and
diversified industrial customers, the most important of which is the
automotive industry. However, Consumers' electric operations are not
dependent upon a single customer, or a few customers, the loss of any one
or more of which would have a material adverse effect on its financial
condition. Consumers' electric operations are seasonal to the extent that
peak demands occur in winter due to shorter days and colder temperatures,
and in summer due to warmer temperatures and the use of air conditioners
and other cooling equipment. Peak demands for 1993 were 5,262 MW in the
winter and 6,226 MW in the summer. For sales by customer class, see Item
1. CONSUMERS CONSOLIDATED REVENUE AND SALES BY BUSINESS SEGMENT.
Fuel
Consumers has five generating plants which utilize coal as a fuel source
and which constitute 77 percent of its baseload capacity. These plants
combined to produce a total of 16,520 million kWhs in 1993 requiring
approximately 7 million tons of coal. Consumers has long-term contracts
covering approximately 68 percent of its coal requirements for 1994.
Consumers' coal requirements not under long-term contract and any portion
of coal under long-term contract which is not delivered must be supplied
through short-term agreements or spot purchases. Consumers' coal
inventory as of December 31, 1993, amounted to approximately 45 days'
supply.
Consumers currently owns and operates two nuclear power plants, Palisades,
near South Haven, Michigan and Big Rock Point, near Charlevoix, Michigan.
In 1993, the combined net generation of these plants was 3,938 million
kWhs. Consumers has contracted for all of its nuclear fuel for 1994 and
ninety percent for 1995. Consumers currently has two contracts for
uranium concentrates which have quantity flexibility sufficient to cover
up to approximately 60 percent of its requirements. The larger of these
two contracts is valid through 1995, with options to extend the term
through 1997. Consumers intends to purchase the balance of its 1995 and
1996 concentrates requirements in the spot market. Consumers has
contracts for nuclear fuel services, including conversion to and
enrichment of uranium hexafluoride and fabrication of nuclear fuel
assemblies. The conversion contract remains in effect until June 1996. The
enrichment contract covers 100 percent of the requirements until 1996, then
70 percent until 2000. The fabrication contracts remain in effect for the
next three Palisades reloads and through the end of the operating license for
Big Rock Point. These contracts are with major private industrial
suppliers of nuclear fuel and related services and with the U. S.
government.
Karn Unit 4, a 638 MW oil fired electric generating unit located in
Essexville, Michigan was modified to burn natural gas in 1993. This unit
has the capability to generate electricity using oil or natural gas or a
combination of both. The unit's maximum capability using natural gas is
375 MW. When using natural gas, the company believes full load can be
achieved by over-firing with oil.
<PAGE>
<PAGE> 14
As shown below, Consumers generates electricity principally from coal and
nuclear fuel.
Power Generated
(Millions of kWhs)
1993 1992 1991 1990 1989
------ ------ ------ ------ ------
Coal 16,520 17,024 16,500 16,427 17,550
Oil (a) 238 206 194 287 453
Gas (a) 110 12 16 8 21
Nuclear (b) 3,938 5,093 5,340 3,406 4,025
Hydro 489 490 518 478 406
Net Pumped
Storage (c) (394) (393) (406) (354) (346)
------- ------- ------- ------- -------
Total Net
Generation 20,901 22,432 22,162 20,252 22,109
======= ======= ======= ======= =======
(a) 1993 reflects the conversion of Karn Unit 4 to a dual fuel
capability enabling the unit to burn natural gas or oil or a combination
of both, having previously only burned oil.
(b) During 1993, an extended outage resulted in reduced generation
at the Palisades nuclear facility. See Note 4 to Consumers Notes to
Consolidated Financial Statements which are incorporated by reference
herein.
(c) Represents Consumers' share of net generation from the Ludington
pumped storage plant. This facility pumps water into a storage pond using
electricity generated during off-peak hours, in order to later generate
electricity during peak demand hours.
The cost of all fuels consumed, shown below, fluctuates with the mix of
fuel burned.
Fuel Consumed
(Cost Per Million Btu)
1993 1992 1991 1990 1989
------ ------ ------ ------ ------
Coal $1.60 $1.62 $1.61 $1.65 $1.80
Oil 2.90 2.73 2.96 3.25 2.95
Gas (a) 3.13 4.73 4.58 6.11 (b) 2.82
Nuclear .40 (c) .38 .62 .67 .62
All Fuels (d) 1.39 1.33 1.36 1.50 1.59
(a) Includes combustion turbines and Karn 4.
(b) 1989 reflects significant refunds from gas suppliers.
(c) An increase in operating cycles from twelve to eighteen months
beginning in 1992 resulted in a significant reduction in nuclear fuel
costs.
(d) Weighted average fuel costs.
Under the Nuclear Waste Policy Act of 1982, the federal government is
responsible for the permanent disposal of spent nuclear fuel and high-
level radioactive waste beginning not later than 1998. On February 17,
1994, the DOE stated that its General Counsel has concluded that the DOE
does not have a legal obligation to accept spent nuclear fuel absent an
operational facility. Until the DOE actually accepts the fuel and waste
for storage, the generators and owners must provide for its storage. The
DOE has begun exploring possible options to offset a portion of the costs
associated with continued on-site storage after 1998. The Palisades plant
added two dry casks in 1993 which provide for the storage of 48 spent fuel
assemblies. Eleven additional casks are scheduled to be loaded in 1994
which will yield a full core discharge reserve capability for the 1995
Palisades refueling outage. The full core discharge is necessary to
complete the requirements of this outage. The thirteen dry casks expand
the total storage capacity for spent fuel by 312 assemblies. This will
accommodate normal spent fuel discharge until the year 2000.
The Big Rock Point plant has the capacity to accommodate normal spent fuel
discharge through 1999, with a full-core reserve through 1996.
CONSUMERS GAS UTILITY OPERATIONS
Consumers supplies natural gas to approximately 1.4 million customers in
40 of the 68 counties in Michigan's Lower Peninsula. It owns gas
transmission and distribution mains and other gas lines, compressor
stations and facilities, storage rights, wells and gathering facilities in
several fields in Michigan. Consumers and its wholly owned subsidiary,
Michigan Gas Storage, store gas during the warmer months of the year for
use in the colder months when demand is higher. Consumers' gas operations
are not dependent upon a single customer, or a few customers, the loss of
any one or more of which would have a material adverse effect on its
financial condition.
Consumers' gas operations are seasonal to the extent that peak demand
occurs in winter due to colder temperatures. Consumers' consolidated gas
operating revenue was $1.160 billion in 1993, an increase of 3 percent
from 1992. The all-time record 24 hour send-out of natural gas for
Consumers was 3,100,000 mcf on January 19, 1994, which Consumers considers
to be the peak-day transportation and distribution capacity of the system.
Deliveries of gas by Consumers, and from other sellers, to ultimate
customers including the MCV Partnership totaled 411 bcf in 1993. See
Item 1. BUSINESS. CONSUMERS CONSOLIDATED REVENUE AND SALES BY BUSINESS
SEGMENT.
Consumers Gas Supply
In 1993, Consumers purchased approximately 85 percent of its required gas
supply directly from producers under long term contracts. Trunkline,
Consumers primary gas supplier, supplied 41 percent of the overall
requirement. Consumers current supply contract with Trunkline runs until
November 1, 1994; however, firm transportation associated with this
contract continues until November 1, 1997. Of Consumers remaining gas
supply requirements purchased under long term contract, 15 percent came
from Michigan producers and 29 percent from various other producers and
non-affiliated marketing companies in the United States and Canada. The
remaining 15 percent of Consumers 1993 gas supply requirements were met by
purchases on the spot market.
Consumers' remaining firm transportation agreements are with Panhandle,
ANR Pipeline Company and Great Lakes Gas Transmission Company. These
agreements are utilized by Consumers to transport its required gas
supplies to market and to replenish its storage fields. Consumers' other
firm transportation agreement with Trunkline extends through February
1996. Consumers' two firm transportation agreements with Panhandle both
extend through March 1995. Consumers has six firm transportation
agreements with ANR Pipeline Company. The first and third largest of
these contracts extend through October 2003, the second largest extends
through October 1999, and the remaining two contracts extend through
December 2001 and 2002. Consumers' firm transportation agreement with
Great Lakes Gas Transmission Company extends through March 2004. In
total, Consumers' firm transportation arrangements amount to almost 90
percent of Consumers' total gas supply requirements. The balance of
Consumers' required gas supply is transported on interruptible contracts.
These contracts are with the same companies mentioned in conjunction with
firm capacity. The amount of interruptible capacity and the utilization
thereof is primarily a function of the price for such service and the
availability and price of the spot supplies to be purchased and
transported. Consumers' utilization of interruptible transportation is
generally in off-peak summer months and after its firm capacity has been
fully subscribed.
CONSUMERS INDEPENDENT POWER PRODUCTION
Two of Consumers' indirect subsidiaries own interests in the MCV Part-
nership and the MCV Facility, an independent power project. See Note 3 of
the Notes to Consolidated Financial Statements.
CMS ENERGY INDEPENDENT POWER PRODUCTION
Enterprises' subsidiary, CMS Generation, invests in, develops, converts
and/or constructs and operates non-utility power generation projects.
CMS Generation currently has ownership interests in 403 MW of owned
operating capacity in eight power plants in Michigan, California,
Connecticut, New York and Argentina.
In 1991, CMS Generation reduced the carrying cost of its investment in the
Oxford, certain loans to Oxford, and Oxford-related properties to
management's estimate of net realizable value, resulting in after-tax
losses of $31 million. In July 1993, CMS Generation, Oxford, and Oxford
Energy Inc. signed an Amended and Restated Asset Acquisition and
Settlement Agreement which was subsequently confirmed by the Bankruptcy
Court of the Southern District of New York and was executed in October
1993. The execution of this agreement did not have a material impact on
the consolidated financial statements of CMS Energy.
CMS ENERGY OIL AND GAS EXPLORATION AND PRODUCTION
NOMECO is an oil and natural gas producer with activities in Michigan and
12 other states, the Gulf of Mexico and eight foreign countries. In 1993,
it produced approximately 1.9 MMbbls of oil, condensate, and plant
products and approximately 18.5 bcf of gas compared to 1.7 MMbbls and 17.6
bcf in 1992.
During 1993 NOMECO participated with a working interest in drilling wells
as follows:
Type of Number of Number of Success
Well Wells Successful Wells Ratio
--------
Gross Net Gross Net Gross Net
----- --- ----- --- ----- ---
Exploratory 7 1.8 -- -- -- --
Development 13 2.0 12 1.9 92% 95%
-- --- -- ---
Total 20 3.8 12 1.9 60% 50%
== === == ===
These numbers do not include NOMECO's participation in Devonian Antrim
Shale gas wells in northern Michigan, where NOMECO had drilled 27 wells
with a 74 percent success rate.
A NOMECO subsidiary, NOMECO Ecuador Oil Company, is a member of a
consortium in which it has a 14 percent working interest in Block 16 of
the Oriente Basin of Ecuador. Two exploratory wells were completed in
1987. During 1988 and 1989, three more exploratory wells resulted in
discoveries. Appraisal wells were drilled and tested with positive
results on two of the discoveries and development began in 1992. This
$700 million project should lead to production in the first half of 1994.
Total production from the block is expected to commence at 30,000 barrels
per day and increase to a maximum of 55,000 barrels per day by the end of
1994 as new wells are brought on line. The successful exploratory and
appraisal program in Ecuador has allowed NOMECO to increase its foreign
oil reserves by 24.4 MMbbls. Ecuador now represents approximately one-
third of the total of NOMECO's proven oil and gas reserves on an
equivalent barrel basis. See Item 2. PROPERTIES, CMS ENERGY OIL AND GAS
EXPLORATION AND PRODUCTION PROPERTIES.
CMS ENERGY GAS TRANSPORTATION AND STORAGE
CMS Energy's subsidiary, Enterprises, through its subsidiaries develops,
owns and manages natural gas pipeline, storage and treating facilities and
markets natural gas to end users.
SUBSIDIARIES
CMS Energy
CMS Energy has two principal subsidiaries: Consumers and Enterprises.
Consumers
Consumers' principal subsidiaries include Huron, Michigan Gas Storage and
MGL.
Huron was formed for the purpose of participating in a partnership which
leases the Marysville gas reforming plant.
Michigan Gas Storage is engaged in the storage of natural gas for
Consumers and the transportation of natural gas for Consumers and others.
MGL was formed in 1988 for the purpose of participating in financing
transactions associated with the MCV Partnership. MGL has three
subsidiaries through which it has so participated: CMS Holdings,
CMS Midland, and MDC.
Enterprises
Enterprises' principal subsidiaries include NOMECO, CMS Generation,
CMS Utility Services, CMS Gas Marketing and CMS Gas Transmission.
NOMECO is engaged in exploration for and production of oil and natural gas
in Michigan and 12 other states, the Gulf of Mexico and eight foreign
countries. NOMECO has 11 active wholly owned subsidiaries and is a
partner in one general partnership.
CMS Generation is engaged in the development of and investment in
cogeneration and other independent power generation projects throughout
the world. CMS Generation has 27 subsidiaries.
CMS Utility Services is engaged in providing utility-related products and
credit management services. CMS Utility Services has one subsidiary:
CMS A/R Services, Inc.
CMS Gas Marketing markets natural gas to customers in several states.
CMS Gas Transmission transports, treats and stores natural gas and has
seven subsidiaries: CMS Antrim Gas Company, CMS Arkoma Pipeline Company,
CMS Grands Lacs Holding Company, CMS Gulf Coast Storage Company,
CMS Jackson Pipeline Company, CMS Saginaw Bay Company and CMS Saginaw Bay
Lateral Company.<PAGE>
<PAGE> 19
CMS ENERGY CONSOLIDATED REVENUE AND SALES BY BUSINESS SEGMENT
Revenue For Years Ended December 31 In Millions
1993 1992 1991
------ ------ ------
Electric Utility Operations
Residential $ 718 $ 644 $ 650
Commercial 620 561 554
Industrial 635 551 531
Other 75 80 84
------ ------- -------
Total System Sales 2,048 1,836 1,819
Intersystem Sales 29 27 30
------ ------- -------
Total 2,077 1,863 1,849
------ ------- -------
Gas Utility Operations
Residential 803 781 742
Commercial 232 226 215
Industrial 55 55 58
Other 14 16 17
Transportation 56 48 29
------ ------- -------
Total 1,160 1,126 1,061
------ ------- -------
Oil and Gas Exploration
and Production Operations 77 70 50
------ ------- -------
Independent Power Production (a) 21 (8) (9)
------ ------- -------
Gas Transmission and Marketing
Operations
Marketing 130 82 36
Transmission 12 7 6
------ ------- -------
142 89 42
------ ------- -------
Other Operations 5 6 5
------ ------- -------
Total $3,482 $3,146 $2,998
====== ======= =======
(a) Does not include CMS Energy's share of unconsolidated independent
power production revenues. See Item 8. FINANCIAL STATEMENTS AND
SUPPLEMENTARY DATA, CMS Energy, Selected Financial Information.
Sales For Years Ended December 31
1993 1992 1991
------ ------ ------
Electric Utility Sales (Millions of kWhs)
Residential 10,066 9,733 9,997
Commercial 8,909 8,652 8,692
Industrial 11,541 10,831 10,692
Other 1,142 1,292 1,311
------ ------ ------
Total System Sales 31,658 30,508 30,692
Intersystem Sales 1,106 1,093 1,121
------ ------ ------
Total 32,764 31,601 31,813
====== ====== ======
Gas Utility Sales and Deliveries (bcf)
Residential 175 167 157
Commercial 56 54 50
Industrial 14 13 15
Transportation 166 150 140
---- ----- -----
Total 411 384 362
==== ===== =====
Oil & Gas Exploration and Produc-
tion Sales (net equiv. MMbbls) 5.0 4.3 3.7
<PAGE>
<PAGE> 20
CONSUMERS CONSOLIDATED REVENUE AND SALES BY BUSINESS SEGMENT
Revenue For Years Ended December 31 In Millions
1993 1992 1991
------ ------ ------
Electric Operations
Residential $ 718 $ 644 $ 650
Commercial 620 561 554
Industrial 635 551 531
Other 75 80 84
------ ------ ------
Total System Sales 2,048 1,836 1,819
Intersystem Sales 29 27 30
------ ------ ------
Total 2,077 1,863 1,849
====== ====== ======
Gas Operations
Residential 803 781 742
Commercial 232 226 215
Industrial 55 55 58
Other 14 16 17
Transportation 56 48 29
------ ------ ------
Total 1,160 1,126 1,061
------ ------ ------
Other Operations 6 (11) (2)
------ ------ ------
Total $3,243 $2,978 $2,908
====== ====== ======
Sales For Years Ended December 31
1993 1992 1991
------ ------ ------
Electric Sales (Millions of kWhs)
Residential 10,066 9,733 9,997
Commercial 8,909 8,652 8,692
Industrial 11,541 10,831 10,692
Other 1,142 1,292 1,311
------ ------ ------
Total System Sales 31,658 30,508 30,692
Intersystem Sales 1,106 1,093 1,121
------ ------ ------
Total 32,764 31,601 31,813
====== ====== ======
Gas Sales and Deliveries (bcf)
Residential 175 167 157
Commercial 56 54 50
Industrial 14 13 15
Transportation 166 150 140
----- ----- -----
Total 411 384 362
===== ===== =====
CMS ENERGY AND CONSUMERS REGULATION
CMS Energy, Consumers and their subsidiaries are subject to regulation by
various federal, state, local and foreign governmental agencies, including
those specifically described below.
Michigan Public Service Commission
Consumers is subject to the jurisdiction of the MPSC, which regulates
public utilities in Michigan with respect to retail utility rates,
accounting, services, certain facilities, the issuance of securities and
various other matters. For information about Consumers' pending MPSC
matters, see Item 3. LEGAL PROCEEDINGS. The MPSC also has or will have
rate jurisdiction over several limited partnerships in which CMS Gas
Transmission has ownership interests. These partnerships own or will own
and operate intrastate gas transmission pipelines.
Nuclear Regulatory Commission
Under the Atomic Energy Act of 1954, as amended, and the Energy
Reorganization Act of 1974, Consumers is subject to the jurisdiction of
the NRC with respect to the design, construction and operation of its
nuclear power plants. Consumers is also subject to NRC jurisdiction with
respect to certain other uses of nuclear material. With respect to
Palisades, the NRC fined Consumers $50,000 in September of 1993
and again on February 9, 1994. On February 15, 1994, the NRC
announced it would be conducting a diagnostic evaluation of Palisades.
For further discussion on the diagnostic evaluation see Note 2 of the
Notes to Consolidated Financial Statements, which is incorporated by
reference herein.
Federal Energy Regulatory Commission
FERC has rate jurisdiction over three independent power projects in which
CMS Generation has an ownership interest which are Qualifying Facilities
under PURPA: HL Power Company, Grayling Generating Station Limited
Partnership, and Genesee Power Station Limited Partnership.
The FERC has jurisdiction over Consumers' subsidiary, Michigan Gas
Storage, as a natural gas company within the meaning of the Natural Gas
Act. The FERC jurisdiction relates, among other things, to the
acquisition, operation and disposal of assets and facilities and to
service provided and rates charged by Michigan Gas Storage. Under certain
circumstances, the FERC also has the power to modify gas tariffs of
interstate pipeline companies. Certain aspects of Consumers' gas business
are also subject to regulation by the FERC including a blanket
transportation tariff pursuant to which Consumers can transport gas in
interstate commerce.
In 1992, the FERC issued Order 636 which makes a number of significant
changes to the structure of the services provided by interstate natural
gas pipelines. The order called for the commencement of individual
interstate pipeline cases leading to implementation of restructuring for
the 1993-94 winter heating season. Consumers is a significant purchaser of
gas from an interstate pipeline (Trunkline) and is a major transportation
customer of a number of pipelines. Through a settlement approved by the
FERC and MPSC, Consumers will be allowed recovery of transition costs
incurred in connection with the Trunkline restructuring. Michigan Gas
Storage, as an interstate pipeline, commenced restructuring proceedings to
comply with the rule. On July 6, 1993, the FERC accepted Michigan Gas
Storage's compliance filing effective November 1993. Consumers does not
believe that such restructuring will have a significant impact on its
financial position or results of operations.
Certain aspects of Consumers' electric operations are also subject to
regulation by the FERC, including compliance with the FERC's accounting
rules and regulations applicable to "public utilities" and "licensees",
the transmission of electric energy in interstate commerce and the rates
and charges for the sale of electric energy at wholesale, the sale or
merger of owners of certain facilities, the construction, operation and
maintenance of hydroelectric projects and the issuance of certain securi-
ties, as provided by the Federal Power Act.
In November 1992, Consumers, the Attorney General, DNR, and other state
and federal officials signed a settlement agreement related to the
relicensing of 11 of the 13 Consumers hydroelectric generating facilities
for which the licenses were to expire at the end of 1993. Temporary
license extensions have been granted to these facilities until new
licenses are issued by the FERC, which is expected to occur in mid-1994.
These conventional hydroelectric facilities constitute approximately one
percent of Consumers owned generating capacity. The agreement, if
approved by FERC, will relicense the generating facilities through
December 2023. The license issued by the FPC, the predecessor to FERC,
to Consumers and Detroit Edison for the Ludington pumped storage plant
extends to the year 2019. For information about various lawsuits
involving the Ludington plant, see Item 3. LEGAL PROCEEDINGS.
Consumers has an effective open-access interconnection service schedule on
file with the FERC for wholesale wheeling transactions. In February 1992,
Consumers also filed a separate but complementary open-access transmission
tariff that makes both firm and non-firm transmission service available to
eligible utilities, including investor-owned utilities, Qualifying
Facilities constructed under PURPA, independent power producers, municipal
and cooperative utilities. In an order issued on April 30, 1992, the FERC
accepted the filing, effective May 2, 1992, subject to refund, and ordered
a hearing before an ALJ related primarily to the level of the rates in the
tariff. In September 1993, the ALJ issued an initial decision that if
affirmed by the FERC would, among other things, compel reductions of the
tariff rates ranging from 25 percent to 65 percent. On November 1, 1993,
Consumers filed exceptions with the FERC seeking reversal of the rate
reductions proposed in the ALJ's initial decision. As of December 31,
1993, the amount of firm transmission service currently subject to the
tariff is 23 MW. At the rates proposed by Consumers, the revenues for
providing service for the 23 MW would be approximately $663,000 annually.
Securities and Exchange Commission
Both CMS Energy and Consumers are subject to the periodic reporting,
disclosure and other requirements of the Securities Exchange Act of 1934,
as well as applicable provisions of the Securities Act of 1933.
In addition, CMS Energy is a public utility holding company which is
exempt from registration under the provisions of the PUHCA. However, in
December 1991 the Attorney General and a coalition of municipal utilities
asked the SEC to revoke CMS Energy's status as an exempt holding company
and to require it to register under PUHCA. CMS Energy is opposing this
request and believes it will maintain its current exemption from
registration under PUHCA. See Item 3. LEGAL PROCEEDINGS.
CONSUMERS AND CMS ENERGY INSURANCE
Consumers is a member of NML, which provides insurance coverage against
property damage to members' nuclear generating facilities. Consumers
maintains $500 million of primary property damage insurance from NML at
each of its operating nuclear plants, Big Rock Point and Palisades,
covering all risks of physical loss, subject to certain exclusions and
deductibles. Consumers also is a member of NEIL and obtains excess
property damage insurance in the amount of $1.45 billion from coverage
from NEIL and additional excess property damage insurance in the amount of
$450 million from ANI. These nuclear property insurance policies cover
decontamination, debris removal and direct property loss. The NEIL II
policy for Palisades also covers much of the premature decommissioning
costs due to an accident which are not already funded and part of the
remaining book value of the plant. The NEIL II and ANI policies insure
the Palisades plant only. For any loss over $100 million, stabilization
and decontamination expenses must be satisfied before other claims
proceeds are received from the insurers. Under all these policies,
Consumers retains the risk of loss with respect to its nuclear plant
facilities to the extent the loss is within the policy deductibles
($1 million for Palisades and $250,000 for Big Rock Point) or exclusions
or exceeds the combined property damage policy limits ($2.4 billion for
Palisades and $500 million for Big Rock Point) at either location. In the
event of covered losses at its own or any other member's nuclear facility
or facilities, Consumers would be subject to assessments under the NML and
NEIL II policies which could total approximately $15 million in any one
policy year. Consumers has also procured from NEIL coverage entitled
NEIL I which would partially cover the cost of replacement power during
certain prolonged accidental outages of the Big Rock Point or Palisades
units. Such cost would not be covered by the insurance during the first
21 weeks of any outage, but the major portion of such cost would be
covered during the next 12 months of the outage, followed by a reduced
level of coverage for a period up to two additional years. Consumers
would be subject to a maximum assessment under the replacement power
insurance of approximately $3 million in any one policy year in the event
of covered losses at its own or any other member's nuclear facility or
facilities.
Consumers maintains nuclear liability insurance and other forms of
financial protection (including an agreement of government indemnity under
the Price-Anderson Act, applicable to the Big Rock Point plant) with
respect to Consumers' liability to others for injuries and off-site
property damage due to the nuclear hazard at such facilities. Such
insurance and financial protection covers Consumers up to the aggregate
limits of liability established by the Price-Anderson Act, which are
presently $544.4 million for Big Rock Point and approximately $9.4
billion for Palisades. Part of such financial protection consists of a
mandatory industry-wide program under which owners of nuclear generating
facilities could be assessed in the event of a nuclear incident at any of
such facilities. Consumers would be subject to a maximum assessment of
$75.5 million per occurrence (adjusted for inflation; plus a 5 percent
surcharge if claims and legal costs exceed the financial protection limit)
in the event of a nuclear incident at certain nuclear facilities, limited
to a maximum installment payment of $10 million per occurrence in any
year. Consumers also maintains insurance under a master worker program
that covers tort claims for bodily injury caused by the nuclear hazard to
workers who began their nuclear related employment after January 1, 1988.
The policies contain a $200 million nuclear industry aggregate limit and
could subject Consumers to a maximum assessment of up to $6.4 million in
the event of claims thereunder.
Property insurance is also maintained on CMS Energy's and Consumers' non-
nuclear facilities and operations. Conventional (non-nuclear) property,
boiler and machine insurance is maintained on buildings, equipment,
boilers, machinery, and gas stored underground. The applicable policies
insure the full replacement value of all major operating locations.
However, the insurance policies are subject to standard terms, conditions,
exclusions and coverage limits similar to those of other companies with
similar facilities and operations. Consumers maintains deductibles
ranging from $500,000 to $1,000,000 on plant and facility losses.
CMS Energy's and Consumers' non-nuclear public liability insurance
policies provide a $125 million policy limit, with a $500,000 deductible.
Other policies include $125 million of excess workers' compensation
insurance, subject to the $500,000 deductible; $125 million of fiduciary
and employee benefit liability insurance, subject to the $500,000
deductible; $10 million of crime insurance coverage subject to a $100,000
deductible; $50 million (offshore) and $20 million (onshore) of oil and
gas well blow-out insurance subject to a $500,000 deductible; and $225
million of aircraft insurance for corporate aircraft.
CMS Energy and Consumers are not insured with regard to certain risks,
most notably the overhead electric transmission and distribution system
equipment. Consumers continues to explore the availability of reasonably
priced insurance to cover this exposure. Consumers has no insurance for
flood or earthquake damage to its underground gas and electrical equipment
because it believes that these properties are not subject to large
earthquake and flood risks. Consumers has also not obtained insurance for
flood and earthquake property damage at its nuclear plants because it
believes that the protective systems built into these plants and the low
probability of an event of this type at the location of these plants makes
such insurance unnecessary. In addition, Consumers' insurance coverages
do not extend to certain environmental clean-up costs, such as claims for
air pollution, some past PCB contamination and for some long-term storage
or disposal of pollutants. See "Consumers and CMS Energy Environmental
Compliance" section below.
Insurance policy terms, limits and conditions are subject to change during
the year as policies are renewed; however, CMS Energy and Consumers
believe that they and their subsidiaries are adequately insured for the
various risk exposures of incident to their respective businesses.
CONSUMERS AND CMS ENERGY ENVIRONMENTAL COMPLIANCE
Consumers and CMS Energy and their subsidiaries are subject to regulation
with regard to environmental quality, including air and water quality,
zoning and other matters, by various federal, state and local authorities.
Management believes that the responsible administration of its energy
resources includes reasonable programs for the protection and enhancement
of the environment.
Consumers has installed electrostatic precipitators to remove particulates
from stack emissions at electric generating plants, converted electric
generating units to burn cleaner fuels, worked with others to use coal ash
in place of topsoil to grow vegetation and prevent erosion and as a
substitute for asphalt in road shoulders, worked with local, state and
national organizations to enhance certain of Consumers' lands for the
benefit of wildlife, provided recreational access to its lands, worked
with universities and other institutions on projects to propagate threat-
ened or endangered species, and made financial contributions to a variety
of environmental enhancement projects.
Capital expenditures by Consumers for environmental protection additions
were approximately $31 million in 1993 and are estimated to be
approximately $48 million in 1994.
Air use permits are required under federal and state law for certain
Consumers' and CMS Generation's affiliates' sources of air emissions.
These laws require that certain affected facilities control their sources'
air emissions. Permits for Consumers' affected steam electric generating
facilities and other affected sources of air emissions have been issued by
the Michigan Air Pollution Control Commission pursuant to a delegation of
authority from the EPA under the federal Clean Air Act and Michigan Air
Pollution Act, as amended. Consumers believes that it is in substantial
compliance with all air use permits.
Included in the 1990 amendments to the federal Clean Air Act are
provisions that limit emissions of sulfur dioxide and nitrogen oxides and
require enhanced emissions monitoring. All of Consumers' coal-fueled
electric generating units burn low-sulfur coal and are presently operating
at or near the sulfur dioxide emission limits which will be effective in
2000. Beginning in 1995, certain coal-fueled generating units will
receive emissions allowances (all of Consumers coal units will receive
allowances beginning in 2000). Based on projected emissions from these
units, Consumers expects to have excess allowances which may be sold or
saved for future use.
The Clean Air Act's provisions also require Consumers to make capital
expenditures estimated to total $14 million for installation of continuous
emission monitoring systems at affected units, and approximately $10
million to install a low nitrogen oxide burner system at one coal-fired
unit. Consumers estimates capital expenditures for possible modifications
at other coal-fired units based on proposed nitrogen oxide regulations to
be an additional $50 million by the year 2000. Consumers expects final
nitrogen oxide regulations to be issued by early 1994. Management
believes that Consumers annual operating costs will not be materially
affected.
The relative costs of compliance by Consumers should be less than that
experienced by other utilities that have not been previously subject to
stringent air quality restrictions. Consumers will seek to recover costs
of complying with new environmental legislation in future rates.
CMS Energy believes that CMS Generation's projects are in substantial
compliance with the 1990 amendments.
The CERCLA or Superfund lists sites for environmental cleanup on the
National Priorities List. The EPA notifies parties who may have some
liability for such cleanup. Along with a number of other credit-worthy,
potentially responsible parties, Consumers has received notice for several
sites, and may receive notice in the future for other sites to be added to
the National Priorities List. Based on its level of involvement with the
sites and the involvement and credit worthiness of other parties with the
sites, Consumers believes that it is unlikely that its liability at any of
the known CERCLA sites, individually or in total, will have a material
adverse effect on its financial condition or results of operations.
In 1990, the State of Michigan passed amendments to its Environmental
Response Act. Effective July 1991, this law established a state program
similar to the federal CERCLA, though broader in scope. Under this law,
Consumers expects it will ultimately incur costs at a number of sites,
including several of the 23 sites that formerly housed manufactured gas
plant facilities at one time operated by Consumers, even those in which it
has a partial or no current ownership interest. It is expected that in
most cases, other parties with current or former ownership interests will
also be considered liable under the law and may be required to share the
costs of any site investigations and remedial actions. There is limited
knowledge of manufactured gas plant contamination at these sites at this
time. However, Consumers is continuing to monitor this issue.
In addition, at the request of the DNR, Consumers prepared work plans for
remedial investigation/feasibility studies for three of these sites. Work
plans for remedial investigation/feasibility studies for four other sites
have also been prepared. The purpose of a remedial
investigation/feasibility study is to define the nature and extent of
contamination at a site and to determine which of several possible
remedial action alternatives, including no action, may be required under
the Environmental Response Act. The DNR has approved two of the three
plans for remedial investigation/feasibility studies submitted and is
currently reviewing the one remaining. The cost to conduct one of the
approved studies will be approximately $250,000 based on bids received.
Although the actual cost of conducting the remaining two remedial
investigation/feasibility studies will not be known until bids are
received from contractors, Consumers currently estimates the total cost of
conducting the three studies submitted to the DNR to be less than $1
million.
The timing and extent of any further site investigation and remedial
actions will depend, among other things, on requests received from the DNR
and on future site usage by Consumers or other owners. Under the current
schedule, Consumers anticipates the first remedial
investigation/feasibility study would be completed in mid-1994. Consumers
believes the results of the remedial investigation/feasibility studies
will allow management to estimate a range of remedial cost estimates for
the sites under study. Based on Consumers' knowledge of other utility
remedial actions, remediation costs for Consumers for these sites may be
substantial. In 1993, the MPSC addressed the question of recovery of
investigation and remedial costs for another Michigan gas utility as part
of that utility's gas rate case. In that proceeding, the MPSC determined
that prudent investigation and remedial costs could be deferred and
amortized over 10-year periods and prudent unamortized costs can be
included for recovery in the utility's rate cases. The MPSC stated the
length of the period may be reviewed from time to time, but any revisions
would be prospective. Consumers believes costs incurred for both
investigation and any required remedial actions would be recoverable from
its gas customers under established regulatory policies and accordingly
are not likely to materially affect its financial position or results of
operations.
Consumers has engaged in an aggressive testing and removal program for
USTs. Since 1985, Consumers and its subsidiaries have reduced the number
of regulated UST systems from approximately 256 to 48. At 98 of the sites
from which UST systems were removed there had been hydrocarbon releases,
either from tank system leaks or from spillage on the surface during
transfer of contents to or from the tanks. Company response activities
have resulted in DNR closure agreements of 52 of those releases. The
remaining releases are at various stages of completion. It is estimated
that about $5 million remains to be spent to complete these response
activities. The Michigan Underground Storage Tank Financial Assurance Act
provides a fund to help pay for the cost of response activities associated
with leaking USTs. To qualify for these funds, an owner or operator must
be in compliance with UST regulations. A substantial portion of future
costs for UST response activities at the release sites and a portion of
the costs already incurred may be eligible for reimbursement from this
fund. During 1993, Consumers was reimbursed $807,400 by this state fund.
Like most electric utilities, Consumers has PCB in some of its electrical
equipment. Although it has been unlawful to manufacture or sell PCB or
PCB contaminated equipment since the 1970's, its continued use in
preexisting electrical equipment is lawful. Consumers has engaged in a
number of programs to reduce the risk of exposure to the environment from
possible PCB spills. These included such actions as removing PCB
capacitors outside of substations, draining large transformers and
refilling them with non-PCB mineral oil, removing PCB equipment which was
found to pose a risk to food supplies or animal feed, and other such
programs. Consumers still has a substantial number of PCB capacitors in
substations. It has approximately 459,000 untested distribution
transformers. By regulation, unless the PCB level is known, transformers
are presumed to be PCB-contaminated. There may also be PCB in certain
other types of equipment. Based upon results of sampling in 1985, it is
thought that about 1 percent of the pole-top transformers had over 500 ppm
of PCB, and about 12 percent had from 50 to 500 ppm. Those percentages
should decline over time with the retirement of older equipment and its
replacement with non-PCB equipment. From time to time there are
accidental releases from such equipment. Consumers typically spends less
than $1 million per year for all clean up and disposal of debris and
equipment from PCB releases.
NPDES permits allow the discharge of certain substances from Consumers'
facilities and pipeline construction projects pursuant to state water
quality standards and federal effluent limitation guidelines. NPDES
permits for discharges from all of Consumers' major operating steam
electric generating facilities and for certain discharges from Consumers'
other facilities, including the Ludington pumped storage plant and
pipeline construction projects, have been issued by the State of Michigan
pursuant to a delegation of authority from the EPA under the Federal Water
Pollution Control Act of 1972, as amended. Consumers believes that it is
in substantial compliance with the NPDES permits.
The cooling water intake structures of both new and existing steam
electric power plants are required by law to reflect the "best technology
available for minimizing adverse environmental impact." The staff of the
DNR concluded in 1976 and 1978 that the existing cooling water intake
structures at the Karn, Weadock and Cobb plants and Campbell Units 1 and 2
do not reflect the "best technology available for minimizing adverse
environmental impact." Until permit conditions impose additional
requirements, their effects on the operating expenses and operations of
these facilities cannot be determined.
In 1980, the staff of the DNR notified Consumers of its opinion that the
thermal component of the discharge of several plants has adverse effects
on certain aquatic species. The MWRC made no findings in this regard.
The opinion of the DNR staff is subject to confirmation in the future by
findings of the replacement of the MWRC as provided in the State of
Michigan Executive Order 1991-31. Executive Order 1991-31 provides that
DNR Staff decisions are subject to confirmation, initially, by the
Director of the new DNR, and finally, by the Natural Resources Commission.
Until the DNR's opinion has been confirmed and additional requirements
imposed, its effects on the operating expenses and operations of these
facilities cannot be determined.
The possibility that exposure to electric and magnetic fields (EMFs)
emanating from power lines and other electric sources may result in
adverse health effects has been a subject of increased public,
governmental and media attention. The EPA has stated that information is
currently insufficient to determine whether a cause-and-effect
relationship exists between EMF and certain health risks. Currently,
there is no Michigan or federal regulation of transmission lines with
regard to EMF.
CONSUMERS AND CMS ENERGY COMPETITION
Electric Competition
The electric utility operations of Consumers are regulated at the
wholesale and retail level. The wholesale utility operations of Consumers
are regulated by the FERC while the retail utility operations are
regulated by the MPSC. Competitors in the electric utility operations of
Consumers must also be similarly regulated or specifically exempted from
such regulation. CMS Energy's non-utility electric generation businesses
are exempt from MPSC regulation and compete in the non-utility power
market with other non-utility energy companies that are similarly exempt.
The electric utility industry has experienced retail load competition in
recent years from cogeneration and self-generation as discussed below.
The electric utility industry is now also experiencing increased
competition in the wholesale power markets. The factors driving this
trend include the enactment of PURPA, the enactment of the Energy Act and
increased transmission access. These initiatives provide both
opportunities for Consumers in competing for new customers and potential
risks because of alternative energy supplies available to existing
customers. CMS Energy is similarly faced with expanded opportunities and
competition for customers in the non-utility electric generation market.
PURPA created a special type of independent power producer that, providing
the requirements of qualifying facility status are met and all other other
aspects of the utility's requirements and the power offered are otherwise
equal, are entitled to sell their production to a utility. Under PURPA,
qualifying facilities are generally exempt from the federal and state
regulation imposed on electric utilities. Similarly, the Energy Act was
designed, among other things, to foster competition in the wholesale
market by facilitating the ownership and operation of generating
facilities by "exempt wholesale generators" (which may include independent
power producers as well as affiliates of electric utilities) and
authorizing the FERC under certain conditions to order utilities which own
transmission facilities to provide wholesale transmission services to or
for other utilities and other entities generating electric energy for sale
or resale. In addition, the Energy Act allows independent power producers
exemptions from the application of much of the regulation imposed on
electric utilities. One effect of the foregoing exemptions from
regulation has been to encourage investment in wholesale power production
facilities which through MPSC mandated bidding procedures will compete
with Consumers to build generation to meet Consumers needs for new
generation. These independent power producers also provide competition
for CMS Energy in the non-utility electric generation market both
domestically and internationally.
Some of Consumers' larger industrial customers are exploring the
possibility of constructing and operating their own on-site generating
facilities. Consumers is actively working with these customers to develop
rate and service alternatives that are competitive with self-generation
options. Under the retail rates authorized by the MPSC, Consumers
industrial and commercial customer rates are structured such that rates
paid by residential customers are kept at levels lower than they would
otherwise be through subsidization by the industrial and commercial
customers. As part of its current electric rate case, Consumers has
requested that the MPSC reduce the level of rate subsidization of
residential customers by commercial and industrial customers so as to
improve rate competitiveness for its largest customers. On March 4, 1994,
the ALJ issued a proposal for decision that recommended an immediate
reduction of 50 percent of such subsidization as compared with Consumers
proposal of phasing in a 60 percent reduction over 3 years.
In addition, a number of municipalities distribute electricity within
their corporate limits and some of these generate all or a portion of
their requirements. These municipalities and various rural electric
cooperative corporations serve a significant number of retail customers in
or adjacent to areas served by Consumers.
Consumers has on file with the FERC an open-access transmission tariff
which enables any electric utility (defined in such tariff to include
independent power producers) to use Consumers' integrated transmission
system for the transmission of capacity and energy produced and sold by
such electric utility or by third parties. Other similar open-access
transmission tariffs have been made effective by the FERC for several
large utility companies or systems and more open-access transmission
tariffs are anticipated. These developments produce increased marketing
opportunities for utility systems such as Consumers and expose the
Consumers' system to loss of wholesale load or reduced revenues due to
possible displacement of Consumers' wholesale transactions by alternative
suppliers with access to Consumers' primary areas of service. Because
wholesale transactions by Consumers generated less than 2 percent of Consumers
1993 revenue from electric operations, Consumers does not believe that
this potential loss is significant.
Gas Competition
Competition with respect to Consumers' gas operations has a longstanding
history, as gas has traditionally competed with other fuels such as coal
and oil. The passage of the Natural Gas Policy Act of 1978 resulted in
gas supplies no longer being curtailed, with competition subsequently
arising between alternative suppliers of gas. Consumers responded to
these developments by offering gas transportation and storage services to
customers that chose to acquire their gas supplies from some other
supplier. Because Consumers' earnings from its gas operations are not
primarily dependent on gas purchased and resold to its customers, but
rather on owning and operating its gas distribution, storage and
transportation facilities, Consumers has not suffered any significant
losses as a result of such competition, nor does it believe that such
losses are likely.
CMS Energy's non-utility interstate and intrastate gas operations face
competition from other gas transportation companies for new opportunities.
The marketing segment faces strong competition for business in all its
markets.<PAGE>
<PAGE> 29
EXECUTIVE OFFICERS
As of March 18, 1994
CMS Energy
Name Age Position Period
---- --- -------- ------
William T. McCormick, Jr. 49 Chairman of the Board and
Chief Executive Officer of
CMS Energy 1987-Present
Chairman of the Board of
Consumers 1992-Present
Chairman of the Board and
Chief Executive Officer
of Enterprises 1988-Present
Chairman of the Board and
Chief Executive Officer
of Consumers 1985-1992
S. Kinnie Smith, Jr. 63 Vice Chairman of the Board
and General Counsel of
CMS Energy 1992-Present
Vice Chairman of the Board
of Consumers 1988-Present
Vice Chairman of the Board
of Enterprises 1989-Present
President and General
Counsel of CMS Energy 1988-1992
Vice Chairman of the Board
and General Counsel
of CMS Energy 1987-1988
Vice Chairman of the Board
and General Counsel
of Consumers 1987-1988
Victor J. Fryling 46 President of CMS Energy 1992-Present
President of Enterprises 1993-Present
Vice Chairman of the Board
of Consumers 1992-Present
President and Chief
Financial Officer of
Enterprises 1992-1993
Executive Vice President
and Chief Financial
Officer of CMS Energy
and Consumers 1988-1992
Senior Vice President and
Chief Financial Officer
of CMS Energy and Consumers 1987-1988
John W. Clark 49 Senior Vice President of CMS
Energy 1987-Present
Senior Vice President of
Consumers 1985-Present
Alan M. Wright 48 Senior Vice President and
Chief Financial Officer
of CMS Energy 1992-Present
Senior Vice President and
Chief Financial Officer
of Consumers 1993-Present
Senior Vice President and
Chief Financial Officer
of Enterprises 1993-Present
Senior Vice President,
Chief Financial Officer and
Treasurer of Consumers 1992-1993
Vice President and Treasurer
of Consumers 1991-1992
Vice President - Finance of
Entergy Corporation 1989-1991
Vice President - Finance of
Entergy Services 1987-1991
Preston D. Hopper* 43 Vice President, Controller
and Chief Accounting
Officer of CMS Energy 1992-Present
Vice President and Controller
of Enterprises 1992-Present
Vice President and Controller
of CMS Energy 1991-1992
Vice President and Controller
of ANR Pipeline Co. 1983-1991
Michael G. Morris* 47 President and Chief Executive
Officer of Consumers 1994-Present
Executive Vice President and
Chief Operating
Officer of Consumers 1992-1994
Executive Vice President of
Consumers 1988-1992
President and Chief Operating
Officer of Colorado
Interstate Gas Company 1987-1988
Executive Vice President of
ANR Pipeline Company 1986-1988
David A. Mikelonis* 45 Senior Vice President and
General Counsel of
Consumers 1988-Present
Vice President and General
Attorney of Consumers 1986-1988
* In April 1993 the Board of Directors designated the Senior Officers of
CMS Energy, its Controller, the President of Enterprises, the President of
Consumers and the General Counsel of Consumers as Executive Officers of
CMS Energy for purposes of the Securities Exchange Act of 1934.
The present term of office of each of the officers extends to the first
meeting of CMS Energy's Board of Directors after the next annual election
of Directors (scheduled to be held May 27, 1994).
There are no family relationships among executive officers and directors
of CMS Energy.
Consumers
Name Age Position Period
---- --- -------- ------
William T. McCormick, Jr. 49 See the information under CMS
Energy's Officers Section above,
incorporated herein by reference.
S. Kinnie Smith, Jr. 63 See the information under CMS
Energy's Officers Section above,
incorporated herein by reference.
Victor J. Fryling 46 See the information under CMS
Energy's Officers Section above,
incorporated herein by reference.
Michael G. Morris 47 See the information under CMS
Energy's Officers Section above,
incorporated herein by reference.
John W. Clark 49 See the information under CMS
Energy's Officers Section above,
incorporated herein by reference.
Paul A. Elbert 44 Senior Vice President of
Consumers 1991-Present
Vice President of Consumers 1988-1991
Plant General Manager,
Karn-Weadock Complex of
Consumers 1986-1988
David A. Mikelonis 45 See the information under
CMS Energy's Officers Section
above, incorporated herein by
reference.
Alan M. Wright 48 See the information under
CMS Energy's Officers Section
above, incorporated herein by
reference.
David W. Joos 40 Senior Vice President of
Consumers 1994-Present
Vice President of Consumers 1990-1994
Dennis DaPra** 51 Vice President and Controller
of Consumers 1991-Present
Director of Financial and
Regulatory Reporting of
Consumers 1984-1991
** In April 1993, Consumers' Board of Directors designated the Senior
Officers of Consumers and its Controller as Executive Officers of
Consumers for purposes of the Securities Exchange Act of 1934.
The present term of office of each of the officers extends to the first
meeting of Consumers' Board of Directors after the next annual election of
Directors (scheduled to be held May 27, 1994).
There are no family relationships among executive officers and directors
of Consumers.
<PAGE>
<PAGE> 32
ITEM 2. PROPERTIES.
CHARACTER OF OWNERSHIP
The principal properties of CMS Energy and its subsidiaries are owned in fee,
except that most electric lines and gas mains are located, pursuant to ease-
ments and other rights, in public roads or on land owned by others. The
statements under this item as to ownership of properties are made without
regard to tax and assessment liens, judgments, easements, rights of way,
contracts, reservations, exceptions, conditions, immaterial liens and encum-
brances, and other outstanding rights. None of these outstanding rights
impairs the usefulness of such properties.
Substantially all of Consumers' properties are subject to the lien of its
First Mortgage Bond Indenture.
CONSUMERS ELECTRIC UTILITY PROPERTIES
Consumers' electric generating system consists of five fossil-fueled
plants, two nuclear plants, one pumped storage hydroelectric facility,
seven gas combustion turbine plants and 13 hydroelectric plants.
<PAGE>
<PAGE> 33
<TABLE>
<CAPTION>
1993 Summer Net 1993 Net
Demonstrated Generation
Name and Location Size and Year Capability (Thousands
(Michigan) Entering Service (Kilowatts) of kWhs)
<S> <C> <C> <C>
Coal Generation
J H Campbell - West Olive 3 Units, 1962-1980 1,346,300 (a) 7,400,192
D E Karn - Essexville 2 Units, 1959-1961 515,000 3,272,247
B C Cobb - Muskegon 2 Units, 1956-1957 296,000 1,713,317
J R Whiting - Erie 3 Units, 1952-1953 310,000 2,013,913
J C Weadock - Essexville 2 Units, 1955-1958 310,000 2,120,296
--------- -----------
Total 2,777,300 16,519,965
--------- -----------
Oil/Gas Generation
D E Karn - Essexville 2 Units, 1975-1977 1,276,000 336,864
--------- -----------
Ludington Pumped Storage 6 Units, 1973 954,700 (b) (394,339) (c)
--------- -----------
Nuclear Generation
Palisades - South Haven 1 Unit, 1971 755,000 3,513,191
Big Rock Point -
Charlevoix 1 Unit, 1962 67,000 424,851
--------- -----------
Total 822,000 3,938,042
--------- -----------
Gas/Oil Combustion Turbine
Generation 7 Plants, 1966-1971 395,300 11,698
--------- -----------
Hydro Generation 13 Plants,1907-1949 73,800 489,229
--------- -----------
Total Owned Generation 6,299,100 20,901,459
===========
Plus Purchased and Inter-
change Power Capacity 1,223,000 (d)
---------
Total 7,522,100
=========
<FN>
(a) Represents Consumers' share of the capacity of the Campbell Plant Unit 3, net of 6.69 percent (ownership interests
of the Michigan Public Power Agency and Wolverine Power Supply Cooperative, Inc.).
(b) Represents Consumers' share of the capacity of the Ludington pumped storage plant. Consumers and Detroit Edison
have 51 percent and 49 percent undivided ownership, respectively, in the plant, and the capacity of the plant is
shared accordingly.
(c) Represents Consumers' share of net pumped storage generation. This facility electrically pumps water during off-
peak hours for storage to later generate electricity during peak-demand hours.
(d) Includes purchased power capacity from the MCV Facility totaling 1,023 MW.
</TABLE>
<PAGE>
<PAGE> 34
Consumers' electric transmission and distribution lines owned and in
service are as follows:
Structure Sub-Surface
(Miles) (Miles)
Transmission
345,000 volt 1,137 -
138,000 volt 3,246 4
120,000 volt 19 -
46,000 volt 4,066 9
23,000 volt 31 7
------ -----
Total transmission 8,499 20
Distribution
(2,400-24,900 volt) 50,359 4,756
------ -----
Total transmission and
distribution 58,858 4,776
====== =====
Consumers owns substations having an aggregate transformer capacity of
36,249,290 kilovoltamperes.
CONSUMERS GAS UTILITY PROPERTIES
Consumers' gas distribution and transmission system consists of
20,768 miles of distribution mains and 1,084 miles of transmission lines
throughout the Lower Peninsula of Michigan. Consumers owns and operates
five compressor stations with a total of 116,070 installed horsepower.
Consumers' gas storage fields, listed below, have an aggregate certified
storage capacity of 241.5 bcf:
Total Certified
Field Name Location Storage Capacity (bcf)
Overisel Allegan and Ottawa Counties 64.0
Salem Allegan and Ottawa Counties 35.0
Ira St Clair County 7.5
Lenox Macomb County 3.5
Ray Macomb County 66.0
Northville Oakland, Washtenaw and
Wayne Counties 25.8
Puttygut St Clair County 16.6
Four Corners St Clair County 3.8
Swan Creek St Clair County .6
Hessen St Clair County 18.0
Lyon - 34 Oakland County .7
<PAGE>
<PAGE> 35
Michigan Gas Storage owns and operates two compressor stations with a
total of 46,600 installed horsepower. Its transmission system consists of
547 miles of pipelines within the Lower Peninsula of Michigan.
Michigan Gas Storage's gas storage fields, listed below, have an aggregate
certified storage capacity of 117 bcf:
Total Certified
Field Name Location Storage Capacity (bcf)
Winterfield Osceola and Clare Counties 75.0
Cranberry Lake Clare and Missaukee Counties 30.0
Riverside Missaukee County 12.0
Consumers' gas properties also include the Marysville gas reforming plant,
located in Marysville, Michigan. Huron entered into a partnership
with PanCanadian Petroleum Company and CanStates Investments to use the
expanded capacity of the underground caverns at the Marysville plant for
commercial storage of liquid hydrocarbons. On February 1, 1994 PanCanadian
Petroleum Company purchased CanStates Investments. In addition, Consumers
and Novacor Hydrocarbons, Inc. are partners in a partnership to use certain
hydrocarbon fractionation facilities at the plant.
CMS ENERGY OIL AND GAS EXPLORATION AND PRODUCTION PROPERTIES
NOMECO has carried on a domestic oil and gas exploration program since
1967. In 1976, NOMECO entered its first venture outside the United
States.
Net oil and gas production by NOMECO for the years 1991 through 1993 is
shown in the following table.
Thousands of barrels of oil and millions of
cubic feet of gas, except for reserves
1993 1992 1991
Natural gas (a) 18,487 17,578 14,714
Oil and condensate (a) 1,716 1,417 1,260
Plant products (a) 186 291 283
Average daily production (b)
Oil 5.6 4.9 4.1
Gas 62.3 59.2 50.5
Reserves to annual production ratio
Oil (MMbbls) 19.1 22.6 21.9
Gas (bcf) 10.9 11.8 13.0
(a) Revenue interest to NOMECO
(b) NOMECO working interest (includes NOMECO's share of royalties)
<PAGE>
<PAGE> 36
<TABLE>
The following table shows NOMECO's estimated proven reserves of oil and gas for the years 1991 through 1993.
<CAPTION>
Total Worldwide United States International
Oil Gas Oil Gas Oil Gas
(MMbbls) (bcf) (MMbbls) (bcf) (MMbbls) (bcf)
<S> <C> <C> <C> <C> <C> <C>
Proven Developed and
Undeveloped Reserves
December 31, 1990 19.5 172.1 5.6 167.9 13.9 4.2
Revisions and other changes 0.4 6.5 0.2 6.4 0.2 0.1
Extensions and discoveries 9.7 24.3 0.4 24.3 9.3 -
Purchases of reserves 0.2 3.0 0.2 3.0 - -
Production (1.3) (14.7) (1.1) (14.5) (0.2) (0.2)
----- ------ ----- ------ ----- -----
December 31, 1991 28.5 191.2 5.3 187.1 23.2 4.1
Revisions and other changes 0.8 (20.4) 0.2 (20.1) 0.6 (0.3)
Extensions and discoveries 7.4 45.4 0.1 44.7 7.3 0.7
Purchases of reserves 1.0 9.9 0.2 6.8 0.8 3.1
Production (1.6) (17.6) (1.1) (17.4) (0.5) (0.2)
----- ------ ----- ------ ----- -----
December 31, 1992 36.1 208.5 4.7 201.1 31.4 7.4
Revisions and other changes 0.4 7.2 (0.4) 7.1 0.8 0.1
Extensions and discoveries 0.1 2.9 0.1 2.9 - -
Purchases of reserves - 1.7 - 1.7 - -
Production (1.9) (18.5) (1.0) (18.2) (0.9) (0.3)
----- ------ ----- ------ ----- -----
December 31, 1993 34.7 201.8 3.4 194.6 31.3 7.2
===== ====== ===== ====== ===== =====
Proven Developed Reserves
December 31, 1990 18.8 155.5 4.9 151.3 13.9 4.2
December 31, 1991 25.9 188.0 5.1 183.9 20.8 4.1
December 31, 1992 31.7 205.0 4.5 198.8 27.2 6.2
December 31, 1993 31.2 200.0 3.3 193.4 27.9 6.6
Equity Interest in Proven
Reserves of Pecten Yemen
December 31, 1993 1.5 - - - 1.5 -
</TABLE>
<PAGE>
<PAGE> 37
The following table shows NOMECO's undeveloped net acres of oil and gas
leasehold interests at December 31.
Net Acres
1993 1992
Michigan 77,672 120,740
Louisiana (a) 37,295 39,226
Texas (a) 8,083 10,411
North Dakota 5,635 -
Indiana 5,034 715
Other states 2,184 2,581
------- ---------
Total domestic 135,903 173,673
------- ---------
Thailand 188,000 188,000
Yemen 120,563 -
Papua New Guinea 96,825 63,220
Equatorial Guinea 83,334 83,334
Ecuador 69,160 69,160
New Zealand 602 1,544
China (b) - 589,334
------- ---------
Total international 558,484 994,592
------- ---------
Total 694,387 1,168,265
======= =========
(a) Includes offshore acreage.
(b) Acreage excluded at year-end 1993 as part of an agreement with the
state oil company to discontinue its current exploration program because
it has been unsuccessful.
CONSUMERS OTHER PROPERTIES
CMS Midland owns a 49 percent interest in the MCV Partnership which was
formed to construct and operate the MCV Facility. The MCV Facility has
been sold to five owner trusts and leased back to the MCV Partnership.
CMS Holdings is a limited partner in the FMLP, which is a beneficiary of
one of these trusts. CMS Holdings' indirect beneficial interest in the
MCV Facility is 35 percent.
Consumers owns fee title to 1,140 acres of land in the City and Township
of Midland, Midland County, Michigan, occupied by the MCV Facility. The
land is leased to the owners of the MCV Facility by five separate leases,
each leasing an undivided interest and in the aggregate totaling 100
percent, for an initial term ending December 31, 2035 with possible
renewal terms to June 15, 2090.
Consumers owns or leases three principal General Office buildings in
Jackson, Michigan and 53 Regional and other field offices at various
locations in Michigan's Lower Peninsula. Of these, two of the General
Office buildings and eleven of the Regional and other field offices are
leased. Also owned are miscellaneous parcels of real estate not now used
in utility operations.
CMS ENERGY OTHER PROPERTIES
Various subsidiaries of CMS Generation own interests in independent power
plants, including a 50 percent partnership interest in a 30 MW wood waste-
fueled power plant near Susanville, California; a 50 percent partnership
interest in a 54 MW coal and wood waste-fueled power plant in Filer City,
Michigan; a 50 percent partnership interest in a 34 MW wood waste-fueled
power plant in Grayling Township, Michigan; a 50 percent interest in a 26
MW tire burning power plant near Sterling, Connecticut; a 50 percent
interest in a wood waste-fueled power plant in Lyons Falls, New York; an
18.6 percent interest in a consortium which owns an 88 percent interest in
a 50 MW fossil-fueled plant in San Nicolas, Argentina; a 25 percent
interest in a consortium which owns a 59 percent interest in two
hydroelectric power plants, with a total of 1,320 MW of capacity, on the
Limay River in western Argentina; and a 50 percent ownership interest in a
18 MW wood waste-fueled power plant near Chateaugay, New York.
CMS Gas Transmission owns a 75 percent interest in a general partnership
which owns and operates a 25-mile, 16-inch natural gas transmission
pipeline in Jackson and Ingham Counties, Michigan; owns a 24 percent
limited partnership interest in the Saginaw Bay Area Limited Partnership
which owns 125 miles of 10-inch and 16-inch natural gas transmission
pipeline in north-central Michigan; owns a 44 percent limited partnership
interest in a partnership that owns certain pipelines of 20 and 12 miles
interconnected to the Saginaw Bay Area Limited Partnership facilities;
owns a 60 percent interest in a partnership that owns and operates a
natural gas treating plant in Otsego County, Michigan; and owns 100
percent interest in 41 miles of gas transmission pipeline in Otsego and
Montmorency Counties, Michigan.
CMS Energy, through certain subsidiaries owns approximately 6,000 acres of
undeveloped land in Benzie and Manistee Counties, Michigan, approximately
53 acres of undeveloped land in Muskegon County, Michigan, and
approximately 300 acres in undeveloped land in Emmet County, Michigan.
CONSUMERS CAPITAL EXPENDITURES
Capital expenditures during 1993 for Consumers and its subsidiaries
totaled $509 million for capital additions and $52 million for demand-side
management programs. These capital additions include approximately
$31 million for environmental protection additions. Of the $509 million,
$265 million was incurred for electric utility additions, $126 million for
gas utility additions, $58 million for capital leases (see Note 14 to
Consumers' Consolidated Financial Statements incorporated by reference
herein), and $60 million for other additions and capital investments.
In 1994, capital expenditures are estimated to be $513 million for capital
additions and $40 million for demand-side management programs. These
capital addition estimates include approximately $48 million related to
environmental protection additions. Of the $513 million, $290 million
will be incurred for electric utility additions, $98 million for gas
utility additions, $73 million for capital leases, and $52 million for
other additions and capital investments.
CMS ENERGY CAPITAL EXPENDITURES
Capital expenditures during 1993 for CMS Energy and its subsidiaries
totaled $714 million for capital additions and $52 million for demand-side
management programs. These capital additions include approximately $31
million for environmental protection additions. Of the $714 million,
$509 million was incurred by Consumers as discussed above. The remaining
$205 million in capital additions include $81 million for oil and gas
exploration, $110 million for independent power production and $14 million
for gas transmission and marketing.
In 1994, capital expenditures are estimated to be $752 million for capital
additions and $40 million for demand-side management programs. This
capital addition estimate includes approximately $48 million related to
environmental protection additions. Of the $752 million, $513 million
will be incurred by Consumers as discussed above. The remaining $239
million in capital additions will be incurred as follows: $117 million
for oil and gas exploration, $84 million for independent power production
and $38 million for gas transmission and marketing.
<PAGE>
<PAGE> 40
ITEM 3. LEGAL PROCEEDINGS
Consumers and some of its subsidiaries and affiliates are parties to
certain routine lawsuits and administrative proceedings incidental to
their businesses involving, for example, claims for personal injury and
property damage, contractual matters, income taxes, and rates and
licensing. Reference is made to the Notes to the Consolidated Financial
Statements included herein for additional information regarding various
pending administrative and judicial proceedings involving rate, operating
and environmental matters.
The Attorney General, ABATE, and the MPSC Staff typically intervene in
MPSC proceedings concerning Consumers. Unless otherwise noted below,
these parties have intervened in such proceedings. For many years, almost
every significant MPSC order affecting Consumers has been appealed.
Appeals from such MPSC orders are pending in the Michigan Court of Appeals
and the Michigan Supreme Court. Consumers is vigorously pursuing these
matters. Under Michigan civil procedure, parties may file a claim of
appeal with the Michigan Court of Appeals which serves as a notice of
appeal. The grounds on which the appeal is being made are not set forth
until a later date when the parties file their briefs.
1. Electric Rate Case Proceedings
A. Appeal of MPSC Orders Related to the Abandoned Midland Nuclear
Plant Investment
In November 1983, Consumers filed an electric rate case with the MPSC
which sought recovery of its investment in the abandoned portion of the
Midland nuclear plant. This case was separated into two phases in
September 1984: a financial stabilization phase, MPSC Case No. U-7830,
Step 3A, and a prudence phase, MPSC Case No. U-7830, Step 3B. Numerous
orders were issued in these cases, including one issued in 1985 in the
financial stabilization phase which contained certain conditions to
Consumers' receiving financial stabilization rate relief.
On May 7, 1991, the MPSC issued final orders in both Step 3A and Step 3B
proceedings in which, among other things, the MPSC ruled that Consumers
could recover approximately $760 million of the $2.1 billion of abandoned
Midland investment. Consumers, as well as the Attorney General and ABATE,
among others, filed applications for rehearing with the MPSC of the May 7
Orders in Step 3A and Step 3B. which were all denied by the MPSC.
Several parties, including Consumers, have appealed the MPSC
determinations in these orders to the Court of Appeals. The Attorney
General and ABATE primarily disagree with the standard used by the MPSC to
determine the amount of investment that is recoverable by Consumers from
its electric customers, contending that recovery should not be allowed for
utility assets that have not been placed in service. Consumers disagrees
with the date the MPSC determined it would have been prudent for Consumers
to abandon construction of the Midland nuclear facility and the reduction
in recoverable investment that resulted from this determination. All
briefs have been filed in these appeals. Oral argument has not yet been
scheduled on the Step 3B appeals; oral argument was held on the Step 3A
appeal in December 1993.
B. Appeal of 1991 General Electric Rate Case Order
On May 7, 1991, the MPSC issued an order in Case No. U-9346, a general
electric rate case the MPSC ordered Consumers to file in response to a
complaint filed by ABATE. On July 1, 1991, the MPSC issued another order
in this proceeding modifying the May 7 Order. These orders, together with
the other orders discussed in paragraph A above, reduced Consumers'
electric retail rates by an annual amount of approximately $73 million.
Certain aspects of the May 7, 1991 and July 1, 1991 electric rate case
orders were appealed by the Attorney General, ABATE, and the Michigan
Association of Home Builders. The appeals of the Attorney General and the
Michigan Association of Home Builders have both been dismissed. ABATE's
appeal, which primarily seeks a reduction in the rates authorized by the
MPSC, remains pending. Briefs have been filed in the ABATE appeal and
oral argument was held in December 1993.
C. 1993 Electric Rate Case
On May 10, 1993, Consumers filed an application with the MPSC seeking an
increase in its base electric rates (MPSC Case No. U-10335). As a result
of the new statutory federal tax rate and interest rate savings resulting
from the refinancing of certain long-term debt, Consumers subsequently
revised its requested electric rate increase to approximately $133 million
in 1994 while its requested electric rate increase for 1995 remained at
$38 million. In their initial brief, the MPSC Staff recommended
approximately $98 million in annual rate relief beginning in 1994. The
MPSC Staff also recommended a lower return on electric common equity
(11.75 percent compared with Consumers' proposal of 13.25 percent), and using
a projected actual equity ratio in the projected capitalization structure
rather than a target ratio. The MPSC Staff did not support Consumers'
request for additional rate relief for 1995 as part of this proceeding,
but did support Consumers' rate design proposal to significantly reduce
the level of cross-subsidization of residential customers' rates by
commercial and industrial customers.
A PFD was issued in this case on March 4, 1994. In the PFD the ALJ
recommended a rate increase in 1994 of approximately $83 million with no
incremental increase in 1995 to be granted as part of this proceeding.
The ALJ adopted MPSC Staff's recommendation of an 11.75 percent return on
common equity and the use of 1994 projected actual capital structure rather
than the target structure proposed by Consumers. The PFD rejected a proposal
made by Consumers through which returns above the authorized level would
be shared with customers, but recommended the implementation of a
performance incentive proposal Consumers had initially proposed with some
modifications. The PFD also recommended the adoption of the cross-
subsidization reduction proposed by Consumers modified so that
subsidization would be immediately reduced by 50 percent in 1994 rates rather
than the phased-in 20 percent per year over a three year period reduction
proposed by Consumers.
Exceptions to the PFD are due March 18 with replies to exceptions due
April 1. The PFD is not binding on the MPSC. An order of the MPSC will
be issued sometime thereafter.
D. 1986 Proceedings - Palisades Outages
The Palisades nuclear plant was out of service for maintenance from May
1986 until April 1987. In the 1986 PSCR reconciliation case decided
December 22, 1988, the MPSC disallowed recovery of $22.4 million of
replacement power costs associated with the 1986 portion of this outage
and refunds to the customers were made. In an appeal filed in 1989 and
now pending decision by the Court of Appeals, Consumers is challenging the
adequacy of the MPSC's findings supporting the disallowance. Oral
arguments were held in December 1993 and in March 1994 the Court of
Appeals affirmed the MPSC order in a per curiam opinion.
2. Settlement Proposals Relating to Consumers' Purchases from the MCV
Partnership
On March 31, 1993, the MPSC issued the Settlement Order which approved
with modifications the Revised Settlement Proposal filed by Consumers, the
MPSC Staff and 10 small power and cogeneration developers. The scope of
the Settlement Order included three major components: 1) treatment of
cost recovery issues regarding the PPA, 2) resolution of PURPA issues
raised by certain developers of Qualifying Facilities that had wanted
contracts with Consumers, and 3) resolution of the remand to the MPSC
ordered by the Court of Appeals in the Capacity Charge Order. In December
1992, Consumers recognized an after-tax loss of $343 million for the
present value of estimated future underrecoveries of power costs under the
PPA as a result of the Settlement Order. On May 26, 1993, the MPSC denied
petitions filed by the Attorney General, ABATE, MMCG and a small project
developer which requested a rehearing of the Settlement Order by the MPSC.
ABATE and the Attorney General have filed claims of appeal of the
Settlement Order and the May 26, 1993 MPSC order with the Court of
Appeals. Briefs have been filed with the Court of Appeals on this matter
but oral argument has not yet been scheduled. In their respective briefs
in opposition to the Settlement Order, ABATE and the Attorney General
essentially reiterate the arguments they made before the MPSC in their
petitions for rehearing. The substance of ABATE's and the Attorney
General's arguments is that the MPSC exceeded its authority in approving
the Revised Settlement Proposal as modified by the Settlement Order and
the rates established thereby are not just and reasonable and lack
evidentiary support. ABATE and the Attorney General also contend that the
MPSC's procedures for the hearing on the Revised Settlement Order violated
due process and denied ABATE and the Attorney General a fair hearing. In
defense of the Settlement Order, the Independent Cogenerators, Consumers
and the MPSC argue in their respective briefs to the Court of Appeals that
the determinations of the MPSC in the Settlement Order are lawful and
reasonable and that the Attorney General and ABATE have failed to meet the
statutory burden of proof minimally necessary for the Court of Appeals to
find otherwise.
In accordance with the terms of the Settlement Order, appeals of MPSC
orders relating to MCV cost recovery issues in Consumers' 1990, 1991 and
1992 PSCR cases that had been pending before the Court of Appeals and the
Michigan Supreme Court have been withdrawn.
3. MPSC Case No. U-10029 - Intrastate Gas Supply
In November 1991, Consumers filed with the MPSC Case No. U-10029 seeking
several kinds of relief with respect to a contract with one of Consumers'
intrastate gas suppliers, North Michigan, including lowering a contract
price. North Michigan filed an objection with the MPSC and in July 1992
filed a collateral case in Federal Court seeking an injunction to block
the MPSC case. On April 8, 1993, the Federal Court dismissed Northern
Michigan's suit. An appeal of the Federal Court's decision is pending in
the U.S. Sixth Circuit Court of Appeals.
On February 8, 1993, the MPSC issued an order granting Consumers' request
to lower the price to be paid North Michigan under its contract. In March
1993, North Michigan filed an appeal of the MPSC's February 8, 1993 order
with the Court of Appeals. In July 1993, consistent with the MPSC's
February 8, 1993 Order, Consumers notified North Michigan that it planned
to terminate the contract in November 1993. In early October 1993, North
Michigan sought to have the Court of Appeals stay Consumers' cancellation
of the contract. The Court of Appeals denied this request in late October
1993 and Consumers terminated its contract with North Michigan effective
November 1, 1993. If the MPSC order is overturned, Consumers would have
to pay North Michigan higher contract costs for purchases in 1993 which
may not be authorized by the MPSC for recovery from Consumers' customers.
Should North Michigan obtain a favorable decision on all of the issues on
appeal, including Consumers' termination of the contract in 1993,
Consumers' total remaining exposure would be $24 million, for which
Consumers previously accrued a loss. Consumers cannot predict the outcome
of this appeal.
4. Palisades Plant - Spent Nuclear Fuel Storage
In April 1993, the NRC amended its regulations, effective May 7, 1993, to
approve the design of the dry spent fuel storage casks to be used by
Consumers at Palisades. In May 1993, the Attorney General and certain
other parties commenced litigation to block Consumers' use of the storage
casks, alleging that the NRC had failed to comply adequately with the
National Environmental Policy Act. As of February, 1994, the courts have
declined to prevent such use and have refused to issue temporary
restraining orders or stays. Several appeals related to this matter are
now pending at the U.S. Sixth Circuit Court of Appeals. As of mid-August
1993, Consumers has loaded two dry storage casks with spent nuclear fuel
and expects to load additional casks in 1994 prior to Palisades' 1995
refueling outage.
5. CMS Energy's Exemption Under the Public Utility Holding Company Act
of 1935
CMS Energy is exempt from registration under PUHCA. In December 1991, the
Attorney General and the MMCG filed a request with the SEC for the
revocation of CMS Energy's exemption. In January 1992, CMS Energy
responded to the revocation request affirming its position that it is
entitled to the exemption. In April 1992, the MPSC filed a statement with
the SEC that recommended that the SEC impose nine conditions on CMS
Energy's exemption. The suggested conditions would (1) preclude CMS
Energy's making non-utility investments without prior SEC approval;
(2) prohibit CMS Energy's subsidiaries from making any upstream loans
without prior SEC approval; (3) prohibit CMS Energy from pledging
Consumers' assets as security without prior SEC approval; (4) prohibit the
sale or transfer of utility securities or assets by CMS Energy without SEC
concurrence; (5) prevent Consumers paying other than "normal" dividend;
(6) require that all contracts and leases over $500,000 annual cost be
filed with the SEC and MPSC; (7) require that access to the books and
records of CMS Energy, its affiliates and their joint ventures, be
provided to the SEC and the MPSC; (8) establish complaint procedures, with
penalty provisions for addressing challenges to CMS Energy's compliance
with the conditions; and (9) require that all pleadings filed with the SEC
relating to the conditions be served contemporaneously on the MPSC. On
July 9, 1993, the Attorney General submitted to the SEC a response to the
MPSC's statement opposing the MPSC's recommendations and reiterating his
argument that CMS Energy should not be allowed an exemption under PUHCA.
On July 12, 1993, the MMCG submitted to the SEC a reply to CMS Energy's
January 1992 response to the revocation request. On September 30, 1993,
CMS Energy responded to the Attorney General's and the MMCG's July
submissions. CMS Energy also contemporaneously submitted comments on the
MPSC's April 1992 statement. In its response to the Attorney General and
MMCG, CMS Energy again refuted the allegations made by the Attorney
General and MMCG regarding CMS Energy's exemption, noting in particular
that the matters complained of by the Attorney General and MMCG have all
been addressed and resolved in proceedings before other regulatory and
judicial authorities, primarily at the State level, with the Attorney
General and MMCG participating. In its comments on the MPSC's April 1992
statement, CMS Energy updated events from the time the MPSC statement was
filed during which the substantive issues underlying the MPSC's
recommendations were resolved.
Should the SEC revoke CMS Energy's current exemption from registration
under PUHCA, CMS Energy could either become a registered holding company
or be granted a new exemption, possibly subject to conditions similar to
those recommended by the MPSC. Registration under PUHCA could require
divestment by CMS Energy of either its gas utility or electric utility
business by some future date following registration. As a registered
company, CMS Energy could also be precluded from engaging in businesses
that are not functionally related to its utility operations; in addition,
SEC approval would be required for the issuance of securities by CMS
Energy and its subsidiaries. If divestiture of Consumers' gas utility or
its electric utility business ultimately were required, the effect on
Consumers and CMS Energy would depend on the method of divestitures and
the extent of the proceeds received, which cannot now be predicted.
CMS Energy is vigorously contesting the revocation request and believes it
will maintain the exemption. There has been no action taken by the SEC on
this matter.
6. Ludington Pumped Storage Plant
In September 1993, the Court of Appeals overturned the dismissal of a
lawsuit filed by the Attorney General in September 1986 seeking damages
from Consumers and Detroit Edison for alleged injuries to fishing
resources due to the operation of the jointly owned Ludington Pumped
Storage Plant. In his 1986 complaint, the Attorney General had sought
$147.9 million (including interest) in damages for past injuries and
approximately $89,000 per day for future damages, subject to adjustment
based on the adequacy of the barrier net installed at the plant and other
changed conditions. In a second lawsuit, filed in 1987, the Attorney
General had also sought to have the plant's bottom lands lease agreement
with the State declared void. The Court of Appeals' September 1993 ruling
upheld the lower court's dismissal relating to the breach of claim, but
would allow the Attorney General to continue his lawsuit for damages
against Consumers and Detroit Edison, limiting the recovery of potential
damages to those occurring not more than 3 years before filing the lawsuit
in 1986. On October 14, 1993, the Court of Appeals made minor
modifications to its opinion. Consumers and Detroit Edison have filed an
application for leave to appeal with the Michigan Supreme Court seeking a
reversal of the September 1993 Court of Appeals' Order and have the trial
court's dismissal of the damages claim affirmed. The Attorney General
filed a brief in opposition to Consumers' and Detroit Edison's application
and also filed an application with the Michigan Supreme Court seeking
reversal of the Court of Appeals' rulings as to the lease claims and the
statute of limitations holding. The decision to grant or deny these
applications is pending at the Michigan Supreme Court.
7. Stray Voltage Lawsuit
Consumers experienced an increase in complaints during 1993 relating to
so-called stray voltage. Claimants contend that stray voltage results
when small electrical currents present in grounded electric systems are
diverted from their intended path. Investigation by Consumers of prior
stray voltage complaints disclosed that many factors, including improper
wiring and malfunctioning of on-farm equipment can lead to the stray
voltage phenomenon. Consumers maintains a policy of investigating all
customer calls regarding stray voltage and working with customers to
address their concerns including, when necessary, modifying the
configuration of the customer's hook-up to Consumers. On October 27,
1993, a complaint seeking certification as a class action suit was filed
against Consumers in a local circuit court. The complaint alleged that in
excess of a billion dollars of damages, primarily related to production by
certain livestock owned by the purported class, were being incurred as a
result of stray voltage from electricity being supplied by Consumers.
Consumers believes the allegations to be without merit and has vigorously
opposed the certification of the class and this suit. On March 11, 1994,
the court decided to deny class certification for this complaint and to
dismiss, subject to refiling as separate suits, the October lawsuit with
respect to all but one of the named plaintiffs.
8. Gas Supplier Dispute
On September 1, 1993, Consumers commenced gas purchases from Trunkline
under a continuation of prior sales agreements at a reduced price compared
to prior gas sales. Some of Consumers' direct gas suppliers, who have
their contract price tied to the price Consumers pays Trunkline, have
claimed that the reduced Trunkline gas cost is not a proper reference
price under their contracts with Consumers. To date, four suppliers have
filed lawsuits, one in Canada, making these charges and seeking open
pricing and/or renegotiation of the pricing provision for their contracts,
and also seeking damages for breach of contract. Consumers is disputing
these claims and has sought declaratory and other relief on this issue in
Michigan courts against nine suppliers. Certain of the suppliers also
allege that, absent successful renegotiation, they have the right to
terminate their supply contracts with Consumers and have involved the MCV
Partnership in the litigation claiming termination rights with respect to
the MCV Partnership's supply contracts that were negotiated during the
same period. Consumers has reached an agreement in principle to settle
with three of the suppliers. Consumers cannot predict the outcome of this
matter.
Additionally, three of these direct gas suppliers of Consumers made
filings with the FERC in Trunkline's Order 636 restructuring case seeking
to preclude Trunkline's ability to make the sales to Consumers which
commenced on September 1, 1993. Consumers and Trunkline vigorously
opposed these filings and in December 1993, the FERC issued an order
which, among other things, allowed Trunkline to continue sales of gas to
Consumers under tariffs on file with the FERC.
9. Arbitration Proceedings Between Consumers and the MCV Partnership
A dispute has arisen between the MCV Partnership and Consumers relating to
the impact of the Settlement Order on the fixed energy charge payment
called for in the PPA and Consumers' ability to exercise its rights under
the regulatory out provision based on the issuance of the Settlement
Order. In accordance with the dispute resolution provisions set out in
the PPA, an arbitrator acceptable to both parties has been selected and
the arbitration of this dispute has commenced. Consumers is unable to
predict the outcome of such arbitration proceedings or of any possible
settlement of the issues underlying this dispute. The lessors of the MCV
Facility have filed a lawsuit in federal district court against CMS
Energy, Consumers and CMS Holdings. It alleges breach of contract, breach
of fiduciary duty and negligent or fraudulent misrepresentation relating to
the MCV Partnership's failure to object to the Settlement Order in light
of Consumers' interpretation of the Settlement Order, which is the subject
of an arbitration between the MCV Partnership and Consumers. The action
alleges damages in excess of $1 billion and seeks injunctive relief
relative to Consumers' payments of the fixed energy charge. CMS Energy
and Consumers believe that at all times they and CMS Holdings have
conducted themselves properly and that the action is without merit. They
also believe that a significant portion of the alleged damages represent
fixed energy charges in dispute in the arbitration. CMS Energy and
Consumers are unable to predict the outcome of this action.
10. 1991 Gas Rate Settlement
On December 19, 1991, the MPSC approved a settlement in Case No. U-10037
concerning Consumers' gas rates which had been entered into by Consumers
and the MPSC Staff. The settlement provides that Consumers is required to
make certain expenditures for gas operation and maintenance activities in
1992, and provides for refunds if these expenditure levels are not met, or
if Consumers' gas earnings exceed certain levels. Both the Attorney
General and ABATE opposed approval of the settlement agreement and ABATE
sought rehearing of the December 19, 1991 Order. On April 15, 1992, the
MPSC denied the rehearing request. Both ABATE and the Attorney General
have appealed the MPSC's order. On March 10, 1994, the Court of Appeals
issued a per curiam opinion affirming the MPSC order.
11. Investigative Demand
On July 17, 1991, the Attorney General served a civil investigative demand
upon Consumers and CMS Energy indicating that the Attorney General was
investigating "possible violations" of the Michigan Antitrust Reform Act
by CMS Energy and Consumers and certain of their affiliates, primarily in
connection with potential acquisitions and dealings with electric
generating companies including the MCV Partnership. CMS Energy and
Consumers do not believe any violations of such Act have occurred. The
Attorney General has not taken any action on this matter since 1991 and
Consumers and CMS Energy believe that this investigation is no longer
being pursued.
12. Environmental Matters
On September 23, 1993, the EPA filed an administrative complaint against
Consumers under Superfund and the Emergency Planning and Community
Right-to-Know Act. The complaint alleges, after release of a certain
hazardous substance at its J. H. Campbell coal-fired electric generating
plant, that Consumers did not immediately notify the appropriate
governmental authorities of the release as soon as Consumers had knowledge
of the release. The complaint proposes penalties aggregating $100,000.
Consumers is disputing these allegations.
In addition, Consumers is subject to various federal, state and local laws
and regulations relating to the environment. Consumers has been named as
a party to several actions involving environmental issues. However, based
on its present knowledge and subject to future legal and factual
developments, CMS Energy and Consumers believe that it is unlikely that
these actions, individually or in total, will have a material adverse
effect on their financial condition. See Item 1. BUSINESS. CONSUMERS
AND CMS ENERGY ENVIRONMENTAL COMPLIANCE.
13. Retail Wheeling Proceedings
In September 1992, in response to an application filed by ABATE, the MPSC
issued an order commencing a joint contested case proceeding to consider
experimental wheeling tariffs for Consumers and Detroit Edison. ABATE's
proposal is that for an experimental period of five years utility
customers with maximum demands of 5,000 kW or more be eligible for the
retail wheeling tariff. Under the proposal, 60 megawatts of Consumers'
load and 90 MW of Detroit Edison's load would be subject to displacement
by retail wheeling. Consumers and Detroit Edison each opposed the
proposed experimental retail wheeling tariff while the MPSC Staff cited
concerns with the impact of the retail wheeling proposals on utility
planning and procurement practices as well as regarding certain
jurisdictional issues. In the PFD issued in August 1993, the ALJ
determined that the MPSC could not order utilities to provide retail
wheeling services and expressed concern regarding the proper pricing for
this service should a utility voluntarily agree to provide the service.
14. Wholesale Wheeling Proceedings
Consumers has an approved open-access interconnection service schedule on
file with the FERC for wholesale wheeling transactions. In 1992,
Consumers also filed a separate but complementary open-access transmission
tariff that would make both firm and non-firm transmission service
available to eligible power generators, including investor-owned
utilities, facilities that meet the ownership and technical requirements
under PURPA, independent power producers, municipal and cooperative
utilities. The FERC accepted the filing, effective May 2, 1992, subject
to refund, and ordered a hearing before an ALJ. In September 1993, the
ALJ issued an initial decision that would compel reductions of the tariff
rates ranging from 25 percent to 65 percent. On November 1, 1993,
Consumers filed exceptions with the FERC seeking reversal of the rate
reductions proposed in the ALJ's initial decision. As of December 31,
1993, the amount of firm transmission service currently subject to the
tariff is 23 MW.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF
SECURITY HOLDERS.
CMS Energy
None in the fourth quarter of 1993 for CMS Energy.
Consumers
None in the fourth quarter of 1993 for Consumers. However, at a special
meeting held on January 31, 1994, the shareholders of Consumers approved
the creation of a new class of stock, Class A preferred stock. The stock
vote taken on the matter was as follows:
For Against Abstain Total
--- ------- ------- -----
Common and
Preferred Stock 84,611,652 103,849 38,072 84,753,573
Preferred Stock 502,863 103,849 38,072 644,784
<PAGE>
<PAGE> 47
PART II
ITEM 5. MARKET FOR CMS ENERGY'S AND CONSUMERS' COMMON EQUITY
AND RELATED STOCKHOLDER MATTERS.
CMS Energy
Market prices for CMS Energy's common stock and related security holder
matters are contained herein in Item 8, CMS Energy's Quarterly Financial
and Common Stock Information, which is incorporated by reference herein.
Number of common shareholders at February 28, 1994 was 66,250.
Consumers
Consumers' common stock is privately held by its parent, CMS Energy, and
does not trade in the public market. In May, August, November and
December 1993, Consumers paid $57 million, $21.5 million, $33.5 million
and $21 million cash dividends, respectively, on its common stock.
ITEM 6. SELECTED FINANCIAL DATA.
CMS Energy
Selected financial information is contained in Item 8, CMS Energy's
Selected Financial Information which is incorporated by reference herein.
Consumers
Selected financial information is contained in Item 8, Consumers' Selected
Financial Information which is incorporated by reference herein.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
CMS Energy
Management's discussion and analysis of financial condition and results of
operations is contained in Item 8, CMS Energy's Management's Discussion
and Analysis which is incorporated by reference herein.
Consumers
Management's discussion and analysis of financial condition and results of
operations is contained in Item 8, Consumers' Management's Discussion and
Analysis which is incorporated by reference herein.
<PAGE>
<PAGE> 48
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
Index to Financial Statements:
CMS Energy Page
Selected Financial Information 51
Management's Discussion and Analysis 53
Consolidated Statements of Income 64
Consolidated Statements of Cash Flows 65
Consolidated Balance Sheets 66
Consolidated Statements of Long-Term Debt 68
Consolidated Statements of Preferred Stock 69
Consolidated Statements of Common Stockholders' Equity 70
Notes to Consolidated Financial Statements 71
Report of Independent Public Accountants 96
Quarterly Financial and Common Stock Information 97
Consumers Page
Selected Financial Information 101
Management's Discussion and Analysis 102
Consolidated Statements of Income 112
Consolidated Statements of Cash Flows 113
Consolidated Balance Sheets 114
Consolidated Statements of Long-Term Debt 116
Consolidated Statements of Preferred Stock 117
Consolidated Statements of Common Stockholder's Equity 118
Notes to Consolidated Financial Statements 119
Report of Independent Public Accountants 142
Quarterly Financial Information 143
<PAGE>
<PAGE> 49
CMS Energy Corporation
1993 Financial Statements
<PAGE>
<PAGE> 50
(This page intentionally left blank)
<PAGE>
<PAGE> 51
<TABLE>
Selected Financial Information CMS Energy Corporation
<CAPTION>
1993 1992 1991 1990 1989
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Operating revenue (in millions) (a) ($) 3,482 3,146 2,998 3,028 3,004
Net income (loss) (in millions) (b) ($) 155 (297) (276) (494) 312
Average common shares outstanding
(in thousands) 81,251 79,877 79,988 81,339 82,131
Earnings (loss) per average
common share (b) ($) 1.90 (3.72) (3.44) (6.07) 3.80
Cash from operations (in millions) ($) 484 468 559 377 834
Construction expenditures, excludes
assets placed under capital
leases (in millions) (a) ($) 548 487 353 425 470
Total assets (in millions) ($) 6,964 6,848 6,194 7,917 8,614
Long-term debt, excluding
current maturities (in millions) ($) 2,405 2,725 1,941 3,321 3,210
Non-current portion of capital
leases (in millions) ($) 115 98 68 68 79
Total preferred stock (in millions) ($) 163 163 163 156 187
Preferred stock with mandatory
redemption (in millions) ($) - - - - 10
Cash dividends declared per
common share ($) .60 .48 .48 .42 .10
Market price of common stock
at year-end ($) 25-1/8 18-3/8 18-3/8 27-7/8 38
Book value per common share at
year-end ($) 11.33 9.09 13.28 17.36 23.97
Return on average common equity (%) 18.3 (33.2) (22.4) (29.4) 17.2
Return on assets (%) 4.5 (2.3) (0.6) (3.2) 6.6
Number of common shareholders
at year-end 66,795 70,801 72,729 76,348 81,131
Number of employees at year-end
(full time equivalents) 10,013 9,971 9,212 9,484 9,790
Electric utility statistics
Sales (millions of kWh) (c) 32,764 31,601 31,813 31,743 31,375
Customers (in thousands) 1,526 1,506 1,492 1,475 1,453
Average sales rate (cents/kWh) 6.28 5.82 5.73 5.89 5.55
Gas utility statistics
Sales and transportation
deliveries (bcf) (d) 389 364 339 333 303
Customers (in thousands) 1,423 1,402 1,382 1,362 1,338
Average sales rate ($/mcf) 4.46 4.55 4.58 4.64 4.75
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<PAGE> 52
<TABLE>
Selected Financial Information (Continued) CMS Energy Corporation
<CAPTION>
1993 1992 1991 1990 1989
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Electric and gas non-utility statistics
CMS Energy's share of unconsolidated
independent power production
revenue (in millions) ($) 334 284 246 197 7
Independent power production
sales (millions of kWh) 5,019 4,057 3,342 3,233 90
Gas transmission and marketing
revenues (in millions) ($) 142 89 42 30 21
Gas marketed for end-users (bcf) 60 45 23 16 11
Exploration statistics
Sales (net equiv. MMbbls) 5.0 4.3 3.7 3.5 3.3
Proven reserves (net equiv. MMbbls) 69.8 70.9 60.3 48.2 36.9
Proven reserves added (net equiv.
MMbbls) 3.9 15.0 16.0 14.7 9.4
Finding cost ($/net equiv. bbl) ($) 4.97 4.88 6.58 5.52 8.16
- -----------------------------------------------------------------------------------------------------------------
<FN>
(a) Certain prior year amounts were restated for comparative purposes.
(b) Amount in 1991 included an extraordinary loss of $14 million, after tax or $.18 per average
common share.
(c) Includes intersystem electric sales.
(d) Excludes off-system transportation services.
</TABLE>
<PAGE>
<PAGE> 53
CMS Energy Corporation
Management's Discussion and Analysis
CMS Energy is the parent holding company of Consumers and Enterprises.
Consumers, a combination electric and gas utility company serving most of
the Lower Peninsula of Michigan, is the principal subsidiary of
CMS Energy. Consumers' customer base includes a mix of residential,
commercial and diversified industrial customers, the largest of which is
the automotive industry. Enterprises is engaged in several non-utility
energy-related businesses including: 1) oil and gas exploration and
production, 2) development and operation of independent power production
facilities, 3) gas marketing services to utility, commercial and
industrial customers, and 4) storage and transmission of natural gas.
Consolidated 1993 Earnings
Consolidated net income for 1993 totaled $155 million or $1.90 per share,
compared to net losses of $297 million or $3.72 per share in 1992 and $276
million or $3.44 per share in 1991. The increased net income reflects the
Settlement Order related to power purchases from the MCV Partnership.
Earnings also reflect record-setting utility electric sales and gas
deliveries and additional earnings from the growth of non-utility
businesses.
Cash Position, Financing and Investing
CMS Energy's primary ongoing source of operating cash is dividends from
its principal subsidiaries. Consumers effected a quasi-reorganization as
of December 31, 1992, which allowed it to resume paying common dividends
(see Note 7 to the Consolidated Financial Statements). Consumers paid
$133 million in common dividends in 1993 and declared a $16 million common
dividend in January 1994 from 1993 earnings. CMS Energy also received
cash dividends of $11 million from its non-utility subsidiaries.
CMS Energy paid $49 million in cash dividends to common shareholders
compared to $38 million in 1992. The $11 million increase reflects an
annual increase of $.24 per share commencing third quarter 1993.
CMS Energy's consolidated cash requirements are met by its operating and
financing activities. In 1993 and 1992, CMS Energy's consolidated cash
inflow from operations was derived mainly from Consumers' sale and
transportation of natural gas and its sale and transmission of electrici-
ty, and from NOMECO's sale of oil and natural gas. Consolidated cash from
operations for 1993 primarily reflects Consumers' record-setting electric
sales and gas deliveries and reduced after-tax cash shortfalls resulting
from Consumers' purchases of power from the MCV Partnership.
During 1992, CMS Energy's cash from operations decreased as compared to
1991 primarily due to higher operational expenditures and reduced electric
rates. In 1991, CMS Energy generated cash primarily from its consolidated
operating and investing activities, including $859 million of net proceeds
from the sale of a majority of the MCV Bonds.
Over the last three years, CMS Energy has used its consolidated cash to
fund its extensive utility construction expenditures, to improve the
reliability of its utility transmission and distribution systems and to
expand its non-utility businesses. It also has used its cash to retire
portions of long-term securities and to pay cash dividends.
Financing Activities
In October 1993, CMS Energy issued 4.6 million shares of common stock at a
price of $26 5/8. The net proceeds of $119 million were used to reduce
existing debt and for general corporate purposes. During 1993, Consumers
significantly reduced its future interest charges by retiring
approximately $51 million of high-cost outstanding debt and refinancing
approximately $573 million of other debt at lower interest rates. In
November 1993, NOMECO amended the terms of its loan agreement and
increased the amount to $110 million. For further information, see Note
7.
Investing Activities
Capital expenditures (excluding assets placed under capital leases of $58
million), deferred DSM costs and investments in unconsolidated
subsidiaries totaled $708 million for 1993 as compared to $525 million in
1992. CMS Energy's expenditures for its utility, independent power
production, oil and gas exploration and production, and gas transmission
and marketing business segments were $503 million, $110 million, $81
million and $14 million, respectively.
In December 1993, Consumers sold $309 million of MCV Bonds it held and
used the net proceeds to temporarily reduce short-term borrowings and
ultimately plans to reduce long-term debt and to finance its construction
program.
Outlook
CMS Energy estimates that capital expenditures, including DSM, new lease
commitments and investments in unconsolidated subsidiaries, will total
approximately $2.2 billion over the next three years.
In Millions
Years Ended December 31 1994 1995 1996
---- ---- ----
Electric and gas utility $553 $461 $471
Oil and gas exploration and production 117 90 100
Independent power production 84 99 98
Gas transmission and marketing 38 40 45
---- ---- ----
$792 $690 $714
==== ==== ====
CMS Energy is required to redeem or retire approximately $796 million of
long-term debt during 1994 through 1996. Cash generated by operations is
expected to satisfy a substantial portion of these capital expenditures
and debt retirements. Additionally, CMS Energy will evaluate the capital
markets in 1994 as a source of financing its subsidiaries' investing
activities.
CMS Energy filed a shelf registration statement with the SEC in January
1994 covering the issuance of up to $250 million of unsecured debt
securities. The net proceeds will be used to reduce the amount of
CMS Energy Notes outstanding and for general corporate purposes. In
October 1993, Consumers received MPSC authorization and is proceeding to
issue $200 million of preferred stock in 1994.
Consumers has several other available sources of credit including
unsecured, committed lines of credit totaling $165 million and a $470
million working capital facility. Consumers has FERC authorization to
issue or guarantee up to $900 million in short-term debt through
December 31, 1994. Consumers uses short-term borrowings to finance
working capital, seasonal fuel inventory, and to pay for capital
expenditures between long-term financings. Consumers has an agreement
permitting the sales of certain accounts receivable for up to $500
million. As of December 31, 1993 and 1992, receivables sold totaled $285
million and $225 million, respectively. On February 15, 1993, Consumers
increased the level of receivables sold to $335 million. In February
1994, Consumers called or redeemed approximately $101 million of first
mortgage bonds (see Note 7).
Electric Utility Operations
Comparative Results of Operations
Electric Pretax Operating Income: The improvement in 1993 pretax
operating income compared to 1992 reflects an increase of $126 million
relating to the resolution of the recoverability of MCV power purchase
costs under the PPA and increased electric system sales of $45 million,
partially offset by higher costs to improve system reliability. The 1992
decrease of $66 million from the 1991 level primarily resulted from an
increased emphasis on system reliability improvements and decreased
electric rates resulting from the full-year impact of a mid-1991 rate
decrease.
Electric Sales: Electric system sales in 1993 totaled a record 31.7
billion kWh, a 3.8 percent increase from 1992 levels. In 1993,
residential and commercial sales increased 3.4 percent and 3.0 percent,
respectively, while industrial sales increased 6.5 percent. Growth in the
industrial sector was the strongest in the auto-related segments of
fabricated and primary metals and transportation equipment. Electric
system sales in 1992 totaled 30.5 billion kWh, essentially unchanged from
the 1991 levels.
Power Costs: Power costs for 1993 totaled $908 million, a $31 million
increase from the corresponding 1992 period. This increase primarily
reflects greater power purchases from outside sources to meet increased
sales demand and to supplement decreased generation at Palisades due to an
extended outage. Power costs for 1992 totaled $877 million, a $17 million
decrease as compared to 1991.
Operation and Maintenance: Increases in other operation and maintenance
expense for 1993 and 1992 reflected increased expenditures to improve
electric system reliability.
Depreciation: The increased depreciation for 1993 reflects additional
capital investments in plant. The 1992 increase resulted from higher
depreciation rates, increased amortization of abandoned nuclear investment
and increased nuclear plant decommissioning expense.
Electric Utility Rates
Power Purchases from the MCV Partnership: Consumers is obligated to
purchase the following amounts of contract capacity from the MCV
Partnership under the PPA:
1995 and
Year 1993 1994 thereafter
- ---- ----- ----- ----------
MW 1,023 1,132 1,240
Since 1990, recovering capacity and fixed-energy costs for power purchased
from the MCV Partnership has been a significant issue. Effective January
1, 1993, the Settlement Order allowed Consumers to recover from electric
retail customers substantially all of the payments for its ongoing
purchase of 915 MW of contract capacity from the MCV Partnership,
significantly reducing the amount of future underrecoveries for these
power costs. ABATE and the Attorney General have filed claims of appeal
of the Settlement Order with the Court of Appeals.
Prior to the Settlement Order, Consumers had recorded losses for
underrecoveries from 1990 through 1992. In December 1992, Consumers
recognized an after-tax loss of $343 million for the present value of
estimated future underrecoveries of power costs under the PPA as a result
of the Settlement Order, based on management's best estimates regarding
the future availability of the MCV Facility, and the effect of the future
wholesale power market on the amount, timing and price at which various
increments of the capacity above the MPSC-authorized level could be
resold. Except for adjustments to the above loss to reflect the after-tax
time value of money through accretion expense, no additional losses are
expected unless actual future experience materially differs from
management's estimates. The after-tax expense for the time value of money
for the $343 million loss is estimated to be approximately $24 million in
1994, and various lower levels thereafter, including $22 million in 1995
and $20 million in 1996. Although the settlement losses were recorded in
1992, the after-tax cash underrecoveries associated with the Settlement
Order were $59 million in 1993. Consumers believes there is and will be a
market for the resale of capacity purchases from the MCV Partnership above
the MPSC-authorized level. If Consumers is unable to sell any capacity
above the current MPSC-authorized level, future additional after-tax
losses and after-tax cash underrecoveries could be incurred. Estimates
for the next five years if none of the additional capacity is sold are as
follows:
After-tax, In Millions
1994 1995 1996 1997 1998
---- ---- ---- ---- ----
Expected cash underrecoveries $56 $65 $62 $61 $ 8
Possible additional under-
recoveries and losses (a) $14 $20 $20 $22 $72
(a) If unable to sell any capacity above the MPSC's authorized level.
The PPA, while requiring payment of a fixed energy charge, contains a
"regulatory out" provision which permits Consumers to reduce the fixed
energy charges payable to the MCV Partnership throughout the entire
contract term if Consumers is not able to recover these amounts from its
customers. Consumers and the MCV Partnership have commenced arbitration
proceedings under the PPA to determine whether Consumers is entitled to
exercise its regulatory out regarding fixed energy charges on the portion
of available MCV capacity above the current MPSC-authorized levels. An
arbitrator acceptable to both parties has been selected. If the
arbitrator determines that Consumers cannot exercise its regulatory out,
Consumers would be required to make these fixed energy payments to the MCV
Partnership. The arbitration proceedings will also determine who is
entitled to the fixed energy amounts for which Consumers did not receive
full cost recovery during the years prior to settlement. As of December
31, 1993, these amounts total $26 million. Although Consumers intends to
aggressively pursue its right to exercise the regulatory out, management
cannot predict the outcome of the arbitration proceedings or any possible
settlement of the matter. Accordingly, losses were recorded prior to 1993
for all fixed energy amounts at issue in the arbitration. In December
1993, Consumers made an irrevocable offer to pay through September 15,
2007, fixed energy charges to the MCV Partnership on all kWh delivered by
the MCV Partnership to Consumers from the contract capacity in excess of
915 MW, which represents a portion of the fixed energy charges in dispute.
Consumers made the offer to facilitate the sale of the remaining MCV Bonds
in 1993.
The lessors of the MCV Facility have filed a lawsuit in federal district
court against CMS Energy, Consumers and CMS Holdings. It alleges breach
of contract, breach of fiduciary duty and negligent or willful
misrepresentation relating to the MCV Partnership's failure to object to
the Settlement Order in light of Consumers' interpretation of the
Settlement Order, which is the subject of an arbitration between the MCV
Partnership and Consumers. The action alleges damages in excess of $1
billion and seeks injunctive relief relative to Consumers' payments of the
fixed energy charge. CMS Energy and Consumers believe that at all times
they and CMS Holdings have conducted themselves properly and that the
action is without merit. They also believe that a significant portion of
the alleged damages represent fixed energy charges in dispute in the
arbitration. CMS Energy and Consumers are unable to predict the outcome
of this action. For further information regarding power purchases from
the MCV Partnership, see Note 3.
PSCR Matters: Consumers began a planned refueling and maintenance outage
at Palisades in June 1993. Following several required, unanticipated
repairs that extended the outage, the plant returned to service in early
November. Recovery of replacement power costs incurred by Consumers
during the outage will be reviewed by the MPSC during the 1993 PSCR
reconciliation of actual costs and revenues to determine the prudency of
actions taken during the outage and any associated delays. Net
replacement power costs were approximately $180,000 per day above the cost
of fuel incurred when the plant is operating.
The Energy Act imposes an obligation on the utility industry, including
Consumers, to decommission DOE uranium enrichment facilities. Consumers
currently estimates its payments for decommissioning those facilities to
be $2.4 million per year for 15 years beginning in 1992, escalating based
on an inflation factor. Consumers believes these costs are recoverable
from its customers under traditional regulatory policies.
Electric Rate Case: Consumers filed a request with the MPSC in May 1993
to increase its electric rates. Subsequently, as a result of changed
estimates, Consumers revised its requested electric rate increase to $133
million annually based on a 1994 test year. Consumers also requested an
additional annual electric rate increase of $38 million based on a 1995
test year. In March 1994, an ALJ issued a proposal for decision that
recommended Consumers' 1994 final annual rate increase total approximately
$83 million, and that the incremental requested 1995 increase not be
granted at this time. The ALJ's recommendation included a lower return on
electric common equity, reflected reduced anticipated debt costs due to
the projected availability of more favorable interest rates and proposed a
lower equity ratio for Consumers' projected capitalization structure. The
ALJ did, however, generally support Consumers' rate design proposal to
significantly reduce the level of subsidization of residential customers
by commercial and industrial customers and generally supported a
performance incentive which Consumers also supported. For further
information, see Note 4.
Electric Conservation Efforts
In October 1993, Consumers completed the customer participation portion of
several incentive-based DSM programs which were designed to encourage the
efficient use of energy, primarily through conservation measures. Based
on the MPSC's determination of Consumers' effectiveness in implementing
these programs, Consumers' future rate of return on electric common equity
may be adjusted either upward by up to one percent or downward by up to
two percent, for one year following reconciliation hearings with the MPSC.
Consumers believes it will receive an increase on its return on common
equity based on having achieved all of the agreed upon objectives (see
Note 4).
Electric Capital Expenditures
CMS Energy estimates capital expenditures, including DSM and new lease
commitments, related to its electric utility operations of $396 million
for 1994, $324 million for 1995 and $332 million for 1996.
Electric Environmental Matters and Health Concerns
The 1990 amendment of the federal Clean Air Act significantly increased
the environmental constraints that utilities will operate under in the
future. While the Clean Air Act's provisions will require Consumers to
make certain capital expenditures in order to comply with the amendments
for nitrogen oxide reductions, Consumers' generating units are presently
operating at or near the sulfur dioxide emission limits which will be
effective in the year 2000. Therefore, management believes that
Consumers' annual operating costs will not be materially affected.
In 1990, the State of Michigan passed amendments to the Environmental
Response Act, under which Consumers expects that it will ultimately incur
costs at a number of sites, even those in which it has a partial or no
current ownership interest. It is expected that in most cases, parties
other than Consumers with current or former ownership interests may also
be considered liable under the law and may be required to share in the
costs of any site investigations and remedial actions. CMS Energy and
Consumers believe costs incurred for both investigation and any required
remedial actions would be recoverable from electric utility customers
under established regulatory policies and accordingly are not likely to
materially affect their financial positions or results of operations.
Consumers is a so-called "Potentially Responsible Party" at several sites
being administered under Superfund. Along with Consumers, there are
numerous credit-worthy, potentially responsible parties with substantial
assets cooperating with respect to the individual sites. Based on
information currently known by management, Consumers and CMS Energy
believe that it is unlikely that their liability at any of the known
Superfund sites, individually or in total, will have a material adverse
effect on their financial positions or results of operations.
Electric Outlook
Consumers expects economic growth, competitive rates and other factors to
increase the demand for electricity within its service territory by
approximately 1.8 percent per year over the next five years. For the near
term, Consumers currently plans a reserve margin of 20 percent and expects
to fill the additional capacity required through long- and short-term
power purchases. Long-term purchased power will likely be obtained
through a competitive bidding solicitation process utilizing the framework
established by the MPSC in 1992. Capacity from the MCV Facility above the
levels authorized by the MPSC may be offered by Consumers in connection
with the solicitation.
A recent NRC review of Consumers' performance at Palisades showed a
decline in performance. Management believes that an increased emphasis on
internal assessments will improve performance at Palisades. To provide
NRC senior management with a more in-depth assessment of plant
performance, the NRC has initiated a diagnostic evaluation team inspection
at Palisades. The inspection will be a broad-based evaluation of all
aspects of nuclear plant operation and management which is expected to
commence in March 1994, with results of the evaluation expected to be
available in May 1994. The outcome of this evaluation cannot be
predicted. Similar reviews conducted at nuclear plants of other utilities
in recent years have in some cases resulted in increased regulatory
oversight or required actions to improve plant operations, maintenance or
condition.
Consumers is currently collecting $45 million annually from electric
retail customers for the future decommissioning of its two nuclear plants.
Consumers believes these amounts will be adequate to meet current
decommissioning cost estimates. For further information regarding nuclear
decommissioning, see Note 2.
Consumers' on-site storage pool at Palisades is at capacity, and it is
unlikely that the DOE will begin accepting any spent nuclear fuel by the
originally scheduled date in 1998. Consumers is using NRC-approved dry
casks, which are steel and concrete vaults, for temporary storage.
Several appeals relating to NRC approval of the casks are now pending at
the U.S. Sixth Circuit Court of Appeals. If Consumers is unable to
continue to use the casks as planned, significant costs, including
replacement power costs during any resulting plant shutdown, could be
incurred.
Consumers has experienced an increase in complaints in 1993 relating
primarily to the effect of so-called stray voltage on certain livestock.
A complaint seeking certification as a class action suit has been filed
against Consumers alleging significant damages, primarily related to
certain livestock, which Consumers believes to be without merit (see Note
12).
Some of Consumers' larger industrial customers are exploring the
possibility of constructing and operating their own on-site generating
facilities. Consumers is actively working with these customers to develop
rate and service alternatives that are competitive with self-generation
options. Although Consumers' electric rates are competitive with other
regional utilities, Consumers has on file with the FERC two open access
interconnection tariffs which could have the effect of increasing
competition for wholesale customers. As part of its current electric rate
case, Consumers has requested that the MPSC reduce the level of rate
subsidization of residential customers by commercial and industrial
customers so as to further improve rate competitiveness for its largest
customers.
The MPSC has completed a hearing on a proposal by ABATE to create an
experimental retail wheeling tariff. Certain other parties have proposals
in support of retail wheeling under development. In August 1993, an ALJ
recommended that the MPSC reject the proposed experiment. An MPSC order
is expected early in 1994.
Gas Utility Operations
Comparative Results of Operations
Gas Pretax Operating Income: For 1993, pretax operating income increased
$38 million compared to 1992, reflecting higher gas deliveries (both sales
and transportation volumes) and more favorable regulatory recovery of gas
costs related to transportation. During 1992, gas pretax operating income
increased $45 million from the 1991 level, essentially for many of the
same reasons as the current period.
Gas Deliveries: Gas sales and gas transported in 1993 totaled 410.6 bcf,
a 6.9 percent increase from 1992. In 1992, gas sales and gas transported
totaled 384.1 bcf, a 6.1 percent increase from 1991 deliveries.
Gas Utility Rates
Consumers currently plans to file a request in 1994 with the MPSC to
increase its gas rates. The request would include, among other things,
costs for postretirement benefits computed under SFAS 106, Employers'
Accounting for Postretirement Benefits Other than Pensions. A final order
should be received approximately nine to twelve months after the request
is filed.
Certain of Consumers' direct gas suppliers have contract prices tied to
the price Consumers pays Trunkline for its gas. The Trunkline contract
covers gas deliveries through October 1994 and is at a price reduced in
September 1993. Some of Consumers' direct gas suppliers have claimed that
the reduced Trunkline gas cost is not a proper reference price under their
contracts with Consumers and that their contracts are terminable after a
12-month period. Consumers is disputing these claims.
In 1992, the FERC issued Order 636, which makes a number of significant
changes to the structure of the services provided by interstate natural
gas pipelines to be implemented by the 1993-94 winter heating season.
Consumers is a significant purchaser of gas from an interstate pipeline
(Trunkline) and is a major transportation customer of a number of
pipelines. Management believes that Consumers will recover any transition
costs it may incur and such restructuring will not have a significant
impact on its financial position or results of operations.
In July 1993, Michigan Gas Storage submitted a notice of rate change with
the FERC to revise its operation and maintenance expenses for 1993 and
update plant costs to reflect the addition of approximately $27 million of
new plant additions in 1993 and began collecting the revised rates subject
to refund and a hearing in February 1994. Hearings or settlement
conferences will follow. For further information regarding gas utility
rates, see Note 4.
Gas Capital Expenditures
CMS Energy estimates capital expenditures, including new lease
commitments, related to its gas utility operations of $99 million for
1994, $88 million for 1995 and $81 million for 1996.
Gas Environmental Matters
Under the Environmental Response Act, Consumers expects that it will
ultimately incur costs at a number of sites, including some of the 23
sites that formerly housed manufactured gas plant facilities, even those
in which it has a partial or no current ownership interest. It is
expected that in most cases, parties other than Consumers with current or
former ownership interests may also be considered liable under the law and
may be required to share in the costs of any site investigations and
remedial actions. There is limited knowledge of manufactured gas plant
contamination at these sites at this time. However, Consumers is
continuing to monitor this issue.
In addition, at the request of the DNR, Consumers prepared plans for
remedial investigation/feasibility studies for three of these sites. Work
plans for remedial investigation/feasibility studies for four other sites
have also been prepared. The DNR has approved two of the three plans for
remedial investigation/feasibility studies submitted and is currently
reviewing the one remaining. Consumers currently estimates the total cost
of conducting the three studies submitted to the DNR to be less than $1
million.
The timing and extent of any further site investigation and remedial
actions will depend, among other things, on requests received from the DNR
and on future site usage by Consumers or other owners. Under the current
schedule, Consumers anticipates the first remedial
investigation/feasibility study would be completed in mid-1994. Consumers
believes the results of the remedial investigation/feasibility studies
will allow management to estimate a range of remedial cost estimates for
the sites under study, which may be substantial. In 1993, the MPSC
addressed the question of recovery of investigation and remedial costs for
another Michigan gas utility as part of that utility's gas rate case. In
that proceeding, the MPSC determined that prudent investigation and
remedial costs could be deferred and amortized over 10-year periods and
prudent unamortized costs can be included for recovery in the utility's
rate cases. CMS Energy and Consumers believe costs incurred for both
investigation and any required remedial actions would be recoverable from
gas utility customers under established regulatory policies and
accordingly are not likely to materially affect their financial positions
or results of operations.
Gas Outlook
In 1993, Consumers purchased approximately 85 percent of its required gas
supply under long-term contracts, and the balance on the spot market.
Trunkline supplied approximately 41 percent of the total requirement.
Consumers expects gas supply reliability to be ensured through long-term
supply contracts, with purchases in the short-term spot market when
economically beneficial. Management believes that Consumers' ability to
purchase gas during the off-season and store it in its extensive
underground storage facilities will continue to help provide customers
with low-cost, competitive gas rates.
Consumers anticipates growth in gas deliveries of approximately 0.6
percent per year over the next five years. Management believes that
environmental benefits, along with the federal requirements included in
the Energy Act, create an opportunity for growth in the natural gas
vehicle industry.
Oil and Gas Exploration and Production
Pretax Operating Income
1993 pretax operating income decreased $4 million from 1992, primarily
reflecting lower average market prices for oil and $10 million of
international write-offs, partially offset by higher gas and oil sales
volumes and higher average market prices for gas. 1992 pretax operating
income decreased $7 million from 1991, primarily due to lower average
market prices for oil, partially offset by increased oil and gas sales
volumes.
Capital Expenditures
During 1993, CMS Energy's oil and gas exploration and production capital
expenditures were $81 million. Most expenditures were made to develop
existing proven reserves -- oil reserves in Ecuador which will start
production in 1994 and Antrim Shale gas in northern Michigan.
CMS Energy currently plans to invest $307 million over the next three
years in its oil and gas exploration and production operations. These
anticipated capital expenditures primarily reflect continued development
of Ecuador oil and Antrim Shale gas and reserve acquisitions.
International focus will remain on Latin America and the Pacific Rim
region.
Independent Power Production
Pretax Operating Income
1993 pretax operating income increased $21 million, primarily reflecting
the addition of new electric generating capacity and improved equity
earnings and operating efficiencies. CMS Energy's ownership share of
sales and revenues increased 24 percent and 18 percent, respectively, over
the prior year.
Capital Expenditures
In 1993, capital expenditures were $110 million, including investments in
unconsolidated subsidiaries. These expenditures were primarily used to
obtain ownership interests in an additional 309 MW of owned operating
capacity or a 40 percent increase from December 31, 1992.
In April 1993, CMS Generation acquired a 50 percent interest in the
Lyonsdale cogeneration plant, a 19 MW power plant in upstate New York.
CMS Generation has invested $9 million in the project and additional
investments relating to this project are expected to be immaterial.
In May 1993, a consortium including CMS Generation purchased an 88 percent
share in the 650 MW San Nicolas power plant near Buenos Aires, Argentina.
As of December 31, 1993, CMS Generation's share of the consortium is 18.6
percent and it has provided notice to exercise its option to increase its
share to 21 percent. The plant sells power under long-term contracts to
two utilities and Argentina's electric grid system. CMS Generation has
invested $21 million in the partnership through December 31, 1993 and
plans to invest approximately $3 million in 1994 in exercising its option.
In June 1993, CMS Generation was involved in the formation of Scudder
Latin American Trust for Independent Power as a lead partner. The fund,
which has investment commitments of $25 million from each of the four lead
partners, will invest in electric generation and infrastructure resulting
from the development of new power generating capacity. CMS Generation has
contributed $.5 million through December 31, 1993 and estimates
contributions of up to $11 million in 1994.
In July 1993, an investment company including CMS Generation S. A.
acquired the rights to a 59 percent ownership interest in two
hydroelectric power plants on the Limay River in western Argentina. These
plants have a total generating capacity of 1,320 MW. The remaining
interest in the project is to be held 39 percent by the Argentine
provincial government and 2 percent by the plant employees.
CMS Generation S.A. has a 25 percent ownership interest in the investment
company. The investment company secured a 30-year concession under a
government privatization program and in August 1993, began operating these
power plants. CMS Generation S.A. entered into letter of credit
agreements to support the acquisition. As of December 31, 1993,
CMS Energy had approximately $41 million of guarantees relating to this
agreement which were reduced to less than $15 million in January 1994.
CMS Generation has invested $64 million in equity and loans and plans to
invest up to an additional $2 million in 1994.
CMS Generation has a 50 percent ownership interest and has invested,
through the Oxford/CMS Development Limited Partnership, $7 million in the
Exeter waste tire-fueled/electric generation facility near Sterling,
Connecticut. Based on a financial restructuring completed in 1993,
CMS Generation may be obligated to invest up to an additional $2 million.
The 26.5 MW Exeter facility has a capacity of processing 10 million waste
tires per year and sells its capacity and energy to Connecticut Light and
Power Company under a long-term agreement.
Effective November 1, 1993, CMS Generation acquired a 50 percent ownership
interest in an 18 MW wood waste-fueled electric generation facility
located near Chateaugay, New York for approximately $5 million and became
the operator March 1, 1994. The facility sells its entire electric output
to New York State Electric and Gas Corporation under a long-term power
purchase agreement. CMS Generation expects no additional investment
relating to this project.
CMS Energy currently plans to invest $281 million relating to its
independent power production operations over the next three years,
primarily in domestic and international subsidiaries and partnerships.
CMS Generation is involved with partnerships that have signed power
contracts to construct power plant facilities capable of producing a total
of 885 MW of operating capacity in Michigan, Tamil Nadu, India, and two
projects in Batangas, Philippines. CMS Generation will also pursue
acquisitions in Latin America, southern Asia and the Pacific Rim region.
Gas Transmission and Marketing
Pretax Operating Income
1993 pretax operating income increased $2 million over 1992, reflecting
earnings growth from existing and new gas transportation projects and
increased natural gas marketed. In 1993, 60 bcf was marketed compared to
45 bcf in 1992.
Capital Expenditures
During 1993, CMS Energy's non-utility gas companies made capital
expenditures of $14 million and formed two marketing partnerships which
will provide natural gas marketing services throughout the Appalachian
region of the United States and in Chicago and northern Illinois.
In November 1993, CMS Gas Transmission acquired an existing $4 million gas
gathering system in the Antrim Shale region of Michigan's Lower Peninsula,
which was placed into service in December 1993. CMS Gas Transmission
began an $11 million expansion of its carbon dioxide processing facility,
with completion expected in March 1994. In December 1993, they signed a
letter of intent to invest $18 million to acquire 50 percent ownership in
an existing 5 bcf high deliverability salt cavern storage facility on the
Gulf Coast of Texas.
CMS Energy currently plans to invest $123 million over the next three
years relating to its non-utility gas operations. These investments would
reflect the significant expansion of certain northern Michigan gas
pipeline and carbon dioxide removal plant facilities. It will continue to
pursue development of natural gas storage, gas gathering and pipeline
operations both domestically and internationally and work toward the
development of a Midwest "market center" for natural gas through strategic
alliances and asset acquisition and development.
Other
Other Income: The 1993 other income level reflects lower Midland-related
losses than experienced in 1992. The 1992 loss included a $343 million
charge related to the Settlement Order. The 1991 loss included $294
million related to an MPSC order received in 1991 that allowed Consumers
to recover only $760 million of remaining abandoned Midland investment.
Fixed Charges: Fixed charges for 1993 increased $22 million from 1992 and
primarily reflect debt outstanding with higher rates of interest in 1993.
The significant decrease in fixed charges in 1992 from 1991 primarily
reflects Consumers' program aimed at significantly reducing its debt and
the refinancing of debt at lower interest rates.
Public Utility Holding Company Act Exemption: CMS Energy is exempt from
registration under PUHCA. However, the Attorney General and the MMCG have
asked the SEC to revoke CMS Energy's exemption from registration under
PUHCA. On April 15, 1992, the MPSC filed a statement with the SEC
recommending that CMS Energy's current exemption be revoked and a new
exemption be issued conditioned upon certain reporting and operating
requirements. If CMS Energy were to lose its current exemption, it would
become more heavily regulated by the SEC; Consumers could ultimately be
forced to divest either its electric or gas utility business; and
CMS Energy would be restricted from conducting businesses that are not
functionally related to the conduct of its utility business as determined
by the SEC. CMS Energy is opposing this request and believes it will
maintain its current exemption from registration under PUHCA.
<PAGE>
<PAGE> 64
<TABLE>
Consolidated Statements of Income CMS Energy Corporation
<CAPTION>
In Millions,
Except Per Share Amounts
Years Ended December 31 1993 1992 1991
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operating Revenue Electric utility $2,077 $1,863 $1,849
Gas utility 1,160 1,126 1,061
Oil and gas exploration and production 77 70 50
Independent power production 21 (8) (9)
Gas transmission and marketing 142 89 42
Other 5 6 5
---------------------------------
Total operating revenue 3,482 3,146 2,998
- ---------------------------------------------------------------------------------------------------------------
Operating Expenses Operation
Fuel for electric generation 293 305 308
Purchased power - related parties 467 460 442
Purchased and interchange power 148 112 144
Cost of gas sold 801 749 693
Other 570 554 514
---------------------------------
Total operation 2,279 2,180 2,101
Maintenance 206 203 172
Depreciation, depletion and amortization 365 348 283
General taxes 193 184 181
---------------------------------
Total operating expenses 3,043 2,915 2.737
- ---------------------------------------------------------------------------------------------------------------
Pretax Operating Electric utility 286 154 220
Income (Loss) Gas utility 147 109 64
Oil and gas exploration and production 3 7 14
Independent power production 5 (16) (18)
Gas transmission and marketing 7 5 4
Other (9) (28) (23)
---------------------------------
Total pretax operating income 439 231 261
- ---------------------------------------------------------------------------------------------------------------
Income Taxes 92 22 25
- ---------------------------------------------------------------------------------------------------------------
Net Operating Income 347 209 236
- ---------------------------------------------------------------------------------------------------------------
Other Income Income from contractual arrangements (MCV Bonds) 32 34 119
(Deductions) Accretion income (Note 4) 14 15 24
Accretion expense (Note 3) (36) - -
Loss on MCV power purchases - settlement (Note 3) - (520) -
Write-down of abandoned Midland project costs (Note 4) - - (398)
Other income taxes, net 17 168 119
Other, net 15 9 (15)
---------------------------------
Total other income (deductions) 42 (294) (151)
- ---------------------------------------------------------------------------------------------------------------
Fixed Charges Interest on long-term debt 204 169 274
Other interest 24 35 68
Capitalized interest (5) (3) (5)
Preferred dividends 11 11 10
---------------------------------
Net fixed charges 234 212 347
- ---------------------------------------------------------------------------------------------------------------
Net Income (Loss) Before Extraordinary Item 155 (297) (262)
Extraordinary Item, Early Redemption of Debt, Net - - (14)
---------------------------------
Net Income (Loss) $ 155 $ (297) $ (276)
===============================================================================================================
Average Common Shares Outstanding 81 80 80
===============================================================================================================
Earnings (Loss) Per Average Common Share Before Extraordinary Item $ 1.90 $(3.72) $(3.26)
Loss Per Average Common Share From Extraordinary Item - - (.18)
---------------------------------
Earnings (Loss) Per Average Common Share $ 1.90 $(3.72) $(3.44)
===============================================================================================================
Dividends Declared Per Common Share $ .60 $ .48 $ .48
===============================================================================================================
<FN>
The accompanying notes are an integral part of these statements.
/TABLE
<PAGE>
<PAGE> 65
<TABLE>
Consolidated Statements of Cash Flows CMS Energy Corporation
<CAPTION>
In Millions
Years Ended December 31 1993 1992 1991
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash Flows From Net income (loss) $ 155 $(297) $(276)
Operating Activities Adjustments to reconcile net income (loss) to
net cash provided by operating activities
Depreciation, depletion and lease amortization 341 338 311
Nuclear decommissioning 54 50 15
Debt discount amortization 36 12 3
Deferred income taxes 66 (177) (150)
Deferred investment tax credit (10) (8) 36
Accretion expense (Note 3) 36 - -
Accretion income - abandoned Midland
project (Note 4) (14) (15) (24)
MCV power purchases - settlement (Note 3) (84) - -
Loss on MCV power purchases - settlement (Note 3) - 520 -
Loss on equity investments and loans to affiliates - 6 56
Write-down of abandoned Midland project costs - - 398
Changes in other assets and liabilities (Note 14) (87) 37 160
Other (9) 2 30
---------------------------
Net cash provided by operating activities 484 468 559
- ----------------------------------------------------------------------------------------------------------------
Cash Flows From Construction expenditures (excludes assets placed under
Investing Activities capital leases of $58 in 1993, $69 in 1992 and
$27 in 1991)(Note 14) (548) (487) (353)
Investments in partnerships
and unconsolidated subsidiaries (108) (12) (33)
Investments in nuclear decommissioning trust funds (54) (50) (15)
Deferred demand-side management costs (52) (26) -
Cost to retire property, net (32) (14) (18)
Sale of subsidiary (Note 2) (14) - -
Other (4) (1) (3)
Reduction of investment in MCV Bonds and
MCV Partnership (Note 3) 322 10 877
Proceeds from sale of property 1 12 5
Proceeds from Bechtel settlement - 46 -
---------------------------
Net cash provided by (used in)
investing activities (489) (522) 460
- ----------------------------------------------------------------------------------------------------------------
Cash Flows From Proceeds from bank loans, notes and bonds (Note 7) 676 607 207
Financing Activities Issuance of common stock 132 - -
Increase (decrease) in notes payable, net 44 (493) 371
Retirement of bonds (Note 7) (645) (12) (606)
Repayment of bank loans (192) (1) (805)
Payment of common stock dividends (49) (38) (38)
Payment of capital lease obligations (26) (36) (41)
Retirement of common and preferred stock (3) (1) (35)
---------------------------
Net cash provided by (used in)
financing activities (63) 26 (947)
- ----------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Cash and Temporary Cash Investments (68) (28) 72
Cash and temporary cash investments
Beginning of year 123 151 79
---------------------------
End of year $ 55 $ 123 $ 151
================================================================================================================
<FN>
The accompanying notes are an integral part of these statements.
</TABLE>
<PAGE>
<PAGE> 66
<TABLE>
Consolidated Balance Sheets CMS Energy Corporation
<CAPTION>
ASSETS In Millions
December 31 1993 1992
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Plant and Property Electric $5,347 $5,076
(At Cost) Gas 1,862 1,749
Oil and gas properties (full-cost method) 845 768
Other 294 256
----------------
8,348 7,849
Less accumulated depreciation, depletion and amortization (Note 2) 4,022 3,775
----------------
4,326 4,074
Construction work-in-progress 257 252
----------------
4,583 4,326
- -----------------------------------------------------------------------------------------------------------
Investments First Midland Limited Partnership (Notes 3 and 16) 213 208
Independent power production 115 36
Midland Cogeneration Venture Limited Partnership (Notes 3 and 16) 67 68
Other 26 26
----------------
421 338
- -----------------------------------------------------------------------------------------------------------
Current Assets Cash and temporary cash investments at cost, which
approximates market (Note 3) 55 123
Accounts receivable and accrued revenues, less allowances
of $4 in 1993 and $5 in 1992 (Note 6) 149 183
Inventories at average cost
Gas in underground storage 228 204
Materials and supplies 74 70
Generating plant fuel stock 41 37
Deferred income taxes (Note 5) 17 -
Investment in MCV Bonds (Note 3) - 322
Prepayments and other 219 230
----------------
783 1,169
- -----------------------------------------------------------------------------------------------------------
Non-current Assets Postretirement benefits (Note 10) 491 466
Nuclear decommissioning trust funds (Note 2) 165 111
Abandoned Midland project (Note 4) 162 175
Trunkline settlement (Note 4) 86 116
Other 273 147
----------------
1,177 1,015
----------------
Total Assets $6,964 $6,848
===========================================================================================================
</TABLE>
<PAGE>
<PAGE> 67
<TABLE>
CMS Energy Corporation
<CAPTION>
STOCKHOLDERS' INVESTMENT AND LIABILITIES In Millions
December 31 1993 1992
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Capitalization Common stockholders' equity $ 966 $ 727
(Note 7) Preferred stock of subsidiary 163 163
Long-term debt 2,405 2,725
Non-current portion of capital leases 115 98
----------------
3,649 3,713
- -----------------------------------------------------------------------------------------------------------
Current Liabilities Current portion of long-term debt and capital leases 368 132
Notes payable 259 215
Accounts payable 171 201
Accounts payable - related parties 46 47
Accrued taxes 233 258
MCV power purchases - settlement (Note 3) 82 81
Accrued interest 40 50
Accrued refunds 28 77
Deferred income taxes (Note 5) - 21
Other 189 188
----------------
1,416 1,270
- -----------------------------------------------------------------------------------------------------------
Non-current Postretirement benefits (Note 10) 540 503
Liabilities Deferred income taxes (Note 5) 509 349
MCV power purchases - settlement (Note 3) 391 439
Deferred investment tax credits 191 201
Trunkline settlement (Note 4) 86 116
Regulatory liabilities for income taxes, net (Note 5) 6 62
Other 176 195
----------------
1,899 1,865
----------------
Commitments and Contingencies (Notes 2, 3, 4, 11 and 12)
Total Stockholders' Investment and Liabilities $6,964 $6,848
===========================================================================================================
<FN>
The accompanying notes are an integral part of these statements.
</TABLE>
<PAGE>
<PAGE> 68
<TABLE>
Consolidated Statements of Long-Term Debt CMS Energy Corporation
In Millions
<CAPTION>
December 31 1993 1992
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
First Mortgage Bonds Series (%) Due
13-7/8 1993 $ - $ 4
5-7/8 1996 36 36
6 1997 50 50
8-3/4 1997 5 11
8-3/4 1998 248 250
6-5/8 1998 45 45
6-7/8 1998 43 43
9-1/8 1998 5 8
7-5/8 1999 48 48
8-1/4 1999 - 55
8-7/8 1999 200 200
8-5/8 2000 - 50
7-1/2 2001 57 57
8-1/8 2001 - 57
7-1/2 2002 62 62
7-1/2 2002 43 43
6-3/8 2003 300 -
8-5/8 2003 - 75
9 2006 - 60
8-7/8 2007 - 85
8-5/8 2007 - 100
9 2008 - 68
7-3/8 2023 300 -
--------------------
1,442 1,407
Long-Term Bank Debt 469 500
Senior Deferred Coupon Notes 466 466
Pollution Control Revenue Bonds 131 133
Bank Loans 115 244
Nuclear Fuel Disposal 90 88
Senior Serial Notes 45 50
4-5/8% Debentures 26 26
Tax Exempt Bonds 22 -
Other 13 13
--------------------
Principal Amount Outstanding 2,819 2,927
Current Amounts (333) (93)
Net Unamortized Discount (81) (109)
--------------------
Total Long-Term Debt $2,405 $2,725
===============================================================================================================
</TABLE>
<TABLE>
The table below shows maturities and improvement fund obligations for long-term debt:
LONG-TERM DEBT MATURITIES AND OBLIGATIONS In Millions
<CAPTION>
First Mortgage Improvement Long-Term Senior Deferred
Bonds Fund Bank Debt Coupon Notes Other Total
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1994 $ 91 $9 $188 $ - $ 45 $333
1995 - 8 188 - 30 226
1996 36 8 93 - 116 253
1997 50 8 - 172 37 267
1998 336 7 - - 32 375
========================================================================================================
<FN>
The accompanying notes are an integral part of these statements.
</TABLE>
<PAGE>
<PAGE> 69
<TABLE>
Consolidated Statements of Preferred Stock CMS Energy Corporation
<CAPTION>
Optional
Redemption Number of Shares In Millions
December 31 Series Price 1993 1992 1993 1992
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Consumers' Preferred Stock
Cumulative, $100 par value,
authorized 7,500,000 shares,
with no mandatory redemption $4.16 $103.25 68,451 68,451 $ 7 $ 7
4.50 110.00 373,148 373,148 37 37
7.45 101.00 379,549 379,549 38 38
7.68 101.00 207,565 207,565 21 21
7.72 101.00 289,642 289,642 29 29
7.76 102.21 308,072 308,072 31 31
--------------
Total Preferred Stock $163 $163
=================================================================================================================
<FN>
The accompanying notes are an integral part of these statements.
</TABLE>
<PAGE>
<PAGE> 70
<TABLE>
Consolidated Statements of Common Stockholders' Equity CMS Energy Corporation
<CAPTION>
In Millions,
Except Number of Shares
Other Retained
Number Common Paid-in Earnings
of Shares Stock Capital (Deficit) Total
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance at January 1, 1991 80,745,032 $1 $1,565 $(164) $1,402
Net loss (276) (276)
Common stock dividends declared (38) (38)
Net gain on retired stock 1 1
Reissuance of affiliate's
preferred stock (2) (2)
Common stock reacquired (1,067,697) (30) (30)
Common stock reissued 147,050 3 3
- ----------------------------------------------------------------------------------------------------------------
Balance at December 31, 1991 79,824,385 1 1,537 (478) 1,060
Net loss (297) (297)
Common stock dividends declared (38) (38)
Common stock reacquired (9,101) (1) (1)
Common stock reissued 150,438 3 3
- ----------------------------------------------------------------------------------------------------------------
Balance at December 31, 1992 79,965,722 1 1,539 (813) 727
Net income 155 155
Common stock dividends declared (49) (49)
Common stock reacquired (97,442) (3) (3)
Common stock issued 5,135,726 132 132
Common stock reissued 192,789 4 4
- ----------------------------------------------------------------------------------------------------------------
Balance at December 31, 1993 85,196,795 $1 $1,672 $(707) $ 966
================================================================================================================
<FN>
The accompanying notes are an integral part of these statements.
</TABLE>
<PAGE>
<PAGE> 71
CMS Energy Corporation
Notes to Consolidated Financial Statements
1: Corporate Structure
CMS Energy is the parent holding company of Consumers and Enterprises.
Consumers, a combination electric and gas utility company serving most of
the Lower Peninsula of Michigan, is the principal subsidiary of
CMS Energy. Consumers' customer base includes a mix of residential,
commercial and diversified industrial customers, the largest of which is
the automotive industry. Enterprises is engaged in several non-utility
energy-related businesses including: 1) oil and gas exploration and
production, 2) development and operation of independent power production
facilities, 3) gas marketing services to utility, commercial and
industrial customers, and 4) transmission and storage of natural gas.
2: Summary of Significant Accounting Policies and Other Matters
Basis of Presentation
The consolidated financial statements include CMS Energy, Consumers and
Enterprises and their wholly owned subsidiaries. CMS Energy eliminates all
material transactions between its consolidated companies. CMS Energy uses
the equity method of accounting for investments in its companies and
partnerships where it has more than a 20 percent but less than a majority
ownership interest and includes these results in operating revenue. For
the years ended December 31, 1993, 1992 and 1991 equity earnings (losses)
were $17 million, $(6) million, and $(8) million, respectively.
Gas Inventory
Consumers uses the weighted average cost method for valuing working gas
inventory. Cushion gas, which is gas stored to maintain reservoir
pressure for recovery of working gas, is recorded in the appropriate gas
utility plant account. Consumers stores gas inventory in its underground
storage facilities.
Maintenance, Depreciation and Depletion
Property repairs and minor property replacements are charged to
maintenance expense. Depreciable property retired or sold plus cost of
removal (net of salvage credits) is charged to accumulated depreciation.
Consumers bases depreciation provisions for utility plant on straight-line
and units-of-production rates approved by the MPSC. In May 1991, the MPSC
approved an increase of approximately $15 million annually in Consumers'
electric and common utility plant depreciation rates. The composite
depreciation rate for electric utility property was 3.4 percent for 1993
and 1992 and 3.3 percent for 1991. The composite rate for gas utility
plant was 4.4 percent for 1993 and 4.3 percent for 1992 and 1991.
NOMECO follows the full-cost method of accounting and, accordingly,
capitalizes its exploration and development costs, including the cost of
non-productive drilling and surrendered acreage, on a country-by-country
basis. The capitalized costs in each cost center are being amortized on an
overall units-of-production method based on total estimated proven oil and
gas reserves.
The composite rates for Consumers' common property, NOMECO's other
property, and other property of CMS Energy and its subsidiaries were 4.5
percent in 1993, 4.7 percent in 1992 and 4.1 percent in 1991.
New Accounting Standards
In November 1992, the FASB issued SFAS 112, Employers' Accounting for
Postemployment Benefits, which CMS Energy adopted January 1, 1994.
CMS Energy pays for several postemployment benefits, the most significant
being workers compensation. Because CMS Energy's postemployment benefit
plans do not vest or accumulate, the standard did not materially impact
CMS Energy's financial position or results of operations. For new
accounting standards related to financial instruments, see Note 8.
Nuclear Fuel, Decommissioning and Other Nuclear Matters
Consumers amortizes nuclear fuel cost to fuel expense based on the
quantity of heat produced for electric generation. Interest on leased
nuclear fuel is expensed as incurred. Under federal law, the DOE is
responsible for permanent disposal of spent nuclear fuel at costs to be
paid by affected utilities under various payment options. However, in a
statement released February 17, 1994, the DOE asserted that it does not
have a legal obligation to accept spent nuclear fuel without an
operational repository. The DOE is exploring options to offset the costs
incurred by nuclear utilities in continuing to store spent nuclear fuel on
site. For fuel burned after April 6, 1983, Consumers charges disposal
costs to nuclear fuel expense, recovers it through electric rates and
remits it to the DOE quarterly. Consumers has elected to defer payment
for disposal of spent nuclear fuel burned before April 7, 1983 until the
spent fuel is delivered to the DOE. As of December 31, 1993, Consumers
has recorded a liability to the DOE of $90 million, including interest, to
dispose of spent nuclear fuel burned before April 7, 1983. Consumers has
been recovering through electric rates the amount of this liability,
excluding a portion of interest. Consumers' liability to the DOE becomes
due when the DOE takes possession of Consumers' spent nuclear fuel, which
was originally scheduled to occur in 1998.
In April 1993, the NRC approved the design of the dry spent fuel storage
casks now being used by Consumers at Palisades. In May 1993, the Attorney
General and certain other parties commenced litigation to block
Consumers' use of the storage casks, alleging that the NRC had failed to
comply adequately with the National Environmental Policy Act. As of mid-
February 1994, the courts have declined to prevent such use and have
refused to issue temporary restraining orders or stays. Several appeals
relating to this matter are now pending at the U.S. Sixth Circuit Court of
Appeals. Consumers loaded two dry storage casks with spent nuclear fuel
in 1993 and expects to load additional casks in 1994 prior to Palisades'
1995 refueling. If Consumers is unable to continue to use the casks as
planned, significant costs, including replacement power costs during any
resulting plant shutdown, could be incurred.
Consumers currently estimates decommissioning costs (decontamination and
dismantlement) of $208 million and $399 million, in 1993 dollars, for the
Big Rock Point and Palisades nuclear plants, respectively. At December
31, 1993, Consumers had recorded $171 million of decommissioning costs and
classified the obligation as accumulated depreciation. In January 1987,
Consumers began collecting estimated costs to decommission its two nuclear
plants through a monthly surcharge to electric customers which currently
totals $45 million annually. Consumers expects to file updated
decommissioning estimates with the MPSC on or before March 31, 1995.
Amounts collected from electric retail customers are deposited in trust.
Trust earnings are recorded as an investment with a corresponding credit
included in accumulated depreciation. The total amount of the trust will
be available for decommissioning Big Rock Point and Palisades at the end
of their respective license periods in 2000 and 2007. Consumers believes
the amounts being collected are adequate to meet its currently estimated
decommissioning costs and current NRC requirements.
In November 1993, Palisades returned to service following a planned
refueling and maintenance outage that had been extended due to several
unanticipated repairs. The results of an NRC review of Consumers'
performance at Palisades published shortly thereafter showed a decline in
performance ratings for the plant. Management believes that an increased
emphasis on internal assessments will improve performance at Palisades.
In order to provide NRC senior management with a more in-depth assessment
of plant performance, the NRC has initiated a diagnostic evaluation team
inspection at Palisades. The inspection will be a broad-based evaluation
of all aspects of nuclear plant operation and management. The evaluation
is expected to commence in March 1994, with results of the evaluation
expected to be available in May 1994. The outcome of this evaluation
cannot be predicted. Similar reviews conducted at nuclear plants of other
utilities in recent years have in some cases resulted in increased
regulatory oversight or required actions to improve plant operations,
maintenance or condition.
Plateau Resources Ltd.
In August 1993, Consumers sold its ownership interest in Plateau to U. S.
Energy Corp. As a result of the sale, approximately $14 million of
Plateau's cash and cash equivalents, other assets and liabilities,
including certain future decommissioning, environmental and other
contingent liabilities were transferred to U. S. Energy Corp. In view of
prior write-offs, this transaction did not result in any material gains or
additional losses.
Reclassifications
CMS Energy and the MCV Partnership (see Note 16) have reclassified certain
prior year amounts for comparative purposes. These reclassifications did
not affect the net losses for the years presented.
Related-Party Transactions
In 1993, 1992, and 1991, Consumers purchased $52 million, $36 million and
$26 million, respectively, of electric generating capacity and energy from
affiliates of Enterprises. Affiliates of CMS Energy sold, stored and
transported natural gas and provided other services to the MCV Partnership
totaling approximately $27 million, $21 million and $19 million for 1993,
1992 and 1991, respectively. For additional discussion of related-party
transactions with the MCV Partnership and the FMLP, see Notes 3 and 16.
Other related-party transactions are immaterial.
Revenue and Fuel Costs
Consumers accrues revenue for electricity and gas used by its customers
but not billed at the end of an accounting period. Consumers also accrues
or reduces revenue for any underrecovery or overrecovery of electric power
supply costs and natural gas costs by establishing a corresponding asset
or liability until Consumers bills these unrecovered costs or refunds the
excess recoveries to customers after reconciliation hearings conducted
before the MPSC.
Utility Regulation
Consumers accounts for the effects of regulation under SFAS 71, Accounting
for the Effects of Certain Types of Regulation. As a result, the actions
of regulators affect when revenues, expenses, assets and liabilities are
recognized.
Other
For significant accounting policies regarding cash equivalents, see Note
14; for income taxes, see Note 5; and for pensions and other
postretirement benefits, see Note 10.
3: The Midland Cogeneration Venture
The MCV Partnership, which leases and operates the MCV Facility,
contracted to supply electricity and steam to The Dow Chemical Company and
to sell electricity to Consumers for a 35-year period beginning in March
1990. At December 31, 1993, Consumers, through its subsidiaries, held the
following assets related to the MCV: 1) CMS Midland owned a 49 percent
general partnership interest in the MCV Partnership; and 2) CMS Holdings
held through the FMLP a 35 percent lessor interest in the MCV Facility.
In late 1993, Consumers sold its remaining $309 million investment in the
MCV Bonds.
Power Purchases from the MCV Partnership
Consumers is obligated to purchase the following amounts of contract
capacity from the MCV Partnership under the PPA:
1995 and
Year 1991 1992 1993 1994 thereafter
- ---- ----- ----- ----- ----- ----------
MW 806 915 1,023 1,132 1,240
During 1992 and 1991, the MPSC only allowed Consumers to recover costs of
power purchased from the MCV Partnership based on delivered energy at
rates less than Consumers paid for 840 MW in 1992 and 806 MW in 1991. As
a result, Consumers recorded after-tax losses of $86 million in 1992 and
$124 million in 1991.
On March 31, 1993, the MPSC approved, with modifications, the Revised
Settlement Proposal which had been co-sponsored by Consumers, the MPSC
staff and 10 small power and cogeneration developers. These parties
accepted the Settlement Order and the MCV Partnership confirmed that it
did not object to its terms. ABATE and the Attorney General have filed
claims of appeal of the Settlement Order with the Court of Appeals.
The Settlement Order determined the cost of power purchased from the MCV
Partnership that Consumers can recover from its electric retail customers
and will significantly reduce the amount of future underrecoveries for
these power costs. Effective January 1, 1993, the Settlement Order
allowed Consumers to recover substantially all of the payments for its on-
going purchase of 915 MW of contract capacity from the MCV Partnership.
Capacity and energy purchases from the MCV Partnership above the 915 MW
level can be competitively bid into Consumers' next solicitation for power
or, if necessary, utilized for current power needs with a prudency review
and a pricing recovery determination in annual PSCR cases. In either
instance, the MPSC would determine the levels of recovery from customers
for the power purchased. The Settlement Order also provides Consumers the
right to remarket all of the remaining capacity to third parties.
The PPA requires Consumers to pay a minimum levelized average capacity
charge of 3.77 cents per kWh, a fixed energy charge and a variable energy
charge based primarily on Consumers' average cost of coal consumed. The
Settlement Order provided Consumers two options for the recovery that
could be used for capacity charges paid to the MCV Partnership. Under the
option selected, Consumers is scheduling deliveries of energy from the MCV
Partnership whenever it has energy available up to hourly availability
limits, or "caps," for the 915 MW of capacity authorized for recovery in
the Settlement Order. Consumers can recover an average 3.62 cents per kWh
capacity charge and the prescribed energy charges associated with the
scheduled deliveries within the caps, whether or not those deliveries are
scheduled on an economic basis. Through December 31, 1997, there is no
cap applied during on-peak hours to Consumers' recovery for the purchase
of capacity made available within the 915 MW authorized. Recovery for
purchases during off-peak hours is capped at 80 percent in 1993, 82
percent in 1994 and 1995, 84 percent in 1996 and 1997, increasing to 88.7
percent in 1998 and thereafter at which time the 88.7 percent cap is
applicable during all hours. For all economic energy deliveries above the
caps to 915 MW, the option also allows Consumers to recover 1/2 cent per
kWh capacity payment in addition to the corresponding energy charge.
In December 1992, Consumers recognized an after-tax loss of $343 million
for the present value of estimated future underrecoveries of power costs
under the PPA as a result of the Settlement Order. This loss included
management's best estimates regarding the future availability of the MCV
Facility, and the effect of the future wholesale power market on the
amount, timing and price at which various increments of the capacity above
the MPSC-authorized level could be resold. Except for adjustments to the
above loss to reflect the after-tax time value of money through accretion
expense, no additional losses are expected unless actual future experience
materially differs from management's estimates. Because the calculation
of the 1992 loss depended in part upon estimates of future unregulated
sales of energy to third parties, a more conservative or risk-free
investment rate of 7 percent was used to calculate $188 million of the
total $343 million after-tax loss. The remaining portion of the loss was
calculated using an 8.5 percent discount rate reflecting Consumers'
incremental borrowing rate as required by SFAS 90, Regulated Enterprises-
Accounting for Abandonments and Disallowances of Plant Costs. The after-
tax expense for the time value of money for the loss is estimated to be
approximately $24 million in 1994, and various lower levels thereafter,
including $22 million in 1995 and $20 million in 1996. Although the
settlement losses were recorded in 1992, the after-tax cash
underrecoveries, including fixed energy charges, associated with the
Settlement Order were $59 million in 1993. Consumers believes there is
and will be a market for the resale of capacity purchases from the MCV
Partnership above the MPSC-authorized level. However, if Consumers is
unable to sell any capacity above the current MPSC-authorized level,
future additional after-tax losses and after-tax cash underrecoveries
could be incurred. Consumers' estimates of its future after-tax cash
underrecoveries and possible additional losses for the next five years if
none of the additional capacity is sold are as follows:
After-tax, In Millions
1994 1995 1996 1997 1998
---- ---- ---- ---- ----
Expected cash underrecoveries $56 $65 $62 $61 $ 8
Possible additional under-
recoveries and losses (a) $14 $20 $20 $22 $72
(a) If unable to sell any capacity above the MPSC's authorized level.
The undiscounted, after-tax amount of the $343 million loss was $789
million. At December 31, 1993, the after-tax present value of the
Settlement Order liability had been reduced to $307 million, which
reflects after-tax cash underrecoveries related to capacity totaling $(54)
million, after-tax accretion expense of $23 million and a $(5) million
adjustment due to the 1993 corporate tax rate change (see Note 5).
The PPA, while requiring payment of a fixed energy charge, contains a
"regulatory out" provision which permits Consumers to reduce the fixed
energy charges payable to the MCV Partnership throughout the entire
contract term if Consumers is not able to recover these amounts from its
customers. In connection with the MPSC's approval of the Revised
Settlement Proposal, Consumers and the MCV Partnership have commenced
arbitration proceedings under the PPA to determine whether Consumers is
entitled to exercise its regulatory out regarding fixed energy charges on
the portion of available MCV capacity above the current MPSC-authorized
levels. An arbitrator acceptable to both parties has been selected. If
the arbitrator determines that Consumers cannot exercise its regulatory
out, Consumers would be required to make these fixed energy payments to
the MCV Partnership even though Consumers may not be recovering these
costs. The arbitration proceedings will also determine who is entitled to
the fixed energy amounts for which Consumers did not receive full cost
recovery during the years prior to settlement. Although Consumers
believes its position on arbitration is sound and intends to aggressively
pursue its right to exercise the regulatory out, management cannot predict
the outcome of the arbitration proceedings or any possible settlement of
the matter. Accordingly, losses were recorded prior to 1993 for all fixed
energy amounts at issue in the arbitration. As of December 31, 1993,
approximately $20 million has been escrowed by Consumers and is included
in Consumers' temporary cash investments. In December 1993, Consumers
made an irrevocable offer to pay through September 15, 2007, fixed energy
charges to the MCV Partnership on all kWh delivered by the MCV Partnership
to Consumers from the contract capacity in excess of 915 MW, which
represents a portion of the fixed energy charges in dispute. Consumers
made the offer to facilitate the sale of the remaining MCV Bonds in 1993.
The lessors of the MCV Facility have filed a lawsuit in federal district
court against CMS Energy, Consumers and CMS Holdings. It alleges breach
of contract, breach of fiduciary duty and negligent or willful
misrepresentation relating to the MCV Partnership's failure to object to
the Settlement Order in light of Consumers' interpretation of the
Settlement Order, which is the subject of an arbitration between the MCV
Partnership and Consumers. The action alleges damages in excess of $1
billion and seeks injunctive relief relative to Consumers' payments of the
fixed energy charge. CMS Energy and Consumers believe that at all times
they and CMS Holdings have conducted themselves properly and that the
action is without merit. They also believe that a significant portion of
the alleged damages represent fixed energy charges in dispute in the
arbitration. CMS Energy and Consumers are unable to predict the outcome
of this action.
PSCR Matters: Consistent with the terms of the Settlement Order,
Consumers has withdrawn its appeals of various MPSC orders issued in
connection with the 1992, 1991 and 1990 PSCR cases. Consumers also agreed
not to appeal any MCV-related issues raised in future orders for these
plan cases and related reconciliations to the extent those issues are
resolved by the Settlement Order. Consumers made refunds, including
interest, of $69 million in 1993 and $29 million in 1992 to customers for
overrecoveries in connection with the 1991 and 1990 PSCR reconciliation
cases, respectively. These amounts were included in losses recorded prior
to 1993. In 1992, Consumers recovered MCV power purchase costs consistent
with the MPSC's 1992 plan case order, and does not anticipate that any
MCV-related refunds will be required.
4: Rate Matters
Electric Rate Case
Consumers filed a request with the MPSC in May 1993 to increase its
electric rates. Subsequently, as a result of changed estimates, Consumers
revised its requested electric rate increase to $133 million annually
based on a 1994 test year. Consumers also requested an additional annual
electric rate increase of $38 million based on a 1995 test year.
Consumers' request included increased future expenditures primarily
related to capital additions, DSM programs, operation and maintenance,
higher depreciation and postretirement benefits computed under SFAS 106,
Employers' Accounting for Postretirement Benefits Other than Pensions.
The filing also proposed experimental incentive provisions that would
either reward or penalize Consumers, based on its operating performance.
In addition, Consumers would share any returns above its MPSC-authorized
level with customers in exchange for the ability to earn not lower than
one percentage point below its authorized level.
In March 1994, an ALJ issued a proposal for decision that recommended
Consumers' 1994 final annual rate increase total approximately $83
million, and that the incremental requested 1995 increase not be granted
at this time. The ALJ's recommendation included a lower return on
electric common equity, reflected reduced anticipated debt costs due to
the projected availability of more favorable interest rates and proposed a
lower equity ratio for Consumers' projected capitalization structure. The
ALJ did, however, generally support Consumers' rate design proposal to
significantly reduce the level of subsidization of residential customers
by commercial and industrial customers and generally supported the
performance incentive but not the shared return mechanism discussed above.
Abandoned Midland Project: In July 1984, Consumers abandoned construction
of its unfinished nuclear power plant located in Midland, Michigan, and
subsequently took a series of write-downs. In May 1991, Consumers began
collecting $35 million pretax annually for the next 10 years and is
amortizing the assets against current income over the recovery period
using an interest method. Amortization for 1993, 1992 and 1991 was $28
million, $28 million and $18 million, respectively.
Consumers was not permitted to earn a return on the portion of the
abandoned Midland investment for which the MPSC was allowing recovery.
Therefore, under SFAS 90, the recorded losses described above included
amounts that reduced the recoverable asset to the present value of future
recoveries. During the remaining recovery period, part of the prior losses
will be reversed to adjust the unrecovered asset to its present value and
is reflected as accretion income. An after-tax total of approximately $35
million of the prior losses remains to be included in accretion income
through April 2001. Several parties, including the Attorney General, have
filed claims of appeal with the Court of Appeals regarding MPSC orders
issued in May and July 1991 that specified the recovery of abandoned
investment.
Electric DSM: As a result of settlement discussions regarding DSM and an
MPSC order in July 1991, Consumers agreed to spend $65 million over two
years on DSM programs. Based on the MPSC's determination of Consumers'
effectiveness in implementing these programs, Consumers' future rate of
return on common equity may be adjusted either upward by up to 1 percent
or downward by up to 2 percent. This adjustment, if implemented, would be
applied to Consumers' retail electric tariff rates and be in effect for
one year following reconciliation hearings with the MPSC that are expected
to be initiated in the first quarter of 1994. The estimated revenue
effects of the potential adjustment range from an $11 million increase to
a $22 million decrease. Consumers believes it will receive an increase on
its return on common equity.
On October 1, 1993, Consumers completed the customer participation portion
of these programs and as part of its current electric rate case has
requested MPSC authorization to continue certain programs in 1994.
Consumers has also requested recovery of DSM expenditures which exceeded
the $65 million level. Consumers is deferring program costs and
amortizing the costs over the period these costs are being recovered from
its customers in accordance with an accounting order issued by the MPSC in
September 1992. The unamortized balance of deferred costs at December 31,
1993 and 1992 was $71 million and $25 million, respectively.
PSCR Issues
Consumers began a planned refueling and maintenance outage at Palisades in
June 1993. Following several required, unanticipated repairs that
extended the outage, the plant returned to service in early November.
Recovery of replacement power costs incurred by Consumers during the
outage will be reviewed by the MPSC during the 1993 PSCR reconciliation of
actual costs and revenues to determine the prudency of actions taken
during the outage. Any finding of delay due to imprudence could result in
disallowances of a portion of replacement power costs. Net replacement
power costs were approximately $180,000 per day above the cost of fuel
incurred when the plant is operating.
The Energy Act imposes an obligation on the utility industry, including
Consumers, to decommission DOE uranium enrichment facilities. Consumers
currently estimates its payments for decommissioning those facilities to
be $2.4 million per year for 15 years beginning in 1992, escalating based
on an inflation factor. Consumers believes these costs are recoverable
from its customers under traditional regulatory policies. As of December
31, 1993, Consumers' remaining estimated liability was approximately $34
million. Consumers has a regulatory asset of $34 million for the expected
recovery of this amount in electric rates.
GCR Issues
In connection with its 1991 GCR reconciliation case, Consumers refunded
$36 million, including interest, to its firm sales and transportation rate
customers in April 1992. Consumers accrued the full amount for this refund
in 1991.
The MPSC issued an order during 1993 that approved an interim settlement
agreement for the 12 months ended March 31, 1993. As a result of the
settlement, Consumers refunded in August 1993, to its GCR and
transportation customers, approximately $22 million, including interest.
Consumers previously accrued amounts sufficient for this refund.
The MPSC, in a February 1993 order, provided that the price payable to
certain intrastate gas producers by Consumers be reduced prospectively.
As a result, Consumers was not allowed to recover approximately $13
million of costs incurred prior to February 8, 1993. In 1991, Consumers
accrued a loss sufficient for this issue. Future disallowances are not
anticipated, unless the remaining appeals filed by the intrastate
producers are successful.
In 1992, the FERC approved a settlement involving Consumers, Trunkline and
certain other parties, which resolved numerous claims and proceedings
concerning Trunkline liquified natural gas costs. The settlement
represents significant gas cost savings for Consumers and its customers in
future years. As part of the settlement, Consumers will not incur any
transition costs from Trunkline as a result of FERC Order 636. In
November 1992, Consumers had recorded a liability and regulatory asset for
the principal amount of payments to Trunkline over a five-year period and
a regulatory asset. On May 11, 1993, the MPSC approved a separate
settlement agreement that provides Consumers with full recovery of these
costs over a five-year period. At December 31, 1993, Consumers' remaining
liability and regulatory asset was $116 million.
Other
Certain of Consumers' direct gas suppliers have contract prices tied to
the price Consumers pays Trunkline for its gas. On September 1, 1993,
Consumers commenced gas purchases from Trunkline under a continuation of
prior sales agreements. The current contract covers gas deliveries
through October 1994 and is at a reduced price compared to prior gas
sales. Some of Consumers' direct gas suppliers have claimed that the
reduced Trunkline gas cost is not a proper reference price under their
contracts with Consumers and that their contracts are terminable after a
12-month period. Consumers is disputing these claims. Additionally,
three of these direct gas suppliers of Consumers have made filings with
the FERC in Trunkline's Order 636 restructuring case seeking to preclude
Trunkline's ability to make the sales to Consumers which commenced on
September 1, 1993. Consumers and Trunkline vigorously opposed these
filings and in December 1993, the FERC issued an order which, among other
things, allowed Trunkline to continue sales of gas to Consumers under
tariffs on file with the FERC.
Estimated losses for certain contingencies discussed in this note have
been accrued. Resolution of these contingencies is not expected to have a
material impact on the financial statements.
5: Income Taxes
CMS Energy and its subsidiaries (including Consumers) file a consolidated
federal income tax return. Income taxes are generally allocated to each
subsidiary based on each subsidiary's separate taxable income. In 1992,
CMS Energy implemented SFAS 109, Accounting for Income Taxes. Deferred
tax assets and liabilities are classified as current or noncurrent based
on the classification of the related asset or liability, for all temporary
differences. Consumers began practicing full deferred tax accounting for
temporary differences arising after January 1, 1993 as authorized by a
generic MPSC order. The generic order reduces the amount of regulatory
assets and liabilities that otherwise could have arisen in future periods
by allowing Consumers to reflect the income statement effect in the period
temporary differences arise.
CMS Energy uses ITC to reduce current income taxes payable and defers and
amortizes ITC over the life of the related property. The AMT requires
taxpayers to perform a second separate federal tax calculation based on a
flat rate applied to a broader tax base. AMT is the amount by which this
"broader-based" tax exceeds regular tax. Any AMT paid generally becomes a
tax credit that can be carried forward indefinitely to reduce regular tax
liabilities in future periods when regular taxes paid exceed the tax
calculated for AMT.
On August 10, 1993, the Omnibus Budget Reconciliation Act of 1993
increased the statutory federal tax rate from 34 percent to 35 percent
effective January 1, 1993. The cumulative effect of this tax rate change
has been reflected in CMS Energy's financial statements.
The significant components of income tax expense (benefit) consisted of:
In Millions
Years Ended December 31 1993 1992 1991(a)
- ----------------------- ------- ------ --------
Current federal income taxes $ 19 $ 39 $ 13
Deferred income taxes 67 (177) (143)
Deferred income taxes - tax rate change (1) - -
Deferred ITC, net (10) (8) 36
------- ------ ------
$ 75 $(146) $ (94)
======= ====== ======
Operating $ 92 $ 22 $ 25
Other (17) (168) (119)
------- ------ ------
$ 75 $(146) $ (94)
======= ====== ======
(a) The 1991 provision for income taxes was before an extraordinary item
that had related deferred income taxes of approximately $7 million.
The principal components of CMS Energy's deferred tax assets (liabilities)
recognized in the balance sheet are as follows:
<PAGE> 80
In Millions
December 31 1993 1992
- ----------- ------- --------
Property $(580) $ (521)
Unconsolidated investments (194) (128)
Postretirement benefits (Note 10) (180) (167)
Abandoned Midland project (Note 4) (57) (60)
Employee benefit obligations (includes
postretirement benefits of
$182 and $168) (Note 10) 204 189
MCV power purchases - settlement (Note 3) 165 177
AMT carryforward 110 83
ITC carryforward (expires 2005) 48 52
Other (8) 5
------- --------
$ (492) $ (370)
======== ========
Gross deferred tax liabilities $(1,571) $(1,416)
Gross deferred tax assets 1,079 1,046
-------- --------
$ (492) $ (370)
======== ========
The actual income tax expense (benefit) differs from the amount computed
by applying the statutory federal tax rate to income before income taxes
as follows:
In Millions
Years Ended December 31 1993 1992 1991
------- ------- -------
Net income (loss) before preferred
dividends and extraordinary item $ 166 $(286) $(252)
Income tax expense (benefit) 75 (146) (94)
------- ------- -------
241 (432) (346)
Statutory federal income tax rate x 35% x 34% x 34%
-------- ------- -------
Expected income tax expense (benefit) 84 (147) (118)
Increase (decrease) in taxes from:
Capitalized overheads previously
flowed through 5 5 35
Differences in book and tax depreciation
not previously deferred 6 9 8
ITC amortization and utilization (12) (11) (9)
Other, net (8) (2) (10)
------- ------- -------
$ 75 $ (146) $(94)
======= ======= =======
6: Short-Term Financings
Consumers has authorization from the FERC to issue or guarantee up to $900
million of short-term debt through December 31, 1994. Consumers has a
$470 million facility that is used to finance seasonal working capital
requirements and unsecured, committed lines of credit aggregating $165
million. As of December 31, 1993, $235 million and $24 million were
outstanding at weighted average interest rates of 4.0 percent and 3.9
percent, respectively. Further, Consumers has an established $500 million
trade receivables purchase and sale program. As of December 31, 1993 and
1992, receivables sold under the agreement totaled $285 million and $225
million, respectively. On February 15, 1994, Consumers increased the
level of receivables sold to $335 million.
7: Capitalization
CMS Energy
Capital Stock: CMS Energy's Articles permit it to issue up to 250 million
shares of common stock at $.01 par value and up to 5 million shares of
preferred stock at $.01 par value. Under its two and one-half year
Secured Credit Facility and Indenture pursuant to which the Notes are
issued, CMS Energy is permitted to pay as dividends on its common stock an
amount not to exceed the total of its net income and any proceeds received
from the issuance or sale of common stock as defined in the Indentures and
$40 million, provided there exists no event of default under the terms of
the Secured Credit Facility or Indentures. The same formula applies to
limits available to repurchase or reacquire CMS Energy stock for either
the payment of dividends or repurchase of stock. In October 1993,
CMS Energy issued an additional 4.6 million shares of common stock at a
price of $26 5/8. The net proceeds of $119 million were used to reduce
existing debt and for general corporate purposes.
Long-Term Debt: In October 1992, CMS Energy received proceeds of $130
million and $219 million from the issuance of Series A and Series B Notes,
respectively. Interest will accrue and increase the principal to the face
value of $172 million for the Series A Notes and $294 million for the
Series B Notes through October 1, 1995. After such date, interest will be
paid semi-annually commencing April 1, 1996, at a rate of 9.5 percent per
annum for the Series A Notes and 9.875 percent per annum for the Series B
Notes. In November 1992, CMS Energy entered into a $220 million Secured
Credit Facility. As of December 31, 1993, $18 million was outstanding at
a weighted average interest rate of 5.7 percent. The Notes and Secured
Credit Facility are secured by a pledge of stock of Consumers,
Enterprises, and NOMECO. Additionally, under the terms of the Secured
Credit Facility, CMS Energy may only have outstanding, at any one time, an
aggregate of $130 million of unsecured debt except for debt issued to
refinance existing debt. The establishment of the Secured Credit Facility
and the proceeds from the Notes, net of underwriting expenses, were used
to retire the $410 million one-year secured revolving credit facility.
CMS Energy filed a shelf registration statement with the SEC in January
1994 covering the issuance of up to $250 million of unsecured debt
securities. The net proceeds will be used to reduce the amount of
CMS Energy Notes outstanding and for general corporate purposes. The
unsecured debt securities may be offered from time to time on terms to be
determined at the time of the sale.
Consumers
Capital Stock: As of December 31, 1992, Consumers effected a quasi-
reorganization, an elective accounting procedure in which Consumers'
accumulated deficit of $574 million was eliminated against other paid-in
capital. This action had no effect on CMS Energy's consolidated financial
statements. As a result of the quasi-reorganization and subsequent
accumulated earnings, Consumers paid $133 million in common stock
dividends in 1993 and also declared from 1993 earnings a $16 million
common stock dividend in January 1994. Consumers has authorization from
the MPSC and is proceeding to issue $200 million of preferred stock in
1994.
First Mortgage Bonds: Consumers secures its first mortgage bonds by a
mortgage and lien on substantially all of its property. Consumers' ability
to issue and sell securities is restricted by certain provisions in its
First Mortgage Bond Indenture, Articles and the need for regulatory
approvals in compliance with appropriate state and federal law. In
September 1993, Consumers issued, with MPSC approval, $300 million of 6
3/8 percent first mortgage bonds, due 2003 and $300 million of 7 3/8
percent first mortgage bonds, due 2023. Consumers used the net proceeds
from the bond issuance to refund approximately $515 million of higher
interest first mortgage bonds and the balance to reduce short-term
borrowings. Unamortized debt costs, premiums and discounts and call
premiums on the refunded debt totaling approximately $18 million were
deferred under SFAS 71, and are being amortized over the lives of the new
debt.
In February 1994, Consumers issued a call for redemption totaling
approximately $10 million. Consumers also fully redeemed two issues of
first mortgage bonds totaling approximately $91 million. These
redemptions completed Consumers' commitment to the MPSC, under the 1993
authorization to issue first mortgage bonds, to refinance certain long-
term debt.
Long-Term Bank Debt: Under its long-term credit agreement at December 31,
1993, Consumers was required to make 10 remaining quarterly principal
payments of approximately $47 million. As of December 31, 1993, the
outstanding balance under this credit agreement totaled $469 million with
a weighted average interest rate of 4.0 percent. In January 1993,
Consumers entered into an interest rate swap agreement, exchanging
variable-rate interest for fixed-rate interest on the latest maturing $250
million of the then remaining $500 million obligation under its long-term
credit agreement.
Other: Consumers has a total of $131 million of PCRBs outstanding with a
weighted average interest rate of 4.2 percent as of December 31, 1993.
Consumers classifies $101 million of PCRBs as long-term because it can
refinance these amounts through irrevocable letters of credit expiring
after one year.
In June 1993, Consumers entered into loan agreements in connection with
the issuance of approximately $28 million of adjustable rate demand
limited obligation refunding revenue bonds, due 2010, which are secured by
an irrevocable letter of credit expiring in 1996. These bonds bear an
initial interest rate of 2.65 percent. Consumers also entered into loan
agreements in connection with the issuance of $30 million of 5.8 percent
limited obligation refunding revenue bonds, due 2010, secured by a
financial guaranty insurance policy and certain first mortgage bonds of
Consumers. Proceeds of these issues were used to redeem on August 1, 1993
in advance of their maturities, approximately $58 million of outstanding
PCRBs.
NOMECO
As of December 31, 1993, NOMECO had total debt outstanding of $122
million. Senior serial notes amounting to $45 million with a weighted
average interest rate of 9.4 percent are outstanding from a private
placement. In November 1993, NOMECO amended the terms of its revolving
credit agreement and increased the amount to $110 million. At December
31, 1993, $72 million was outstanding at a weighted average interest rate
of 4.7 percent. NOMECO also has $5 million outstanding under other credit
agreements.
Enterprises
As of December 31, 1993, MOAPA had $22 million of Clark County, Nevada,
tax-exempt bonds outstanding with an interest rate of 3.35%. These bonds
are backed by a letter of credit guaranteed by CMS Energy. If the letter
of credit is not extended past its current expiration date of June 1,
1994, the bonds could be redeemed with the funds held in a trust account.
These funds are invested in certificates of deposits and included in other
noncurrent assets. The bonds were issued in 1990 for the purpose of
providing partial funding for the development of a tires-to-energy solid
waste disposal and resource recovery facility. In December 1993, the
Nevada Public Service Commission rejected the power purchase agreement
between MOAPA and the Nevada Power Company and subsequently rejected
MOAPA's motion for rehearing.
8: Financial Instruments
Cash, short-term investments and current liabilities approximate their
fair value due to the short-term nature of those instruments. The
estimated fair value of long-term investments is based on quoted market
prices where available. When specific market prices do not exist for an
instrument, the fair value is based on quoted market prices of similar
investments or other valuation techniques. All long-term investments in
financial instruments approximate fair value. The carrying amount of
long-term debt was $2.4 billion and $2.7 billion and the fair value of
long-term debt was $2.6 billion and $2.8 million as of December 31, 1993
and 1992, respectively. Although the current fair value of the long-term
debt, which is based on calculations made by debt pricing specialists, may
be greater than the current carrying amount, settlement of the reported
debt is generally not expected until maturity. The fair value of
CMS Energy's off-balance sheet financial instruments is based on the
amount estimated to terminate or settle the obligation. The fair value of
interest rate swap agreements was $6 million and $1 million and
guarantees/letters of credit was $96 million and $56 million as of
December 31, 1993 and 1992, respectively (see Notes 7 and 12).
On January 1, 1994, CMS Energy adopted SFAS 115, Accounting for Certain
Investments in Debt and Equity Securities, requiring accounting for
investments in debt securities to be held to maturity at amortized cost;
otherwise debt and marketable equity securities would be recorded at fair
value, with any unrealized gains or losses included in earnings if the
security is held for trading purposes or as a separate component of
shareholders' equity if the security is available for sale. The
implementation of this standard did not materially impact CMS Energy's
financial position or results of operations.
In May 1993, the FASB issued SFAS 114, Accounting by Creditors for
Impairment of a Loan, effective in 1995, requiring certain loans that are
determined to be impaired be measured based on the present value of
expected future cash flows discounted at the loan's effective interest
rate, the loan's observable market price or the fair value of any
collateral for a secured loan. CMS Energy does not believe this standard
will have a material impact on its financial position or results of
operations.
9: Executive Incentive Compensation
Under CMS Energy's Performance Incentive Stock Plan, restricted shares of
common stock of CMS Energy, stock options and stock appreciation rights
may be granted to key employees based on their contributions to the
successful management of CMS Energy and its subsidiaries. The plan
reserves for award not more than 2 percent of CMS Energy's common stock
outstanding on January 1 each year, less the number of shares of
restricted common stock awarded and of common stock subject to options
granted under the plan during the immediately preceding four calendar
years. Any forfeitures are subject to award under the plan. As of
December 31, 1993, awards of up to 447,686 shares of common stock may be
issued.
Restricted shares of common stock are outstanding shares with full voting
and dividend rights. Performance criteria were added in 1990 based on
CMS Energy's total return to shareholders. Shares of restricted common
stock cannot be distributed until they are vested and the performance
objectives are met. Further, the restricted stock is subject to
forfeiture if employment terminates before vesting. If key employees
exceed performance objectives, the plan will allow additional awards.
Restricted shares vest fully if control of CMS Energy changes, as defined
by the plan.
Consumers' Executive Stock Option and Stock Appreciation Rights Plan, an
earlier plan approved by shareholders, remains in effect until all
authorized options are granted or September 25, 1995. As of December 31,
1993, options for 43,000 shares remained to be granted.
Under both plans, for stock options and stock appreciation rights, the
exercise price on each grant date equaled the closing market price on the
grant date. Options are exercisable upon grant and expire up to 10 years
and one month from date of grant. The status of the restricted stock
granted under the Performance Incentive Stock Plan and options granted
under both plans follows:
Restricted
Stock Options
---------- ----------------------------
Number Number Price
of Shares of Shares per Share
----------- --------- ---------------
Outstanding at
January 1, 1991 212,500 1,162,216 $ 7.13 - $34.25
Granted 97,000 194,000 $ 21.13 - $21.13
Exercised or Issued (34,437) (65,125) $ 7.13 - $16.00
--------- ---------- ---------------
Outstanding at
December 31, 1991 275,063 1,291,091 $ 7.13 - $34.25
Granted 101,000 215,000 $ 17.13 - $18.00
Exercised or Issued (37,422) (21,000) $ 13.00 - $16.00
Canceled (15,375) (50,000) $ 20.50 - $33.88
--------- ---------- ---------------
Outstanding at
December 31, 1992 323,266 1,435,091 $ 7.13 - $34.25
Granted 132,000 249,000 $ 25.13 - $26.25
Exercised or Issued (54,938) (152,125) $ 7.13 - $21.13
Canceled (84,141) (33,000) $ 20.50 - $33.88
--------- ---------- ---------------
Outstanding at
December 31, 1993 316,187 1,498,966 $ 7.13 - $34.25
========= ========== ===============
10: Retirement Benefits
Postretirement Benefit Plans Other Than Pensions
CMS Energy and its subsidiaries adopted SFAS 106 effective as of the
beginning of 1992. The standard required CMS Energy to change its
accounting for the cost of health care and life insurance benefits that
are provided to retirees from a pay-as-you-go (cash) method to a full
accrual method. CMS Energy's non-utility subsidiaries expensed their
accumulated transition obligation liability. The amount of such
transition obligation is not material to the presentation of the
consolidated financial statements or significant to CMS Energy's total
transition obligation. Consumers recorded a liability of $466 million for
the accumulated transition obligation and a corresponding regulatory asset
for anticipated recovery in utility rates.
Both the MPSC and FERC have generally adopted SFAS 106 costs for
ratemaking purposes provided costs recovered through rates are placed in
external funds until they are needed to pay benefits. The MPSC's generic
order allows utilities three years to seek recovery of costs and provides
for recovery from customers of any deferred costs incurred prior to the
beginning of rate recovery of such costs. Consumers anticipates
recovering its regulatory asset within 20 years. As discussed in Note 4,
Consumers has requested recovery of the portion of these costs allocated
to the electric business. In late 1994, Consumers plans to request
recovery of the gas utility portion of these costs. CMS Energy plans to
fund the benefits using external Voluntary Employee Beneficiary
Associations. Funding of the health care benefits would begin when
Consumers' rate recovery based on SFAS 106 begins. A portion of the life
insurance benefits have previously been funded.
As of December 31, 1993, the actuary assumed that retiree health care
costs increased 10.5 percent in 1994, then decreased gradually to 5.5
percent in 2000 and thereafter. The health care cost trend rate
assumption significantly affects the amounts reported. For example, a 1
percentage point increase in each year would increase the accumulated
postretirement benefit obligation as of December 31, 1993 by $75 million
and the aggregate of the service and interest cost components of net
periodic postretirement benefit costs for 1993 by $9 million.
For the years ended December 31, 1993 and 1992, the weighted average
discount rate was 7.25 percent and 8 percent, respectively, and the
expected long-term rate of return on plan assets was 8.5 percent. Net
periodic postretirement benefit cost for health care benefits and life
insurance benefits was $51 million in 1993 and $50 million in 1992. The
1993 and 1992 cost was comprised of $13 million and $11 million for
service plus $38 million and $39 million for interest, respectively.
The funded status of the postretirement benefit plans is reconciled with
the liability recorded at December 31 as follows:
In Millions
1993 1992
------- -------
Actuarial present value of estimated benefits
Retirees $ 282 $ 265
Eligible for retirement 54 50
Active (upon retirement) 190 177
------- -------
Accumulated postretirement benefit obligation 526 492
Plan assets (premium deposit fund) at fair value 4 4
------- -------
Projected postretirement benefit obligation
in excess of plan assets (522) (488)
Unrecognized prior service cost (39) (39)
Unrecognized net loss 41 33
------- -------
Recorded liability $(520) $(494)
======= =======
CMS Energy's postretirement health care plan is unfunded; the accumulated
postretirement benefit obligation for that plan is $514 million and $482
million at December 31, 1993 and 1992, respectively. Consumers'
regulatory asset is $510 million and $485 million at December 31, 1993 and
1992, respectively.
Supplemental Executive Retirement Plan
Certain management employees qualify under the SERP. Benefits are based on
the employee's service and earnings as defined in the SERP. In 1988, a
trust from which SERP benefits are paid was established and funded.
Because the SERP is not a qualified plan under the Internal Revenue Code,
earnings of the trust are taxable and trust assets are included in
Consumers' consolidated assets. As of December 31, 1993 and 1992, trust
assets at cost (which approximates market) were $18 million and $16
million, respectively, and were classified as other non-current assets.
Defined Benefit Pension Plan
A trusteed, non-contributory, defined benefit Pension Plan covers
substantially all employees. The benefits are based on an employee's years
of accredited service and earnings, as defined in the plan, during an
employee's five highest years of earnings. Because the plan is fully
funded, no contributions were made for plan years 1991 through 1993.
Years Ended December 31 1993 1992 1991
- ----------------------- ----- ----- -----
Discount rate 7.25% 8.5% 8.5%
Rate of compensation increase 4.5% 5.5% 5.5%
Expected long-term rate of return on assets 8.75% 8.75% 8.75%
Net Pension Plan and SERP costs consisted of:
In Millions
Years Ended December 31 1993 1992 1991
- ----------------------- ------ ------ ------
Service cost $ 19 $ 19 $ 18
Interest cost 50 48 48
Actual return on plan assets (92) (36) (88)
Net amortization and deferral 34 (20) 29
------ ------ ------
Net periodic pension cost $ 11 $ 11 $ 7
====== ====== ======
The funded status of the Pension Plan and SERP reconciled to the pension
liability recorded at December 31 was:
In Millions
Pension Plan SERP
-------------- -------------
1993 1992 1993 1992
----- ----- ----- -----
Actuarial present value of
estimated benefits
Vested $ 471 $ 349 $ 16 $ 11
Non-vested 56 49 - -
----- ----- ----- -----
Accumulated benefit obligation 527 398 16 11
Provision for future pay increases 138 177 8 6
----- ----- ----- -----
Projected benefit obligation 665 575 24 17
Plan assets (primarily stocks and
bonds, including $87 in 1993 and
$64 in 1992 in common stock
of CMS Energy) at fair value 692 631 - -
----- ----- ----- -----
Projected benefit obligation less than
(in excess of) plan assets 27 56 (24) (17)
Unrecognized net (gain) loss from
experience different than assumed (56) (76) 7 2
Unrecognized prior service cost 45 49 1 1
Unrecognized net transition
(asset) obligation (44) (49) 1 1
Adjustment to recognize minimum
liability - - (1) -
----- ----- ----- -----
Recorded liability $ (28) $ (20) $ (16) $ (13)
====== ====== ====== =====
Beginning January 1, 1986, the amortization period for the Pension Plan's
unrecognized net transition asset is 16 years and 11 years for the SERP's
unrecognized net transition obligation. Prior service costs are amortized
on a straight-line basis over the average remaining service period of
active employees.
In 1991, certain eligible employees accepted early retirement incentives.
The incentives consisted of lump-sum cash payments and increased pension
payments. The pretax cost of the incentives was $25 million. Also in
1991, portions of the projected benefit obligation were settled which
resulted in a pretax gain of $25 million that offset the early retirement
costs.
11: Leases
CMS Energy, Consumers, and Enterprises lease various assets, including
vehicles, aircraft, construction equipment, computer equipment, nuclear
fuel and buildings. Consumers' nuclear fuel capital leasing arrangement
was extended an additional year and is now scheduled to expire in November
1995. The maximum amount of nuclear fuel that can be leased increased
from $55 million to $70 million. Consumers further increased this amount
in early 1994 to $80 million. The lease provides for an additional
one-year extension upon mutual agreement by the parties. Upon termination
of the lease, the lessor would be entitled to a cash payment equal to its
remaining investment, which was $57 million as of December 31, 1993.
Consumers is responsible for payment of taxes, maintenance, operating
costs, and insurance.
Minimum rental commitments under CMS Energy's non-cancelable leases at
December 31, 1993, were:
In Millions
Capital Operating
Leases Leases
------- ---------
1994 $ 43 $ 9
1995 64 8
1996 16 3
1997 15 3
1998 13 3
1999 and thereafter 26 22
----- -----
Total minimum lease payments 177 $ 48
=====
Less imputed interest 27
-----
Present value of net minimum lease payments 150
Less current portion 35
-----
Non-current portion (a) $115
=====
(a) In January 1994, Consumers amended its nuclear fuel lease to include
fuel previously owned at Big Rock Point. This is estimated to increase
the non-current portion of capital leases by approximately $6 million.
Consumers recovers these charges from customers and accordingly charges
payments for its capital and operating leases to operating expense.
Operating lease charges, including charges to clearing and other accounts
as of December 31, 1993, 1992 and 1991, were $18 million, $15 million and
$15 million, respectively.
Capital lease expenses for the years ended December 31, 1993, 1992 and
1991 were $34 million, $47 million and $51 million, respectively.
Included in these amounts for the years ended 1993, 1992 and 1991, are
nuclear fuel lease expenses of $13 million, $17 million and $24 million,
respectively.
12: Commitments, Contingencies and Other
Ludington Pumped Storage Plant Litigation
In 1986, the Attorney General filed a lawsuit on behalf of the State of
Michigan in the Circuit Court of Ingham County, seeking damages from
Consumers and Detroit Edison for alleged injuries to fishery resources
because of the operation of the Ludington Pumped Storage Plant. The state
sought $148 million (including $16 million of interest) for past injuries
and $89,000 per day for future injuries, with the latter amount to be
adjusted upon installation of "adequate" fish barriers and other changed
conditions.
In 1987, the Attorney General filed a second lawsuit alleging that
Consumers and Detroit Edison have breached a bottomlands lease agreement
with the state and asked that the lease be declared void. This complaint
was consolidated with the suit described in the preceding paragraph. In
1990, both of the lawsuits were dismissed on the basis of federal
preemption. In 1993, the Court of Appeals overturned the dismissal, as to
damages, effectively allowing the state to continue its damages lawsuit
against Consumers and Detroit Edison, but generally affirmed the lower
court's ruling as to the breach of lease claim. The Court of Appeals'
ruling also limited any potential damages to those occurring no earlier
than 1983. Consumers, Detroit Edison and the Attorney General have filed
an application for leave to appeal with the Michigan Supreme Court.
Consumers and Detroit Edison are seeking to have the trial court's
dismissal of the damages claim affirmed.
Each year since 1989, Consumers and Detroit Edison have complied with FERC
orders by installing a seasonal barrier net from April to October at the
Ludington plant site. The FERC is now considering whether the barrier net
(along with other actions by Consumers, including contributions to state
fish-stocking programs) would be a satisfactory permanent solution.
Environmental Matters
Consumers is a so-called "Potentially Responsible Party" at several sites
being administered under Superfund. Along with Consumers, there are
numerous credit-worthy, potentially responsible parties with substantial
assets cooperating with respect to the individual sites. Based on
information currently known by management, Consumers and CMS Energy
believe that it is unlikely that their liability at any of the known
Superfund sites, individually or in total, will have a material adverse
effect on their financial positions or results of operations.
The State of Michigan in 1990 passed amendments to the Environmental
Response Act that established a state program similar to the federal
Superfund law, though broader in scope. Under this law, Consumers expects
that it will ultimately incur costs at a number of sites, including some
of the 23 sites that formerly housed manufactured gas plant facilities,
even those in which it has a partial or no current ownership interest. It
is expected that in most cases, parties other than Consumers with current
or former ownership interests may also be considered liable under the law
and may be required to share in the costs of any site investigations and
remedial actions. There is limited knowledge of manufactured gas plant
contamination at these sites at this time. However, Consumers is
continuing to monitor this issue.
In addition, at the request of the DNR, Consumers prepared plans for
remedial investigation/feasibility studies for three of these sites. Work
plans for remedial investigation/feasibility studies for four other sites
have also been prepared. The purpose of a remedial
investigation/feasibility study is to define the nature and extent of
contamination at a site and to determine which of several possible
remedial action alternatives, including no action, may be required under
the Environmental Response Act. The DNR has approved two of the three
plans for remedial investigation/feasibility studies submitted and is
currently reviewing the one remaining. The cost to conduct one of the
approved studies will be approximately $250,000 based on bids received.
Although the actual cost of conducting the remaining two remedial
investigation/feasibility studies will not be known until bids are
received from contractors, Consumers currently estimates the total cost of
conducting the three studies submitted to the DNR to be less than $1
million.
The timing and extent of any further site investigation and remedial
actions will depend, among other things, on requests received from the DNR
and on future site usage by Consumers or other owners. Under the current
schedule, Consumers anticipates the first remedial
investigation/feasibility study would be completed in mid-1994. Consumers
believes the results of the remedial investigation/feasibility studies
will allow management to estimate a range of remedial cost estimates for
the sites under study. Based on Consumers' knowledge of other utility
remedial actions, remediation costs for Consumers for these sites may be
substantial. In 1993, the MPSC addressed the question of recovery of
investigation and remedial costs for another Michigan gas utility as part
of that utility's gas rate case. In that proceeding, the MPSC determined
that prudent investigation and remedial costs could be deferred and
amortized over 10-year periods and prudent unamortized costs can be
included for recovery in the utility's rate cases. The MPSC stated the
length of the period may be reviewed from time to time, but any revisions
would be prospective. Consumers and CMS Energy believe costs incurred for
both investigation and any required remedial actions would be recoverable
from utility customers under established regulatory policies and
accordingly are not likely to materially affect their financial positions
or results of operations.
Included in the 1990 amendments to the federal Clean Air Act are
provisions that limit emissions of sulfur dioxide and nitrogen oxides and
require enhanced emissions monitoring. All of Consumers' coal-fueled
electric generating units burn low-sulfur coal and are presently operating
at or near the sulfur dioxide emission limits which will be effective in
2000. Beginning in 1995, certain coal-fueled generating units will
receive emissions allowances (all of Consumers' coal units will receive
allowances beginning in 2000). Based on projected emissions from these
units, Consumers expects to have excess allowances which may be sold or
saved for future use.
The Clean Air Act's provisions require Consumers to make capital
expenditures estimated to total $74 million through 1999 for completed,
in-process and possible modifications at coal-fired units based on
existing and proposed regulations. Management believes that Consumers'
annual operating costs will not be materially affected.
The EPA has asked a number of utilities in the Great Lakes area to
voluntarily retire certain equipment containing specific levels of
polychlorinated biphenyls. Consumers believes that it is largely in
compliance with the EPA's petition. Consumers is continuing to study the
request and has been granted an extension for responding until March 30,
1994.
Capital Expenditures
CMS Energy estimates capital expenditures, including investments in
unconsolidated subsidiaries, DSM and new lease commitments, of $792
million for 1994, $690 million for 1995 and $714 million for 1996.
Public Utility Holding Company Act Exemption
CMS Energy is exempt from registration under PUHCA. However, the Attorney
General and the MMCG have asked the SEC to revoke CMS Energy's exemption
from registration under PUHCA. In 1992, the MPSC filed a statement with
the SEC recommending that CMS Energy's current exemption be revoked and a
new exemption be issued conditioned upon certain reporting and operating
requirements. If CMS Energy were to lose its current exemption, it would
become more heavily regulated by the SEC; Consumers could ultimately be
forced to divest either its electric or gas utility business; and
CMS Energy would be restricted from conducting businesses that are not
functionally related to the conduct of its utility business as determined
by the SEC. CMS Energy is opposing this request and believes it will
maintain its current exemption from registration under PUHCA.
Other
As of December 31, 1993, CMS Energy and Enterprises have guaranteed up to
$90 million in contingent obligations of unconsolidated affiliates of
Enterprises' subsidiaries.
NOMECO has hedged its gas supply obligations in the years 2001 through
2006 by purchasing the economic equivalent of 10,000 MMBtu per day at a
fixed, escalated price starting at $2.82 per MMBtu in 2001. The
settlement periods are each a one-year period ending December 31, 2001
through 2006 on 3.65 MMBtu. If the "floating price," essentially the then
current Gulf Coast spot price, for a period is higher than the "fixed
price," the seller pays NOMECO the difference, and vice versa. If a
party's exposure at any time exceeds $2 million, that party is required to
obtain a letter of credit in favor of the other party for the excess over
$2 million, to a maximum of $10 million. At December 31, 1993, the seller
had arranged a letter of credit in NOMECO's favor for $10 million. NOMECO
also periodically enters into oil and gas price hedging arrangements to
mitigate its exposure to price fluctuations on the sale of crude oil and
natural gas. As of December 31, 1993, the fair value of these hedge
arrangements was not material.
Consumers experienced an increase in complaints during 1993 relating to
so-called stray voltage. Claimants contend that stray voltage results
when small electrical currents present in grounded electric systems are
diverted from their intended path. Investigation by Consumers of prior
stray voltage complaints disclosed that many factors, including improper
wiring and malfunctioning of on-farm equipment, can lead to the stray
voltage phenomenon. Consumers maintains a policy of investigating all
customer calls regarding stray voltage and working with customers to
address their concerns including, when necessary, modifying the
configuration of the customer's hook-up to Consumers. A complaint seeking
certification as a class action suit was filed against Consumers in a
local county circuit court in 1993. The complaint alleges the existence
of a purported class that has incurred damages of up to $1 billion,
primarily to certain livestock owned by the purported class, as a result
of stray voltage from electricity being supplied by Consumers. Consumers
believes the allegations to be without merit and intends to vigorously
oppose the certification of the class and this suit.
In addition to the matters disclosed in these notes, Consumers and certain
other subsidiaries of CMS Energy are parties to certain lawsuits and
administrative proceedings before various courts and governmental
agencies, arising from the ordinary course of business involving personal
injury and property damage, contractual matters, environmental issues,
federal and state taxes, rates, licensing and other matters.
The ultimate effect of the proceedings discussed in this note is not
expected to have a material impact on CMS Energy's financial position or
results of operations.
13: Jointly Owned Utility Facilities
Consumers is responsible for providing its share of financing for jointly
owned facilities. The following table indicates the extent of Consumers'
investment in jointly owned utility facilities:
In Millions
December 31 1993 1992
- ----------- ---- ----
Net investment
Ludington - 51% $114 $112
Campbell Unit 3 - 93.3% 349 360
Transmission lines - various 32 33
Accumulated depreciation
Ludington $ 74 $ 71
Campbell Unit 3 210 199
Transmission lines 11 10
14: Supplemental Cash Flow Information
For purposes of the Statement of Cash Flows, all highly liquid investments
with an original maturity of three months or less are considered cash
equivalents. Other cash flow activities and non-cash investing and
financing activities for the years ended December 31 were:
In Millions
1993 1992 1991
------ ------ ------
Cash transactions
Interest paid (net of amounts capitalized) $193 $203 $325
Income taxes paid (net of refunds) 32 19 21
Non-cash transactions
Nuclear fuel placed under capital lease $ 28 $ 30 $ 6
Other assets placed under capital leases 30 39 21
Capital leases refinanced 42 - -
Assumption of debt - 15 -
Changes in other assets and liabilities as shown on the Consolidated
Statements of Cash Flows at December 31 are described below:
In Millions
1993 1992 1991
------ ------ ------
Sale of receivables, net $ 60 $ 25 $ -
Accounts receivable 22 6 118
Accrued revenue (48) 88 7
Accrued refunds (48) (143) 102
Inventories (32) 23 (8)
Accounts payable (31) 20 (70)
Tax Reform Act refund reserve - - (77)
Other current assets and liabilities, net (19) 46 (20)
Non-current deferred amounts, net 9 (28) 108
------ ------ ------
$ (87) $ 37 $ 160
======= ====== ======
15: Reportable Segments
CMS Energy operates principally in the following five business segments:
electric utility, gas utility, oil and gas exploration and production,
independent power production, and gas transmission and marketing.
The Consolidated Statements of Income show operating revenue and pretax
operating income by business segment. Other segment information follows:
In Millions
Years Ended December 31 1993 1992 1991
--------- -------- ------
Depreciation, depletion and amortization
Electric utility $ 241 $ 230 $ 172
Gas utility 73 76 70
Oil and gas exploration and production 45 38 33
Independent power production 2 2 2
Gas transmission and marketing 1 1 -
Other 3 1 6
-------- ------- --------
$ 365 $ 348 $ 283
======== ======= ========
Identifiable assets
Electric utility (a) $ 4,027 $3,812 $3,399
Gas utility 1,443 1,387 1,186
Oil and gas exploration and production 398 364 334
Independent power production 488 333 321
Gas transmission and marketing 75 60 45
Other 533 892 909
--------- ------- -------
$ 6,964 $6,848 $6,194
========= ======= =======
Capital expenditures (b)(c)(d)
Electric utility (e) $ 365 $ 353 $ 213
Gas utility 127 86 61
Oil and gas exploration and production 81 68 71
Independent power production 110 12 18
Gas transmission and marketing 14 6 17
Other 69 69 33
--------- ------- -------
$ 766 $ 594 $ 413
========= ======= =======
(a) Includes abandoned Midland investment of $162 million, $175 million
and $287 million for 1993, 1992 and 1991, respectively.
(b) Includes capital leases for nuclear fuel and other assets (see Note
14).
(c) Includes equity investments in unconsolidated partnerships of $108
million for 1993, $12 million for 1992 and $33 million for 1991.
(d) Certain prior year amounts have been adjusted for comparative
purposes.
(e) Includes DSM costs of $52 million for 1993 and $26 million for 1992.
16: Summarized Financial Information of Significant Related Energy
Supplier
Under the PPA with the MCV Partnership discussed in Note 3, Consumers'
1993 obligation to purchase electricity from the MCV Partnership was
approximately 14 percent of Consumers' owned and contracted capacity.
Summarized financial information of the MCV Partnership is shown below:
Statements of Income
In Millions
Years Ended December 31 1993 1992 1991
- ----------------------- ------ ------ ------
Operating revenue (a) $ 548 $ 488 $ 425
Operating expenses 362 315 278
------ ------ ------
Operating income 186 173 147
Other expense, net (189) (190) (186)
------ ------ ------
Net loss $ (3) $ (17) $ (39)
====== ====== ======
Balance Sheets
In Millions
December 31 1993 1992
- ----------- ------ ------
Assets
Current assets (a) $ 181 $ 165
Property, plant and equipment, net 2,073 2,124
Other assets 146 147
------ ------
$2,400 $2,436
====== ======
Liabilities and Partners' Equity
Current liabilities $ 198 $ 189
Long-term debt and other non-current liabilities (b) 2,147 2,189
Partners' equity (c) 55 58
------ ------
$2,400 $2,436
====== ======
(a) Revenue from Consumers totaled $505 million, $444 million and $384
million for 1993, 1992 and 1991, respectively. As of December 31, 1993,
1992 and 1991, $44 million, $38 million and $33 million, respectively,
were receivable from Consumers.
(b) FMLP is a beneficiary of an owner trust that is the lessor in a
long-term direct finance lease with the lessee, MCV Partnership.
CMS Holdings holds a 46.4 percent ownership interest in FMLP (see Note 3).
At December 31, 1993 and 1992, lease obligations of $1.7 billion were owed
to the owner trust of which FMLP is the sole beneficiary. CMS Holdings'
share of the interest and principal portion for the 1993 lease payments
was $63 million and $16 million, respectively, and for the 1992 lease
payments was $65 million and $12 million, respectively. The lease payments
service $1.2 billion and $1.3 billion in non-recourse debt outstanding as
of December 31, 1993 and 1992, respectively, of the owner-trust whose
beneficiary is FMLP. FMLP's debt is secured by the MCV Partnership's lease
obligations, assets, and operating revenues. For 1993 and 1992, the
owner-trust whose beneficiary is FMLP made debt payments of $172 million
and $166 million, respectively, which included $10 million and $8 million
principal and $25 million and $26 million interest, respectively, on the
MCV Bonds held by MEC Development Corporation during part of 1991 and by
Consumers through December 1993.
(c) CMS Midland's recorded investment in the MCV Partnership includes
capitalized interest, which is being amortized to expense over the life of
its investment in the MCV Partnership.
<PAGE>
<PAGE> 96
Arthur Andersen & Co.
Report of Independent Public Accountants
To CMS Energy Corporation:
We have audited the accompanying consolidated balance sheets and
consolidated statements of long-term debt and preferred stock of CMS
ENERGY CORPORATION (a Michigan corporation) and subsidiaries as of
December 31, 1993 and 1992, and the related consolidated statements of
income, common stockholders' equity, and cash flows for each of the three
years in the period ended December 31, 1993. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the consolidated financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the consolidated financial statements. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
consolidated financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of CMS
Energy Corporation and subsidiaries as of December 31, 1993 and 1992, and
the results of their operations and their cash flows for each of the three
years in the period ended December 31, 1993 in conformity with generally
accepted accounting principles.
As discussed in Note 5 to the consolidated financial statements, effective
January 1, 1992, the Company changed its method of accounting for income
taxes. Additionally, as discussed in Note 10 to the consolidated
financial statements, effective January 1, 1992, the Company changed its
method of accounting for postretirement benefits other than pensions.
ARTHUR ANDERSEN & Co.
Detroit, Michigan,
January 28, 1994.
<PAGE>
<PAGE> 97
<TABLE>
Quarterly Financial and Common Stock Information CMS Energy Corporation
<CAPTION>
In Millions,
Except Per Share Amounts
1993 (Unaudited) 1992 (Unaudited)
Quarters Ended March 31 June 30 Sept. 30 Dec. 31 March 31 June 30 Sept. 30 Dec. 31
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Operating revenue (a) $1,046 $742 $758 $936 $973 $681 $618 $874
Pretax operating income (a) $168 $82 $101 $88 $113 $56 $38 $24
Net income (loss) $72 $24 $32 $27 $51 $14 $10 $(372)
Earnings (loss) per average
common share $.90 $.30 $.40 $.30 $.64 $.17 $.13 $(4.66)
Dividends declared per
common share $.12 $.12 $.18 $.18 $.12 $.12 $.12 $.12
Common stock prices (b)
High $20-7/8 $25-1/2 $27-1/2 $27-1/8 $22-3/4 $21-7/8 $17-1/2 $18-3/8
Low $18-3/8 $21-3/4 $24-7/8 $23 $17-7/8 $14-7/8 $15-1/4 $16-3/4
- ----------------------------------------------------------------------------------------------------------------
<FN>
(a) Amounts in 1992 and March 31, 1993 were restated for comparative purposes.
(b) Based on NYSE - Composite transactions.
</TABLE>
<PAGE>
<PAGE> 98
(This page intentionally left blank)
<PAGE>
<PAGE> 99
Consumers Power Company
1993 Financial Statements
<PAGE>
<PAGE> 100
(This page intentionally left blank)
<PAGE>
<PAGE> 101
<TABLE>
Selected Financial Information Consumers Power Company
<CAPTION>
1993 1992 1991 1990 1989
<S> <C> <C> <C> <C> <C> <C>
Operating revenue (in millions) (a) ($) 3,243 2,978 2,908 2,968 2,960
Net income (loss) (in millions) (b) ($) 198 (244) (249) (382) 352
Net income (loss) after dividends
on preferred stock (in millions) ($) 187 (255) (260) (393) 334
Cash from operations (in millions) ($) 404 483 376 476 839
Capital expenditures (excludes assets
placed under capital leases)
(in millions) (a) ($) 451 411 279 339 408
Total assets (in millions) ($) 6,551 6,596 5,986 7,700 8,212
Long-term debt, excluding
current maturities (in millions) ($) 1,839 2,079 1,846 2,944 3,036
Non-current portion of capital
leases (in millions) ($) 106 88 57 56 79
Total preferred stock (in millions) ($) 163 163 163 168 187
Preferred stock with mandatory
redemption (in millions) ($) - - - - 10
Number of preferred shareholders
at year-end 7,037 7,376 7,616 7,991 8,712
Book value per common share at
year-end ($) 15.28 14.64 17.67 20.46 25.16
Return on average common equity (%) 14.8 (18.8) (16.2) (20.5) 17.2
Return on assets (%) 4.7 (0.2) (0.6) (2.3) 7.1
Number of employees at year end
(full time equivalents) 9,567 9,531 8,933 9,209 9,577
Electric statistics
Sales (millions of kWh) (c) 32,764 31,601 31,813 31,743 31,375
Customers (in thousands) 1,526 1,506 1,492 1,475 1,453
Average sales rate (cents/kWh) (cents) 6.28 5.82 5.73 5.89 5.55
Gas statistics
Sales and transportation
deliveries (bcf) (d) 389 364 339 333 303
Customers (in thousands) 1,423 1,402 1,382 1,362 1,338
Average sales rate ($/mcf) ($) 4.46 4.55 4.58 4.64 4.75
<FN>
(a) Certain prior period amounts were restated for comparative purposes.
(b) Amount in 1991 included an extraordinary loss of $14 million, after tax.
(c) Includes intersystem electric sales.
(d) Excludes off-system transportation services.
</TABLE>
<PAGE>
<PAGE> 102
Consumers Power Company
Management's Discussion and Analysis
Consumers is a combination electric and gas utility company serving most
of the Lower Peninsula of Michigan, and is the principal subsidiary of
CMS Energy, an energy holding company. Consumers' customer base includes
a mix of residential, commercial and diversified industrial customers, the
largest of which is the automotive industry.
Consolidated 1993 Earnings
Consolidated net income after dividends on preferred stock totaled $187
million in 1993, compared to net losses of $255 million in 1992 and $260
million in 1991. The increased net income reflects the Settlement Order
related to power purchases from the MCV Partnership. Earnings also
reflect record setting electric sales and gas deliveries.
Cash Position, Financing and Investing
Consumers' operating cash requirements are met by its operating and
financing activities. In 1993 and 1992, Consumers' cash from operations
mainly resulted from its sale and transportation of natural gas and its
sale and transmission of electricity. Cash from operations for 1993
primarily reflects record-setting electric sales and gas deliveries and
reduced after-tax cash shortfalls resulting from Consumers' purchases of
power from the MCV Partnership.
During 1992, Consumers' cash from operations increased as compared to 1991
primarily due to lower interest charges resulting from reduced levels of
debt, partially offset by higher operating expenditures and reduced
electric rates. In 1991, Consumers generated cash primarily from its
consolidated operating and investing activities, including $859 million of
net proceeds from the sale of a majority of the MCV Bonds.
Over the last three years, Consumers has used its cash primarily to fund
its extensive construction expenditures and to improve the reliability of
its transmission and distribution systems. Consumers has also used its
cash to retire portions of long-term debt and to pay cash dividends.
Financing Activities
As a result of the 1992 quasi-reorganization (see Note 7 to the
Consolidated Financial Statements), and subsequent accumulated earnings,
Consumers paid $133 million in common stock dividends during 1993 and
declared a $16 million common stock dividend in January 1994 from 1993
earnings.
During 1993, Consumers significantly reduced its future interest charges
by retiring approximately $51 million of high-cost outstanding debt and
refinancing approximately $573 million of other debt at lower interest
rates. For further information, see Note 7.
Investing Activities
Capital expenditures (excluding assets placed under capital leases of $58
million) and deferred demand-side management costs totaled $503 million in
1993 as compared to $437 million in 1992. These amounts primarily
represent capital investments in Consumers' electric and gas utility
segments. In December 1993, Consumers sold $309 million of MCV Bonds it
held and used the net proceeds to temporarily reduce short-term borrowings
and ultimately plans to reduce long-term debt and to finance its
construction program.
Outlook
Consumers estimates that capital expenditures, including demand-side
management and new lease commitments, related to its electric and gas
utility operations will total approximately $1.5 billion over the next
three years.
In Millions
Years Ended December 31 1994 1995 1996
---- ---- ----
Consumers
Construction (including DSM) $474 $425 $391
Nuclear fuel lease 46 4 45
Capital leases other than nuclear fuel 27 27 28
Michigan Gas Storage 6 5 7
---- ---- ----
$553 $461 $471
==== ==== ====
Consumers is required to redeem or retire approximately $741 million of
long-term debt during 1994 through 1996. Cash generated by operations is
expected to satisfy a substantial portion of these capital expenditures
and debt retirements.
Consumers has several other available sources of credit including
unsecured, committed lines of credit totaling $165 million and a $470
million working capital facility. Consumers has FERC authorization to
issue or guarantee up to $900 million in short-term debt through
December 31, 1994. Consumers uses short-term borrowings to finance
working capital, seasonal fuel inventory and to pay for capital
expenditures between long-term financings. Consumers has an agreement
permitting the sales of certain accounts receivable for up to $500
million. As of December 31, 1993 and 1992, receivables sold totaled $285
million and $225 million, respectively. On February 15, 1994, Consumers
increased the level of receivables sold to $335 million.
In October 1993, Consumers received MPSC authorization and is proceeding
to issue $200 million of preferred stock in 1994. In February 1994,
Consumers called or redeemed approximately $101 million of first mortgage
bonds.
At December 31, 1993, Consumers' capital structure consisted of
approximately 32 percent common equity, 4 percent preferred stock, and 64
percent long- and short-term debt (including capital leases and notes
payable). Consumers' long term goal is to achieve and maintain a capital
structure consisting of approximately 37 percent common equity, 8 percent
preferred stock and 55 percent debt. Management expects to achieve this
structure through debt reductions, accumulated earnings, the issuance of
new preferred stock and equity investments from CMS Energy.
Electric Utility Operations
Comparative Results of Operations
Electric Pretax Operating Income: The improvement in 1993 pretax
operating income compared to 1992 reflects an increase of $126 million
relating to the resolution of the recoverability of MCV power purchase
costs under the PPA and increased electric system sales of $45 million,
partially offset by higher costs to improve system reliability. The 1992
decrease of $66 million from the 1991 level primarily resulted from an
increased emphasis on system reliability improvements and decreased
electric rates resulting from the full-year impact of a mid-1991 rate
decrease.
In Millions
1993 1992
Over Over
(Under) (Under)
1992 1991
------ ------
Sales growth $ 34 $ 11
Weather 11 (16)
Resolution of MCV power cost issues 126 -
Other regulatory issues 5 (13)
O&M, general taxes and depreciation (a) (44) (48)
----- -----
Total change $132 $(66)
===== =====
(a) Largely caused by Consumers' system reliability improvement program.
Electric Sales: Electric system sales in 1993 totaled a record 31.7
billion kWh, a 3.8 percent increase from 1992 levels. In 1993,
residential and commercial sales increased 3.4 percent and 3.0 percent,
respectively, while industrial sales increased 6.5 percent. Growth in the
industrial sector was the strongest in the auto-related segments of
fabricated and primary metals and transportation equipment. Electric
system sales in 1992 totaled 30.5 billion kWh, essentially unchanged from
the 1991 levels.
Electric Sales Millions of kWh
1993 1992 1991
------ ------ ------
Residential 10,066 9,733 9,997
Commercial 8,909 8,652 8,692
Industrial 11,541 10,831 10,692
Sales for resale 1,142 1,292 1,311
------ ------ ------
System sales (a) 31,658 30,508 30,692
====== ====== ======
Total customers (000) 1,526 1,506 1,492
====== ====== ======
(a) Excludes intersystem exchanges of power with other utilities through
joint dispatching for the economic benefit of customers. The level of
intersystem sales has been essentially unchanged during each of the last
three years.
Power Costs: Power costs for 1993 totaled $908 million, a $31 million
increase from the corresponding 1992 period. This increase primarily
reflects greater power purchases from outside sources to meet increased
sales demand and to supplement decreased generation at Palisades due to an
extended outage. Power costs for 1992 totaled $877 million, a $17 million
decrease as compared to 1991.
Operation and Maintenance: Increases in other operation and maintenance
expense for 1993 and 1992 reflected increased expenditures to improve
electric system reliability.
Depreciation: The increased depreciation for 1993 reflects additional
capital investments in plant. The 1992 increase resulted from higher
depreciation rates, increased amortization of abandoned nuclear investment
and increased nuclear plant decommissioning expense.
Electric Utility Rates
Power Purchases from the MCV Partnership: Consumers is obligated to
purchase the following amounts of contract capacity from the MCV
Partnership under the PPA:
1995 and
Year 1993 1994 thereafter
- ---- ----- ----- ----------
MW 1,023 1,132 1,240
Since 1990, recovering capacity and fixed-energy costs for power purchased
from the MCV Partnership has been a significant issue. Effective
January 1, 1993, the Settlement Order allowed Consumers to recover from
electric retail customers substantially all of the payments for its
ongoing purchase of 915 MW of contract capacity from the MCV Partnership,
significantly reducing the amount of future underrecoveries for these
power costs. ABATE and the Attorney General have filed claims of appeal
of the Settlement Order with the Court of Appeals.
Prior to the Settlement Order, Consumers had recorded losses for
underrecoveries from 1990 through 1992. In December 1992, Consumers
recognized an after-tax loss of $343 million for the present value of
estimated future underrecoveries of power costs under the PPA as a result
of the Settlement Order, based on management's best estimates regarding
the future availability of the MCV Facility, and the effect of the future
wholesale power market on the amount, timing and price at which various
increments of the capacity above the MPSC-authorized level could be
resold. Except for adjustments to the above loss to reflect the after-tax
time value of money through accretion expense, no additional losses are
expected unless actual future experience materially differs from
management's estimates. The after-tax expense for the time value of money
for the $343 million loss is estimated to be approximately $24 million in
1994, and various lower levels thereafter, including $22 million in 1995
and $20 million in 1996. Although the settlement losses were recorded in
1992, the after-tax cash underrecoveries associated with the Settlement
Order were $59 million in 1993. Consumers believes there is and will be a
market for the resale of capacity purchases from the MCV Partnership above
the MPSC-authorized level. If Consumers is unable to sell any capacity
above the current MPSC-authorized level, future additional after-tax
losses and after-tax cash underrecoveries could be incurred. Estimates
for the next five years if none of the additional capacity is sold are as
follows:
After-tax, In Millions
1994 1995 1996 1997 1998
---- ---- ---- ---- ----
Expected cash underrecoveries $56 $65 $62 $61 $ 8
Possible additional under-
recoveries and losses (a) $14 $20 $20 $22 $72
(a) If unable to sell any capacity above the MPSC's authorized level
The PPA, while requiring payment of a fixed energy charge, contains a
"regulatory out" provision which permits Consumers to reduce the fixed
energy charges payable to the MCV Partnership throughout the entire
contract term if Consumers is not able to recover these amounts from its
customers. Consumers and the MCV Partnership have commenced arbitration
proceedings under the PPA to determine whether Consumers is entitled to
exercise its regulatory out regarding fixed energy charges on the portion
of available MCV capacity above the current MPSC-authorized levels. An
arbitrator acceptable to both parties has been selected. If the
arbitrator determines that Consumers cannot exercise its regulatory out,
Consumers would be required to make these fixed energy payments to the MCV
Partnership. The arbitration proceedings will also determine who is
entitled to the fixed energy amounts for which Consumers did not receive
full cost recovery during the years prior to settlement. As of December
31, 1993, these amounts total $26 million. Although Consumers intends to
aggressively pursue its right to exercise the regulatory out, management
cannot predict the outcome of the arbitration proceedings or any possible
settlement of the matter. Accordingly, losses were recorded prior to 1993
for all fixed energy amounts at issue in the arbitration. In December
1993, Consumers made an irrevocable offer to pay through September 15,
2007, fixed energy charges to the MCV Partnership on all kWh delivered by
the MCV Partnership to Consumers from the contract capacity in excess of
915 MW, which represents a portion of the fixed energy charges in dispute.
Consumers made the offer to facilitate the sale of the remaining MCV Bonds
in 1993.
The lessors of the MCV Facility have filed a lawsuit in federal district
court against CMS Energy, Consumers and CMS Holdings. It alleges breach
of contract, breach of fiduciary duty and negligent or willful
misrepresentation relating to the MCV Partnership's failure to object to
the Settlement Order in light of Consumers' interpretation of the
Settlement Order, which is the subject of an arbitration between the MCV
Partnership and Consumers. The action alleges damages in excess of $1
billion and seeks injunctive relief relative to Consumers' payments of the
fixed energy charge. CMS Energy and Consumers believe that at all times
they and CMS Holdings have conducted themselves properly and that the
action is without merit. They also believe that a significant portion of
the alleged damages represent fixed energy charges in dispute in the
arbitration. CMS Energy and Consumers are unable to predict the outcome
of this action. For further information regarding power purchases from
the MCV Partnership, see Note 3.
PSCR Matters: Consumers began a planned refueling and maintenance outage
at Palisades in June 1993. Following several required, unanticipated
repairs that extended the outage, the plant returned to service in early
November. Recovery of replacement power costs incurred by Consumers
during the outage will be reviewed by the MPSC during the 1993 PSCR
reconciliation of actual costs and revenues to determine the prudency of
actions taken during the outage and any associated delays. Net
replacement power costs were approximately $180,000 per day above the cost
of fuel incurred when the plant is operating.
The Energy Act imposes an obligation on the utility industry, including
Consumers, to decommission DOE uranium enrichment facilities. Consumers
currently estimates its payments for decommissioning those facilities to
be $2.4 million per year for 15 years beginning in 1992, escalating based
on an inflation factor. Consumers believes these costs are recoverable
from its customers under traditional regulatory policies.
Electric Rate Case: Consumers filed a request with the MPSC in May 1993
to increase its electric rates. Subsequently, as a result of changed
estimates, Consumers revised its requested electric rate increase to $133
million annually based on a 1994 test year. Consumers also requested an
additional annual electric rate increase of $38 million based on a 1995
test year. In March 1994, an ALJ issued a proposal for decision that
recommended Consumers' 1994 final annual rate increase total approximately
$83 million, and that the incremental requested 1995 increase not be
granted at this time. The ALJ's recommendation included a lower return on
electric common equity, reflected reduced anticipated debt costs due to
the projected availability of more favorable interest rates and proposed a
lower equity ratio for Consumers' projected capitalization structure. The
ALJ did, however, generally support Consumers' rate design proposal to
significantly reduce the level of subsidization of residential customers
by commercial and industrial customers and generally supported a
performance incentive which Consumers also supported. For further
information, see Note 4.
Electric Conservation Efforts
In October 1993, Consumers completed the customer participation portion of
several incentive-based demand-side management programs which were
designed to encourage the efficient use of energy, primarily through
conservation measures. Based on the MPSC's determination of Consumers'
effectiveness in implementing these programs, Consumers' future rate of
return on electric common equity may be adjusted either upward by up to 1
percent or downward by up to 2 percent, for one year following
reconciliation hearings with the MPSC. Consumers believes it will receive
an increase on its return on common equity based on having achieved all of
the agreed upon objectives. For further information, see Note 4.
Electric Capital Expenditures
Consumers estimates capital expenditures, including demand-side management
and new lease commitments, related to its electric utility operations of
$396 million for 1994, $324 million for 1995 and $332 million for 1996.
Electric Environmental Matters and Health Concerns
The 1990 amendment of the federal Clean Air Act significantly increased
the environmental constraints that utilities will operate under in the
future. While the Clean Air Act's provisions will require Consumers to
make certain capital expenditures in order to comply with the amendments
for nitrogen oxide reductions, Consumers' generating units are presently
operating at or near the sulfur dioxide emission limits which will be
effective in the year 2000. Therefore, management believes that
Consumers' annual operating costs will not be materially affected.
In 1990, the State of Michigan passed amendments to the Environmental
Response Act, under which Consumers expects that it will ultimately incur
costs at a number of sites, even those in which it has a partial or no
current ownership interest. It is expected that in most cases, parties
other than Consumers with current or former ownership interests may also
be considered liable under the law and may be required to share in the
costs of any site investigations and remedial actions. Consumers believes
costs incurred for both investigation and any required remedial actions
would be recoverable from its electric customers under established
regulatory policies and accordingly are not likely to materially affect
its financial position or results of operations.
Consumers is a so-called "Potentially Responsible Party" at several sites
being administered under Superfund. Along with Consumers, there are
numerous credit-worthy, potentially responsible parties with substantial
assets cooperating with respect to the individual sites. Based on
information currently known by management, Consumers believes that it is
unlikely that its liability at any of the known Superfund sites,
individually or in total, will have a material adverse effect on its
financial position or results of operations.
Electric Outlook
Consumers expects economic growth, competitive rates and other factors to
increase the demand for electricity within its service territory by
approximately 1.8 percent per year over the next five years. For the near
term, Consumers currently plans a reserve margin of 20 percent and expects
to fill the additional capacity required through long- and short-term
power purchases. Long-term purchased power will likely be obtained
through a competitive bidding solicitation process utilizing the framework
established by the MPSC in 1992. Capacity from the MCV Facility above the
levels authorized by the MPSC may be offered by Consumers in connection
with the solicitation.
A recent NRC review of Consumers' performance at Palisades showed a
decline in performance. Management believes that an increased emphasis on
internal assessments will improve performance at Palisades. To provide
NRC senior management with a more in-depth assessment of plant
performance, the NRC has initiated a diagnostic evaluation team inspection
at Palisades. The inspection will be a broad-based evaluation of all
aspects of nuclear plant operation and management which is expected to
commence in March 1994, with results of the evaluation expected to be
available in May 1994. The outcome of this evaluation cannot be
predicted. Similar reviews conducted at nuclear plants of other utilities
in recent years have in some cases resulted in increased regulatory
oversight or required actions to improve plant operations, maintenance or
condition.
Consumers is currently collecting $45 million annually from electric
retail customers for the future decommissioning of its two nuclear plants.
Consumers believes these amounts will be adequate to meet current
decommissioning cost estimates. For further information regarding nuclear
decommissioning, see Note 2.
Consumers' on-site storage pool at Palisades is at capacity, and it is
unlikely that the DOE will begin accepting any spent nuclear fuel by the
originally scheduled date in 1998. Consumers is using NRC-approved dry
casks, which are steel and concrete vaults, for temporary storage.
Several appeals relating to NRC approval of the casks are now pending at
the U.S. Sixth Circuit Court of Appeals. If Consumers is unable to
continue to use the casks as planned, significant costs, including
replacement power costs during any resulting plant shutdown, could be
incurred.
Consumers has experienced an increase in complaints in 1993 relating
primarily to the effect of so-called stray voltage on certain livestock.
A complaint seeking certification as a class action suit has been filed
against Consumers alleging significant damages, primarily related to
certain livestock, which Consumers believes to be without merit (see
Note 12).
Some of Consumers' larger industrial customers are exploring the
possibility of constructing and operating their own on-site generating
facilities. Consumers is actively working with these customers to develop
rate and service alternatives that are competitive with self-generation
options. Although Consumers' electric rates are competitive with other
regional utilities, Consumers has on file with the FERC two open access
interconnection tariffs which could have the effect of increasing
competition for wholesale customers. As part of its current electric rate
case, Consumers has requested that the MPSC reduce the level of rate
subsidization of residential customers by commercial and industrial
customers so as to further improve rate competitiveness for its largest
customers.
The MPSC has completed a hearing on a proposal by ABATE to create an
experimental retail wheeling tariff. Certain other parties have proposals
in support of retail wheeling under development. In August 1993, an ALJ
recommended that the MPSC reject the proposed experiment. An MPSC order
is expected early in 1994.
Gas Utility Operations
Comparative Results of Operations
Gas Pretax Operating Income: For 1993, pretax operating income increased
$37 million compared to 1992, reflecting higher gas deliveries (both sales
and transportation volumes) and more favorable regulatory recovery of gas
costs related to transportation. During 1992, gas pretax operating income
increased $45 million from the 1991 level, essentially for many of the
same reasons as the current period.
In Millions
1993 1992
Over Over
(Under) (Under)
1992 1991
------ ------
Sales growth $ 7 $ 14
Weather 10 6
Regulatory recovery of gas cost 12 48
O&M, general taxes and depreciation 8 (23)
------ ------
Total change $ 37 $ 45
====== ======
Gas Deliveries: Gas sales and gas transported in 1993 totaled 410.6 bcf,
a 6.9 percent increase from 1992. In 1992, gas sales and gas transported
totaled 384.1 bcf, a 6.1 percent increase from 1991 deliveries.
Gas Deliveries Bcf
1993 1992 1991
----- ----- -----
Residential 174.9 166.7 157.2
Commercial 55.9 53.4 50.2
Industrial 13.9 13.5 14.5
Other .2 .2 .2
----- ----- -----
Gas sales 244.9 233.8 222.1
Transportation deliveries 70.5 66.4 61.5
Transportation for MCV 73.4 63.5 55.0
Off-system transportation service 21.8 20.4 23.4
----- ----- -----
Total deliveries 410.6 384.1 362.0
===== ===== =====
Total customers (000) 1,423 1,402 1,382
===== ===== =====
Gas Utility Rates
Consumers currently plans to file a request in 1994 with the MPSC to
increase its gas rates. The request would include, among other things,
costs for postretirement benefits computed under SFAS 106, Employers'
Accounting for Postretirement Benefits Other than Pensions. A final order
should be received approximately nine to twelve months after the request
is filed.
Certain of Consumers' direct gas suppliers have contract prices tied to
the price Consumers pays Trunkline for its gas. The Trunkline contract
covers gas deliveries through October 1994 and is at a price reduced in
September 1993. Some of Consumers' direct gas suppliers have claimed that
the reduced Trunkline gas cost is not a proper reference price under their
contracts with Consumers and that their contracts are terminable after a
12-month period. Consumers is disputing these claims.
In 1992, the FERC issued Order 636, which makes a number of significant
changes to the structure of the services provided by interstate natural
gas pipelines to be implemented by the 1993-94 winter heating season.
Consumers is a significant purchaser of gas from an interstate pipeline
(Trunkline) and is a major transportation customer of a number of
pipelines. Management believes that Consumers will recover any transition
costs it may incur and such restructuring will not have a significant
impact on its financial position or results of operations.
In July 1993, Michigan Gas Storage submitted a notice of rate change with
the FERC to revise its operation and maintenance expenses for 1993 and
update plant costs to reflect the addition of approximately $27 million of
new plant additions in 1993 and began collecting the revised rates subject
to refund and a hearing in February 1994. Hearings or settlement
conferences will follow. For further information regarding gas utility
rates, see Note 4.
Gas Capital Expenditures
Consumers estimates capital expenditures, including new lease commitments,
related to its gas utility operations of $99 million for 1994, $88 million
for 1995 and $81 million for 1996.
Gas Environmental Matters
Under the Environmental Response Act, Consumers expects that it will
ultimately incur costs at a number of sites, including some of the 23
sites that formerly housed manufactured gas plant facilities, even those
in which it has a partial or no current ownership interest. It is
expected that in most cases, parties other than Consumers with current or
former ownership interests may also be considered liable under the law and
may be required to share in the costs of any site investigations and
remedial actions. There is limited knowledge of manufactured gas plant
contamination at these sites at this time. However, Consumers is
continuing to monitor this issue.
In addition, at the request of the DNR, Consumers prepared plans for
remedial investigation/feasibility studies for three of these sites. Work
plans for remedial investigation/feasibility studies for four other sites
have also been prepared. The DNR has approved two of the three plans for
remedial investigation/feasibility studies submitted and is currently
reviewing the one remaining. Consumers currently estimates the total cost
of conducting the three studies submitted to the DNR to be less than $1
million.
The timing and extent of any further site investigation and remedial
actions will depend, among other things, on requests received from the DNR
and on future site usage by Consumers or other owners. Under the current
schedule, Consumers anticipates the first remedial
investigation/feasibility study would be completed in mid-1994. Consumers
believes the results of the remedial investigation/feasibility studies
will allow management to estimate a range of remedial cost estimates for
the sites under study, which may be substantial. In 1993, the MPSC
addressed the question of recovery of investigation and remedial costs for
another Michigan gas utility as part of that utility's gas rate case. In
that proceeding, the MPSC determined that prudent investigation and
remedial costs could be deferred and amortized over 10-year periods and
prudent unamortized costs can be included for recovery in the utility's
rate cases. Consumers believes costs incurred for both investigation and
any required remedial actions would be recoverable from gas utility
customers under established regulatory policies and accordingly are not
likely to materially affect its financial position or results of
operations.
Gas Outlook
In 1993, Consumers purchased approximately 85 percent of its required gas
supply under long-term contracts, and the balance on the spot market.
Trunkline supplied approximately 41 percent of the total requirement.
Consumers expects gas supply reliability to be ensured through long-term
supply contracts, with purchases in the short-term spot market when
economically beneficial. Management believes that Consumers' ability to
purchase gas during the off-season and store it in its extensive
underground storage facilities will continue to help provide customers
with low-cost, competitive gas rates.
Consumers anticipates growth in gas deliveries of approximately 0.6
percent per year over the next five years. Management believes that
environmental benefits, along with the federal requirements included in
the Energy Act, create an opportunity for growth in the natural gas
vehicle industry.
Other
Other Income: The 1993 other income level reflects lower Midland-related
losses than experienced in 1992. The 1992 loss included a $343 million
charge related to the Settlement Order. The 1991 loss included $294
million, related to an MPSC order received in 1991 that allowed Consumers
to recover only $760 million of remaining abandoned Midland investment,
and a $92 million loss related to the cancellation of the CMS Debentures.
Public Utility Holding Company Act Exemption: CMS Energy is exempt from
registration under PUHCA. However, the Attorney General and the MMCG have
asked the SEC to revoke CMS Energy's exemption from registration under
PUHCA. On April 15, 1992, the MPSC filed a statement with the SEC
recommending that CMS Energy's current exemption be revoked and a new
exemption be issued conditioned upon certain reporting and operating
requirements. If CMS Energy were to lose its current exemption, it would
become more heavily regulated by the SEC; Consumers could ultimately be
forced to divest either its electric or gas utility business; and
CMS Energy would be restricted from conducting businesses that are not
functionally related to the conduct of its utility business as determined
by the SEC. CMS Energy is opposing this request and believes it will
maintain its current exemption from registration under PUHCA.
<PAGE>
<PAGE> 112
<TABLE>
Consolidated Statements of Income Consumers Power Company
<CAPTION>
In Millions
Years Ended December 31 1993 1992 1991
<S> <C> <C> <C>
Operating Revenue Electric $2,077 $1,863 $1,849
Gas 1,160 1,126 1,061
Other 6 (11) (2)
---------------------------------
Total operating revenue 3,243 2,978 2,908
---------------------------------
Operating Expenses Operation
Fuel for electric generation 293 305 308
Purchased power - related parties 467 460 442
Purchased and interchange power 148 112 144
Cost of gas sold 678 673 677
Other 516 492 471
---------------------------------
Total operation 2,102 2,042 2,042
Maintenance 203 201 169
Depreciation, depletion and amortization 316 307 242
General taxes 187 179 174
---------------------------------
Total operating expenses 2,808 2,729 2,627
---------------------------------
Pretax Operating Electric 286 154 220
Income (Loss) Gas 146 109 64
Other 3 (14) (3)
---------------------------------
Total pretax operating income 435 249 281
Income Taxes 116 51 48
---------------------------------
Net Operating Income 319 198 233
---------------------------------
Other Income MCV Bond income 32 34 45
(Deductions) Dividends from affiliates 16 16 13
Accretion income (Note 4) 14 15 24
Accretion expense (Note 3) (36) - -
Loss on MCV power purchases - settlement (Note 3) - (520) -
Write-down of abandoned Midland project costs (Note 4) - - (398)
Income from contractual arrangements (Note 16) - - 129
Loss on exchange of related party debentures (Note 16) - - (125)
Other income taxes, net 25 178 123
Other, net 1 (1) 33
---------------------------------
Total other income (deductions) 52 (278) (156)
---------------------------------
Interest Charges Interest on long-term debt 152 150 249
Other interest 22 15 64
Capitalized interest (1) (1) (1)
---------------------------------
Net interest charges 173 164 312
---------------------------------
Net Income (Loss) Before Extraordinary Item 198 (244) (235)
Extraordinary Item, Early Redemption of Debt, Net - - (14)
---------------------------------
Net Income (Loss) 198 (244) (249)
Preferred Stock Dividends 11 11 11
---------------------------------
Net Income (Loss) after Dividends on Preferred Stock $ 187 $ (255) $ (260)
=================================
<FN>
The accompanying notes are an integral part of these statements.
</TABLE>
<PAGE>
<PAGE> 113
<TABLE>
Consolidated Statements of Cash Flows Consumers Power Company
In Millions
<CAPTION>
Years Ended December 31 1993 1992 1991
<S> <C> <C> <C>
Cash Flows From Net income (loss) $ 198 $ (244) $ (249)
Operating Activities Adjustments to reconcile net income (loss) to
net cash provided by operating activities
Depreciation, depletion and amortization 292 298 275
Nuclear decommissioning 54 50 15
Deferred income taxes 59 (172) (173)
Deferred investment tax credit (9) (7) 33
Accretion expense (Note 3) 36 - -
Accretion income - abandoned Midland project (Note 4) (14) (15) (24)
MCV power purchases - settlement (Note 3) (84) - -
Loss on MCV power purchases - settlement (Note 3) - 520 -
Write-down of abandoned Midland project costs - - 398
Income from contractual arrangements - - (129)
Loss on exchange of related party debentures - - 125
MCV Bond income - - (42)
Changes in other assets and liabilities (Note 14) (125) 50 121
Other (3) 3 26
-------- -------- --------
Net cash provided by operating activities 404 483 376
-------- -------- --------
Cash Flows From Capital expenditures (excludes assets placed under
Investing Activities capital leases of $58 in 1993, $69 in 1992 and
$27 in 1991) (Note 14) (451) (411) (279)
Investments in nuclear decommissioning trust funds (54) (50) (15)
Deferred demand-side management costs (52) (26) -
Cost to retire property, net (32) (14) (18)
Sale of subsidiary (Note 2) (14) - -
Other (2) (1) (2)
Proceeds from Midland-related assets (Note 3) 322 10 1,024
Proceeds from sale of property 1 12 5
Proceeds from loan to affiliate - 50 -
Proceeds from Bechtel settlement - 46 -
-------- -------- --------
Net cash provided by (used in) investing activities (282) (384) 715
-------- -------- --------
Cash Flows From Proceeds from bonds (Note 7) 644 - -
Financing Activities Increase (decrease) in notes payable, net 44 (79) (40)
Retirement of bonds (Note 7) (640) (12) (606)
Payment of common stock dividends (133) - (75)
Repayment of bank loans (31) - (310)
Payment of capital lease obligations (24) (35) (38)
Payment of preferred stock dividends (11) (11) (11)
Retirement of other long-term debt (1) - -
Proceeds from bank loans - 60 -
Retirement of preferred stock - - (4)
-------- -------- --------
Net cash used in financing activities (152) (77) (1,084)
-------- -------- --------
Net Increase (Decrease) in Cash and Temporary Cash Investments (30) 22 7
Cash and temporary cash investments
Beginning of year 70 48 41
-------- -------- --------
End of year $ 40 $ 70 $ 48
======== ======== ========
<FN>
The accompanying notes are an integral part of these statements.
</TABLE>
<PAGE>
<PAGE> 114
<TABLE>
Consolidated Balance Sheets Consumers Power Company
<CAPTION>
ASSETS In Millions
December 31 1993 1992
<S> <C> <C>
Plant (At original cost) Electric $5,347 $5,076
Gas 1,837 1,728
Other 253 228
---------------------
7,437 7,032
Less accumulated depreciation, depletion
and amortization (Note 2) 3,550 3,348
---------------------
3,887 3,684
Construction work-in-progress 248 252
---------------------
4,135 3,936
---------------------
Investments Stock of affiliates (Note 16) 291 291
First Midland Limited Partnership (Notes 3 and 17) 213 208
Midland Cogeneration Venture Limited
Partnership (Notes 3 and 17) 67 68
Other 6 6
---------------------
577 573
---------------------
Current Assets Cash and temporary cash investments at cost,
which approximates market (Note 3) 40 70
Accounts receivable and accrued revenue, less allowances
of $4 in 1993 and $5 in 1992 (Note 6) 110 142
Accounts receivable - related parties 12 11
Inventories at average cost
Gas in underground storage 228 204
Materials and supplies 73 70
Generating plant fuel stock 41 37
Deferred income taxes (Note 5) 17 -
Investment in MCV Bonds (Note 3) - 322
Prepayments and other 205 217
---------------------
726 1,073
---------------------
Non-current Assets Postretirement benefits (Note 10) 485 460
Nuclear decommissioning trust funds (Note 2) 165 111
Abandoned Midland project (Note 4) 162 175
Trunkline settlement (Note 4) 86 116
Other 215 152
---------------------
1,113 1,014
---------------------
Total Assets $6,551 $6,596
=====================
/TABLE
<PAGE>
<PAGE> 115
<TABLE>
Consumers Power Company
<CAPTION>
STOCKHOLDERS' INVESTMENT AND LIABILITIES In Millions
December 31 1993 1992
<S> <C> <C>
Capitalization (Note 7) Common stockholder's equity
Common stock $ 841 $ 841
Paid-in-capital 391 391
Retained earnings since December 31, 1992 54 -
---------------------
1,286 1,232
Preferred stock 163 163
Long-term debt 1,839 2,079
Non-current portion of capital leases 106 88
---------------------
3,394 3,562
---------------------
Current Liabilities Current portion of long-term debt and capital leases 355 123
Notes payable 259 215
Accounts payable 148 174
Accounts payable - related parties 49 47
Accrued taxes 171 232
MCV power purchases - settlement (Note 3) 82 81
Accrued interest 39 48
Accrued refunds 28 77
Deferred income taxes (Note 5) - 24
Other 183 184
---------------------
1,314 1,205
---------------------
Non-current Liabilities Postretirement benefits (Note 10) 527 494
Deferred income taxes (Note 5) 485 329
MCV power purchases - settlement (Note 3) 391 439
Deferred investment tax credit 190 199
Trunkline settlement (Note 4) 86 116
Regulatory liabilities for income taxes, net (Note 5) 6 62
Other 158 190
---------------------
1,843 1,829
---------------------
Commitments and Contingencies (Notes 2, 3, 4, 11 and 12)
Total Stockholders' Investment and Liabilities $6,551 $6,596
=====================
<FN>
The accompanying notes are an integral part of these statements.
</TABLE>
<PAGE>
<PAGE> 116
<TABLE>
Consolidated Statements of Long-Term Debt Consumers Power Company
<CAPTION>
In Millions
December 31 1993 1992
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
First Mortgage Bonds Series (%) Due
13-7/8 1993 $ - $ 4
5-7/8 1996 36 36
6 1997 50 50
8-3/4 1997 5 11
8-3/4 1998 248 250
6-5/8 1998 45 45
6-7/8 1998 43 43
9-1/8 1998 5 8
7-5/8 1999 48 48
8-1/4 1999 - 55
8-7/8 1999 200 200
8-5/8 2000 - 50
7-1/2 2001 57 57
8-1/8 2001 - 57
7-1/2 2002 62 62
7-1/2 2002 43 43
6-3/8 2003 300 -
8-5/8 2003 - 75
9 2006 - 60
8-7/8 2007 - 85
8-5/8 2007 - 100
9 2008 - 68
7-3/8 2023 300 -
--------------------
1,442 1,407
Long-Term Bank Debt 469 500
Pollution Control Revenue Bonds 131 133
Nuclear Fuel Disposal 90 88
4-5/8% Debentures 26 26
Other 12 12
--------------------
Principal Amount Outstanding 2,170 2,166
Current Amounts (321) (85)
Net Unamortized Discount (10) (2)
--------------------
Total Long-Term Debt $1,839 $2,079
===============================================================================================================
</TABLE>
<TABLE>
The table below shows maturities and improvement fund obligations for long-term debt:
LONG-TERM DEBT MATURITIES AND OBLIGATIONS In Millions
<CAPTION>
First Mortgage Improvement Long-Term
Bonds Fund Bank Debt Other Total
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1994 $ 91 $9 $188 $ 33 $321
1995 - 8 188 1 197
1996 36 8 93 102 239
1997 50 8 - 1 59
1998 336 7 - 2 345
===========================================================================================================
<FN>
The accompanying notes are an integral part of these statements.
</TABLE>
<PAGE>
<PAGE> 117
<TABLE>
Consolidated Statements of Preferred Stock Consumers Power Company
<CAPTION>
Optional
Redemption Number of Shares In Millions
December 31 Series Price 1993 1992 1993 1992
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Preferred Stock
Cumulative, $100 par value,
authorized 7,500,000 shares,
with no mandatory redemption $4.16 $103.25 68,451 68,451 $ 7 $ 7
4.50 110.00 373,148 373,148 37 37
7.45 101.00 379,549 379,549 38 38
7.68 101.00 207,565 207,565 21 21
7.72 101.00 289,642 289,642 29 29
7.76 102.21 308,072 308,072 31 31
--------------
Total Preferred Stock $163 $163
=================================================================================================================
<FN>
The accompanying notes are an integral part of these statements.
</TABLE>
<PAGE>
<PAGE> 118
<TABLE>
Consolidated Statements of Common Stockholder's Equity Consumers Power Company
<CAPTION>
In Millions,
Except Number of Shares
Other Retained
Number Common Paid-in Earnings
of Shares Stock Capital (Deficit) Total
<S> <C> <C> <C> <C> <C>
Balance at January 1, 1991 84,108,789 $841 $ 864 $ 16 $1,721
Net loss (249) (249)
Cash dividends declared:
Common stock (75) (75)
Preferred stock (11) (11)
Increase in preferred stock
of affiliate (Note 16) 100 100
Net gain on retired stock 1 1
--------------------------------------------------------------------
Balance at December 31, 1991 84,108,789 841 965 (319) 1,487
Net loss (244) (244)
Preferred stock dividends declared (11) (11)
Quasi-reorganization (Note 7) (574) 574 -
Balance at December 31, 1992 84,108,789 841 391 - 1,232
Net income 198 198
Cash dividends declared:
Common stock (133) (133)
Preferred stock (11) (11)
--------------------------------------------------------------------
Balance at December 31, 1993 84,108,789 841 $ 391 $ 54 $1,286
====================================================================
<FN>
The accompanying notes are an integral part of these statements.
</TABLE>
<PAGE>
<PAGE> 119
Consumers Power Company
Notes to Consolidated Financial Statements
1: Corporate Structure
Consumers is a combination electric and gas utility company serving most
of the Lower Peninsula of Michigan, and is the principal subsidiary of
CMS Energy, an energy holding company. Consumers' customer base includes
a mix of residential, commercial and diversified industrial customers, the
largest of which is the automotive industry.
2: Summary of Significant Accounting Policies and Other Matters
Basis of Presentation
The consolidated financial statements include Consumers and its wholly
owned subsidiaries. Consumers eliminates all material transactions between
its consolidated companies. Consumers uses the equity method of accounting
for investments in its companies and partnerships where it has more than a
20 percent but less than a majority ownership interest.
Gas Inventory
Consumers uses the weighted average cost method for valuing working gas
inventory. Cushion gas, which is gas stored to maintain reservoir
pressure for recovery of working gas, is recorded in the appropriate gas
utility plant account. Consumers stores gas inventory in its underground
storage facilities.
Maintenance, Depreciation and Depletion
Property repairs and minor property replacements are charged to
maintenance expense. Depreciable property retired or sold plus cost of
removal (net of salvage credits) is charged to accumulated depreciation.
Consumers bases depreciation provisions for utility plant on straight-line
and units-of-production rates approved by the MPSC. In May 1991, the MPSC
approved an increase of approximately $15 million annually in Consumers'
electric and common utility plant depreciation rates. The composite
depreciation rate for electric utility property was 3.4 percent for 1993
and 1992 and 3.3 percent for 1991. The composite rate for gas utility
plant was 4.4 percent for 1993 and 4.3 percent for 1992 and 1991. The
composite rate for other plant and property was 4.7 percent for 1993, 5.8
percent for 1992 and 3.7 percent for 1991.
New Accounting Standards
In November 1992, the FASB issued SFAS 112, Employers' Accounting for
Postemployment Benefits, which Consumers adopted January 1, 1994.
Consumers pays for several postemployment benefits, the most significant
being workers compensation. Because Consumers' postemployment benefit
plans do not vest or accumulate, the standard did not materially impact
Consumers' financial position or results of operations. For new
accounting standards related to financial instruments, see Note 8.
Nuclear Fuel, Decommissioning and Other Nuclear Matters
Consumers amortizes nuclear fuel cost to fuel expense based on the
quantity of heat produced for electric generation. Interest on leased
nuclear fuel is expensed as incurred. Under federal law, the DOE is
responsible for permanent disposal of spent nuclear fuel at costs to be
paid by affected utilities under various payment options. However, in a
statement released February 17, 1994, the DOE asserted that it does not
have a legal obligation to accept spent nuclear fuel without an
operational repository. The DOE is exploring options to offset the costs
incurred by nuclear utilities in continuing to store spent nuclear fuel on
site. For fuel burned after April 6, 1983, Consumers charges disposal
costs to nuclear fuel expense, recovers it through electric rates and
remits it to the DOE quarterly. Consumers has elected to defer payment
for disposal of spent nuclear fuel burned before April 7, 1983 until the
spent fuel is delivered to the DOE. As of December 31, 1993, Consumers
has recorded a liability to the DOE of $90 million, including interest, to
dispose of spent nuclear fuel burned before April 7, 1983. Consumers has
been recovering through electric rates the amount of this liability,
excluding a portion of interest. Consumers' liability to the DOE becomes
due when the DOE takes possession of Consumers' spent nuclear fuel, which
was originally scheduled to occur in 1998.
In April 1993, the NRC approved the design of the dry spent fuel storage
casks now being used by Consumers at Palisades. In May 1993, the Attorney
General and certain other parties commenced litigation to block Consumers'
use of the storage casks, alleging that the NRC had failed to comply
adequately with the National Environmental Policy Act. As of mid-February
1994, the courts have declined to prevent such use and have refused to
issue temporary restraining orders or stays. Several appeals relating to
this matter are now pending at the U.S. Sixth Circuit Court of Appeals.
Consumers loaded two dry storage casks with spent nuclear fuel in 1993 and
expects to load additional casks in 1994 prior to Palisades' 1995
refueling. If Consumers is unable to continue to use the casks as
planned, significant costs, including replacement power costs during any
resulting plant shutdown, could be incurred.
Consumers currently estimates decommissioning costs (decontamination and
dismantlement) of $208 million and $399 million, in 1993 dollars, for the
Big Rock Point and Palisades nuclear plants, respectively. At December
31, 1993, Consumers had recorded $171 million of decommissioning costs and
classified the obligation as accumulated depreciation. In January 1987,
Consumers began collecting estimated costs to decommission its two nuclear
plants through a monthly surcharge to electric customers which currently
totals $45 million annually. Consumers expects to file updated
decommissioning estimates with the MPSC on or before March 31, 1995.
Amounts collected from electric retail customers are deposited in trust.
Trust earnings are recorded as an investment with a corresponding credit
included in accumulated depreciation. The total amount of the trust will
be available for decommissioning Big Rock Point and Palisades at the end
of their respective license periods in 2000 and 2007. Consumers believes
the amounts being collected are adequate to meet its currently estimated
decommissioning costs and current NRC requirements.
In November 1993, Palisades returned to service following a planned
refueling and maintenance outage that had been extended due to several
unanticipated repairs. The results of an NRC review of Consumers'
performance at Palisades published shortly thereafter showed a decline in
performance ratings for the plant. Management believes that an increased
emphasis on internal assessments will improve performance at Palisades.
In order to provide NRC senior management with a more in-depth assessment
of plant performance, the NRC has initiated a diagnostic evaluation team
inspection at Palisades. The inspection will be a broad-based evaluation
of all aspects of nuclear plant operation and management. The evaluation
is expected to commence in March 1994, with results of the evaluation
expected to be available in May 1994. The outcome of this evaluation
cannot be predicted. Similar reviews conducted at nuclear plants of other
utilities in recent years have in some cases resulted in increased
regulatory oversight or required actions to improve plant operations,
maintenance or condition.
Plateau Resources Ltd.
In August 1993, Consumers sold its ownership interest in Plateau to U. S.
Energy Corp. As a result of the sale, approximately $14 million of
Plateau's cash and cash equivalents, other assets and liabilities,
including certain future decommissioning, environmental and other
contingent liabilities were transferred to U. S. Energy Corp. In view of
prior write-offs, this transaction did not result in any material gains or
additional losses.
Reclassifications
Consumers and the MCV Partnership (see Note 17) have reclassified certain
prior year amounts for comparative purposes. These reclassifications did
not affect the net losses for the years presented.
Revenue and Fuel Costs
Consumers accrues revenue for electricity and gas used by its customers
but not billed at the end of an accounting period. Consumers also accrues
or reduces revenue for any underrecovery or overrecovery of electric power
supply costs and natural gas costs by establishing a corresponding asset
or liability until Consumers bills these unrecovered costs or refunds the
excess recoveries to customers after reconciliation hearings conducted
before the MPSC.
Utility Regulation
Consumers accounts for the effects of regulation under SFAS 71, Accounting
for the Effects of Certain Types of Regulation. As a result, the actions
of regulators affect when revenues, expenses, assets and liabilities are
recognized.
Other
For significant accounting policies regarding cash equivalents, see
Note 14; for income taxes, see Note 5; and for pensions and other
postretirement benefits, see Note 10.
3: The Midland Cogeneration Venture
The MCV Partnership, which leases and operates the MCV Facility,
contracted to supply electricity and steam to The Dow Chemical Company and
to sell electricity to Consumers for a 35-year period beginning in March
1990. At December 31, 1993, Consumers, through its subsidiaries, held the
following assets related to the MCV: 1) CMS Midland owned a 49 percent
general partnership interest in the MCV Partnership; and 2) CMS Holdings
held through the FMLP a 35 percent lessor interest in the MCV Facility.
In late 1993, Consumers sold its remaining $309 million investment in the
MCV Bonds.
Power Purchases from the MCV Partnership
Consumers is obligated to purchase the following amounts of contract
capacity from the MCV Partnership under the PPA:
1995 and
Year 1991 1992 1993 1994 thereafter
- ---- ----- ----- ----- ----- ----------
MW 806 915 1,023 1,132 1,240
During 1992 and 1991, the MPSC only allowed Consumers to recover costs of
power purchased from the MCV Partnership based on delivered energy at
rates less than Consumers paid for 840 MW in 1992 and 806 MW in 1991. As
a result, Consumers recorded after-tax losses of $86 million in 1992 and
$124 million in 1991.
On March 31, 1993, the MPSC approved, with modifications, the Revised
Settlement Proposal which had been co-sponsored by Consumers, the MPSC
staff and 10 small power and cogeneration developers. These parties
accepted the Settlement Order and the MCV Partnership confirmed that it
did not object to its terms. ABATE and the Attorney General have filed
claims of appeal of the Settlement Order with the Court of Appeals.
The Settlement Order determined the cost of power purchased from the MCV
Partnership that Consumers can recover from its electric retail customers
and will significantly reduce the amount of future underrecoveries for
these power costs. Effective January 1, 1993, the Settlement Order
allowed Consumers to recover substantially all of the payments for its
ongoing purchase of 915 MW of contract capacity from the MCV Partnership.
Capacity and energy purchases from the MCV Partnership above the 915 MW
level can be competitively bid into Consumers' next solicitation for power
or, if necessary, utilized for current power needs with a prudency review
and a pricing recovery determination in annual PSCR cases. In either
instance, the MPSC would determine the levels of recovery from customers
for the power purchased. The Settlement Order also provides Consumers the
right to remarket all of the remaining capacity to third parties.
The PPA requires Consumers to pay a minimum levelized average capacity
charge of 3.77 cents per kWh, a fixed energy charge and a variable energy
charge based primarily on Consumers' average cost of coal consumed. The
Settlement Order provided Consumers two options for the recovery that
could be used for capacity charges paid to the MCV Partnership. Under the
option selected, Consumers is scheduling deliveries of energy from the MCV
Partnership whenever it has energy available up to hourly availability
limits, or "caps," for the 915 MW of capacity authorized for recovery in
the Settlement Order. Consumers can recover an average 3.62 cents per kWh
capacity charge and the prescribed energy charges associated with the
scheduled deliveries within the caps, whether or not those deliveries are
scheduled on an economic basis. Through December 31, 1997, there is no
cap applied during on-peak hours to Consumers' recovery for the purchase
of capacity made available within the 915 MW authorized. Recovery for
purchases during off-peak hours is capped at 80 percent in 1993, 82
percent in 1994 and 1995, 84 percent in 1996 and 1997, increasing to 88.7
percent in 1998 and thereafter at which time the 88.7 percent cap is
applicable during all hours. For all economic energy deliveries above the
caps to 915 MW, the option also allows Consumers to recover 1/2 cent per
kWh capacity payment in addition to the corresponding energy charge.
In December 1992, Consumers recognized an after-tax loss of $343 million
for the present value of estimated future underrecoveries of power costs
under the PPA as a result of the Settlement Order. This loss included
management's best estimates regarding the future availability of the MCV
Facility, and the effect of the future wholesale power market on the
amount, timing and price at which various increments of the capacity above
the MPSC-authorized level could be resold. Except for adjustments to the
above loss to reflect the after-tax time value of money through accretion
expense, no additional losses are expected unless actual future experience
materially differs from management's estimates. Because the calculation
of the 1992 loss depended in part upon estimates of future unregulated
sales of energy to third parties, a more conservative or risk-free
investment rate of 7 percent was used to calculate $188 million of the
total $343 million after-tax loss. The remaining portion of the loss was
calculated using an 8.5 percent discount rate reflecting Consumers'
incremental borrowing rate as required by SFAS 90, Regulated Enterprises-
Accounting for Abandonments and Disallowances of Plant Costs. The after-
tax expense for the time value of money for the loss is estimated to be
approximately $24 million in 1994, and various lower levels thereafter,
including $22 million in 1995 and $20 million in 1996. Although the
settlement losses were recorded in 1992, the after-tax cash
underrecoveries, including fixed energy charges, associated with the
Settlement Order were $59 million in 1993. Consumers believes there is
and will be a market for the resale of capacity purchases from the MCV
Partnership above the MPSC-authorized level. However, if Consumers is
unable to sell any capacity above the current MPSC-authorized level,
future additional after-tax losses and after-tax cash underrecoveries
could be incurred. Consumers' estimates of its future after-tax cash
underrecoveries and possible additional losses for the next five years if
none of the additional capacity is sold are as follows:
After-tax, In Millions
1994 1995 1996 1997 1998
---- ---- ---- ---- ----
Expected cash underrecoveries $56 $65 $62 $61 $ 8
Possible additional under-
recoveries and losses (a) $14 $20 $20 $22 $72
(a) If unable to sell any capacity above the MPSC's authorized level
The undiscounted, after-tax amount of the $343 million loss was $789
million. At December 31, 1993, the after-tax present value of the
Settlement Order liability had been reduced to $307 million, which
reflects after-tax cash underrecoveries related to capacity totaling $(54)
million, after-tax accretion expense of $23 million and a $(5) million
adjustment due to the 1993 corporate tax rate change (see Note 5).
The PPA, while requiring payment of a fixed energy charge, contains a
"regulatory out" provision which permits Consumers to reduce the fixed
energy charges payable to the MCV Partnership throughout the entire
contract term if Consumers is not able to recover these amounts from its
customers. In connection with the MPSC's approval of the Revised
Settlement Proposal, Consumers and the MCV Partnership have commenced
arbitration proceedings under the PPA to determine whether Consumers is
entitled to exercise its regulatory out regarding fixed energy charges on
the portion of available MCV capacity above the current MPSC-authorized
levels. An arbitrator acceptable to both parties has been selected. If
the arbitrator determines that Consumers cannot exercise its regulatory
out, Consumers would be required to make these fixed energy payments to
the MCV Partnership even though Consumers may not be recovering these
costs. The arbitration proceedings will also determine who is entitled to
the fixed energy amounts for which Consumers did not receive full cost
recovery during the years prior to settlement. Although Consumers
believes its position on arbitration is sound and intends to aggressively
pursue its right to exercise the regulatory out, management cannot predict
the outcome of the arbitration proceedings or any possible settlement of
the matter. Accordingly, losses were recorded prior to 1993 for all fixed
energy amounts at issue in the arbitration. As of December 31, 1993,
approximately $20 million has been escrowed by Consumers and is included
in Consumers' temporary cash investments. In December 1993, Consumers
made an irrevocable offer to pay through September 15, 2007, fixed energy
charges to the MCV Partnership on all kWh delivered by the MCV Partnership
to Consumers from the contract capacity in excess of 915 MW, which
represents a portion of the fixed energy charges in dispute. Consumers
made the offer to facilitate the sale of the remaining MCV Bonds in 1993.
The lessors of the MCV Facility have filed a lawsuit in federal district
court against CMS Energy, Consumers and CMS Holdings. It alleges breach
of contract, breach of fiduciary duty and negligent or willful
misrepresentation relating to the MCV Partnership's failure to object to
the Settlement Order in light of Consumers' interpretation of the
Settlement Order, which is the subject of an arbitration between the MCV
Partnership and Consumers. The action alleges damages in excess of $1
billion and seeks injunctive relief relative to Consumers' payments of the
fixed energy charge. CMS Energy and Consumers believe that at all times
they and CMS Holdings have conducted themselves properly and that the
action is without merit. They also believe that a significant portion of
the alleged damages represent fixed energy charges in dispute in the
arbitration. CMS Energy and Consumers are unable to predict the outcome
of this action.
PSCR Matters: Consistent with the terms of the Settlement Order,
Consumers has withdrawn its appeals of various MPSC orders issued in
connection with the 1992, 1991 and 1990 PSCR cases. Consumers also agreed
not to appeal any MCV-related issues raised in future orders for these
plan cases and related reconciliations to the extent those issues are
resolved by the Settlement Order. Consumers made refunds, including
interest, of $69 million in 1993 and $29 million in 1992 to customers for
overrecoveries in connection with the 1991 and 1990 PSCR reconciliation
cases, respectively. These amounts were included in losses recorded prior
to 1993. In 1992, Consumers recovered MCV power purchase costs consistent
with the MPSC's 1992 plan case order, and does not anticipate that any
MCV-related refunds will be required.
4: Rate Matters
Electric Rate Case
Consumers filed a request with the MPSC in May 1993 to increase its
electric rates. Subsequently, as a result of changed estimates, Consumers
revised its requested electric rate increase to $133 million annually
based on a 1994 test year. Consumers also requested an additional annual
electric rate increase of $38 million based on a 1995 test year.
Consumers' request included increased future expenditures primarily
related to capital additions, demand-side management programs, operation
and maintenance, higher depreciation and postretirement benefits computed
under SFAS 106, Employers' Accounting for Postretirement Benefits Other
than Pensions. The filing also proposed experimental incentive provisions
that would either reward or penalize Consumers, based on its operating
performance. In addition, Consumers would share any returns above its
MPSC-authorized level with customers in exchange for the ability to earn
not lower than one percentage point below its authorized level.
In March 1994, an ALJ issued a proposal for decision that recommended
Consumers' 1994 final annual rate increase total approximately $83
million, and that the incremental requested 1995 increase not be granted
at this time. The ALJ's recommendation included a lower return on
electric common equity, reflected reduced anticipated debt costs due to
the projected availability of more favorable interest rates and proposed a
lower equity ratio for Consumers' projected capitalization structure. The
ALJ did, however, generally support Consumers' rate design proposal to
significantly reduce the level of subsidization of residential customers
by commercial and industrial customers and generally supported the
performance incentive but not the shared return mechanism discussed above.
Abandoned Midland Project: In July 1984, Consumers abandoned construction
of its unfinished nuclear power plant located in Midland, Michigan, and
subsequently took a series of write-downs. In May 1991, Consumers began
collecting $35 million pretax annually for the next 10 years and is
amortizing the assets against current income over the recovery period
using an interest method. Amortization for 1993, 1992 and 1991 was $28
million, $28 million and $18 million, respectively.
Consumers was not permitted to earn a return on the portion of the
abandoned Midland investment for which the MPSC was allowing recovery.
Therefore, under SFAS 90, the recorded losses described above included
amounts that reduced the recoverable asset to the present value of future
recoveries. During the remaining recovery period, part of the prior
losses will be reversed to adjust the unrecovered asset to its present
value. and is reflected as accretion income. An after-tax total of
approximately $35 million of the prior losses remains to be included in
accretion income through April 2001. Several parties, including the
Attorney General, have filed claims of appeal with the Court of Appeals
regarding MPSC orders issued in May and July 1991 that specified the
recovery of abandoned investment.
Electric Demand-side Management: As a result of settlement discussions
regarding demand-side management and an MPSC order in July 1991, Consumers
agreed to spend $65 million over two years on demand-side management
programs. Based on the MPSC's determination of Consumers' effectiveness
in implementing these programs, Consumers' future rate of return on common
equity may be adjusted either upward by up to 1 percent or downward by up
to 2 percent. This adjustment, if implemented, would be applied to
Consumers' retail electric tariff rates and be in effect for one year
following reconciliation hearings with the MPSC that are expected to be
initiated in the first quarter of 1994. The estimated revenue effects of
the potential adjustment range from an $11 million increase to a $22
million decrease. Consumers believes it will receive an increase on its
return on common equity based on having achieved all of the agreed upon
objectives.
On October 1, 1993, Consumers completed the customer participation portion
of these programs and as part of its current electric rate case has
requested MPSC authorization to continue certain programs in 1994.
Consumers has also requested recovery of demand-side management
expenditures which exceeded the $65 million level. Consumers is deferring
program costs and amortizing the costs over the period these costs are
being recovered from its customers in accordance with an accounting order
issued by the MPSC in September 1992. The unamortized balance of deferred
costs at December 31, 1993 and 1992 was $71 million and $25 million,
respectively.
PSCR Issues
Consumers began a planned refueling and maintenance outage at Palisades in
June 1993. Following several required, unanticipated repairs that
extended the outage, the plant returned to service in early November.
Recovery of replacement power costs incurred by Consumers during the
outage will be reviewed by the MPSC during the 1993 PSCR reconciliation of
actual costs and revenues to determine the prudency of actions taken
during the outage. Any finding of delay due to imprudence could result in
disallowances of a portion of replacement power costs. Net replacement
power costs were approximately $180,000 per day above the cost of fuel
incurred when the plant is operating.
The Energy Act imposes an obligation on the utility industry, including
Consumers, to decommission DOE uranium enrichment facilities. Consumers
currently estimates its payments for decommissioning those facilities to
be $2.4 million per year for 15 years beginning in 1992, escalating based
on an inflation factor. Consumers believes these costs are recoverable
from its customers under traditional regulatory policies. As of December
31, 1993, Consumers' remaining estimated liability was approximately $34
million. Consumers has a regulatory asset of $34 million for the expected
recovery of this amount in electric rates.
GCR Issues
In connection with its 1991 GCR reconciliation case, Consumers refunded
$36 million, including interest, to its firm sales and transportation rate
customers in April 1992. Consumers accrued the full amount for this refund
in 1991.
The MPSC issued an order during 1993 that approved an interim settlement
agreement for the 12 months ended March 31, 1993. As a result of the
settlement, Consumers refunded in August 1993, to its GCR and
transportation customers, approximately $22 million, including interest.
Consumers previously accrued amounts sufficient for this refund.
The MPSC, in a February 1993 order, provided that the price payable to
certain intrastate gas producers by Consumers be reduced prospectively.
As a result, Consumers was not allowed to recover approximately $13
million of costs incurred prior to February 8, 1993. In 1991, Consumers
accrued a loss sufficient for this issue. Future disallowances are not
anticipated, unless the remaining appeals filed by the intrastate
producers are successful.
In 1992, the FERC approved a settlement involving Consumers, Trunkline and
certain other parties, which resolved numerous claims and proceedings
concerning Trunkline liquified natural gas costs. The settlement
represents significant gas cost savings for Consumers and its customers in
future years. As part of the settlement, Consumers will not incur any
transition costs from Trunkline as a result of FERC Order 636. In
November 1992, Consumers had recorded a liability and regulatory asset for
the principal amount of payments to Trunkline over a five-year period and
a regulatory asset. On May 11, 1993, the MPSC approved a separate
settlement agreement that provides Consumers with full recovery of these
costs over a five-year period. At December 31, 1993, Consumers' remaining
liability and regulatory asset was $116 million.
Other
Certain of Consumers' direct gas suppliers have contract prices tied to
the price Consumers pays Trunkline for its gas. On September 1, 1993,
Consumers commenced gas purchases from Trunkline under a continuation of
prior sales agreements. The current contract covers gas deliveries
through October 1994 and is at a reduced price compared to prior gas
sales. Some of Consumers' direct gas suppliers have claimed that the
reduced Trunkline gas cost is not a proper reference price under their
contracts with Consumers and that their contracts are terminable after a
12-month period. Consumers is disputing these claims. Additionally,
three of these direct gas suppliers of Consumers have made filings with
the FERC in Trunkline's Order 636 restructuring case seeking to preclude
Trunkline's ability to make the sales to Consumers which commenced on
September 1, 1993. Consumers and Trunkline vigorously opposed these
filings and in December 1993, the FERC issued an order which, among other
things, allowed Trunkline to continue sales of gas to Consumers under
tariffs on file with the FERC.
Estimated losses for certain contingencies discussed in this note have
been accrued. Resolution of these contingencies is not expected to have a
material impact on the financial statements.
5: Income Taxes
Consumers and its subsidiaries file a consolidated federal income tax
return with CMS Energy. Income taxes are generally allocated to each
company based on each company's separate taxable income. Consumers'
accrued federal income tax benefits from CMS Energy were $49 million and
$3 million as of December 31, 1993 and 1992, respectively. In 1992,
Consumers implemented SFAS 109, Accounting for Income Taxes. Deferred tax
assets and liabilities are classified as current or noncurrent based on
the classification of the related asset or liability, for all temporary
differences. Consumers began practicing full deferred tax accounting for
temporary differences arising after January 1, 1993, as authorized by a
generic MPSC order. The generic order reduces the amount of regulatory
assets and liabilities that otherwise could have arisen in future periods
by allowing Consumers to reflect the income statement effect in the period
temporary differences arise.
Consumers uses ITC to reduce current income taxes payable and defers and
amortizes ITC over the life of the related property. The AMT requires
taxpayers to perform a second separate federal tax calculation based on a
flat rate applied to a broader tax base. AMT is the amount by which this
"broader-based" tax exceeds regular tax. Any AMT paid generally becomes a
tax credit that can be carried forward indefinitely to reduce regular tax
liabilities in future periods when regular taxes paid exceed the tax
calculated for AMT.
On August 10, 1993, the Omnibus Budget Reconciliation Act of 1993
increased the statutory federal tax rate from 34 percent to 35 percent
effective January 1, 1993. The cumulative effect of this tax rate change
has been reflected in Consumers' financial statements.
The significant components of income tax expense (benefit) consisted of:
In Millions
Years Ended December 31 1993 1992 1991(a)
- ----------------------- ------- ------ --------
Current federal income taxes $ 41 $ 52 $ 58
Deferred income taxes 61 (172) (166)
Deferred income taxes - tax rate change (2) - -
Deferred ITC, net (9) (7) 33
------- ------ ------
$ 91 $(127) $(75)
======= ====== ======
Operating $ 116 $ 51 $ 48
Other (25) (178) (123)
------- ------ ------
$ 91 $(127) $(75)
======= ====== ======
(a) The 1991 provision for income taxes was before an extraordinary item
that had related deferred income taxes of approximately $7 million.
The principal components of Consumers' deferred tax assets (liabilities)
recognized in the balance sheet are as follows:
In Millions
December 31 1993 1992
- ----------- ------- --------
Property $ (518) $ (458)
Unconsolidated investments (184) (129)
Postretirement benefits (Note 10) (178) (165)
Abandoned Midland project (Note 4) (57) (60)
Employee benefit obligations (includes
postretirement benefits of
$178 and $165) (Note 10) 200 186
MCV power purchases - settlement (Note 3) 165 177
AMT carryforward 64 51
ITC carryforward (expires 2005) 48 49
Other (8) (4)
------- --------
$ (468) $ (353)
======= ========
Gross deferred tax liabilities $(1,319) $(1,228)
Gross deferred tax assets 851 875
-------- --------
$ (468) $ (353)
======== ========
The actual income tax expense (benefit) differs from the amount computed
by applying the statutory federal tax rate to income before income taxes
as follows:
In Millions
Years Ended December 31 1993 1992 1991
------- ------- -------
Net income (loss) before extraordinary item $ 198 $(244) $(235)
Income tax expense (benefit) 91 (127) (75)
------- ------- -------
289 (371) (310)
Statutory federal income tax rate x 35% x 34% x 34%
-------- ------- -------
Expected income tax expense (benefit) 101 (126) (105)
Increase (decrease) in taxes from:
Capitalized overheads previously
flowed through 5 5 35
Differences in book and tax depreciation
not previously deferred 6 9 8
ITC amortization and utilization (10) (10) (7)
Affiliated companies' dividends (6) (5) (5)
Other, net (5) - (1)
------- ------- -------
$ 91 $(127) $ (75)
======= ======= =======
6: Short-Term Financings
Consumers has authorization from the FERC to issue or guarantee up to $900
million of short-term debt through December 31, 1994. Consumers has a
$470 million facility that is used to finance seasonal working capital
requirements and unsecured, committed lines of credit aggregating $165
million. As of December 31, 1993, $235 million and $24 million were
outstanding at weighted average interest rates of 4.0 percent and 3.9
percent, respectively. Further, Consumers has an established $500 million
trade receivables purchase and sale program. As of December 31, 1993 and
1992, receivables sold under the agreement totaled $285 million and $225
million, respectively. On February 15, 1994, Consumers increased the
level of receivables sold to $335 million.
7: Capitalization
Capital Stock
As of December 31, 1992, Consumers effected a quasi-reorganization, an
elective accounting procedure in which Consumers' accumulated deficit of
$574 million was eliminated against other paid-in capital. The fair
values of Consumers' assets and liabilities at the date of the quasi-
reorganization were determined by management to approximate their carrying
values and no material adjustments to the historical bases were made.
This action was approved by Consumers' Board of Directors and did not
require shareholder approval. As a result of the quasi-reorganization and
subsequent accumulated earnings, Consumers paid $133 million in common
stock dividends in 1993 and also declared from 1993 earnings a $16 million
common stock dividend in January 1994. Consumers has authorization from
the MPSC and is proceeding to issue $200 million of preferred stock in
1994.
First Mortgage Bonds
Consumers secures its first mortgage bonds by a mortgage and lien on
substantially all of its property. Consumers' ability to issue and sell
securities is restricted by certain provisions in its First Mortgage Bond
Indenture, Articles and the need for regulatory approvals in compliance
with appropriate state and federal law. In September 1993, Consumers
issued, with MPSC approval, $300 million of 6 3/8 percent first mortgage
bonds, due 2003 and $300 million of 7 3/8 percent first mortgage bonds,
due 2023. Consumers used the net proceeds from the bond issuance to
refund approximately $515 million of higher interest first mortgage bonds
and the balance to reduce short-term borrowings. Unamortized debt costs,
premiums and discounts and call premiums on the refunded debt totaling
approximately $18 million were deferred under SFAS 71, and are being
amortized over the lives of the new debt.
In February 1994, Consumers issued a call for redemption totaling
approximately $10 million. Consumers also fully redeemed two issues of
first mortgage bonds totaling approximately $91 million. These
redemptions completed Consumers' commitment to the MPSC, under the 1993
authorization to issue first mortgage bonds, to refinance certain long-
term debt.
Long-Term Bank Debt
Under its long-term credit agreement at December 31, 1993, Consumers was
required to make 10 remaining quarterly principal payments of
approximately $47 million. As of December 31, 1993, the outstanding
balance under this credit agreement totaled $469 million with a weighted
average interest rate of 4.0 percent. In January 1993, Consumers entered
into an interest rate swap agreement, exchanging variable-rate interest
for fixed-rate interest on the latest maturing $250 million of the then
remaining $500 million obligation under its long-term credit agreement.
Other
Consumers has a total of $131 million of PCRBs outstanding with a weighted
average interest rate of 4.2 percent as of December 31, 1993. Consumers
classifies $101 million of PCRBs as long-term because it can refinance
these amounts through irrevocable letters of credit expiring after one
year.
In June 1993, Consumers entered into loan agreements in connection with
the issuance of approximately $28 million of adjustable rate demand
limited obligation refunding revenue bonds, due 2010, which are secured by
an irrevocable letter of credit expiring in 1996. These bonds bear an
initial interest rate of 2.65 percent. Consumers also entered into loan
agreements in connection with the issuance of $30 million of 5.8 percent
limited obligation refunding revenue bonds, due 2010, secured by a
financial guaranty insurance policy and certain first mortgage bonds of
Consumers. Proceeds of these issues were used to redeem on August 1, 1993
in advance of their maturities, approximately $58 million of outstanding
PCRBs.
8: Financial Instruments
Cash, short-term investments and current liabilities approximate their
fair value due to the short-term nature of those instruments. The
estimated fair value of long-term investments is based on quoted market
prices where available. When specific market prices do not exist for an
instrument, the fair value is based on quoted market prices of similar
investments or other valuation techniques. All long-term investments in
financial instruments, except as shown below, approximate fair value.
Although the current fair value of the long-term debt, which is based on
calculations made by debt pricing specialists, may be greater than the
current carrying amount, settlement of the reported debt is generally not
expected until maturity. The estimated fair values of Consumers'
financial instruments are as follows:
In Millions
Years Ended December 31 1993 1992
- ----------------------- ----------------- -----------------
Carrying Fair Carrying Fair
Amount Value Amount Value
Investment in stock
of affiliates $ 291 $ 323 $ 291 $ 303
Long-term debt 1,839 1,984 2,079 2,123
The fair value of Consumers' off-balance sheet financial instruments is
based on the amount estimated to terminate or settle the obligation:
In Millions
Years Ended December 31 1993 1992
---------- ----------
Fair Value Fair Value
Interest rate swaps (Note 7) $ 5 $ -
Guarantees 7 7
On January 1, 1994, Consumers adopted SFAS 115, Accounting for Certain
Investments in Debt and Equity Securities, requiring accounting for
investments in debt securities to be held to maturity at amortized cost;
otherwise debt and marketable equity securities would be recorded at fair
value, with any unrealized gains or losses included in earnings if the
security is held for trading purposes or as a separate component of
shareholders' equity if the security is available for sale. The
implementation resulted in an increase in assets of $30 million in January
1994 with a corresponding increase in stockholders' equity of $20 million,
net of tax.
In May 1993, the FASB issued SFAS 114, Accounting by Creditors for
Impairment of a Loan, effective in 1995, requiring certain loans that are
determined to be impaired be measured based on the present value of
expected future cash flows discounted at the loan's effective interest
rate, the loan's observable market price or the fair value of any
collateral for a secured loan. Consumers does not believe this standard
will have a material impact on its financial position or results of
operations.
9: Executive Incentive Compensation
Consumers participates in CMS Energy's Performance Incentive Stock Plan.
Under the plan, restricted shares of common stock of CMS Energy, stock
options and stock appreciation rights may be granted to key employees
based on their contributions to the successful management of CMS Energy
and its subsidiaries. The plan reserves for award not more than 2 percent
of CMS Energy's common stock outstanding on January 1 each year, less the
number of shares of restricted common stock awarded and of common stock
subject to options granted under the plan during the immediately preceding
four calendar years. Any forfeitures are subject to award under the plan.
As of December 31, 1993, awards of up to 447,686 shares of common stock
may be issued.
Restricted shares of common stock are outstanding shares with full voting
and dividend rights. Performance criteria were added in 1990 based on
CMS Energy's total return to shareholders. Shares of restricted common
stock cannot be distributed until they are vested and the performance
objectives are met. Further, the restricted stock is subject to
forfeiture if employment terminates before vesting. If key employees
exceed performance objectives, the plan will allow additional awards.
Restricted shares vest fully if control of CMS Energy changes, as defined
by the plan.
Consumers' Executive Stock Option and Stock Appreciation Rights Plan, an
earlier plan approved by shareholders, remains in effect until all
authorized options are granted or September 25, 1995. As of December 31,
1993, options for 43,000 shares remained to be granted.
Under both plans, for stock options and stock appreciation rights, the
exercise price on each grant date equaled the closing market price on the
grant date. Options are exercisable upon grant and expire up to 10 years
and one month from date of grant. The status of the restricted stock
granted under the Performance Incentive Stock Plan and options granted
under both plans follows. The number of shares presented also includes
shares for employees of CMS Energy and non-utility affiliates.
Restricted
Stock Options
---------- ----------------------------
Number Number Price
of Shares of Shares per Share
----------- --------- ---------------
Outstanding at
January 1, 1991 212,500 1,162,216 $ 7.13 - $34.25
Granted 97,000 194,000 $ 21.13 - $21.13
Exercised or Issued (34,437) (65,125) $ 7.13 - $16.00
--------- ---------- ---------------
Outstanding at
December 31, 1991 275,063 1,291,091 $ 7.13 - $34.25
Granted 101,000 215,000 $ 17.13 - $18.00
Exercised or Issued (37,422) (21,000) $ 13.00 - $16.00
Canceled (15,375) (50,000) $ 20.50 - $33.88
--------- ---------- ---------------
Outstanding at
December 31, 1992 323,266 1,435,091 $ 7.13 - $34.25
Granted 132,000 249,000 $ 25.13 - $26.25
Exercised or Issued (54,938) (152,125) $ 7.13 - $21.13
Canceled (84,141) (33,000) $ 20.50 - $33.88
--------- ---------- ---------------
Outstanding at
December 31, 1993 316,187 1,498,966 $ 7.13 - $34.25
========= ========== ===============
10: Retirement Benefits
Postretirement Benefit Plans Other Than Pensions
Consumers adopted SFAS 106 effective as of the beginning of 1992. The
standard required Consumers to change its accounting for the cost of
health care and life insurance benefits that are provided to retirees from
a pay-as-you-go (cash) method to a full accrual method. Accordingly,
Consumers recorded a liability of $466 million for the accumulated
transition obligation and a corresponding regulatory asset for anticipated
recovery in utility rates.
Both the MPSC and FERC have generally adopted SFAS 106 costs for
ratemaking purposes provided costs recovered through rates are placed in
external funds until they are needed to pay benefits. The MPSC's generic
order allows utilities three years to seek recovery of costs and provides
for recovery from customers of any deferred costs incurred prior to the
beginning of rate recovery of such costs. Consumers anticipates
recovering its regulatory asset within 20 years. As discussed in Note 4,
Consumers has requested recovery of the portion of these costs allocated
to the electric business. In late 1994, Consumers plans to request
recovery of the gas utility portion of these costs. Consumers plans to
fund the benefits using external Voluntary Employee Beneficiary
Associations. Funding of the health care benefits would begin when
Consumers' rate recovery based on SFAS 106 begins. A portion of the life
insurance benefits have previously been funded.
As of December 31, 1993, the actuary assumed that retiree health care
costs increased 10.5 percent in 1994 then decreased gradually to 5.5
percent in 2000 and thereafter. The health care cost trend rate
assumption significantly affects the amounts reported. For example, a 1
percentage point increase in each year would increase the accumulated
postretirement benefit obligation as of December 31, 1993 by $75 million
and the aggregate of the service and interest cost components of net
periodic postretirement benefit costs for 1993 by $9 million.
For the years ended December 31, 1993 and 1992, the weighted average
discount rate was 7.25 percent and 8 percent, respectively, and the
expected long-term rate of return on plan assets was 8.5 percent. Net
periodic postretirement benefit cost for health care benefits and life
insurance benefits was $51 million in 1993 and $49 million in 1992. The
1993 and 1992 cost was comprised of $13 million and $10 million for
service plus $38 million and $39 million for interest, respectively.
The funded status of the postretirement benefit plans is reconciled with
the liability recorded at December 31 as follows:
In Millions
1993 1992
------- -------
Actuarial present value of estimated benefits
Retirees $ 281 $ 264
Eligible for retirement 54 50
Active (upon retirement) 187 175
------- -------
Accumulated postretirement benefit obligation 522 489
Plan assets (premium deposit fund) at fair value 4 4
------- -------
Projected postretirement benefit obligation
in excess of plan assets (518) (485)
Unrecognized net loss from experience
different than assumed 8 -
------- -------
Recorded liability and regulatory asset $ (510) $ (485)
======= =======
Consumers' postretirement health care plan is unfunded; the accumulated
postretirement benefit obligation for that plan is $510 million and $478
million at December 31, 1993 and 1992, respectively.
Supplemental Executive Retirement Plan
Certain management employees qualify under the SERP. Benefits are based on
the employee's service and earnings as defined in the SERP. In 1988, a
trust from which SERP benefits are paid was established and funded.
Because the SERP is not a qualified plan under the Internal Revenue Code,
earnings of the trust are taxable and trust assets are included in
Consumers' consolidated assets. As of December 31, 1993 and 1992, trust
assets at cost (which approximates market) were $16 million and $14
million, respectively, and were classified as other non-current assets.
Defined Benefit Pension Plan
A trusteed, non-contributory, defined benefit Pension Plan covers
substantially all employees. The benefits are based on an employee's years
of accredited service and earnings, as defined in the plan, during an
employee's five highest years of earnings. Because the plan is fully
funded, no contributions were made for plan years 1991 through 1993.
Amounts presented for the Pension Plan include amounts for CMS Energy and
non-utility affiliates, which are not distinguishable from nor are they
significant when compared with the plan's total amounts.
Years Ended December 31 1993 1992 1991
- ----------------------- ----- ----- -----
Discount rate 7.25% 8.5% 8.5%
Rate of compensation increase 4.5% 5.5% 5.5%
Expected long-term rate of return on assets 8.75% 8.75% 8.75%
Net Pension Plan and SERP costs consisted of:
In Millions
Years Ended December 31 1993 1992 1991
----- ----- -----
Service cost $ 19 $ 19 $ 18
Interest cost 49 47 48
Actual return on plan assets (92) (36) (88)
Net amortization and deferral 34 (20) 28
----- ----- -----
Net periodic pension cost $ 10 $ 10 $ 6
===== ===== =====
The funded status of the Pension Plan and SERP reconciled to the pension
liability recorded at December 31 was:
In Millions
Pension Plan SERP
------------- -------------
1993 1992 1993 1992
----- ----- ----- -----
Actuarial present value of
estimated benefits
Vested $ 471 $ 349 $ 12 $ 10
Non-vested 56 49 - -
------ ------ ----- -----
Accumulated benefit obligation 527 398 12 10
Provision for future pay increases 138 177 5 5
------ ------ ----- -----
Projected benefit obligation 665 575 17 15
Plan assets (primarily stocks and
bonds,including $87 in 1993 and
$64 in 1992 in common stock
of CMS Energy) at fair value 692 631 - -
------ ------ ----- -----
Projected benefit obligation less than
(in excess of) plan assets 27 56 (17) (15)
Unrecognized net (gain) loss from
experience different than assumed (56) (76) 5 2
Unrecognized prior service cost 45 49 - 1
Unrecognized net transition
(asset) obligation (44) (49) 1 1
------ ------ ------ -----
Recorded liability $ (28) $ (20) $ (11) $(11)
====== ====== ====== =====
Beginning January 1, 1986, the amortization period for the Pension Plan's
unrecognized net transition asset is 16 years and 11 years for the SERP's
unrecognized net transition obligation. Prior service costs are amortized
on a straight-line basis over the average remaining service period of
active employees.
In 1991, certain eligible employees accepted early retirement incentives.
The incentives consisted of lump-sum cash payments and increased pension
payments. The pretax cost of the incentives was $25 million. Also in
1991, portions of the projected benefit obligation were settled which
resulted in a pretax gain of $25 million that offset the early retirement
costs.
11: Leases
Consumers leases various assets, including vehicles, aircraft,
construction equipment, computer equipment, nuclear fuel and buildings.
Consumers' nuclear fuel capital leasing arrangement was extended an
additional year and is now scheduled to expire in November 1995. The
maximum amount of nuclear fuel that can be leased increased from $55
million to $70 million. Consumers further increased this amount in early
1994 to $80 million. The lease provides for an additional one-year
extension upon mutual agreement by the parties. Upon termination of the
lease, the lessor would be entitled to a cash payment equal to its
remaining investment, which was $57 million as of December 31, 1993.
Consumers is responsible for payment of taxes, maintenance, operating
costs, and insurance.
Minimum rental commitments under Consumers' non-cancelable leases at
December 31, 1993, were:
In Millions
Capital Operating
Leases Leases
------- ---------
1994 $ 40 $ 7
1995 57 6
1996 16 2
1997 15 2
1998 13 2
1999 and thereafter 26 21
----- -----
Total minimum lease payments 167 $ 40
=====
Less imputed interest 27
-----
Present value of net minimum lease payments 140
Less current portion 34
-----
Non-current portion (a) $106
=====
(a) In January 1994, Consumers amended its nuclear fuel lease to include
fuel previously owned at Big Rock Point. This is estimated to increase
the non-current portion of capital leases by approximately $6 million.
Consumers recovers these charges from customers and accordingly charges
payments for its capital and operating leases to operating expense.
Operating lease charges, including charges to clearing and other accounts
as of December 31, 1993, 1992 and 1991, were $8 million, $12 million and
$12 million, respectively.
Capital lease expenses for the years ended December 31, 1993, 1992 and
1991 were $32 million, $44 million and $48 million, respectively.
Included in these amounts for the years ended 1993, 1992 and 1991, are
nuclear fuel lease expenses of $13 million, $17 million and $24 million,
respectively.
12: Commitments and Contingencies
Ludington Pumped Storage Plant Litigation
In 1986, the Attorney General filed a lawsuit on behalf of the State of
Michigan in the Circuit Court of Ingham County, seeking damages from
Consumers and Detroit Edison for alleged injuries to fishery resources
because of the operation of the Ludington Pumped Storage Plant. The state
sought $148 million (including $16 million of interest) for past injuries
and $89,000 per day for future injuries, with the latter amount to be
adjusted upon installation of "adequate" fish barriers and other changed
conditions.
In 1987, the Attorney General filed a second lawsuit alleging that
Consumers and Detroit Edison have breached a bottomlands lease agreement
with the state and asked that the lease be declared void. This complaint
was consolidated with the suit described in the preceding paragraph. In
1990, both of the lawsuits were dismissed on the basis of federal
preemption. In 1993, the Court of Appeals overturned the dismissal, as to
damages, effectively allowing the state to continue its damages lawsuit
against Consumers and Detroit Edison, but generally affirmed the lower
court's ruling as to the breach of lease claim. The Court of Appeals'
ruling also limited any potential damages to those occurring no earlier
than 1983. Consumers, Detroit Edison and the Attorney General have filed
an application for leave to appeal with the Michigan Supreme Court.
Consumers and Detroit Edison are seeking to have the trial court's
dismissal of the damages claim affirmed.
Each year since 1989, Consumers and Detroit Edison have complied with FERC
orders by installing a seasonal barrier net from April to October at the
Ludington plant site. The FERC is now considering whether the barrier net
(along with other actions by Consumers, including contributions to state
fish-stocking programs) would be a satisfactory permanent solution.
Environmental Matters
Consumers is a so-called "Potentially Responsible Party" at several sites
being administered under Superfund. Along with Consumers, there are
numerous credit-worthy, potentially responsible parties with substantial
assets cooperating with respect to the individual sites. Based on
information currently known by management, Consumers believes that it is
unlikely that its liability at any of the known Superfund sites,
individually or in total, will have a material adverse effect on its
financial position or results of operations.
The State of Michigan in 1990 passed amendments to the Environmental
Response Act that established a state program similar to the federal
Superfund law, though broader in scope. Under this law, Consumers expects
that it will ultimately incur costs at a number of sites, including some
of the 23 sites that formerly housed manufactured gas plant facilities,
even those in which it has a partial or no current ownership interest. It
is expected that in most cases, parties other than Consumers with current
or former ownership interests may also be considered liable under the law
and may be required to share in the costs of any site investigations and
remedial actions. There is limited knowledge of manufactured gas plant
contamination at these sites at this time. However, Consumers is
continuing to monitor this issue.
In addition, at the request of the DNR, Consumers prepared plans for
remedial investigation/feasibility studies for three of these sites. Work
plans for remedial investigation/feasibility studies for four other sites
have also been prepared. The purpose of a remedial
investigation/feasibility study is to define the nature and extent of
contamination at a site and to determine which of several possible
remedial action alternatives, including no action, may be required under
the Environmental Response Act. The DNR has approved two of the three
plans for remedial investigation/feasibility studies submitted and is
currently reviewing the one remaining. The cost to conduct one of the
approved studies will be approximately $250,000 based on bids received.
Although the actual cost of conducting the remaining two remedial
investigation/feasibility studies will not be known until bids are
received from contractors, Consumers currently estimates the total cost of
conducting the three studies submitted to the DNR to be less than $1
million.
The timing and extent of any further site investigation and remedial
actions will depend, among other things, on requests received from the DNR
and on future site usage by Consumers or other owners. Under the current
schedule, Consumers anticipates the first remedial
investigation/feasibility study would be completed in mid-1994. Consumers
believes the results of the remedial investigation/feasibility studies
will allow management to estimate a range of remedial cost estimates for
the sites under study. Based on Consumers' knowledge of other utility
remedial actions, remediation costs for Consumers for these sites may be
substantial. In 1993, the MPSC addressed the question of recovery of
investigation and remedial costs for another Michigan gas utility as part
of that utility's gas rate case. In that proceeding, the MPSC determined
that prudent investigation and remedial costs could be deferred and
amortized over 10-year periods and prudent unamortized costs can be
included for recovery in the utility's rate cases. The MPSC stated the
length of the period may be reviewed from time to time, but any revisions
would be prospective. Consumers believes costs incurred for both
investigation and any required remedial actions would be recoverable from
its customers under established regulatory policies and accordingly are
not likely to materially affect its financial position or results of
operations.
Included in the 1990 amendments to the federal Clean Air Act are
provisions that limit emissions of sulfur dioxide and nitrogen oxides and
require enhanced emissions monitoring. All of Consumers' coal-fueled
electric generating units burn low-sulfur coal and are presently operating
at or near the sulfur dioxide emission limits which will be effective in
2000. Beginning in 1995, certain coal-fueled generating units will
receive emissions allowances (all of Consumers' coal units will receive
allowances beginning in 2000). Based on projected emissions from these
units, Consumers expects to have excess allowances which may be sold or
saved for future use.
The Clean Air Act's provisions require Consumers to make capital
expenditures estimated to total $74 million through 1999 for completed,
in-process and possible modifications at coal-fired units based on
existing and proposed regulations. Management believes that Consumers'
annual operating costs will not be materially affected.
The EPA has asked a number of utilities in the Great Lakes area to
voluntarily retire certain equipment containing specific levels of
polychlorinated biphenyls. Consumers believes that it is largely in
compliance with the EPA's petition. Consumers is continuing to study the
request and has been granted an extension for responding until March 30,
1994.
Capital Expenditures
Consumers estimates capital expenditures, including demand-side management
and new lease commitments, of $553 million for 1994, $461 million for 1995
and $471 million for 1996.
Public Utility Holding Company Act Exemption
CMS Energy is exempt from registration under PUHCA. However, the Attorney
General and the MMCG have asked the SEC to revoke CMS Energy's exemption
from registration under PUHCA. In 1992, the MPSC filed a statement with
the SEC recommending that CMS Energy's current exemption be revoked and a
new exemption be issued conditioned upon certain reporting and operating
requirements. If CMS Energy were to lose its current exemption, it would
become more heavily regulated by the SEC; Consumers could ultimately be
forced to divest either its electric or gas utility business; and
CMS Energy would be restricted from conducting businesses that are not
functionally related to the conduct of its utility business as determined
by the SEC. CMS Energy is opposing this request and believes it will
maintain its current exemption from registration under PUHCA.
Other
Consumers experienced an increase in complaints during 1993 relating to
so-called stray voltage. Claimants contend that stray voltage results
when small electrical currents present in grounded electric systems are
diverted from their intended path. Investigation by Consumers of prior
stray voltage complaints disclosed that many factors, including improper
wiring and malfunctioning of on-farm equipment, can lead to the stray
voltage phenomenon. Consumers maintains a policy of investigating all
customer calls regarding stray voltage and working with customers to
address their concerns including, when necessary, modifying the
configuration of the customer's hook-up to Consumers. A complaint seeking
certification as a class action suit was filed against Consumers in a
local county circuit court in 1993. The complaint alleges the existence
of a purported class that has incurred damages of up to $1 billion,
primarily to certain livestock owned by the purported class, as a result
of stray voltage from electricity being supplied by Consumers. Consumers
believes the allegations to be without merit and intends to vigorously
oppose the certification of the class and this suit.
In addition to the matters disclosed in these notes, Consumers and certain
of its subsidiaries are parties to certain lawsuits and administrative
proceedings before various courts and governmental agencies, arising from
the ordinary course of business involving personal injury and property
damage, contractual matters, environmental issues, federal and state
taxes, rates, licensing and other matters.
The ultimate effect of the proceedings discussed in this note is not
expected to have a material impact on Consumers' financial position or
results of operations.
13: Jointly Owned Utility Facilities
Consumers is responsible for providing its share of financing for the
jointly owned facilities. The following table indicates the extent of
Consumers' investment in jointly owned utility facilities:
In Millions
December 31 1993 1992
- ----------- ---- ----
Net investment
Ludington - 51% $114 $112
Campbell Unit 3 - 93.3% 349 360
Transmission lines - various 32 33
Accumulated depreciation
Ludington $ 74 $ 71
Campbell Unit 3 210 199
Transmission lines 11 10
<PAGE>
<PAGE> 138
14: Supplemental Cash Flow Information
For purposes of the Statement of Cash Flows, all highly liquid investments
with an original maturity of three months or less are considered cash
equivalents. Other cash flow activities and non-cash investing and
financing activities for the years ended December 31 were:
In Millions
1993 1992 1991
------ ------ ------
Cash transactions
Interest paid (net of amounts capitalized) $177 $176 $308
Income taxes paid (net of refunds) 90 6 30
Non-cash transactions
Nuclear fuel placed under capital lease $ 28 $ 30 $ 6
Other assets placed under capital leases 30 39 21
Capital leases refinanced 42 - -
Assumption of debt - 15 -
Return of Midland related assets (Note 16) - - (92)
Increased value of investment in Enterprises'
preferred stock (Note 16) - - 100
Changes in other assets and liabilities as shown on the Consolidated
Statements of Cash Flows at December 31 are described below:
In Millions
1993 1992 1991
------ ------ ------
Sale of receivables, net $ 60 $ 25 $ -
Accounts receivable 19 30 66
Accrued revenue (48) 91 7
Inventories (32) 24 (8)
Accounts payable (25) 21 (83)
Accrued refunds (48) (143) 102
Tax Reform Act refund reserve - - (77)
Other current assets and liabilities, net (59) 38 (56)
Non-current deferred amounts, net 8 (36) 170
------ ------ -----
$(125) $ 50 $ 121
======= ====== ======
15: Reportable Segments
The Consolidated Statements of Income show operating revenue and pretax
operating income by segments. These amounts include earnings (losses) from
investments accounted for by the equity method of $6 million, $(10)
million and $(2) million for 1993, 1992 and 1991, respectively. Other
segment information follows:
In Millions
Years Ended December 31 1993 1992 1991
- ----------------------- ------ ------ ------
Depreciation, depletion and amortization
Electric $ 241 $ 230 $ 172
Gas 73 76 70
Other 2 1 -
------ ------ ------
$ 316 $ 307 $ 242
====== ====== ======
Identifiable assets
Electric (a) $4,027 $3,812 $3,399
Gas 1,443 1,387 1,186
Other (b) 1,081 1,397 1,401
------ ------ ------
$6,551 $6,596 $5,986
====== ====== ======
Capital expenditures (c)
Electric (d) $ 365 $ 353 $ 213
Gas 127 86 61
Other 69 67 32
------ ------ ------
$ 561 $ 506 $ 306
====== ====== ======
(a) Includes abandoned Midland investment of $162 million, $175 million
and $287 million for 1993, 1992 and 1991, respectively.
(b) Reclassified 1992 and 1991 to include independent power production,
which is no longer significant enough for Consumers to report separately.
Also, other was reduced by the sale of $309 million of MCV Bonds (see
Note 3).
(c) Includes capital leases for nuclear fuel and other assets (see
Note 14).
(d) Includes DSM costs of $52 million for 1993 and $26 million for 1992.
16: Related-Party Transactions
Consumers has an investment of $250 million in 10 shares of the preferred
stock of Enterprises, an affiliate company of Consumers. Prior to a 1991
amendment to Enterprises' Articles, it was to have redeemed on July 1,
1991 and in each of the next four years, two shares of its preferred stock
held by Consumers at a redemption price equal to $25 million per share.
Because of the amendment, the dividend rate increased and the first
mandatory redemption date became August 1, 1997. The asset value and other
paid-in capital of Consumers were increased $100 million as a result of
the amendment. In addition, Consumers has an investment in approximately
3 million shares of CMS Energy common stock totaling $42 million at
December 31, 1993. As a result of these two investments, Consumers
received dividends on affiliates' common and preferred stock totaling $16
million in 1993 and 1992 and $13 million in 1991.
In March 1990, Consumers' subsidiary, MGL and Consumers' parent,
CMS Energy, entered into an agreement where MGL exchanged its investment
in several subsidiaries that held Midland-related assets for
CMS Debentures issued by CMS Energy. Consumers recorded the earnings on
the CMS Debentures as income from contractual arrangements. In December
1991, the subsidiaries were returned to Consumers and the CMS Debentures
were cancelled to comply with various regulatory and court orders. On
July 27, 1991, Consumers stopped recording income on the CMS Debentures
when it became probable the return would be required. The return resulted
in a net after-tax loss of approximately $92 million because the book
value of the subsidiaries was less than the CMS Debentures' book value.
Consumers purchases a portion of its gas from an affiliate, NOMECO. The
amounts of purchases for the years ended 1993, 1992 and 1991 were
$3 million, $3 million and $20 million, respectively. In 1993, 1992 and
1991, Consumers purchased $52 million, $36 million and $26 million,
respectively, of electric generating capacity and energy from affiliates
of Enterprises. Consumers and its subsidiaries sold, stored and
transported natural gas and provided other services to the MCV Partnership
totaling approximately $14 million for 1993, 1992 and 1991, respectively.
For additional discussion of related-party transactions with the MCV
Partnership and the FMLP, see Notes 3 and 17. Other related-party
transactions are immaterial.
17: Summarized Financial Information of Significant Related Energy
Supplier
Under the PPA with the MCV Partnership discussed in Note 3, Consumers'
1993 obligation to purchase electricity from the MCV Partnership was
approximately 14 percent of Consumers' owned and contracted capacity.
Summarized financial information of the MCV Partnership is shown below:
Statements of Income
In Millions
Years Ended December 31 1993 1992 1991
- ----------------------- ------ ------ ------
Operating revenue (a) $ 548 $ 488 $ 425
Operating expenses 362 315 278
------ ------ ------
Operating income 186 173 147
Other expense, net (189) (190) (186)
------ ------ ------
Net loss $ (3) $ (17) $ (39)
====== ====== ======
Balance Sheets
In Millions
December 31 1993 1992
- ----------- ------ ------
Assets
Current assets (a) $ 181 $ 165
Property, plant and equipment, net 2,073 2,124
Other assets 146 147
------ ------
$2,400 $2,436
====== ======
Liabilities and Partners' Equity
Current liabilities $ 198 $ 189
Long-term debt and other non-current liabilities (b) 2,147 2,189
Partners' equity (c) 55 58
------ ------
$2,400 $2,436
====== ======
(a) Revenue from Consumers totaled $505 million, $444 million and $384
million for 1993, 1992 and 1991, respectively. As of December 31, 1993,
1992 and 1991, $44 million, $38 million and $33 million, respectively,
were receivable from Consumers.
(b) FMLP is a beneficiary of an owner trust that is the lessor in a
long-term direct finance lease with the lessee, MCV Partnership.
CMS Holdings holds a 46.4 percent ownership interest in FMLP (see Note 3).
At December 31, 1993 and 1992, lease obligations of $1.7 billion were owed
to the owner trust of which FMLP is the sole beneficiary. CMS Holdings'
share of the interest and principal portion for the 1993 lease payments
was $63 million and $16 million, respectively, and for the 1992 lease
payments was $65 million and $12 million, respectively. The lease payments
service $1.2 billion and $1.3 billion in non-recourse debt outstanding as
of December 31, 1993 and 1992, respectively, of the owner-trust whose
beneficiary is FMLP. FMLP's debt is secured by the MCV Partnership's lease
obligations, assets, and operating revenues. For 1993 and 1992, the
owner-trust whose beneficiary is FMLP made debt payments of $172 million
and $166 million, respectively, which included $10 million and $8 million
principal and $25 million and $26 million interest, respectively, on the
MCV Bonds held by MEC Development Corporation during part of 1991 and by
Consumers through December 1993.
(c) CMS Midland's recorded investment in the MCV Partnership includes
capitalized interest, which is being amortized to expense over the life of
its investment in the MCV Partnership.
<PAGE>
<PAGE> 142
Arthur Andersen & Co.
Report of Independent Public Accountants
To Consumers Power Company:
We have audited the accompanying consolidated balance sheets and
consolidated statements of long-term debt and preferred stock of CONSUMERS
POWER COMPANY (a Michigan corporation and wholly owned subsidiary of CMS
Energy Corporation) and subsidiaries as of December 31, 1993 and 1992, and
the related consolidated statements of income, common stockholder's
equity, and cash flows for each of the three years in the period ended
December 31, 1993. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to
express an opinion on these consolidated financial statements based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the consolidated financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the consolidated financial statements. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
consolidated financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of
Consumers Power Company and subsidiaries as of December 31, 1993 and 1992,
and the results of their operations and their cash flows for each of the
three years in the period ended December 31, 1993 in conformity with
generally accepted accounting principles.
As discussed in Note 5 to the consolidated financial statements, effective
January 1, 1992, the Company changed its method of accounting for income
taxes. As discussed in Note 10 to the consolidated financial statements,
effective January 1, 1992, the Company changed its method of accounting
for postretirement benefits other than pensions. Additionally, as
discussed in Note 7 to the consolidated financial statements, the Company
effected a quasi-reorganization on December 31, 1992.
ARTHUR ANDERSEN & Co.
Detroit, Michigan,
January 28, 1994.
<PAGE>
<PAGE> 143
<TABLE>
Quarterly Financial Information Consumers Power Company
<CAPTION>
In Millions
1993 (Unaudited) 1992 (Unaudited)
Quarters Ended March 31 June 30 Sept. 30 Dec. 31 March 31 June 30 Sept. 30 Dec. 31
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Operating revenue (a) $987 $681 $702 $873 $941 $644 $576 $817
Pretax operating income (a) $156 $74 $101 $104 $116 $53 $34 $46
Net income (loss) $78 $26 $45 $49 $63 $23 $8 $(338)
Preferred stock dividends $3 $3 $3 $2 $3 $3 $3 $2
Net income (loss) after
preferred stock dividends $75 $23 $42 $47 $60 $20 $5 $(340)
<FN>
(a) Amounts in 1992 and March 31, 1993 were restated for comparative purposes.
</TABLE>
<PAGE>
<PAGE> 144
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE.
CMS Energy
None for CMS Energy.
Consumers
None for Consumers.
PART III
(ITEMS 10., 11., 12. and 13.)
CMS Energy
CMS Energy's definitive Proxy Statement, except for the organization and
compensation committee report contained therein, is incorporated by
reference herein. See also Item 1. BUSINESS for information pursuant to
Item 10.
Consumers
Consumers' definitive Proxy Statement, except for the organization and
compensation committee report contained therein, is incorporated by
reference herein. See also Item 1. BUSINESS for information pursuant to
Item 10.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
AND REPORTS ON FORM 8-K.
(a)(1) Financial Statements and Reports of Independent Public Accountants
for CMS Energy and Consumers are listed in Item 8 in the Index to
Financial Statements, and are incorporated by reference herein.
(a)(2) Financial Statement Schedules and Reports of Independent Public
Accountants for CMS Energy and Consumers are listed after the
Exhibits in the Index to Financial Statement Schedules, and are
incorporated by reference herein.
(a)(3) Exhibits for CMS Energy and Consumers are listed after Item (c)
below and are incorporated by reference herein.
(b) Reports on Form 8-K for CMS Energy and Consumers.
CMS Energy
Current reports dated September 29, 1993, as amended by Form 8-K/A,
Amendment No. 1, dated October 22, 1993, and dated December 10,
1993 covering matters reported pursuant to Item 5. Other Events.
and Item 7. Financial Statements and Exhibits., and current
reports dated December 28, 1993 and March 4, 1994 covering matters
reported pursuant to Item 5. Other Events.
Consumers
Current reports dated September 21, 1993 and December 10, 1993
covering matters reported pursuant to Item 5. Other Events. and
Item 7. Financial Statements and Exhibits., and dated December 28,
1993 and March 4, 1994 covering matters reported pursuant to
Item 5. Other Events.
(c) Exhibits, including those incorporated by reference (see also
Exhibit volume).
<PAGE>
<PAGE> 145
The following exhibits are applicable to CMS Energy and Consumers except
where otherwise indicated "CMS ONLY":
CMS Energy
and Consumers
Exhibit Numbers
- ---------------
(1)-(2) - Not applicable.
(3)(a) (CMS ONLY) - Articles of Incorporation of CMS Energy
Corporation, as Amended. (Designated in CMS
Energy Corporation's Form S-8 dated
June 30, 1989, File No 1-9513, as Exhibit
(4).)
(3)(b) (CMS ONLY) - Copy of the By-Laws of CMS Energy Corporation.
(3)(c) - Restated Articles of Incorporation of
Consumers Power Company.
(3)(d) - Copy of By-Laws of Consumers Power Company.
(4)(a) - Composite Working Copy of Indenture dated as
of September 1, 1945, between Consumers Power
Company and Chemical Bank (successor to
Manufacturers Hanover Trust Company), as
Trustee, including therein indentures
supplemental thereto through the Forty-third
Supplemental Indenture dated as of May 1,
1979. (Designated in Consumers Power
Company's Registration No 2-65973 as
Exhibit (b)(1)-4.)
Indentures Supplemental thereto:
Consumers
Power Company
Sup Ind/Dated as of File Reference Exhibit
------------------- ---------------- -------
44th 11/15/79 Reg No 2-65973 (b)(1)-7
45th 01/15/80 Reg No 2-68900 (b)(1)-5
46th 01/15/80 Reg No 2-69704 (4)(b)
47th 06/15/80 Form 10-K for
year end Dec 31,
1980, File
No 1-5611 (4)(b)
48th 03/15/81 Reg No 2-73741 (4)(b)
49th 11/01/81 Reg No 2-75542 (4)(b)
50th 03/01/82 Form 10-K for
year end Dec 31,
1981, File
No 1-5611 (4)(b)
51st 08/10/82 Reg No 2-78842 (4)(f)
52nd 08/31/82 Reg No 2-79390 (4)(f)
53rd 12/01/82 Reg No 2-81077 (4)(f)
54th 05/01/83 Reg No 2-84172 (4)(e)
55th 09/15/83 Reg No 2-86751 (4)(e)
56th 10/15/83 Reg No 2-87735 (4)(e)
57th 03/01/84 Reg No 2-89215 (4)(e)
58th 07/16/84 Form 10-Q for
quarter ended
June 30, 1984,
File No 1-5611 (4)(f)
59th 10/01/84 Reg No 2-93438 (4)(c)
60th 06/01/85 Form 10-Q for
quarter ended
June 30, 1985,
File No 1-5611 (4)(f)
61st 10/15/86 Reg No 33-9732 (4)(e)
63rd 04/15/87 Form 10-Q for
quarter ended
June 30, 1987
File No 1-5611 (4)(f)
64th 06/15/87 Form 10-Q for
quarter ended
June 30, 1987
File No 1-5611 (4)(g)
65th 02/15/88 Form 8-K dated
Feb 18, 1988
File No 1-5611 (4)
66th 04/15/88 Form 10-Q for
quarter ended
March 31, 1988
File No 1-5611 (4)(d)
67th 11/15/89 Reg No 33-31866 (4)(d)
68th 06/15/93 Reg No 33-41126 (4)(c)
69th 09/15/93 Form 8-K dated
September 21,
1993 File No
1-5611 (4)
(4)(b) (CMS ONLY) - Indenture between CMS Energy Corporation and
NBD Bank, National Association, as Trustee.
(Designated in CMS Energy's Form S-3
Registration Statement filed May 1, 1992, File
No. 33-47629, as Exhibit (4)(a).)
First Supplemental Indenture dated as of
October 1, 1992 between CMS Energy Corporation
and NBD Bank, National Association, as
Trustee. (Designated in CMS Energy's Form 8-K
dated October 1, 1992, File No. 1-9513, as
Exhibit (4).)
Second Supplemental Indenture dated as of
October 1, 1992 between CMS Energy Corporation
and NBD Bank, National Association, as
Trustee. (Designated in CMS Energy's Form 8-K
dated October 1, 1992, File No. 1-9513, as
Exhibit (4).)
(5)-(9) - Not applicable.
(10)(a) - Credit Agreement dated as of May 1, 1989 among
Consumers Power Company, the Co-Managers, as
defined therein, the Banks, as defined
therein, the Lenders, as defined therein, and
Citibank, NA, as Agent, and the Exhibits
thereto. (Designated in Consumers Power
Company's Form 10-Q for the quarter ended
March 31, 1989, File No 1-5611, as
Exhibit (19).)
Letter amendment dated as of December 11,
1991. (Designated in Consumers Power
Company's Form 10-K for the year ended
December 30, 1991, File No. 1-5611, as Exhibit
(3)(d).)
(10)(b) (CMS ONLY) - Amended and Restated Credit Agreement dated as
of November 30, 1992 as Amended and Restated
as of October 15, 1993, among CMS Energy
Corporation, the Banks, the Co-Agents, the
Documentation Agent and the Operational Agent,
all as defined therein, and the Exhibits
thereto.
(10)(c) - Employment Agreement dated as of August 1,
1990 among Consumers Power Company, CMS Energy
Corporation and William T. McCormick, Jr.
(Designated in CMS Energy Corporation's Form
10-K for the year ended December 31, 1990,
File No 1-9513, as Exhibit (10)(c).)
(10)(d) - Employment contract effective as of March 1,
1987 among CMS Energy Corporation, Consumers
Power Company and S. Kinnie Smith, Jr.
(Designated in Consumers Power Company's
Form 10-K for the year ended December 31,
1987, File No 1-5611, as Exhibit (10)(g).)
(10)(e) - Employment Agreement effective as of June 15,
1988 among Consumers Power Company, CMS Energy
Corporation and Victor J. Fryling.
(Designated in Consumers Power Company's
Form 10-K for the year ended December 31,
1988, File No 1-5611, as Exhibit (10)(i).)
(10)(f) - Employment Agreement dated May 26, 1989
between Consumers Power Company and Michael G.
Morris. (Designated in Consumers Power
Company's Form 10-K for the year ended
December 31, 1990, File No 1-5611, as
Exhibit (10)(f).)
(10)(g) - Employment Agreement dated May 26, 1989
between Consumers Power Company and David A.
Mikelonis. (Designated in Consumers Power
Company's Form 10-K for the year ended
December 31, 1991, File No. 1-5611, as Exhibit
10(h).)
(10)(h) - Employment Agreement dated May 26, 1989 among
Consumers Power Company, CMS Energy
Corporation and John W. Clark. (Designated in
CMS Energy Corporation's Form 10-K for the
year ended December 31, 1990, File No 1-9513,
as Exhibit (10)(f).)
(10)(i) - Employment Agreement dated March 25, 1992
between Consumers Power Company and Alan M.
Wright. (Designated in Consumers Power
Company's Form 10-K for the year ended
December 31, 1992, File No. 1-5611, as Exhibit
10(j).)
(10)(j) - Employment Agreement dated March 25, 1992
between Consumers Power Company and Paul A.
Elbert. (Designated in Consumers Power
Company's Form 10-K for the year ended
December 31, 1992, File No. 1-5611, as Exhibit
10(k).)
(10)(k) - Consumers Power Company's Executive Stock
Option and Stock Appreciation Rights Plan
effective December 1, 1989. (Designated in
Consumers Power Company's Form 10-K for the
year ended December 31, 1990, File No 1-5611,
as Exhibit (10)(g).)
(10)(l) - CMS Energy Corporation's Performance Incentive
Stock Plan effective as of December 1, 1989.
(Designated in CMS Energy Corporation's
Form 10-K for the year ended December 31,
1990, File No 1-9513, as Exhibit (10)(h).)
(10)(m) - CMS Deferred Salary Savings Plan effective
January 1, 1994.
(10)(n) - Consumers Power Company's Annual Executive
Incentive Compensation Plan effective February
1993, as amended March 1994.
(10)(o) - Consumers Power Company's Supplemental
Executive Retirement Plan effective
November 1, 1990.
(10)(p) - Senior Trust Indenture, Leasehold Mortgage and
Security Agreement dated as of June 1, 1990
between The Connecticut National Bank and
United States Trust Company of New York.
(Designated in Midland Cogeneration Venture
Limited Partnership's Form S-1 filed November
23, 1990, File No 33-37977, as Exhibit 4.1.)
Indenture Supplemental thereto:
Supplement No. 1 dated as of June 1, 1990.
(Designated in Midland Cogeneration Venture
Limited Partnership's Form S-1 filed November
23, 1990, File No 33-37977, as Exhibit 4.2.)
(10)(q) - Collateral Trust Indenture dated as of June 1,
1990 among Midland Funding Corporation I,
Midland Cogeneration Venture Limited
Partnership and United States Trust Company of
New York, Trustee. (Designated in CMS Energy
Corporation's Form 10-Q for the quarter ended
June 30, 1990, File No 1-9513, as
Exhibit (28)(b).)
Indenture Supplemental thereto:
Supplement No 1 dated as of June 1, 1990.
(Designated in Midland Cogeneration Venture
Limited Partnership's Form S-1 filed
November 23, 1990, File No 33-37977, as
Exhibit 4.4.)
(10)(r) - Amended and Restated Investor Partner Tax
Indemnification Agreement dated as of June 1,
1990 among Investor Partners, CMS Midland
Holdings Corporation as Indemnitor and CMS
Energy Corporation as Guarantor. (Designated
in CMS Energy Corporation's Form 10-K for the
year ended December 31, 1990, File No 1-9513,
as Exhibit (10)(v).)
(10)(s) - Environmental Agreement dated as of June 1,
1990 made by CMS Energy Corporation to The
Connecticut National Bank and Others.
(Designated in CMS Energy Corporation's Form
10-K for the year ended December 31, 1990,
File No 1-9513, as Exhibit (10)(y) and
Form 10-Q for the quarter ended September 30,
1991, File No 1-9513, as Exhibit (19)(d).)**
(10)(t) - Indemnity Agreement dated as of June 1, 1990
made by CMS Energy Corporation to Midland
Cogeneration Venture Limited Partnership.
(Designated in CMS Energy Corporation's
Form 10-K for the year ended December 31,
1990, File No 1-9513, as Exhibit (10)(z).)**
(10)(u) - Environmental Agreement dated as of June 1,
1990 made by CMS Energy Corporation to United
States Trust Company of New York, Meridian
Trust Company, each Subordinated Collateral
Trust Trustee and Holders from time to time of
Senior Bonds and Subordinated Bonds and
Participants from time to time in Senior Bonds
and Subordinated Bonds. (Designated in CMS
Energy Corporation's Form 10-K for the year
ended December 31, 1990, File No 1-9513, as
Exhibit (10)(aa).)**
(10)(v) - Amended and Restated Participation Agreement
dated as of June 1, 1990 among Midland
Cogeneration Venture Limited Partnership,
Owner Participant, The Connecticut National
Bank, United States Trust Company, Meridian
Trust Company, Midland Funding Corporation I,
Midland Funding Corporation II, MEC
Development Corporation and Institutional
Senior Bond Purchasers. (Designated in
Midland Cogeneration Venture Limited
Partnership's Form S-1 filed November 23,
1990, File No 33-37977, as Exhibit 4.13.)
Amendment No 1 dated as of July 1, 1991.
(Designated in Consumers Power Company's Form
10-K for the year ended December 31, 1991,
File No. 1-5611, as Exhibit (10)(w).)
(10)(w) - Power Purchase Agreement dated as of July 17,
1986 between Midland Cogeneration Venture
Limited Partnership and Consumers Power
Company. (Designated in Midland Cogeneration
Venture Limited Partnership's Form S-1 filed
November 23, 1990, File No 33-37977, as
Exhibit 10.4.)
Amendments thereto:
Amendment No 1 dated September 10, 1987.
(Designated in Midland Cogeneration Venture
Limited Partnership's Form S-1 filed November
23, 1990, File No 33-37977, as Exhibit 10.5.)
Amendment No 2 dated March 18, 1988.
(Designated in Midland Cogeneration Venture
Limited Partnership's Form S-1 filed November
23, 1990, File No 33-37977, as Exhibit 10.6.)
Amendment No 3 dated August 28, 1989.
(Designated in Midland Cogeneration Venture
Limited Partnership's Form S-1 filed November
23, 1990, File No 33-37977, as Exhibit 10.7.)
Amendment No 4A dated May 25, 1989.
(Designated in Midland Cogeneration Venture
Limited Partnership's Form S-1 filed November
23, 1990, File No 33-37977, as Exhibit 10.8.)
(10)(x) - Request for Approval of Settlement Proposal to
Resolve MCV Cost Recovery Issues and Court
Remand, filed with the Michigan Public Service
Commission on July 7, 1992, MPSC Case No. U-
10127. (Designated in CMS Energy
Corporation's and Consumers Power Company's
Forms 10-K for the year ended December 31,
1991 as amended by Form 8 dated July 15, 1992
as Exhibit (28).)
(10)(y) - Settlement Proposal Filed on July 7, 1992 as
Revised on September 8, 1992 by Filing with
the Michigan Public Service Commission.
(Designated in CMS Energy Corporation's and
Consumers Power Company's Forms 8-K dated
September 8, 1992 as Exhibit (28).)
(10)(z) - Michigan Public Service Commission Order Dated
March 31, 1993, Approving with Modifications
the Settlement Proposal Filed on July 7, 1992,
as Revised on September 8, 1992. (Designated
in CMS Energy Corporation's and Consumers
Power Company's Forms 10-K for the year ended
December 31, 1992 as Exhibit (10)(cc).
(10)(aa) - Unwind Agreement dated as of December 10, 1991
by and among CMS Energy Corporation, Midland
Group, Ltd., Consumers Power Company, CMS
Midland, Inc., MEC Development Corp. and CMS
Midland Holdings Company. (Designated in
Consumers Power Company's Form 10-K for the
year ended December 31, 1991, File No. 1-5611,
as Exhibit (10)(y).)
(10)(bb) - Stipulated AGE Release Amount Payment
Agreement dated as of June 1, 1990, among CMS
Energy Corporation, Consumers Power Company
and The Dow Chemical Company. (Designated in
Consumers Power Company's Form 10-K for the
year ended December 31, 1991, File No. 1-5611,
as Exhibit (10)(z).)
(10)(cc) - Parent Guaranty dated as of June 14, 1990 from
CMS Energy Corporation to MCV, each of the
Owner Trustees, the Indenture Trustees, the
Owner Participants and the Initial Purchasers
of Senior Bonds in the MCV Sale Leaseback
transaction, and MEC Development. (Designated
in Consumers Power Company's Form 10-K for the
year ended December 31, 1991, File No. 1-5611,
as Exhibit (10)(aa).)**
(11)-(12) - Not applicable.
(13) - Not Applicable.
(14)-(20) - Not applicable.
(21)(a) (CMS ONLY) - Subsidiaries of CMS Energy Corporation.
(21)(b) - Subsidiaries of Consumers Power Company.
(22) - Not applicable.
(23) - Consents of experts and counsel.
(24) - Powers of Attorney.
(25)-(28) - Not applicable.
*Five copies of this exhibit have been signed by, or on behalf of, each of
five Owner Participants. With regard to each of the agreements, each copy
is substantially identical in all material respects except as to the
parties thereto. Therefore, pursuant to Instruction 2, Item 601(a) of
Regulation S-K, CMS Energy Corporation and Consumers Power Company are
filing a copy of only one such document.
** Obligations of only CMS Holdings and CMS Midland, second tier
subsidiaries of Consumers, and of CMS Energy but not of Consumers.
Exhibits listed above which have heretofore been filed with the Securities
and Exchange Commission pursuant to various acts administered by the
Commission, and which were designated as noted above, are hereby
incorporated herein by reference and made a part hereof with the same
effect as if filed herewith.
<PAGE>
<PAGE> 153
Index to Financial Statement Schedules
Schedule Page
V Property, Plant and Equipment
1993, 1992 and 1991:
CMS Energy Corporation 154
Consumers Power Company 157
VI Accumulated Depreciation, Depletion and
Amortization of Property, Plant
and Equipment
1993, 1992 and 1991:
CMS Energy Corporation 160
Consumers Power Company 163
VIII Valuation and Qualifying Accounts and Reserves
1993, 1992 and 1991:
CMS Energy Corporation 166
Consumers Power Company 167
IX Short-Term Borrowings
1993, 1992 and 1991:
CMS Energy Corporation 168
Consumers Power Company 169
X Supplementary Income Statement Information
1993, 1992 and 1991:
CMS Energy Corporation 170
Consumers Power Company 171
Report of Independent Public Accountants
CMS Energy Corporation 172
Consumers Power Company 173
Schedules other than those listed above are omitted because they are
either not required, not applicable or the required information is shown
in the financial statements or notes thereto.
Columns omitted from schedules filed have been omitted because the
information is not applicable.
<PAGE>
<PAGE> 154
<TABLE>
CMS ENERGY CORPORATION
Schedule V - Property, Plant and Equipment
Year Ended December 31, 1993
(Millions of Dollars)
<CAPTION>
Balance at Balance at
Beginning Additions Other Changes End of
Classification of Period at cost Retirements Add (Deduct) Period
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Electric Utility
Consumers Power Company:
Intangible $ 2 $ - $ - $ - $ 2
Steam production 1,363 22 13 1 (a) 1,373
Nuclear production 665 53 5 (5) (a) 708
Nuclear fuel 195 4 - - 199
Nuclear fuel under capital lease 148 28 - - 176
Hydro production 170 13 1 - 182
Other production 37 - - - 37
Transmission 685 22 5 (1) (a) 701
Distribution 1,682 157 16 - 1,823
General 61 8 - - 69
Capital leases 55 41 (b) 35 (9) (a) 52
Plant held for future use 13 12 - - 25
--------------------------------------------------------------
Total electric utility 5,076 360 75 (14) 5,347
--------------------------------------------------------------
Gas Utility
Consumers Power Company:
Intangible 2 - - - 2
Natural gas production 9 - - - 9
Underground storage 169 4 - - 173
Transmission 178 15 2 - 191
Distribution 1,117 73 7 - 1,183
General 26 5 - - 31
Capital leases 16 7 (b) 13 - 10
Plant held for future use 142 1 - - 143
--------------------------------------------------------------
1,659 105 22 - 1,742
Michigan Gas Storage Company 69 27 1 - 95
--------------------------------------------------------------
Total gas utility 1,728 132 23 - 1,837
--------------------------------------------------------------
Other
NOMECO Oil and Gas Company 768 81 - (4) (a)(c) 845
Consumers Power Company - Other 147 40 - 3 (a) 190
Consumers Power Company - Capital leases 81 24 (b) 42 - 63
CMS Generation Company 2 2 - 11 (d) 15
CMS Energy Corporation 13 - - (1) (e) 12
Jackson Pipeline Company 10 - - - 10 (f)
CMS Arcadia Land Management Company 8 - - - 8
Antrim Limited Partnership 8 - - - 8 (f)
CMS Gas Transmission Company 3 4 - - 7 (f)
CMS Utility Services, Inc. 4 - - - 4
Other 1 1 - - 2
--------------------------------------------------------------
Total other 1,045 152 42 9 1,164
--------------------------------------------------------------
Total plant 7,849 644 140 (5) 8,348
--------------------------------------------------------------
Construction Work in Progress
Consumers Power Company 248 (3) - 1 (a) 246
Antrim Limited Partnership - 9 - - 9
Michigan Gas Storage Company 4 (2) - - 2
--------------------------------------------------------------
252 4 - 1 257
--------------------------------------------------------------
Total plant including work
in progress $8,101 $ 648 $ 140 $ (4) $8,605
==============================================================
<FN>
(a) Reclassifications of accounts (d) Plant additions due to acquired ownership
(b) Refinanced: Electric $22, Gas $5 and Other $15 (e) Lease amortization
(c) Write-off of prediscovery foreign expenditures (f) Non-utility gas plant and property
</TABLE>
<PAGE> 155
<TABLE>
CMS ENERGY CORPORATION
Schedule V - Property, Plant and Equipment
Year Ended December 31, 1992
(Millions of Dollars)
<CAPTION>
Balance at Balance at
Beginning Additions Other Changes End of
Classification of Period at cost Retirements Add (Deduct) Period
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Electric Utility
Consumers Power Company:
Intangible $ 2 $ - $ - $ - $ 2
Steam production 1,355 22 11 (3) (a) 1,363
Nuclear production 619 48 2 - 665
Nuclear fuel 191 4 - - 195
Nuclear fuel under capital lease 118 30 - - 148
Hydro production 165 5 - - 170
Other production 37 - - - 37
Transmission 660 29 7 3 (a) 685
Distribution 1,569 130 11 (6) (b) 1,682
General 54 7 - - 61
Capital leases 40 22 8 1 (a) 55
Plant held for future use 13 - - - 13
--------------------------------------------------------------
Total electric utility 4,823 297 39 (5) 5,076
--------------------------------------------------------------
Gas Utility
Consumers Power Company:
Intangible 2 - - - 2
Natural gas production 14 - 4 (1) (a) 9
Underground storage 168 1 - - 169
Transmission 178 3 3 - 178
Distribution 1,050 62 (4) 1 (a) 1,117
General 23 3 - - 26
Capital leases 25 3 12 - 16
Plant held for future use 141 1 - - 142
--------------------------------------------------------------
1,601 73 15 - 1,659
Michigan Gas Storage Company 65 4 - - 69
--------------------------------------------------------------
Total gas utility 1,666 77 15 - 1,728
--------------------------------------------------------------
Other
NOMECO Oil and Gas Company 702 68 - (2) (c) 768
Consumers Power Company - Other 120 31 3 (1) (a) 147
Consumers Power Company - Capital leases 74 14 7 - 81
CMS Energy Corporation 14 - - (1) (d) 13
Jackson Pipeline Company 10 - - - 10 (g)
Antrim Limited Partnership - 8 - - 8 (g)
CMS Arcadia Land Management Company 8 - - - 8
CMS Utility Services, Inc. 4 - - - 4
CMS Gas Transmission Company - 3 - - 3 (g)
CMS Generation Company - - - 2 (e) 2
Other 1 1 1 - 1
--------------------------------------------------------------
Total other 933 125 11 (2) 1,045
--------------------------------------------------------------
Total plant 7,422 499 65 (7) 7,849
--------------------------------------------------------------
Construction Work in Progress
Consumers Power Company 190 59 - (1) (f) 248
Antrim Limited Partnership 4 (4) - - -
Michigan Gas Storage Company 2 2 - - 4
--------------------------------------------------------------
196 57 - (1) 252
--------------------------------------------------------------
Total plant including work
in progress $7,618 $ 556 $ 65 $ (8) $8,101
==============================================================
<FN>
(a) Reclassifications of accounts (e) Plant additions due to acquired ownership
(b) Sale of facilities to Michigan Public Power Agency (f) Write-off of PSI transmission line
(c) Write-off of prediscovery foreign expenditures (g) Non-utility gas plant and property
(d) Lease amortization
</TABLE>
<PAGE> 156
<TABLE>
CMS ENERGY CORPORATION
Schedule V - Property, Plant and Equipment
Year Ended December 31, 1991
(Millions of Dollars)
<CAPTION>
Balance at Balance at
Beginning Additions Other Changes End of
Classification of Period at cost Retirements Add (Deduct) Period
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Electric Utility
Consumers Power Company:
Intangible $ 2 $ - $ - $ - $ 2
Steam production 1,357 9 11 - 1,355
Nuclear production 508 113 2 - 619
Nuclear fuel 191 - - - 191
Nuclear fuel under capital lease 112 6 - - 118
Hydro production 165 - - - 165
Other production 37 - - - 37
Transmission 656 13 1 (8) (a) 660
Distribution 1,490 95 15 (1) (a) 1,569
General 40 13 - 1 (a) 54
Capital leases 40 8 8 - 40
Plant held for future use 13 - - - 13
--------------------------------------------------------------
Total electric utility 4,611 257 37 (8) 4,823
--------------------------------------------------------------
Gas Utility
Consumers Power Company:
Intangible 2 - - - 2
Natural gas production 17 - 1 (2) (a) 14
Underground storage 166 5 2 (1) (b) 168
Transmission 178 1 1 - 178
Distribution 1,009 45 4 - 1,050
General 22 1 - - 23
Capital leases 27 2 4 - 25
Plant held for future use 142 - 1 - 141
--------------------------------------------------------------
1,563 54 13 (3) 1,601
Michigan Gas Storage Company 65 - - - 65
--------------------------------------------------------------
Total gas utility 1,628 54 13 (3) 1,666
--------------------------------------------------------------
Other
NOMECO Oil and Gas Company 639 71 - (8) (c) 702
Consumers Power Company - Other 101 13 2 8 (a) 120
Consumers Power - Capital leases 71 11 8 - 74
CMS Energy Corporation 14 1 - (1) (d) 14
Jackson Pipeline Company 10 - - - 10 (e)
CMS Arcadia Land Management Company 8 - - - 8
CMS Utility Services, Inc. 3 1 - - 4
Other - - - 1 (a) 1
--------------------------------------------------------------
Total other 846 97 10 - 933
--------------------------------------------------------------
Total plant 7,085 408 60 (11) 7,422
--------------------------------------------------------------
Construction Work in Progress
Consumers Power Company 224 (33) - (1) (a) 190
Antrim Limited Partnership - 4 - - 4
Michigan Gas Storage Company 1 1 - - 2
--------------------------------------------------------------
225 (28) - (1) 196
--------------------------------------------------------------
Total plant including work
in progress $7,310 $ 380 $ 60 $ (12) $7,618
==============================================================
<FN>
(a) Reclassifications of accounts (d) Lease amortization
(b) Northville base gas removal (e) Non-utility gas plant and property
(C) Write-off of prediscovery foreign expenditures
</TABLE>
<PAGE>
<PAGE> 157
<TABLE>
CONSUMERS POWER COMPANY
Schedule V - Property, Plant and Equipment
Year Ended December 31, 1993
(Millions of Dollars)
<CAPTION>
Balance at Balance at
Beginning Additions Other Changes End of
Classification of Period at cost Retirements Add (Deduct) Period
<S> <C> <C> <C> <C> <C>
Electric Utility
Consumers Power Company:
Intangible $ 2 $ - $ - $ - $ 2
Steam production 1,363 22 13 1 (a) 1,373
Nuclear production 665 53 5 (5) (a) 708
Nuclear fuel 195 4 - - 199
Nuclear fuel under capital lease 148 28 - - 176
Hydro production 170 13 1 - 182
Other production 37 - - - 37
Transmission 685 22 5 (1) (a) 701
Distribution 1,682 157 16 - 1,823
General 61 8 - - 69
Capital leases 55 41 (b) 35 (9) (a) 52
Plant held for future use 13 12 - - 25
---------------------------------------------------------------
Total electric utility 5,076 360 75 (14) 5,347
---------------------------------------------------------------
Gas Utility
Consumers Power Company:
Intangible 2 - - - 2
Natural gas production 9 - - - 9
Underground storage 169 4 - - 173
Transmission 178 15 2 - 191
Distribution 1,117 73 7 - 1,183
General 26 5 - - 31
Capital leases 16 7 (b) 13 - 10
Plant held for future use 142 1 - - 143
---------------------------------------------------------------
1,659 105 22 - 1,742
Michigan Gas Storage Company 69 27 1 - 95
---------------------------------------------------------------
Total gas utility 1,728 132 23 - 1,837
---------------------------------------------------------------
Other
Consumers Power Company
Capital leases 81 24 (b) 42 - 63
Other 147 40 - 3 (a) 190
---------------------------------------------------------------
Total other 228 64 42 3 253
---------------------------------------------------------------
Total plant 7,032 556 140 (11) 7,437
---------------------------------------------------------------
Construction Work in Progress
Consumers Power Company 248 (3) - 1 (a) 246
Michigan Gas Storage Company 4 (2) - - 2
---------------------------------------------------------------
Total Construction Work in Progress 252 (5) - 1 248
---------------------------------------------------------------
Total plant including work
in progress $7,284 $ 551 $ 140 $ (10) $7,685
===============================================================
<FN>
(a) Reclassifications of accounts
(b) Refinanced: Electric $22
Gas 5
Other 15
----
$42
====
</TABLE>
<PAGE>
<PAGE> 158
<TABLE>
CONSUMERS POWER COMPANY
Schedule V - Property, Plant and Equipment
Year Ended December 31, 1992
(Millions of Dollars)
<CAPTION>
Balance at Balance at
Beginning Additions Other Changes End of
Classification of Period at cost Retirements Add (Deduct) Period
<S> <C> <C> <C> <C> <C>
Electric Utility
Consumers Power Company:
Intangible $ 2 $ - $ - $ - $ 2
Steam production 1,355 22 11 (3) (a) 1,363
Nuclear production 619 48 2 - 665
Nuclear fuel 191 4 - - 195
Nuclear fuel under capital lease 118 30 - - 148
Hydro production 165 5 - - 170
Other production 37 - - - 37
Transmission 660 29 7 3 (a) 685
Distribution 1,569 130 11 (6) (b) 1,682
General 54 7 - - 61
Capital leases 40 22 8 1 (a) 55
Plant held for future use 13 - - - 13
---------------------------------------------------------------
Total electric utility 4,823 297 39 (5) 5,076
---------------------------------------------------------------
Gas Utility
Consumers Power Company:
Intangible 2 - - - 2
Natural gas production 14 - 4 (1) (a) 9
Underground storage 168 1 - - 169
Transmission 178 3 3 - 178
Distribution 1,050 62 (4) 1 (a) 1,117
General 23 3 - - 26
Capital leases 25 3 12 - 16
Plant held for future use 141 1 - - 142
---------------------------------------------------------------
1,601 73 15 - 1,659
Michigan Gas Storage Company 65 4 - - 69
---------------------------------------------------------------
Total gas utility 1,666 77 15 - 1,728
---------------------------------------------------------------
Other
Consumers Power Company
Capital leases 74 14 7 - 81
Other 120 31 3 (1) (a) 147
---------------------------------------------------------------
Total other 194 45 10 (1) 228
---------------------------------------------------------------
Total plant 6,683 419 64 (6) 7,032
---------------------------------------------------------------
Construction Work in Progress
Consumers Power Company 190 59 - (1) (c) 248
Michigan Gas Storage Company 2 2 - - 4
---------------------------------------------------------------
Total Construction Work in Progress 192 61 - (1) 252
---------------------------------------------------------------
Total plant including work
in progress $6,875 $ 480 $ 64 $ (7) $7,284
===============================================================
<FN>
(a) Reclassifications of accounts
(b) Sale of facilities to Michigan Public Power Agency
(c) Write-off of PSI transmission line
/TABLE
<PAGE>
<PAGE> 159
<TABLE>
CONSUMERS POWER COMPANY
Schedule V - Property, Plant and Equipment
Year Ended December 31, 1991
(Millions of Dollars)
<CAPTION>
Balance at Balance at
Beginning Additions Other Changes End of
Classification of Period at cost Retirements Add (Deduct) Period
<S> <C> <C> <C> <C> <C>
Electric Utility
Consumers Power Company:
Intangible $ 2 $ - $ - $ - $ 2
Steam production 1,357 9 11 - 1,355
Nuclear production 508 113 2 - 619
Nuclear fuel 191 - - - 191
Nuclear fuel under capital lease 112 6 - - 118
Hydro production 165 - - - 165
Other production 37 - - - 37
Transmission 656 13 1 (8) (a) 660
Distribution 1,490 95 15 (1) (a) 1,569
General 40 13 - 1 (a) 54
Capital leases 40 8 8 - 40
Plant held for future use 13 - - - 13
---------------------------------------------------------------
Total electric utility 4,611 257 37 (8) 4,823
---------------------------------------------------------------
Gas Utility
Consumers Power Company:
Intangible 2 - - - 2
Natural gas production 17 - 1 (2) (a) 14
Underground storage 166 5 2 (1) (b) 168
Transmission 178 1 1 - 178
Distribution 1,009 45 4 - 1,050
General 22 1 - - 23
Capital leases 27 2 4 - 25
Plant held for future use 142 - 1 - 141
---------------------------------------------------------------
1,563 54 13 (3) 1,601
Michigan Gas Storage Company 65 - - - 65
---------------------------------------------------------------
Total gas utility 1,628 54 13 (3) 1,666
---------------------------------------------------------------
Other
Consumers Power Company
Capital leases 71 11 8 - 74
Other 101 13 2 8 (a) 120
---------------------------------------------------------------
Total other 172 24 10 8 194
---------------------------------------------------------------
Total plant 6,411 335 60 (3) 6,683
---------------------------------------------------------------
Construction Work in Progress
Consumers Power Company 224 (33) - (1) (a) 190
Michigan Gas Storage Company 1 1 - - 2
---------------------------------------------------------------
Total Construction Work in Progress 225 (32) - (1) 192
---------------------------------------------------------------
Total plant including work
in progress $6,636 $ 303 $ 60 $ (4) $6,875
===============================================================
<FN>
(a) Reclassifications of accounts
(b) Northville base gas removal
</TABLE>
<PAGE>
<PAGE> 160
<TABLE>
CMS ENERGY CORPORATION
Schedule VI - Accumulated Depreciation, Depletion, and Amortization
of Property, Plant and Equipment
Year Ended December 31, 1993
(Millions of Dollars)
<CAPTION>
Additions
Balance at charged to Retirements, Balance at
Beginning costs and Removal Costs Other Changes End of
Classification of Period expenses and Salvage Add (Deduct) Period
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Electric Utility
Consumers Power Company:
Intangible $ 1 $ - $ - $ - $ 1
Steam production 704 32 18 - 718
Nuclear production 161 30 8 - 183
Nuclear decommissioning trust 111 47 - 7 (a) 165
Nuclear fuel 188 5 - (1) (b) 192
Nuclear fuel under capital lease 111 10 - - 121
Hydro production 73 3 5 - 71
Other production 32 1 - - 33
Transmission 236 18 5 - 249
Distribution 643 75 30 - 688
General 15 3 1 - 17
Capital leases 16 28 35 - 9
--------------------------------------------------------------
Total electric utility 2,291 252 102 6 2,447
--------------------------------------------------------------
Gas Utility
Consumers Power Company:
Intangible 1 - - - 1
Natural gas production 9 - - - 9
Underground storage 55 3 - - 58
Transmission 105 8 1 - 112
Distribution 604 52 13 - 643
General 9 1 - - 10
Capital leases 8 8 13 - 3
Plant held for future use 139 3 - - 142
--------------------------------------------------------------
930 75 27 - 978
Michigan Gas Storage Company 52 1 2 - 51
--------------------------------------------------------------
Total gas utility 982 76 29 - 1,029
--------------------------------------------------------------
Other
NOMECO Oil and Gas Company 422 45 - (1) (b) 466
Consumers Power Company 75 68 41 (28) (c) 74
CMS Utility Services, Inc. 2 1 - - 3
CMS Energy Corporation 1 - - - 1
Jackson Pipeline Company 1 - - - 1
Antrim Limited Partnership - 1 - - 1
Other 1 - 1 - -
--------------------------------------------------------------
Total other 502 115 42 (29) 546
--------------------------------------------------------------
Total provision for accumulated
depreciation, depletion and
amortization $3,775 $ 443 $ 173 $ (23) $4,022
==============================================================
<FN>
(a) Decommissioning trust funds
(b) Write-off of foreign drilling expenditures
(c) Reclassifications of accounts
</TABLE>
<PAGE>
<PAGE> 161
<TABLE>
CMS ENERGY CORPORATION
Schedule VI - Accumulated Depreciation, Depletion, and Amortization
of Property, Plant and Equipment
Year Ended December 31, 1992
(Millions of Dollars)
<CAPTION>
Additions
Balance at charged to Retirements, Balance at
Beginning costs and Removal Costs Other Changes End of
Classification of Period expenses and Salvage Add (Deduct) Period
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Electric Utility
Consumers Power Company:
Intangible $ 1 $ - $ - $ - $ 1
Steam production 689 32 15 (2) (a) 704
Nuclear production 136 29 4 - 161
Nuclear decommissioning trust 62 44 - 5 (b) 111
Nuclear fuel 185 5 - (2) (a) 188
Nuclear fuel under capital lease 95 16 - - 111
Hydro production 72 3 2 - 73
Other production 31 1 - - 32
Transmission 218 17 1 3 (a)
(1) (c) 236
Distribution 598 69 22 (2) (a) 643
General 12 3 - - 15
Capital leases 18 6 8 - 16
--------------------------------------------------------------
Total electric utility 2,117 225 52 1 2,291
--------------------------------------------------------------
Gas Utility
Consumers Power Company:
Intangible 1 - - - 1
Natural gas production 9 3 - (3) (a) 9
Underground storage 52 3 - - 55
Transmission 105 5 1 (4) (a) 105
Distribution 557 49 2 - 604
General 9 1 1 - 9
Capital leases 14 6 12 - 8
Plant held for future use 129 10 - - 139
--------------------------------------------------------------
876 77 16 (7) 930
Michigan Gas Storage Company 51 1 - - 52
--------------------------------------------------------------
Total gas utility 927 78 16 (7) 982
--------------------------------------------------------------
Other
NOMECO Oil and Gas Company 387 37 - (2) (d) 422
Consumers Power Company 63 47 8 (27) (a) 75
CMS Utility Services, Inc. 1 1 - - 2
CMS Energy Corporation 1 - - - 1
Jackson Pipeline Company - 1 - - 1
Other 1 1 1 - 1
--------------------------------------------------------------
Total other 453 87 9 (29) 502
--------------------------------------------------------------
Total provision for accumulated
depreciation, depletion and
amortization $3,497 $ 390 $ 77 $ (35) $3,775
==============================================================
<FN>
(a) Reclassifications of accounts
(b) Decommissioning trust funds
(c) Sale of property to Michigan Public Power Agency
(d) Write-off of foreign drilling expenditures
</TABLE>
<PAGE>
<PAGE> 162
<TABLE>
CMS ENERGY CORPORATION
Schedule VI - Accumulated Depreciation, Depletion, and Amortization
of Property, Plant and Equipment
Year Ended December 31, 1991
(Millions of Dollars)
<CAPTION>
Additions
Balance at charged to Retirements, Balance at
Beginning costs and Removal Costs Other Changes End of
Classification of Period expenses and Salvage Add (Deduct) Period
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Electric Utility
Consumers Power Company:
Intangible $ 1 $ - $ - $ - $ 1
Steam production 662 36 10 1 (a) 689
Nuclear production 120 22 6 - 136
Nuclear decommissioning trust 47 12 - 3 (b) 62
Nuclear fuel 181 5 - (1) (a) 185
Nuclear fuel under capital lease 74 21 - - 95
Hydro production 68 4 - - 72
Other production 30 1 - - 31
Transmission 205 15 1 (1) (a) 218
Distribution 562 61 24 (1) (a) 598
General 12 1 1 - 12
Capital leases 21 5 8 - 18
--------------------------------------------------------------
Total electric utility 1,983 183 50 1 2,117
--------------------------------------------------------------
Gas Utility
Consumers Power Company:
Intangible 1 - - - 1
Natural gas production 11 1 1 (2) (a) 9
Underground storage 51 3 2 - 52
Transmission 100 5 1 1 (a) 105
Distribution 519 47 9 - 557
General 7 1 - 1 (a) 9
Capital leases 13 6 5 - 14
Plant held for future use 120 9 - - 129
--------------------------------------------------------------
822 72 18 - 876
Michigan Gas Storage Company 51 1 1 - 51
--------------------------------------------------------------
Total gas utility 873 73 19 - 927
--------------------------------------------------------------
Other
NOMECO Oil and Gas Company 362 33 - (8) (c) 387
Consumers Power Company 57 33 7 (20) (a) 63
Other 2 1 - - 3
--------------------------------------------------------------
Total other 421 67 7 (28) 453
--------------------------------------------------------------
Total provision for accumulated
depreciation, depletion and
amortization $3,277 $ 323 $ 76 $ (27) $3,497
==============================================================
<FN>
(a) Reclassifications of accounts
(b) Decommissioning trust funds
(c) Write-off of foreign drilling expenditures
</TABLE>
<PAGE>
<PAGE> 163
<TABLE>
CONSUMERS POWER COMPANY
Schedule VI - Accumulated Depreciation, Depletion and Amortization
of Property, Plant, and Equipment
Year Ended December 31, 1993
(Millions of Dollars)
<CAPTION>
Additions
Balance at charged to Retirements, Balance at
Beginning costs and Removal Costs Other Changes End of
Classification of Period expenses and Salvage Add (Deduct) Period
<S> <C> <C> <C> <C> <C>
Electric Utility
Consumers Power Company:
Intangible $ 1 $ - $ - $ - $ 1
Steam production 704 32 18 - 718
Nuclear production 161 30 8 - 183
Nuclear decommissioning trust 111 47 - 7 (a) 165
Nuclear fuel 188 5 - (1) (b) 192
Nuclear fuel under capital lease 111 10 - - 121
Hydro production 73 3 5 - 71
Other production 32 1 - - 33
Transmission 236 18 5 - 249
Distribution 643 75 30 - 688
General 15 3 1 - 17
Capital leases 16 28 35 - 9
---------------------------------------------------------------
Total electric utility 2,291 252 102 6 2,447
---------------------------------------------------------------
Gas Utility
Consumers Power Company:
Intangible 1 - - - 1
Natural gas production 9 - - - 9
Underground storage 55 3 - - 58
Transmission 105 8 1 - 112
Distribution 604 52 13 - 643
General 9 1 - - 10
Capital leases 8 8 13 - 3
Plant held for future use 139 3 - - 142
---------------------------------------------------------------
930 75 27 - 978
Michigan Gas Storage Company 52 1 2 - 51
---------------------------------------------------------------
Total gas utility 982 76 29 - 1,029
---------------------------------------------------------------
Other
Consumers Power Company 75 68 41 (28) (b) 74
---------------------------------------------------------------
Total other 75 68 41 (28) 74
---------------------------------------------------------------
Total provision for accumulated
depreciation, depletion and
amortization $3,348 $ 396 $ 172 $ (22) $3,550
===============================================================
<FN>
(a) Decommissioning trust funds
(b) Reclassifications of accounts
</TABLE>
<PAGE>
<PAGE> 164
<TABLE>
CONSUMERS POWER COMPANY
Schedule VI - Accumulated Depreciation, Depletion and Amortization
of Property, Plant, and Equipment
Year Ended December 31, 1992
(Millions of Dollars)
<CAPTION>
Additions
Balance at charged to Retirements, Balance at
Beginning costs and Removal Costs Other Changes End of
Classification of Period expenses and Salvage Add (Deduct) Period
<S> <C> <C> <C> <C> <C>
Electric Utility
Consumers Power Company:
Intangible $ 1 $ - $ - $ - $ 1
Steam production 689 32 15 (2) (a) 704
Nuclear production 136 29 4 - 161
Nuclear decommissioning trust 62 44 - 5 (b) 111
Nuclear fuel 185 5 - (2) (a) 188
Nuclear fuel under capital lease 95 16 - - 111
Hydro production 72 3 2 - 73
Other production 31 1 - - 32
Transmission 218 17 1 3 (a)
(1) (c) 236
Distribution 598 69 22 (2) (a) 643
General 12 3 - - 15
Capital leases 18 6 8 - 16
---------------------------------------------------------------
Total electric utility 2,117 225 52 1 2,291
---------------------------------------------------------------
Gas Utility
Consumers Power Company:
Intangible 1 - - - 1
Natural gas production 9 3 - (3) (a) 9
Underground storage 52 3 - - 55
Transmission 105 5 1 (4) (a) 105
Distribution 557 49 2 - 604
General 9 1 1 - 9
Capital leases 14 6 12 - 8
Plant held for future use 129 10 - - 139
---------------------------------------------------------------
876 77 16 (7) 930
Michigan Gas Storage Company 51 1 - - 52
---------------------------------------------------------------
Total gas utility 927 78 16 (7) 982
---------------------------------------------------------------
Other
Consumers Power Company 63 47 8 (27) (a) 75
---------------------------------------------------------------
Total other 63 47 8 (27) 75
---------------------------------------------------------------
Total provision for accumulated
depreciation, depletion and
amortization $3,107 $ 350 $ 76 $ (33) $3,348
===============================================================
<FN>
(a) Reclassifications of accounts
(b) Decommissioning trust funds
(c) Sale of property to Michigan Public Power Agency
</TABLE>
<PAGE>
<PAGE> 165
<TABLE>
CONSUMERS POWER COMPANY
Schedule VI - Accumulated Depreciation, Depletion and Amortization
of Property, Plant, and Equipment
Year Ended December 31, 1991
(Millions of Dollars)
<CAPTION>
Additions
Balance at charged to Retirements, Balance at
Beginning costs and Removal Costs Other Changes End of
Classification of Period expenses and Salvage Add (Deduct) Period
<S> <C> <C> <C> <C> <C>
Electric Utility
Consumers Power Company:
Intangible $ 1 $ - $ - $ - $ 1
Steam production 662 36 10 1 (a) 689
Nuclear production 120 22 6 - 136
Nuclear decommissioning trust 47 12 - 3 (b) 62
Nuclear fuel 181 5 - (1) (a) 185
Nuclear fuel under capital lease 74 21 - - 95
Hydro production 68 4 - - 72
Other production 30 1 - - 31
Transmission 205 15 1 (1) (a) 218
Distribution 562 61 24 (1) (a) 598
General 12 1 1 - 12
Capital leases 21 5 8 - 18
---------------------------------------------------------------
Total electric utility 1,983 183 50 1 2,117
---------------------------------------------------------------
Gas Utility
Consumers Power Company:
Intangible 1 - - - 1
Natural gas production 11 1 1 (2) (a) 9
Underground storage 51 3 2 - 52
Transmission 100 5 1 1 (a) 105
Distribution 519 47 9 - 557
General 7 1 - 1 (a) 9
Capital leases 13 6 5 - 14
Plant held for future use 120 9 - - 129
---------------------------------------------------------------
822 72 18 - 876
Michigan Gas Storage Company 51 1 1 - 51
---------------------------------------------------------------
Total gas utility 873 73 19 - 927
---------------------------------------------------------------
Other
Consumers Power Company 57 33 7 (20) (a) 63
---------------------------------------------------------------
Total other 57 33 7 (20) 63
---------------------------------------------------------------
Total provision for accumulated
depreciation, depletion and
amortization $2,913 $ 289 $ 76 $ (19) $3,107
===============================================================
<FN>
(a) Reclassifications of accounts
(b) Decommissioning trust funds
</TABLE>
<PAGE>
<PAGE> 166
<TABLE>
CMS ENERGY CORPORATION
Schedule VIII - Valuation and Qualifying Accounts and Reserves
Years Ended December 31, 1993, 1992 and 1991
(Millions of Dollars)
<CAPTION>
Balance at Charged Charged to Balance
Beginning to other at End
Description of Period Expense Accounts Deductions of Period
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Accumulated provision for
uncollectible accounts
(substantially all
Consumers Power Company):
1993 $5 $ 9 - $10(a) $4
1992 $5 $11 - $11(a) $5
1991 $4 $17 - $16(a) $5
Reserve for rights to
additional MCV Bonds:
1993 - - - - -
1992 $366 - - $366 -
1991 $366 - - - $366
<FN>
(a) Accounts receivable written off including net uncollectible amounts of $8 in 1993, $10 in 1992, and
$15 in 1991 charged directly to operating expense and credited to accounts receivable.
</TABLE>
<PAGE>
<PAGE> 167
<TABLE>
CONSUMERS POWER COMPANY
Schedule VIII - Valuation and Qualifying Accounts and Reserves
Years Ended December 31, 1993, 1992 and 1991
(Millions of Dollars)
<CAPTION>
Balance at Charged Charged to Balance
Beginning to other at End
Description of Period Expense Accounts Deductions of Period
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Accumulated provision for
uncollectible accounts:
1993 $5 $ 9 - $10(a) $4
1992 $5 $11 - $11(a) $5
1991 $4 $17 - $16(a) $5
Reserve for rights to
additional MCV Bonds:
1993 - - - - -
1992 $366 - - $366 -
1991 - - $366(b) - $366
Reserve for rights to
additional CMS Energy
Debentures:
1993 - - - - -
1992 - - - - -
1991 $236 - - $236 -
<FN>
(a) Accounts receivable written off including net uncollectible amounts of $8 in 1993, $10 in 1992, and $15 in
1991 charged directly to operating expense and credited to accounts receivable.
(b) Rights to additional MCV Bonds were transferred to Consumers Power in December, 1991 from MEC Development
Corp.
</TABLE>
<PAGE>
<PAGE> 168
<TABLE>
CMS ENERGY CORPORATION
Schedule IX - Short-Term Borrowings
Years Ended December 31, 1993, 1992 and 1991
(Millions of Dollars)
<CAPTION>
Weighted
Maximum Average (Daily)
(Daily) (Daily) Average
Weighted Amount Amount Interest
Balance Average Outstanding Outstanding Rate
Category of Aggregate at End Interest During the During the During the
Short-Term Borrowings of Period Rate Period Period Period
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Year Ended December 31, 1993
Consumers Power Company:
Bankers' acceptance drafts $ - - $219 $ 65 3.9%
Bank advances 235 4.0% $394 $143 4.0%
Committed bank lines 24 3.9% $165 $ 69 3.8%
----
$259
====
Year Ended December 31, 1992
CMS Energy Corporation:
Credit Agreement - - $414 $357 5.4%
Consumers Power Company:
Bankers' acceptance drafts $115 4.2% $149 $ 68 4.3%
Bank advances 35 4.2% $181 $ 32 4.4%
Committed bank lines 65 4.6% $215 $ 84 4.3%
----
$215
====
Year Ended December 31, 1991
CMS Energy Corporation:
Credit Agreement $414 6.5% $450 $ 23 7.1%
Consumers Power Company:
Bankers' acceptance drafts 73 5.7% $201 $ 61 6.2%
Bank advances 181 5.7% $181 $122 7.5%
Committed bank lines 40 6.5% $212 $ 78 6.7%
----
294
----
Jackson Pipeline Company:
Note payable - - $ 10 $ 4 9.1%
$708
====
</TABLE>
<PAGE>
<PAGE> 169
<TABLE>
CONSUMERS POWER COMPANY
Schedule IX - Short-Term Borrowings
Years Ended December 31, 1993, 1992 and 1991
(Millions of Dollars)
<CAPTION>
Weighted
Maximum Average (Daily)
(Daily) (Daily) Average
Weighted Amount Amount Interest
Balance Average Outstanding Outstanding Rate
Category of Aggregate at End Interest During the During the During the
Short-Term Borrowings of Period Rate Period Period Period
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Year Ended December 31, 1993
Consumers Power Company:
Bankers' acceptance drafts $ - - $219 $ 65 3.9%
Bank advances 235 4.0% $394 $143 4.0%
Committed bank lines 24 3.9% $165 $ 69 3.8%
----
$259
====
Year Ended December 31, 1992
Consumers Power Company:
Bankers' acceptance drafts $115 4.2% $149 $68 4.3%
Bank advances 35 4.2% $181 $32 4.4%
Committed bank lines 65 4.6% $215 $84 4.3%
----
$215
====
Year Ended December 31, 1991
Consumers Power Company:
Bankers' acceptance drafts $ 73 5.7% $201 $ 61 6.2%
Bank advances 181 5.7% $181 $122 7.5%
Committed bank lines 40 6.5% $212 $ 78 6.7%
----
$294
====
</TABLE>
<PAGE>
<PAGE> 170
<TABLE>
CMS ENERGY CORPORATION
Schedule X - Supplementary Income Statement Information
Years Ended December 31, 1993, 1992 and 1991
(Millions of Dollars)
<CAPTION>
Charged to Expense
------------------------------------------
Item(a) 1993 1992 1991
- -------------------------------- -------- -------- --------
<S> <C> <C> <C>
Real and personal property taxes $139 $137 $128
Royalties 46 42 49
<FN>
(a) "Other items" are either less than 1% of total operating revenue or are disclosed in the Consolidated
Statements of Income.
</TABLE>
<PAGE>
<PAGE> 171
<TABLE>
CONSUMERS POWER COMPANY
Schedule X - Supplementary Income Statement Information
Years Ended December 31, 1993, 1992 and 1991
(Millions of Dollars)
<CAPTION>
Charged to Expense
-------------------------------------------
Item (a) 1993 1992 1991
- -------------------------------- ---- ---- ----
<S> <C> <C> <C>
Real and personal property taxes $138 $136 $128
<FN>
(a) "Other items" are either less than 1% of total operating revenue or are disclosed in the Consolidated
Statements of Income.
</TABLE>
<PAGE>
<PAGE> 172
Arthur Andersen & Co.
Report of Independent Public Accountants
To CMS Energy Corporation:
We have audited in accordance with generally accepted auditing standards,
the consolidated financial statements included in CMS Energy Corporation's
1993 Annual Report to shareholders incorporated by reference in this Form
10-K, and have issued our report thereon dated January 28, 1994. Our
audit was made for the purpose of forming an opinion on those basic
consolidated financial statements taken as a whole. The schedules listed
in Item 14(a) are the responsibility of the Company's management and are
presented for purposes of complying with the Securities and Exchange
Commission's rules and are not part of the basic consolidated financial
statements. These schedules have been subjected to the auditing
procedures applied in the audit of the basic consolidated financial
statements and, in our opinion, fairly state in all material respects the
financial data required to be set forth therein in relation to the basic
consolidated financial statements taken as a whole.
ARTHUR ANDERSEN & Co.
Detroit, Michigan,
January 28, 1994.
<PAGE>
<PAGE> 173
Arthur Andersen & Co.
Report of Independent Public Accountants
To Consumers Power Company:
We have audited in accordance with generally accepted auditing standards,
the consolidated financial statements included in Consumers Power
Company's 1993 Annual Report to shareholders incorporated by reference in
this Form 10-K, and have issued our report thereon dated January 28, 1994.
Our audit was made for the purpose of forming an opinion on those basic
consolidated financial statements taken as a whole. The schedules listed
in Item 14(a) are the responsibility of the Company's management and are
presented for the purpose of complying with the Securities and Exchange
Commission's rules and are not part of the basic consolidated financial
statements. These schedules have been subjected to the auditing
procedures applied in the audit of the basic consolidated financial
statements and, in our opinion, fairly state in all material respects the
financial data required to be set forth therein in relation to the basic
consolidated financial statements taken as a whole.
ARTHUR ANDERSEN & Co.
Detroit, Michigan,
January 28, 1994.
<PAGE>
<PAGE> 174
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, CMS Energy Corporation has duly caused this Annual
Report to be signed on its behalf by the undersigned, thereunto duly
authorized, on the 18th day of March 1994.
CMS ENERGY CORPORATION
By William T. McCormick, Jr.
----------------------------
William T. McCormick, Jr.
Chairman of the Board
and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Annual Report has been signed below by the following persons on behalf of
CMS Energy Corporation and in the capacities and on the 18th day of March
1994.
Signature Title
- -------------------------------------- -----------------------------------
(i) Principal executive officer:
Chairman of the Board,
Chief Executive Officer
William T. McCormick, Jr. and Director
- -------------------------------------
William T. McCormick, Jr.
(ii) Principal financial officer:
Senior Vice President and
A M Wright Chief Financial Officer
- -------------------------------------
Alan M. Wright
(iii) Controller or principal
accounting officer:
Vice President, Controller
P. D. Hopper and Chief Accounting Officer
- -------------------------------------
Preston D. Hopper
(iv) A majority of the Directors
including those named above:
Director
- -------------------------------------
James J. Duderstadt
<PAGE>
<PAGE> 175
Signature Title
- ------------------------------------- -----------------------------------
Victor J. Fryling Director
- -------------------------------------
Victor J. Fryling
Earl D. Holton* Director
- -------------------------------------
Earl D. Holton
Lois A. Lund* Director
- -------------------------------------
Lois A. Lund
Frank H. Merlotti* Director
- -------------------------------------
Frank H. Merlotti
W. U. Parfet* Director
- -------------------------------------
William U. Parfet
Percy A. Pierre* Director
- -------------------------------------
Percy A. Pierre
T. F. Russell* Director
- -------------------------------------
Thomas F. Russell
S. Kinnie Smith, Jr.* Director
- -------------------------------------
S. Kinnie Smith, Jr.
Director
- -------------------------------------
Robert D. Tuttle
Kenneth Whipple* Director
- -------------------------------------
Kenneth Whipple
John B. Yasinsky* Director
- -------------------------------------
John B. Yasinsky
* By Thomas A. McNish
-------------------------------
Thomas A. McNish, Attorney-in-Fact
<PAGE>
<PAGE> 176
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, Consumers Power Company has duly caused this Annual
Report to be signed on its behalf by the undersigned, thereunto duly
authorized, on the 18th day of March 1994.
CONSUMERS POWER COMPANY
By William T. McCormick, Jr.
---------------------------------
William T. McCormick, Jr.
Chairman of the Board
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Annual Report has been signed below by the following persons on behalf of
Consumers Power Company and in the capacities and on the 18th day of March
1994.
Signature Title
- ------------------------------------- -----------------------------------
(i) Principal executive officer:
President and
Michael G. Morris Chief Executive Officer
- -------------------------------------
Michael G. Morris
(ii) Principal financial officer:
Senior Vice President and
A M Wright Chief Financial Officer
- -------------------------------------
Alan M. Wright
(iii) Controller or principal
accounting officer:
Vice President and
Dennis DaPra Controller
- -------------------------------------
Dennis DaPra
(iv) A majority of the Directors
including those named above:
Director
- -------------------------------------
James J. Duderstadt
<PAGE>
<PAGE> 177
Signature Title
- ------------------------------------- -----------------------------------
Victor J. Fryling Director
- -------------------------------------
Victor J. Fryling
Earl D. Holton* Director
- -------------------------------------
Earl D. Holton
Lois A. Lund* Director
- -------------------------------------
Lois A. Lund
William T. McCormick, Jr. Director
- -------------------------------------
William T. McCormick, Jr.
Frank H. Merlotti* Director
- -------------------------------------
Frank H. Merlotti
W. U. Parfet* Director
- -------------------------------------
William U. Parfet
Percy A. Pierre* Director
- -------------------------------------
Percy A. Pierre
T. F. Russell* Director
- -------------------------------------
Thomas F. Russell
S. Kinnie Smith, Jr.* Director
- -------------------------------------
S. Kinnie Smith, Jr.
Director
- -------------------------------------
Robert D. Tuttle
Kenneth Whipple* Director
- -------------------------------------
Kenneth Whipple
John B. Yasinsky* Director
- -------------------------------------
John B. Yasinsky
*By Thomas A. McNish
--------------------------------
Thomas A. McNish, Attorney-in-Fact
<PAGE>
<PAGE>
EXHIBIT (3)(b)
<PAGE>
<PAGE>
EXHIBIT (3)(b)
CMS ENERGY CORPORATION
BYLAWS
ARTICLE I: LOCATION OF OFFICES
- -------------------------------
Section 1 - Registered Office: The registered office of CMS Energy
Corporation, (the "Corporation") shall be at such place in the City
of Jackson, County of Jackson, Michigan, or elsewhere in the State
of Michigan, as the Board of Directors may from time to time
designate.
Section 2 - Other Offices: The Corporation may have and maintain
other offices within or without the State of Michigan.
ARTICLE II: CORPORATE SEAL
- ---------------------------
Section 1 - Corporate Seal: The Corporation shall have a corporate
seal bearing the name of the Corporation. The form of the
corporate seal may be altered by the Board of Directors.
ARTICLE III: FISCAL YEAR
- -------------------------
Section 1 - Fiscal Year: The fiscal year of the Corporation shall
begin with the first day of January and end with the thirty-first
day of December of each year.
ARTICLE IV: SHAREHOLDERS' MEETINGS
- -----------------------------------
Section 1 - Annual Meetings: An annual meeting of the shareholders
for election of Directors and for such other business as may come
before the meeting shall be held at the registered office of the
Corporation or at such other place within or without the State of
Michigan, at 10:00 AM, Eastern Daylight Saving Time, or at such
other time on the fourth Friday in April of each year or upon such
other day as the Board of Directors may designate, but in no event
shall such date be more than 90 days after the fourth Friday in
April.
Section 2 - Special Meetings: Special meetings of the shareholders
may be called by the Board of Directors or by the Chairman of the
Board. Such meetings shall be held at the registered office of the
Corporation or at such other place within or without the State of
Michigan as the Board of Directors may designate.
Section 3 - Notices: Except as otherwise provided by law, written
notice of any meeting of the shareholders shall be given, either
personally or by mail to each shareholder of record entitled to
vote at such meeting, not less than ten days nor more than sixty
days prior to date of the meeting, at their last known address as
the same appears on the stock records of the Corporation. Written
notice shall be considered given when deposited, with postage
thereon prepaid, in a post office or official depository under the
control of the United States postal service. Such notice shall
specify the time and place of holding the meeting, the purpose or
purposes for which such meeting is called, and the record date
fixed for the determination of shareholders entitled to notice of
and to vote at such meeting. The Board of Directors shall fix a
record date for determining shareholders entitled to notice of and
to vote at such meeting. The Board of Directors shall fix a record
date for determining shareholders entitled to notice of and to vote
at a meeting of shareholders, which record date shall not be more
than sixty days nor less than ten days before the date of the
meeting. Such record date shall apply to any adjournment of the
meeting unless the Board of Directors shall fix a new record date
for purposes of the adjourned meeting.
No notice of an adjourned meeting shall be necessary if the
time and place to which the meeting is adjourned are announced at
the meeting at which the adjournment is taken. At the adjourned
meeting only such business may be transacted as might have been
transacted at the original meeting. If, after an adjournment, the
Board of Directors shall fix a new record date for the adjourned
meeting, a notice of the adjourned meeting shall be mailed, in
conformity with the provisions of the first paragraph of this
Section 3, to each shareholder of record on the new record date
entitled to vote at the adjourned meeting.
Section 4 - Quorum: Except as otherwise provided by law or by the
Articles of Incorporation of the Corporation, the holders of the
shares of stock of the Corporation entitled to cast a majority of
the votes at a meeting shall constitute a quorum for the
transaction of business at the meeting, but a lesser number may
convene any meeting and, by a majority vote of the shares present
at the meeting, may adjourn the same from time to time until a
quorum shall be present.
Section 5 - Voting: Shareholders may vote at all meetings in
person or by proxy in writing, but all proxies shall be filed with
the Secretary of the meeting before being voted upon.
Subject to the provisions of the Articles of Incorporation
of the Corporation at all meetings of the shareholders of the
Corporation each holder of Common Stock shall be entitled on all
questions to one vote for each share of stock held by such holder,
and a majority of the votes cast by the holders of shares entitled
to vote thereon shall be sufficient for the adoption of any
question presented, unless otherwise provided by law or by the
Articles of Incorporation of the Corporation.
Section 6 - Inspectors: In advance of any meeting of shareholders
the Board of Directors shall appoint one or more inspectors to act
at such meeting or any adjournment thereof. The inspectors shall
have such powers and duties as are provided by law.
ARTICLE V: DIRECTORS
- ---------------------
Section 1 - Number: The Board of Directors of the Company shall
consist of two members and an alternate of each, if desirable, or
as many members or alternates as shall be fixed from time to time
by resolution of the Board of Directors.
Section 2 - Election: Each shareholder shall elect annually one
Director and an alternate Director, if desirable, at the annual
meeting of the shareholders.
Section 3 - Term of Office: Subject to the provisions of the
Articles of Incorporation of the Company and unless otherwise
provided by law, the Directors shall hold office from the date of
their election until the next succeeding annual meeting and until
their successors are elected and shall qualify.
Section 4 - Vacancies: Any vacancy or vacancies in the Board of
Directors arising from any cause may be filled by appointment by
the responsible Shareholder. An increase in the number of members
shall be construed as creating a vacancy.
Section 5 - Fees: Except as otherwise provided by law, the Board
of Directors, by affirmative vote of all Directors then in office,
may establish reasonable compensation for Directors for services to
the Company as Directors, and may from time to time review and
adjust such compensation in an amount the Board may deem
reasonable.
ARTICLE VI: DIRECTORS' MEETINGS
- --------------------------------
Section 1 - Organization Meeting: As soon as possible after their
election, the Board of Directors shall meet and organize and may
also transact other business.
Section 2 - Other Meetings: Meetings of the Board of Directors may
be held at any time upon call of the Secretary made at the
direction of the Chairman of the Board, the President, or a
Director.
Section 3 - Place of Meeting: All meetings of Directors shall be
held at such place within or without the State of Michigan as may
be designated in the call therefore.
Section 4 - Notice: A reasonable notice of all meetings, in
writing or otherwise, shall be given to each Director or sent to
the Director's residence or place of business; provided, however,
that no notice shall be required for an organization meeting if
held on the same day as the shareholders' meeting at which
Directors were elected.
No notice of the holding of an adjourned meeting shall be
necessary.
Notice of all meetings shall specify the time and place of
holding the meeting and unless otherwise stated any and all
business may be transacted at any such meeting.
Notice of the time, place and purpose of any meeting may be
waived in writing either before or after the holding thereof.
Section 5 - Quorum: At all meetings of the Board of Directors a
majority of the Board then in office shall constitute a quorum but
a majority of the Directors present may convene and adjourn any
such meeting from time to time until a quorum shall be present;
provided, that if the Board shall consist of ten and not more than
fifteen, then five members shall constitute a quorum; and if the
Board shall consist of more than fifteen, then seven members shall
constitute a quorum.
Section 6 - Voting: All questions coming before any meeting of the
Board of Directors for action shall be decided by a majority vote
of the Directors present at such meeting, unless otherwise provided
by law, the Articles of Incorporation of the Corporation or by
these Bylaws.
Section 7 - Participation by Communications Equipment: A Director
or a member of a Committee designated by the Board of Directors may
participate in a meeting by means of conference telephone or
similar communications equipment by means of which all persons
participating in the meeting can hear each other. Participation in
a meeting by such means shall constitute presence in person at the
meeting.
Section 8 - Action Without Meeting: Any action required or
permitted to be taken pursuant to authorization voted at a meeting
of the Board of Directors or a Committee thereof, may be taken
without a meeting if, before or after the action, all members of
the Board or of the Committee consent thereto in writing. The
written consents shall be filed with the minutes of the proceedings
of the Board or Committee, and the consents shall have the same
effect as a vote of the Board or Committee for all purposes.
ARTICLE VII: EXECUTIVE AND OTHER COMMITTEES
- --------------------------------------------
Section 1 - Number and Qualifications: By resolution passed by a
majority of the whole Board, the Board of Directors may from time
to time designate one or more of their number to constitute an
Executive or any other Committee of the Board, as the Board of
Directors may from time to time determine to be desirable, and may
fix the number of and designate the Chairman of each such
Committee. Except as otherwise provided by law, the powers of each
such Committee shall be as defined in the resolution or resolutions
of the Board of Directors relating to the authorization of such
Committee, and may include, if such resolution or resolutions so
provide, the power and authority to declare a dividend or to
authorize issuance of shares of stock of the Corporation.
Section 2 - Appointment: The appointment of members of each such
Committee, or other action respecting any Committee, may take place
at any meeting of the Directors.
Section 3 - Term of Office: The members of each Committee shall
hold office at the pleasure of the Board of Directors.
Section 4 - Vacancies: Any vacancy or vacancies in any such
Committee arising from any cause shall be filled by resolution
passed by a majority of the whole Board of Directors. By like vote
the Board may designate one or more Directors to serve as alternate
members of a Committee, who may replace an absent or disqualified
member at a meeting of a Committee; provided, however, in the
absence or disqualification of a member of a Committee, the members
of the Committee present at a meeting and not disqualified from
voting, whether or not constituting a quorum, may unanimously
appoint another member of the Board of Directors to act in the
place of the absent or disqualified member.
Section 5 - Minutes: Except as provided in Section 2 of Article X
hereof or as otherwise determined by the Board of Directors, each
such Committee shall make a written report or recommendation
following its meetings or keep minutes of all its meetings.
Section 6 - Quorum: At all meetings of any duly authorized
Committee of the Board of Directors, a majority of the members of
such Committee shall constitute a quorum but a majority of the
members present may convene and adjourn any such meeting from time
to time until a quorum shall be present; provided, that with
respect to any Committee of the Board other than the Executive
Committee, if the membership of such Committee is four or less,
then two members of such Committee shall constitute a quorum and
one member may convene and adjourn any such meeting from time to
time until a quorum shall be present.
ARTICLE VIII: OFFICERS
- -----------------------
Section 1 - Election: The officers shall be chosen by the Board of
Directors. The Corporation shall have a Chairman of the Board, a
President, a Secretary and a Treasurer, and such other officers as
the Board of Directors may from time to time determine, who shall
have respectively such duties and authority as may be provided by
these Bylaws or as may be provided by resolution of the Board of
Directors not inconsistent herewith. Any two or more of such
offices may be held by the same persons but no officer shall
execute, acknowledge or verify any instrument in more than one
capacity if such instrument is required by law, by the Articles of
Incorporation of the Corporation or by these Bylaws to be executed,
acknowledged or verified by two or more officers.
Section 2 - Qualifications: The Chairman of the Board, the
President and Vice Chairmen, if any, shall be chosen from among the
Board of Directors, but the other officers need not be members of
the Board.
Section 3 - Vacancies: Any vacancy or vacancies among the officers
arising from any cause shall be filled by the Board of Directors.
In case of the absence of any officer of the Corporation or for any
other reason that the Board of Directors may deem sufficient, the
Board of Directors may delegate, for the time being, the powers or
duties, or any of them, of any officer to any other officer or to
any Director.
Section 4 - Term of Office: Each officer of the Corporation shall
hold office until a successor is chosen and qualified, or until the
officer's resignation or removal. Any officer appointed by the
Board of Directors may be removed at any time by the Board of
Directors with or without cause.
Section 5 - Compensation: The compensation of the officers shall
be fixed by the Board of Directors.
ARTICLE IX: AGENTS
- -------------------
Section 1 - Resident Agent: The Corporation shall have and
continuously maintain a resident agent, which may be either an
individual resident in the State of Michigan whose business office
is identical with the Corporation's registered office or a Michigan
corporation or a foreign corporation authorized to transact
business in Michigan and having a business office identical with
the Corporation's registered office. The Board of Directors shall
appoint the resident agent.
Section 2 - Other Agents: The Board of Directors may appoint such
other agents as may in their judgment be necessary for the proper
conduct of the business of the Corporation.
ARTICLE X: POWERS AND DUTIES
- -----------------------------
Section 1 - Directors: The business and affairs of the Corporation
shall be managed by the Board of Directors which shall have and
exercise all of the powers and authority of the Corporation except
as otherwise provided by law, by the Articles of Incorporation of
the Corporation or by these Bylaws.
Section 2 - Executive Committee: In the interim between meetings
of the Board of Directors the Executive Committee shall have and
exercise all the powers and authority of the Board of Directors
except as otherwise provided by law. The Executive Committee shall
meet from time to time on the call of the Chairman of the Board or
the Chairman of the Committee. The Secretary shall keep minutes in
sufficient detail to advise fully the Board of Directors of the
actions taken by the Committee and shall submit copies of such
minutes to the Board of Directors for its approval or other action
at its next meeting.
Section 3 - Chairman of the Board: The Chairman of the Board shall
be the chief executive officer of the Corporation and, subject to
the supervision of the Board of Directors and of the Executive
Committee, shall have general charge of the business and affairs of
the Corporation; shall preside at all meetings of Directors and
shareholders; and shall perform and do all acts and things incident
to the position of Chairman of the Board, and such other duties as
may be assigned from time to time by the Board of Directors or the
Executive Committee.
Unless otherwise provided by the Board or the Executive
Committee, the Chairman of the Board shall have full power and
authority on behalf of the Corporation to execute any shareholders'
consents and to attend and act and to vote in person or by proxy at
any meetings of shareholders of any corporation in which the
Corporation may own stock and at any such meeting shall possess and
may exercise any and all the rights and powers incident to the
ownership of such stock and which, as the owner thereof, the
Corporation might have possessed and exercised if present. If the
Chairman of the Board shall not exercise such powers, or in the
absence or inability to act of the Chairman, the President may
exercise such powers. In the absence or inability to act of the
President, a Vice Chairman, if any, may exercise such powers. In
the absence or inability to act of a Vice Chairman, any Vice
President may exercise such powers. The Board of Directors or
Executive Committee by resolution from time to time may confer like
powers upon any other person or persons.
Section 4 - President: The President shall be the chief operating
officer of the Corporation; shall perform and do all acts and
things incident to such position and such other duties as may be
assigned from time to time by the Board of Directors, the Executive
Committee or the Chairman of the Board; in the absence of the
Chairman of the Board and a Vice Chairman, shall preside at
meetings of Directors; and in the absence of the Chairman of the
Board shall preside at meetings of shareholders.
Section 5 - Vice Chairman: A Vice Chairman, if any, shall perform
such of the duties of the Chairman of the Board or the President on
behalf of the Corporation as may be respectively assigned from time
to time by the Board of Directors, the Executive Committee, the
Chairman of the Board or the President; in the absence of the
Chairman of the Board shall preside at meetings of Directors; and
in the absence of the Chairman of the Board and the President shall
preside at meetings of shareholders.
Section 6 - Vice Presidents: Vice Presidents, if any, shall
perform such of the duties of the Chairman of the Board or the
President or the Vice Chairman, if any, on behalf of the
Corporation as may be respectively assigned to them from time to
time by the Board of Directors, the Executive Committee, the
Chairman of the Board or the President or a Vice Chairman. The
Board of Directors or Executive Committee may designate one or more
of the Vice Presidents as Executive Vice President or Senior Vice
President.
Section 7 - Controller: Subject to the control of the Board of
Directors, the Executive Committee, the Chairman of the Board, the
President and the Vice President having general charge of
accounting, the Controller, if any, shall have charge of the
supervision of the accounting system of the Corporation, including
the preparation and filing of all tax returns and financial reports
required by law to be made to any and all public authorities and
officials; and shall perform such other duties as may be assigned,
from time to time, by the Board of Directors, the Executive
Committee, the Chairman of the Board, the President, a Vice
Chairman, if any, or Vice President having general charge of
accounting.
Section 8 - Treasurer: It shall be the duty of the Treasurer to
have the care and custody of all the funds and securities,
including the investment thereof, of the Corporation which may come
into Treasurer's hands, and to endorse checks, drafts and other
instruments for the payment of money for deposit or collection when
necessary or proper and to deposit the same to the credit of the
Corporation in such bank or banks or depository as may be
designated, may endorse all commercial documents requiring
endorsements for or on behalf of the Corporation, may sign all
receipts and vouchers for the payments made to the Corporation,
shall render an account of transactions to the Board of Directors
or the Executive Committee as often as the Board or the Committee
shall require, and shall perform all acts incident to the position
of Treasurer, subject to the control of the Board of Directors, the
Executive Committee, the Chairman of the Board, the President and a
Vice Chairman, if any.
Section 9 - Secretary: The Secretary shall record the minutes of
all meetings of the Board of Directors, of the Executive Committee,
of the shareholders and of any Committees of the Board of Directors
which keep formal minutes; shall attend to the giving and serving
of all notices of the Corporation; shall prepare or cause to be
prepared the list of shareholders required to be produced at any
meeting; shall attest the seal of the Corporation upon all
contracts and instruments executed under such seal, shall affix or
cause to be affixed the seal of the Corporation thereto and to all
certificates of shares of the capital stock, shall have charge of
the stock records of the Corporation, and shall, in general,
perform all the duties of Secretary, subject to the control of the
Board of Directors, the Executive Committee, the Chairman of the
Board, the President and a Vice Chairman, if any.
Section 10 - General Counsel: The General Counsel, if any, shall
have charge of all matters of a legal nature involving the
Corporation.
Section 11 - Assistant Controllers,
Assistant Secretaries and
Assistant Treasurers: An Assistant Controller, an
Assistant Secretary or an Assistant Treasurer, if any, shall, in
the absence or inability to act or at the request of the
Controller, Secretary or Treasurer, respectively, perform the
duties of the Controller or Secretary or Treasurer, respectively,
and shall perform such other duties as may from time to time be
assigned by the Board of Directors, the Executive Committee, the
Chairman of the Board, the President or a Vice Chairman, if any.
The performance of any such duty shall be conclusive evidence of
right to act.
Section 12 - Principal Financial Officer and
Principal Accounting Officer: The Board of Directors
or the Executive Committee may from time to time designate officers
of the Corporation to be the Principal Financial Officer and the
Principal Accounting Officer of the Corporation.
ARTICLE XI: STOCK
- ------------------
Section 1 - Stock Certificates: The shares of stock of the
Corporation shall be represented by certificates which shall be
numbered and shall be entered on the stock records of the
Corporation and registered as they are issued. Each certificate
shall state on its face that the Corporation is formed under the
laws of Michigan, the name of the person or persons to whom issued,
the number and class of shares and the designation of the series
the certificate represents, and the par value of each share
represented by the certificate; shall be signed by the Chairman of
the Board or a Vice Chairman or the President or one of the Vice
Presidents and by the Treasurer or an Assistant Treasurer or the
Secretary or an Assistant Secretary; and shall be sealed with the
seal of the Corporation or a facsimile thereof. When such
certificates are countersigned by a transfer agent or registered by
a registrar, the signatures of any such Chairman of the Board, Vice
Chairman, President, Vice President, Treasurer, Assistant
Treasurer, Secretary or Assistant Secretary may be facsimiles. In
case any officer, who shall have signed or whose facsimile
signature shall have been placed on any such certificate, shall
cease to be such officer of the Corporation before such certificate
shall have been issued by the Corporation, such certificate may
nevertheless be issued by the Corporation with the same effect as
if the person, who signed such certificate or whose facsimile
signature shall have been placed thereon, were such officer of the
Corporation at the date of issue.
Each certificate shall set forth on its face or back or
state that the Corporation will furnish to a shareholder upon
request and without charge a full statement of the designations,
relative rights, preferences and limitations of the shares of stock
of each class authorized to be issued and of each series so far as
the same have been prescribed and the authority of the Board of
Directors to designate and prescribe the relative rights,
preferences and limitations of other series.
Section 2 - Stock Records: The shares of stock of the Corporation
shall be transferable on the stock records of the Corporation in
person or by proxy duly authorized and upon surrender and
cancellation of the old certificates therefore.
The Board of Directors may fix a date preceding the date
fixed for any meeting of the shareholders or any dividend payment
date or the date for the allotment of rights or the date when any
change, conversion or exchange of stock shall go into effect or the
date for any other action, as the record date for the determination
of the shareholders entitled to notice of and to vote at such
meeting or to receive payment of such dividend or to receive such
allotment of rights or to exercise such rights in respect of any
such change, conversion or exchange of stock or to take such other
action, as the case may be, notwithstanding any transfer of shares
on the records of the Corporation or otherwise after any such
record date fixed as aforesaid. The record date so fixed by the
Board shall not be more than sixty nor less than ten days before
the date of the meeting of the shareholders, nor more than sixty
days before any other action. If the Board of Directors does not
fix a date of record, as aforesaid, the record date shall be as
provided by law.
Section 3 - Stock - Preferred and Common: The Preferred Stock, and
the Common Stock of the Corporation shall consist of shares having
a par value of $.01 per share.
The designations, relative rights, preferences, limitations
and voting powers, or restrictions, or qualifications of the shares
of Preferred Stock and Common Stock shall be as set forth in the
Articles of Incorporation of the Corporation.
Section 4 - Replacing Certificates: In case of the alleged loss,
theft or destruction of any certificate of shares of stock and the
submission of proper proof thereof, a new certificate may be issued
in lieu thereof upon delivery to the Corporation by the owner or
legal representative of a bond of indemnity against any claim that
may be made against the Corporation on account of such alleged
lost, stolen or destroyed certificate or such issuance of a new
certificate.
ARTICLE XII: AUTHORIZED SIGNATURES
- -----------------------------------
Section 1 - Authorized Signatures: All checks, drafts and other
negotiable instruments issued by the Corporation shall be made in
the name of the Corporation and shall be signed manually or signed
by facsimile signature by such one of the officers of the
Corporation or such other person as the Chairman of the Board may
from time to time designate.
ARTICLE XIII: AMENDMENTS OF BYLAWS
- -----------------------------------
Section 1 - Amendments, How Effected: These Bylaws may be amended
or repealed, or new Bylaws may be adopted, either by the majority
vote of the votes cast by the shareholders entitled to vote thereon
or by the majority vote of the Directors then in office at any
meeting of the Directors.
July 1, 1993
<PAGE>
EXHIBIT (3)(c)
<PAGE>
<PAGE>
EXHIBIT (3)(c)
STATE OF MICHIGAN
MICHIGAN DEPARTMENT OF COMMERCE
CORPORATION DIVISION
LANSING, MICHIGAN
RESTATED ARTICLES OF INCORPORATION
(Profit Corporation)
These Restated Articles of Incorporation are executed pursuant
to the provisions of Sections 641 through 651, Act 284, Public Acts of
1972, as amended, (the "Act"). These Restated Articles of Incorporation
were duly adopted on February 25, 1994 by the Board of Directors of
Consumers Power Company, without a vote of the shareholders, in accordance
with provisions of Section 642 of the Act. These Restated Articles of
Incorporation only restate and integrate and do not further amend the
provisions of the Articles of Incorporation as heretofore amended and
there is no material discrepancy between those provisions and the
provisions of these Restated Articles.
The present name of the corporation is Consumers Power
Company. The former name of the corporation was Consumers Power Company
of Michigan.
Consumers Power Company is the successor to a corporation of
the same name which was organized in Maine in 1910 and did business in
Michigan from 1915 to 1968.
The date of filing the original Articles of
Incorporation in Michigan was January 22, 1968.
RESTATED ARTICLES OF INCORPORATION
The following restated Articles of Incorporation supersede the
original Articles as amended and shall be the Articles of Incorporation of
the corporation.
ARTICLE I
The name of the corporation is CONSUMERS POWER COMPANY
(hereinafter called the "Company").
ARTICLE II
The purposes for which the Company is formed are as follows:
(a) To generate, manufacture, produce, gather, purchase,
store, transmit, distribute, transform, use, sell and supply electric
energy or gas, either artificial or natural, or both electric energy and
gas, to the public generally, and to public utilities, natural gas
companies and to any and all other entities (whether governmental, public
or private); and generally to carry on the electric business or the gas
business, or both businesses, as a public utility.
(b) To generate, manufacture, produce, purchase, transmit,
distribute, transform, use, sell and supply hot water, steam, heat, power
and energy, or any or all thereof, to the public generally, and to any and
all other entities (whether governmental, public or private); and
generally to carry on any or all of such businesses as a public utility.
(c) To acquire by lease, purchase, grant, donation, devise,
bequest or otherwise, all such lands, easements, royalties, leaseholds,
flowage rights, water power and other property, real, personal or mixed,
tangible or intangible, and any interest therein, wherever the same may be
located and whether within or without the State of Michigan, as may be
necessary, incidental or appropriate to the carrying out of any of its
purposes, and to hold, convey, mortgage or lease, with or without any of
its franchises, corporate or otherwise, any of the foregoing.
(d) To dam any stream or streams, lake or other body of
water, and excavate, construct, maintain, repair and improve any existing
stream, lake, reservoir, body of water, or canal, or which it may excavate
and construct, with water power appurtenant thereto; to flood, flow and
submerge land and property by any means whatsoever, including but not
limited to, the construction of the necessary dams or other facilities in
any canal, or in creeks, streams, reservoirs, lakes or other bodies of
water or watercourses, natural or artificial; to excavate, construct,
improve, maintain, repair, remove and replace reservoirs, dams, dikes and
other facilities; and to condemn all lands, easements, rights of way,
waterpowers, flowage rights, gas royalties, natural gas leaseholds,
royalty interests, and other property, and any and all interests therein,
to the extent authorized, and subject to the limitations imposed by the
laws of the State of Michigan or of any other State applicable thereto.
(e) To explore for, mine, produce, gather, purchase, store,
transmit, distribute, refine, sell and supply natural gas, oil and other
hydrocarbons.
(f) To sell appliances and carry on an appliance business.
(g) To carry on any and all other businesses and perform any
and all other acts incident to or appropriate in connection with any of
the foregoing.
(h) To guarantee, subscribe for, purchase, invest in, own,
hold or otherwise acquire, sell, assign, transfer, mortgage, pledge or
otherwise dispose of, the shares of the capital stock of, or any bonds,
securities or evidences of indebtedness created by, or any other evidences
of interest in, any other corporation or corporations or other entity of
the District of Columbia or of the State of Michigan or any other State,
country, nation or government so far as permitted by the laws applicable
thereto, and while the owner thereof to exercise all the rights, powers
and privileges of ownership, including the right to vote thereon or with
respect thereto and to receive all dividends or payments thereon, so far
as permitted by the laws applicable thereto; to lend money to or aid in
any lawful manner whatsoever any corporation or other entity now existing
or hereafter formed whose shares of capital stock, bonds, securities or
evidences of indebtedness, or other evidences of interest therein, are
held or are in any manner guaranteed by the Company; and to do any and all
lawful acts and things to protect, preserve, improve or enhance the value
of any such shares of capital stock, bonds, securities, evidences of
indebtedness or other interests.
(i) To acquire, purchase, hold, sell and transfer shares of
its own capital stock, bonds and other evidences of indebtedness to the
extent and in the manner authorized by, and subject to any requirements
of, the laws applicable thereto.
(j) To borrow money and issue, sell or pledge bonds,
promissory notes, bills of exchange, debentures and other obligations and
evidences of indebtedness, whether secured by mortgage, pledge or
otherwise, or unsecured.
(k) To make contributions of money, property, services or
otherwise for public welfare, including, among other things, charitable,
scientific, educational and religious purposes.
(l) To conduct its business in the State of Michigan, other
States, the District of Columbia, the territories and colonies of the
United States and in foreign countries and the territories and colonies
thereof and to have one or more offices within or without the State of
Michigan.
(m) To have and to exercise all such powers as may be
conferred by the laws of the State of Michigan applicable to the Company
or to corporations engaged in the State of Michigan in any business which
may be carried on by the Company.
The foregoing clauses shall be construed both as purposes and
powers, but no recitation, expression or declaration of specific or
special purposes or powers hereinabove enumerated shall be deemed to be
exclusive, it being hereby expressly declared that all purposes and powers
not inconsistent therewith or with the laws of the State of Michigan
applicable to the Company are hereby included, and the Company shall
possess all such incidental and other powers as are reasonably necessary,
appropriate or convenient to the accomplishment of any of the foregoing
purposes or powers, either alone or in association with other
corporations, associations, firms, individuals or entities (whether
governmental, public or private), to the same extent and as fully as
individuals might or could do, as principals, agents, contractors or
otherwise.
ARTICLE III
The street and mailing address of the registered office is 212
West Michigan Avenue, Jackson, Michigan 49201.
The name of the resident agent at the registered office is T.
A. McNish.
ARTICLE IV
The total number of shares of all classes of stock which the
Company shall have authority to issue is 188,500,000: 23,500,000 shares
of preferred stock, 7,500,000 of which are of the par value of $100 per
share and are of a class designated Preferred Stock, and 16,000,000 shares
of which are of no par value and are of a class designated Class A
Preferred Stock; 40,000,000 shares are of the par value of $1 per share
and are of a class designated Preference Stock; and 125,000,000 shares are
of the par value of $10 per share and are of a class designated Common
Stock.
ARTICLE V
A director shall not be personally liable to the Company or
its shareholders for monetary damages for breach of duty as a director
except (i) for a breach of the director's duty of loyalty to the Company
or its shareholders, (ii) for acts or omissions not in good faith or that
involve intentional misconduct or a knowing violation of law, (iii) for a
violation of Section 551(1) of the Michigan Business Corporation Act, and
(iv) any transaction from which the director derived an improper personal
benefit. No amendment to or repeal of this Article V, and no modification
to its provisions by law, shall apply to, or have any effect upon, the
liability or alleged liability of any director of the Company for or with
respect to any acts or omissions of such director occurring prior to such
amendment, repeal or modification.
ARTICLE VI
Each director and each officer of the Company shall be
indemnified by the Company to the fullest extent permitted by law against
expenses (including attorneys' fees), judgments, penalties, fines and
amounts paid in settlement actually and reasonably incurred by him or her
in connection with the defense of any proceeding in which he or she was or
is a party or is threatened to be made a party by reason of being or
having been a director or an officer of the Company. Such right of
indemnification is not exclusive of any other rights to which such
director or officer may be entitled under any now or hereafter existing
statute, any other provision of these Articles, bylaw, agreement, vote of
shareholders or otherwise. If the Business Corporation Act of the State
of Michigan is amended after approval by the shareholders of this Article
VI to authorize corporate action further eliminating or limiting the
personal liability of directors, then the liability of a director of the
Company shall be eliminated or limited to the fullest extent permitted by
the Business Corporation Act of the State of Michigan, as so amended. Any
repeal or modification of this Article VI by the shareholders of the
Company shall not adversely affect any right or protection of a director
of the Company existing at the time of such repeal or modification.
ARTICLE VII
The statement of the designations and the voting and other
powers, preferences and rights, and the qualifications, limitations or
restrictions thereof, of the Common Stock, of the Preference Stock, of the
Preferred Stock and of the Class A Preferred Stock is as follows:
PREFERRED STOCK
Preferred Stock Issuable in Series
----------------------------------
The shares of Preferred Stock may be divided into and issued
in series. Each such series shall be so designated as to distinguish the
shares thereof from the shares of all other series and classes, and all
shares of the Preferred Stock shall be identical, except as to the
following relative rights and preferences, as to which there may be
variations between different series:
(a) The rate of dividend;
(b) The price at which shares may be redeemed, such price
to be not less than $100 or more than $115 per share,
plus accrued dividends to the date of redemption;
(c) The amount payable upon shares in event of involuntary
liquidation, which amount shall not be less than $100
per share or more than $115 per share, plus accrued
dividends;
(d) The amount payable upon shares in event of voluntary
liquidation, which amount shall not be less than $100
per share or more than $115 per share, plus accrued
dividends;
(e) The terms and conditions, if any, on which shares shall
be by their terms convertible into or exchangeable for
shares of any other class of stock of the Company over
which the Preferred Stock has preference as to payment
of dividends and as to assets;
(f) Subject to the rights and preferences of shares of
Preferred Stock set forth under the heading "General
Provisions", the terms and conditions of a sinking or
purchase fund, if any, for the redemption or purchase
of such shares.
No change shall be made in any of the rights and preferences
of any series of Preferred Stock at the time outstanding in those respects
in which the shares thereof vary from the shares of other series of
Preferred Stock at the time outstanding without the affirmative vote in
favor thereof of the holders of at least 66-2/3% of the shares of such
series of Preferred Stock at the time outstanding, in addition to such
other vote, if any, as may be required for such change under the
applicable provisions of these Articles or of the Michigan General
Corporation Act.
Series Established By Articles
------------------------------
There are hereby established six series of Preferred Stock
designated, respectively, as $4.50 Preferred Stock, $4.16 Preferred Stock,
$7.45 Preferred Stock, $7.72 Preferred Stock, $7.76 Preferred Stock and
$7.68 Preferred Stock.
$4.50 Preferred Stock
---------------------
The rights and preferences of the shares of $4.50 Preferred
Stock in those respects in which the shares thereof may vary from the
shares of other series are as follows:
(a) The rate of dividend is $4.50 per annum;
(b) The price at which shares may be redeemed is $110 per
share, plus accrued dividends to the date of
redemption;
(c) The amount payable in event of involuntary liquidation
is $100 per share, plus accrued dividends;
(d) The amount payable in event of voluntary liquidation is
$105 per share, plus accrued dividends;
(e) Shares are not, by their terms, convertible or
exchangeable;
(f) Shares are not, by their terms, entitled to the benefit
of any sinking or purchase fund.
$4.16 Preferred Stock
---------------------
The rights and preferences of the shares of $4.16 Preferred
Stock in those respects in which the shares thereof may vary from the
shares of other series are as follows:
(a) The rate of dividend is $4.16 per annum;
(b) The price at which shares may be redeemed is $103.25
per share, plus accrued dividends to the date of
redemption;
(c) The amount payable in event of involuntary liquidation
is $100 per share, plus accrued dividends;
(d) The amount payable in event of voluntary liquidation is
$101 per share, plus accrued dividends;
(e) Shares are not, by their terms, convertible or
exchangeable;
(f) Shares are not, by their terms, entitled to the benefit
of any sinking or purchase fund.
$7.45 Preferred Stock
---------------------
The rights and preferences of the shares of $7.45 Preferred
Stock in those respects in which the shares thereof may vary from the
shares of other series are as follows:
(a) The rate of dividend is $7.45 per annum;
(b) The price at which shares may be redeemed is $108 per
share if redeemed prior to April 1, 1978; $106 per
share if redeemed thereafter and prior to April 1,
1981; $103 per share if redeemed thereafter and prior
to April 1, 1986; and at $101 per share thereafter,
plus, in each case, accrued dividends to the date of
redemption; provided, however, that prior to April 1,
1978 none of the shares may be redeemed if such
redemption is a part of or in anticipation of any
refunding operation involving the application, directly
or indirectly, of borrowed funds or the proceeds of an
issue of any stock ranking prior to or on a parity with
the $7.45 Preferred Stock if such borrowed funds have
an interest rate or cost to the Company (computed in
accordance with generally accepted financial practice),
or such stock has a dividend rate or cost to the
Company (so computed), less than $7.45 per annum;
(c) The amount payable in event of involuntary liquidation
is $100 per share, plus accrued dividends;
(d) The amount payable in event of voluntary liquidation is
$100 per share, plus accrued dividends;
(e) Shares are not, by their terms, convertible or
exchangeable;
(f) Shares are not, by their terms, entitled to the benefit
of any sinking or purchase fund.
$7.72 Preferred Stock
---------------------
The rights and preferences of the shares of $7.72 Preferred
Stock in those respects in which the shares thereof may vary from the
shares of other series are as follows:
(a) The rate of dividend is $7.72 per annum;
(b) The price at which shares may be redeemed is $108 per
share if redeemed prior to July 1, 1977; $106 per share
if redeemed thereafter and prior to July 1, 1982; $103
per share if redeemed thereafter and prior to July 1,
1987; and at $101 per share thereafter, plus, in each
case, accrued dividends to the date of redemption;
provided, however, that prior to July 1, 1977 none of
the shares may be redeemed if such redemption is a part
of or in anticipation of any refunding operation
involving the application, directly or indirectly, of
borrowed funds or the proceeds of an issue of any stock
ranking prior to or on a parity with the $7.72
Preferred Stock if such borrowed funds have an interest
rate or cost to the Company (computed in accordance
with generally accepted financial practice), or such
stock has a dividend rate or cost to the Company (so
computed), less than 7.72% per annum;
(c) The amount payable in event of involuntary liquidation
is $100 per share, plus accrued dividends;
(d) The amount payable in event of voluntary liquidation is
$100 per share, plus accrued dividends;
(e) Shares are not, by their terms, convertible or
exchangeable;
(f) Shares are not, by their terms, entitled to the benefit
of any sinking or purchase fund.
$7.76 Preferred Stock
---------------------
The rights and preferences of the shares of $7.76 Preferred
Stock in those respects in which the shares thereof may vary from the
shares of other series are as follows:
(a) The rate of dividend is $7.76 per annum;
(b) The price at which shares may be redeemed is $109.19
per share if redeemed prior to June 1, 1978; $107.25
per share if redeemed thereafter and prior to June 1,
1983; $105.31 per share if redeemed thereafter and
prior to June 1, 1988; and at $102.21 per share
thereafter, plus, in each case, accrued dividends to
the date of redemption; provided, however, that prior
to June 1, 1978 none of the shares may be redeemed if
such redemption is for the purpose or in anticipation
of refunding such share through the use, directly or
indirectly, of funds borrowed by the Company, or
through the use, directly or indirectly, of funds
derived through the issuance by the Company of stock
ranking prior to or on a parity with the $7.76
Preferred Stock as to dividends or assets, if such
borrowed funds have an effective interest cost to the
Company (computed in accordance with generally accepted
financial practice) or such stock has an effective
dividend cost to the Company (so computed) of less than
7.7439% per annum;
(c) The amount payable in event of involuntary liquidation
is $100 per share, plus accrued dividends;
(d) The amount payable in the event of voluntary
liquidation is $101.43 per share, plus accrued
dividends;
(e) Shares are not, by their terms, convertible or
exchangeable;
(f) Shares are not, by their terms, entitled to the benefit
of any sinking or purchase fund.
$7.68 Preferred Stock
---------------------
The rights and preferences of the shares of $7.68 Preferred
Stock in those respects in which the shares thereof may vary from the
shares of other series are as follows:
(a) The rate of dividend is $7.68 per annum;
(b) The price at which shares may be redeemed is $108 per
share if redeemed prior to November 1, 1978; $106 per
share if redeemed thereafter and prior to November 1,
1983; $103 per share if redeemed thereafter and prior
to November 1, 1988; and at $101 per share thereafter,
plus, in each case, accrued dividends to the date of
redemption; provided, however, that prior to November
1, 1978 none of the shares may be redeemed if such
redemption is for the purpose or in anticipation of
refunding such share through the use, directly or
indirectly, of funds borrowed by the Company, or
through the use, directly or indirectly, of funds
derived through the issuance by the Company of stock
ranking prior to or on a parity with the $7.68
Preferred Stock as to dividends or assets, if such
borrowed funds have an effective interest cost to the
Company (computed in accordance with generally accepted
financial practice) or such stock has an effective
dividend cost to the Company (so computed), of less
than 7.68% per annum;
(c) The amount payable in event of involuntary liquidation
is $100 per share, plus accrued dividends;
(d) The amount payable in event of voluntary liquidation is
$100 per share, plus accrued dividends;
(e) Shares are not, by their terms, convertible or
exchangeable;
(f) Shares are not, by their terms, entitled to the benefit
of any sinking or purchase fund.
Authority of Board of Directors as to Other Series
To the extent that series of Preferred Stock have not been
established and variations in the relative rights and preferences as
between series have not been fixed and determined as hereinbefore set
forth in these Articles, authority is vested in the Board of Directors of
the Company to divide the shares of Preferred Stock into and to establish
series of Preferred Stock, to fix and determine within the limitations
hereinabove set forth in these Articles the relative rights and
preferences of the shares of any series so established, to issue and sell
any and all of the authorized and unissued shares of Preferred Stock as
shares of any series thereof established by these Articles or by action of
the Board of Directors pursuant hereto, and to create a sinking or
purchase fund for the redemption or purchase of shares of any series
without the necessity of providing a sinking or purchase fund for any
other series, and in the event that the Company shall acquire, by purchase
or redemption or otherwise, any issued shares of its Preferred Stock of
any series, the Board of Directors may resell or convert and sell or
otherwise dispose of, in their discretion, any shares so acquired as
shares of the same series or of any other duly created series of Preferred
Stock.
CLASS A PREFERRED STOCK
Class A Preferred Stock Issuable in Series
------------------------------------------
The shares of Class A Preferred Stock may be divided into and
issued in series. Each such series shall be so designated as to
distinguish the shares thereof from the shares of all other series and
classes, and all shares of the Class A Preferred Stock shall be identical,
except as to the following relative rights and preferences, as to which
there may be variations between different series:
(a) The rate of dividend;
(b) The price at which shares may be redeemed;
(c) The amount payable upon shares in event of involuntary
liquidation;
(d) The amount payable upon shares in event of voluntary
liquidation;
(e) The voting rights of the holders of such series, if
any; provided that such holders of all series shall
have the voting rights hereinafter specified in these
Articles;
(f) The terms and conditions, if any, on which shares shall
be by their terms convertible into or exchangeable for
any other securities; and
(g) The terms and conditions of a sinking or purchase fund,
if any, for the redemption or purchase of such shares.
No change shall be made in any of the rights and preferences
of any series of Class A Preferred Stock at the time outstanding in those
respects in which the shares thereof vary from the shares of other series
of Class A Preferred Stock at the time outstanding without the affirmative
vote in favor thereof of the holders of at least 66-2/3% of the shares of
such series of Class A Preferred Stock at the time outstanding, in
addition to such other vote, if any, as may be required for such change
under the applicable provisions of these Articles or of the Michigan
Business Corporation Act.
Authority of Board of Directors As to Other Series
--------------------------------------------------
To the extent that series of Class A Preferred Stock have not
been established and variations in the relative rights and preferences as
between series have not been fixed and determined as hereinbefore set
forth in these Articles, authority is vested in the Board of Directors of
the Company to divide the shares of Class A Preferred Stock into and to
establish series of Class A Preferred Stock, to fix and determine the
relative rights and preferences of the shares of any series so
established, to issue and sell any and all of the authorized and unissued
shares of Class A Preferred Stock as shares of any series thereof
established by these Articles or by action of the Board of Directors
pursuant hereto, and to create a sinking or purchase fund for the
redemption or purchase of shares of any series without the necessity of
providing a sinking or purchase fund for any other series, and in the
event that the Company shall acquire, by purchase or redemption or
otherwise, any issued shares of its Class A Preferred Stock of any series,
the Board of Directors may resell or convert and sell or otherwise dispose
of, in their discretion, any shares so acquired as shares of the same
series or of any other duly created series of Class A Preferred Stock.
PREFERRED STOCK AND CLASS A PREFERRED STOCK
General Provisions
------------------
In these General Provisions, the Company's Preferred Stock,
par value $100 per share, is referred to as the "Preferred Stock"; the
Company's Class A Preferred Stock is referred to as the "Class A Preferred
Stock"; and the Preferred Stock and Class A Preferred Stock are together
referred to as the "Company Preferred Stock".
(A) The holders of the Company Preferred Stock of each
series shall be entitled to receive dividends, payable when and as
declared by the Board of Directors, at such rates as shall be determined
for the respective series thereof from the first day of the current
dividend period within which such stock shall have been originally issued
except that, as to any share of Company Preferred Stock originally issued
subsequent to December 31, 1972, from the date upon which such share shall
have been originally issued, before any dividends shall be declared or
paid upon or set apart for the Common Stock or any other stock of the
Company not having preference over the Company Preferred Stock as to
payment of dividends. Such dividends shall be cumulative so that if for
any dividend period or periods dividends shall not have been paid or
declared and set apart for payment upon all outstanding Company Preferred
Stock at the rates determined for the respective series, the deficiency
shall be fully paid, or declared and set apart for payment, before any
dividends shall be declared or paid upon the Common Stock or any other
stock of the Company not having preference over the Company Preferred
Stock as to payment of dividends. Dividends shall not be declared and set
apart for payment, or paid, on the Company Preferred Stock of any one
series, for any dividend period, unless dividends have been or are
contemporaneously declared and set apart for payment or paid on all series
of the Company Preferred Stock for all dividend periods terminating on the
same or an earlier date. As to all series of the Company Preferred Stock,
the term "dividend period" shall mean any of the four calendar quarters in
each year commencing, respectively, the first day of January, April, July
and October and the first days of each such calendar quarter shall be the
dividend payment dates for the regular quarterly dividends payable for the
preceding dividend period on such series.
(B) When full cumulative dividends as aforesaid upon all
series of the Company Preferred Stock then outstanding for all past
dividend periods and for the current dividend periods shall have been paid
or declared and set apart for payment, the Board of Directors may declare
dividends on the Common Stock or any other stock over which the Company
Preferred Stock has a preference as to payment of dividends, and no
holders of any series of the Company Preferred Stock as such shall be
entitled to share therein; provided, however, that no dividends (other
than dividends paid in or presently thereafter repaid to the Company for
or as a capital contribution with respect to stock over which the Company
Preferred Stock has preference as to payment of dividends and as to
assets) shall be paid or any other distribution of assets made, by
purchase of shares or otherwise, on Common Stock or on any other stock
over which the Company Preferred Stock has preference as to payment of
dividends or as to assets except out of earned surplus of the Company
available for distribution to stock over which the Company Preferred Stock
has preference as to payment of dividends and as to assets, or if, at the
time of declaration thereof or the making of such distribution there shall
not remain to the credit of earned surplus account (after deducting
therefrom the amount of such dividends and distribution), an amount at
least equal to (i) $7.50 per share on all then outstanding shares of the
Preferred Stock, (ii) in respect to the Class A Preferred Stock 7.5% of
the aggregate amount established by the Board of Directors to be payable
on the shares of each series thereof in the event of involuntary
liquidation of the Company, and (iii) $7.50 per share on all then
outstanding shares of all other stock over which the Company Preferred
Stock does not have preference as to the payment of dividends and as to
assets.
So long as any shares of the Company Preferred Stock are
outstanding, the payment of dividends on the Common Stock (other than
dividends payable in Common Stock) and the making of any distribution of
assets to holders of Common Stock by purchase of shares or otherwise (each
of such actions being herein embraced within the term "payment of Common
Stock dividends") shall be subject to the following limitations (except as
such payments may be approved or permitted by subsequent order of the
Securities and Exchange Commission or any successor thereto or any other
Federal governmental agency having the same or similar jurisdiction, or,
in the event that the Company ceases to be subject to the jurisdiction of
said Commission or of any successor thereto or of any such other Federal
governmental agency, except as such payments may be permitted in
accordance with a waiver of such limitations which shall have been
approved by the affirmative vote in favor thereof of the holders of at
least 66-2/3% of the shares of Preferred Stock and Class A Preferred Stock
(voting as separate classes) at the time outstanding):
(a) If and so long as the ratio of the aggregate of the par
value of, or stated capital represented by, the
outstanding shares of Common Stock (including premiums
on the Common Stock but excluding premiums on the
Company Preferred Stock) and of the surplus of the
Company to the total capitalization and surplus of the
Company at the end of a period of twelve consecutive
calendar months within the fourteen calendar months
immediately preceding the calendar month in which the
proposed payment of Common Stock dividends is to be
made (which period is hereinafter referred to as the
"base period"), adjusted to reflect the proposed
payment of Common Stock dividends (which ratio is
hereinafter referred to as the "capitalization ratio"),
is less than 20%, the payment of Common Stock
dividends, including the proposed payment, during the
twelve calendar months period ending with and including
the calendar month in which the proposed payment is to
be made shall not exceed 50% of the net income of the
Company available for the payment of dividends on the
Common Stock during the base period;
(b) If and so long as the capitalization ratio is 20% or
more but less than 25%, the payment of Common Stock
dividends, including the proposed payment, during the
twelve calendar months period ending with and including
the calendar month in which the proposed payment is to
be made shall not exceed 75% of the net income of the
Company available for the payment of dividends on the
Common Stock during the base period;
(c) Except to the extent permitted under paragraphs (a) and
(b) above, the Company shall not make any payment of
Common Stock dividends which would reduce the
capitalization ratio to less than 25%.
For the purpose of the foregoing provisions, the following
terms shall have the following meanings:
(1) The term "net income of the Company available for the
payment of dividends on the Common Stock" shall mean
for any base period the balance remaining after
deducting from the total gross revenues of the Company
from all sources during such period the following:
(a) All operating expenses and taxes, including
charges to income for general taxes and for
federal and state taxes measured by income, for
retirement or depreciation reserve and for
amortization or other disposition of amounts, if
any, classified as amounts in excess of original
cost of utility plant; (b) the amount, if any,
by which the aggregate of the charges to income
during the period in question for repairs,
maintenance and provision for depreciation is
less than the maintenance and replacement
requirement embodied in the Indenture, or any
indenture supplemental thereto, succeeding the
same or in substitution therefor; (c) all
interest charges and other income deductions,
including charges to income for amortization of
debt discount, premium and expense and of the
Company Preferred Stock premium and expense; and
(d) all dividends applicable to the period in
question on stock having preference over the
Common Stock as to the payment of dividends.
(2) The term "total capitalization" shall mean the
aggregate of the principal amount of all outstanding
indebtedness of the Company maturing more than twelve
months after the date of determination of total
capitalization, plus the par value of, or stated
capital represented by, the outstanding shares of all
classes of stock of the Company, including any premiums
on capital stock.
(3) The term "surplus" shall include capital surplus,
earned surplus and any other surplus of the Company,
adjusted to eliminate any amounts which may then be
classified by the Company on its books as amounts in
excess of the original cost of utility plant and which
are not provided for by reserve and any items set forth
on the asset side of the balance sheet of the Company
as a result of accounting convention, such as
unamortized debt discount and expense and the Company
Preferred Stock expense, unless any such amount or
item, as the case may be, is being amortized or is
being provided for by reserve.
(C) Upon any dissolution, liquidation or winding up
of the Company, whether voluntary or involuntary, the holders
of the Company Preferred Stock of each series, without any
preference of the shares of any series of the Company
Preferred Stock over the shares of any other series of the
Company Preferred Stock, shall be entitled to receive out of
the assets of the Company, whether capital, surplus or other,
before any distribution of the assets to be distributed shall
be made to the holders of Common Stock or of any other stock
not having preference as to assets over the Company Preferred
Stock, the amount determined to be payable on the shares of
such series in the event of voluntary or involuntary
liquidation, as the case may be. In case the assets shall not
be sufficient to pay in full the amounts determined to be
payable on all the shares of the Company Preferred Stock in
the event of voluntary or involuntary liquidation, as the case
may be, then the assets available for such payment shall be
distributed to the extent available as follows: first, to the
payment, pro rata, of $100 per share on each share of
Preferred Stock outstanding irrespective of series and the
amount established by the Board of Directors to be payable on
each outstanding share of each series of Class A Preferred
Stock in the event of involuntary liquidation; second, to the
payment of the accrued dividends on such shares, such payment
to be made pro rata in accordance with the amount of accrued
dividends on each such share; and, third, to the payment of
any amounts in excess of $100 per share of the Preferred Stock
outstanding and the difference between the amount established
by the Board of Directors to be payable on the outstanding
shares of each series of Class A Preferred Stock in the event
of voluntary liquidation and the amount similarly determined
to be payable on such shares in the event of involuntary
liquidation, plus accrued dividends which shall have been
determined to be payable on the shares of any series in the
event of voluntary or involuntary liquidation, as the case may
be, such payment also to be made pro rata in accordance with
the amounts, if any, so payable on each such share. After
payment to the holders of the Company Preferred Stock of the
full preferential amounts hereinbefore provided for, the
holders of the Company Preferred Stock as such shall have no
right or claim to any of the remaining assets of the Company,
either upon any distribution of such assets or upon
dissolution, liquidation or winding up, and the remaining
assets to be distributed, if any, upon a distribution of such
assets or upon dissolution, liquidation or winding up, may be
distributed among the holders of the Common Stock or of any
other stock over which the Company Preferred Stock has
preference as to assets. Without limiting the right of the
Company to distribute its assets or to dissolve, liquidate or
wind up in connection with any sale, merger, or consolidation,
the sale of all the property of the Company to, or the merger
or consolidation of the Company into or with any other
corporation shall not be deemed to be a distribution of assets
or a dissolution, liquidation or winding up for the purposes
of this paragraph.
(D) At the option of the Board of Directors of the Company,
the Company may redeem any series of the Company Preferred Stock
determined to be redeemable, or any part of any series, at any time at the
redemption price determined for such series; provided, however, that not
less than thirty nor more than sixty days previous to the date fixed for
redemption a notice of the time and place thereof shall be given to the
holders of record of the Company Preferred Stock so to be redeemed, by
mail or publication, in such manner as may be prescribed by the By-laws of
the Company or by resolution of the Board of Directors; and, provided,
further, that in every case of redemption of less than all of the
outstanding shares of any one series of the Company Preferred Stock, the
shares of such series to be redeemed shall be chosen by lot in such manner
as may be prescribed by resolution of the Board of Directors. At any time
after notice of redemption has been given in the manner prescribed by the
By-laws of the Company or by resolution of the Board of Directors to the
holders of stock so to be redeemed, the Company may deposit, or may cause
its nominee to deposit, the aggregate redemption price with some bank or
trust company named in such notice, payable on the date fixed for
redemption as aforesaid and in the amounts aforesaid to the respective
orders of the holders of the shares so to be redeemed, on endorsement to
the Company or its nominee, or otherwise, as may be required, and upon
surrender of the certificates for such shares. Upon the deposit of said
money as aforesaid, or, if no such deposit is made, upon said redemption
date (unless the Company defaults in making payment of the redemption
price as set forth in such notice), such holders shall cease to be
shareholders with respect to said shares, and from and after the making of
said deposit, or, if no such deposit is made, after the redemption date
(the Company not having defaulted in making payment of the redemption
price as set forth in such notice), the said holders shall have no
interest in or claim against the Company, or its nominee, with respect to
said shares, but shall be entitled only to receive said moneys on the date
fixed for redemption as aforesaid from said bank or trust company, or if
no such deposit is made, from the Company, without interest thereon, upon
endorsement, if required, and surrender of the certificates as aforesaid.
If such deposit shall be made by a nominee of the Company as
aforesaid, such nominee shall upon such deposit become the owner of the
shares with respect to which such deposit was made and certificates of
stock may be issued to such nominee in evidence of such ownership.
In case the holder of any such Company Preferred Stock shall
not, within six years after said deposit, claim the amount deposited as
above stated for the redemption thereof, the Depositary shall upon demand
pay over to the Company such amounts so deposited and the Depositary shall
thereupon be relieved from all responsibility to the holder thereof.
Nothing herein contained shall limit any legal right of the
Company to purchase any shares of the Company Preferred Stock.
(E) So long as any shares of the Preferred Stock are
outstanding, the Company shall not, without the affirmative vote in favor
thereof of the holders of at least 66-2/3% of the shares of the Preferred
Stock (voting together as a single class) at the time outstanding, adopt
an amendment to these Articles if such amendment would either (i)
authorize or create any class of stock preferred as to dividends or assets
over the Preferred Stock or (ii) change any of the rights and preferences
of the then outstanding Preferred Stock; provided, however, that nothing
in this paragraph contained shall authorize the adoption of any amendment
of these Articles by the vote of the holders of a less number of shares of
the Preferred Stock, or of any other class of stock, or of all classes of
stock, than is required for such amendment by the laws of the State of
Michigan at the time applicable thereto.
(F) So long as any shares of Class A Preferred Stock are
outstanding, the Company shall not, without the affirmative vote in favor
thereof of the holders of at least 66-2/3% of the shares of Class A
Preferred Stock at the time outstanding (voting together as a single
class) adopt an amendment to these Articles if such amendment would either
(i) authorize or create any class of stock preferred as to dividends or
assets over the Class A Preferred Stock or (ii) change any of the rights
and preferences of the then outstanding Class A Preferred Stock; provided,
however, that nothing in this paragraph contained shall authorize the
adoption of any amendment of these Articles by the vote of the holders of
a lesser number of shares of Class A Preferred Stock, or of any other
class of stock, or of all classes of stock, than is required for such
amendment by the laws of the State of Michigan at the time applicable
thereto.
(G) So long as any shares of the Company Preferred Stock
are outstanding, the Company shall not, without the affirmative vote in
favor thereof of the holders of at least 66-2/3% of the shares of the
Preferred Stock and Class A Preferred Stock (voting as separate classes)
at the time outstanding,
(a) issue, sell or otherwise dispose of any shares of
the Company Preferred Stock or issue, sell or otherwise
dispose of any stock over which the Company Preferred Stock
does not have preference as to the payment of dividends and as
to assets, unless, in any such case, (i) the net income of the
Company available for the payment of dividends for a period of
twelve consecutive calendar months within the fifteen calendar
months immediately preceding the issuance, sale or disposition
of such stock (including, in any case in which such stock is
to be issued, sold or otherwise disposed of in connection with
the acquisition of new property, the net income of the
property to be so acquired, computed on the same basis as the
net income of the Company available for the payment of
dividends) is at least equal to two times the annual dividend
requirements on all outstanding shares of the Company
Preferred Stock and of all stock over which the Company
Preferred Stock does not have preference as to the payment of
dividends and as to assets, including the shares proposed to
be issued, and (ii) the gross income of the Company available
for the payment of interest for a period of twelve consecutive
calendar months within the fifteen calendar months immediately
preceding the issuance, sale or disposition of such stock
(including, in any case in which such stock is to be issued,
sold or otherwise disposed of in connection with the
acquisition of new property, the gross income of the property
to be so acquired, computed on the same basis as the gross
income of the Company available for the payment of interest)
is at least equal to one and one-half times the aggregate of
the annual interest requirements (adjusted by provision for
amortization of debt discount and expense or of premium on
debt, as the case may be) on all outstanding indebtedness of
the Company and the annual dividend requirements (adjusted by
provision for amortization of the Company Preferred Stock
premium and expense) on all outstanding shares of the Company
Preferred Stock and of all stock over which the Company
Preferred Stock does not have preference as to the payment of
dividends and as to assets, including the shares proposed to
be issued; or
(b) issue, sell or otherwise dispose of any shares of
the Company Preferred Stock or issue, sell or otherwise
dispose of any stock over which the Company Preferred Stock
does not have preference as to the payment of dividends and as
to assets, unless, in any such case, the aggregate of the par
value of, or stated capital represented by, the outstanding
shares of Common Stock and of the surplus of the Company
(paid-in, earned and other, if any) shall be not less than the
aggregate amount payable in the event of involuntary
liquidation upon all outstanding shares of the Company
Preferred Stock and of all stock over which the Company
Preferred Stock does not have preference as to the payment of
dividends and as to assets, including the shares proposed to
be issued, provided that no portion of the surplus of the
Company utilized to satisfy the foregoing requirement shall be
available for dividends or other distributions of assets, by
purchase of shares or otherwise, on Common Stock or on any
other stock over which the Company Preferred Stock has
preference as to the payment of dividends and as to assets
until shares of the Company Preferred Stock or of stock over
which the Company Preferred Stock does not have preference as
to the payment of dividends and as to assets are retired and
then only to the extent of the amount payable in the event of
involuntary liquidation upon such shares or until and then
only to the extent that the par value of, or stated capital
represented by, the outstanding shares of Common Stock shall
have been increased.
For the purpose of the foregoing provisions, the following
terms shall have the following meanings:
(1) The term "net income of the Company available for the
payment of dividends" shall mean the balance remaining
after deducting from the total gross revenues of the
Company from all sources the following: (a) all
operating expenses and taxes, including charges to
income for general taxes and for federal and state
taxes measured by income, for retirement or
depreciation reserve and for amortization or other
disposition of amounts, if any, classified as amounts
in excess of original cost of utility plant, (b) the
amount, if any, by which the aggregate of the charges
to income during the period in question for repairs,
maintenance and provision for depreciation is less than
the maintenance and replacement requirement embodied in
the Indenture, or any indenture supplemental thereto,
succeeding the same or in substitution therefor, and
(c) all interest charges and other income deductions,
including charges to income for the amortization of
debt discount, premium and expense and of the Company
Preferred Stock premium and expense.
(2) The term "gross income of the Company available for the
payment of interest" shall mean the balance remaining
after deducting from the total gross revenues of the
Company from all sources the following: (a) all
operating expenses and taxes, including charges to
income for general taxes and for federal and state
taxes measured by income, for retirement or
depreciation reserve and for amortization or other
disposition of amounts, if any, classified as amounts
in excess of original cost of utility plant and (b) the
amount, if any, by which the aggregate of the charges
to income during the period in question for repairs,
maintenance and provision for depreciation is less than
the maintenance and replacement requirement embodied in
the Indenture, or any indenture supplemental thereto,
succeeding the same or in substitution therefor.
(3) The term "accrued dividends" shall be deemed to mean in
respect of any share of any series of the Company
Preferred Stock as of any given date, the amount, if
any, by which the product of the rate of dividend per
annum, determined upon the shares of such series,
multiplied by the number of years and any fractional
part of a year which shall have elapsed from the date
after which dividends on such stock became cumulative
to such given date, exceeds the total dividends
actually paid on such stock and the dividends declared
and set apart for payment. Accumulations of dividends
shall not bear interest.
The term "outstanding", whenever used herein with respect to
shares of the Company Preferred Stock or of any other class of stock which
are by their terms redeemable, or with respect to bonds or other evidences
of indebtedness shall not include any such shares or bonds or evidences of
indebtedness which have been called for redemption in accordance with the
provisions applicable thereto, of which call for redemption notice shall
have been given, as required by such provisions and for the redemption of
which a sum of money sufficient to pay the amount payable on such
redemption shall have been deposited with a bank or trust company,
irrevocably in trust for such purpose, or any bonds or other evidences of
indebtedness for the payment of which at maturity provision has been made
in a similar manner.
The term "capital represented by" whenever used herein with
respect to shares of stock of the Company shall mean at any time the
amount paid in on or contributed, transferred or otherwise then held and
recorded or accounted for, as permitted by the provisions of law
applicable thereto, as capital with respect to said shares.
COMMON STOCK
Each share of Common Stock of the Company shall be equal to
every other share of said stock in every respect. The entire
consideration received for shares of Common Stock shall be capital.
VOTING POWERS GENERALLY
At all meetings of the shareholders of the Company, the
holders of the Preferred Stock and the holders of Common Stock shall be
entitled on all questions to one vote for each share of stock held by them
respectively, regardless of class.
Whenever and as often as four quarterly dividends payable on
the Company Preferred Stock of any series shall be in default, in whole or
in part, the holders of the Company Preferred Stock of all series shall
have the exclusive right, voting separately and as a single class, to vote
for and to elect the smallest number of directors which shall constitute a
majority of the then authorized number of directors of the Company, and,
in all matters other than the election of directors, each holder of one or
more shares of the Company Preferred Stock shall be entitled to one vote
for each such share of stock held. In the event of defaults entitling the
holders of Company Preferred Stock to elect a majority of the directors as
aforesaid, the holders of the Common Stock shall, subject to the prior
rights of the holders of the Preference Stock, have the exclusive right,
voting separately and as a class, to vote for and to elect the greatest
number of directors which shall constitute a minority of the then
authorized number of directors of the Company, and, in all matters other
than the election of directors, each holder of Common Stock shall be
entitled to one vote for each such share of stock held. The right of the
holders of the Company Preferred Stock to elect a majority of the
directors, however, shall cease when all defaults in the payment of
dividends on their stock shall have been cured, and such dividends shall
be declared and paid out of any funds legally available therefor as soon
as, in the judgment of the Board of Directors, is reasonably practicable.
The terms of office of all persons who may be directors of the Company at
the time when the right to elect a majority of the directors shall accrue
to the holders of the Company Preferred Stock, as herein provided, shall
terminate upon the election of their successors at a meeting of the
shareholders of the Company then entitled to vote. Such election shall be
held at the next annual meeting of shareholders or may be held at a
special meeting of shareholders, which shall be held upon notice as
provided in the By-laws of the Company for a special meeting of the
shareholders, at the request in writing of the holders of not less than
1,000 shares of the then outstanding Company Preferred Stock entitled to
vote addressed to the Secretary of the Company at its principal business
office. Any vacancy in the Board of Directors occurring during any period
that the Company Preferred Stock shall have elected representatives on the
Board shall be filled by a majority vote of the remaining directors (or
the one director) representing the class of stock theretofore represented
by the director causing the vacancy. Upon the termination of such
exclusive right of the holders of the Company Preferred Stock to elect a
majority of the directors of the Company, the terms of office of all the
directors of the Company shall terminate upon the election of their
successors at a meeting of the shareholders of the Company then entitled
to vote. Such election shall be held at the next annual meeting of
shareholders or may be held at a special meeting of shareholders, which
shall be held upon notice as provided in the By-laws of the Company for a
special meeting of the shareholders, at the request in writing of the
holders of not less than 1,000 shares of the then outstanding Common Stock
addressed to the Secretary of the Company at its principal business
office.
At all meetings of the shareholders held for the purpose of
electing directors during such times as the holders of the Company
Preferred Stock shall have the exclusive right to elect a majority of the
directors of the Company, the presence in person or by proxy of the
holders of a majority of the outstanding shares of Common Stock shall be
required to constitute a quorum of such class for the election of
directors, and the presence in person or by proxy of the holders of a
majority of the outstanding shares of the Company Preferred Stock shall be
required to constitute a quorum of such class for the election of
directors; provided, however, that the absence of a quorum of the holders
of stock of either class shall not prevent the election at any such
meeting, or adjournment thereof, of directors by the other class if the
necessary quorum of the holders of stock of such class is present in
person or by proxy at such meeting; and provided, further, that, in the
absence of a quorum of the holders of stock of either class, a majority of
those holders of such stock who are present in person or by proxy shall
have the power to adjourn the election of those directors to be elected by
that class from time to time without notice, other than announcement at
the meeting, until the requisite amount of holders of stock of such class
shall be present in person or by proxy.
At all elections of directors, shareholders will be entitled
to as many votes as shall equal the number of their shares of stock
multiplied by the number of directors to be elected for whom such
shareholders may vote, and they may cast all of such votes for a single
director or may distribute them among the number to be voted for, or any
two or more of them, as they may see fit.
For the purposes of the foregoing provisions, the Company
Preferred Stock of all series shall be deemed to be a single class.
PRE-EMPTIVE RIGHTS
The holders of shares of Preferred Stock, Class A Preferred
Stock, or of Common Stock shall have no pre-emptive rights to subscribe
for or purchase any additional issues of shares of the capital stock of
the Company of any class now or hereafter authorized or any bonds,
debentures, or other obligations or rights or options convertible into or
exchangeable for or entitling the holder or owner to subscribe for or
purchase any shares of capital stock, or any rights to exchange shares
issued for shares to be issued.
PREFERENCE STOCK
Preference Stock Issuable in Series
-----------------------------------
The shares of Preference Stock may be divided into and issued
in series. Each such series shall be so designated as to distinguish the
shares thereof from the shares of all other series and classes, and all
shares of the Preference Stock shall be identical, except as to the
following relative rights and preferences, as to which there may be
variations between different series:
(a) The rate of dividend;
(b) The price at which shares may be redeemed;
(c) The amount payable upon shares in event of involuntary
liquidation;
(d) The amount payable upon shares in event of voluntary
liquidation;
(e) The terms and conditions, if any, on which shares shall
be by their terms convertible into or exchangeable for
shares of any other class of stock of the Company;
(f) The terms and conditions of a sinking or purchase fund,
if any, for the redemption or purchase of such shares.
No change shall be made in any of the rights and preferences
of any series of Preference Stock at the time outstanding in those
respects in which the shares thereof vary from the shares of other series
of Preference Stock at the time outstanding without the affirmative vote
in favor thereof of the holders of at least 66-2/3% of the shares of such
series of Preference Stock at the time outstanding, in addition to such
other vote, if any, as may be required for such change under the
applicable provisions of these Articles or of the laws of the State of
Michigan at the time applicable thereto.
PREFERENCE STOCK
Authority of Board of Directors as to Other Series
--------------------------------------------------
To the extent that series of Preference Stock have not been
established and variations in the relative rights and preferences as
between series have not been fixed and determined in these Articles,
authority is vested in the Board of Directors of the Company to divide the
shares of Preference Stock into and to establish series of Preference
Stock, to fix and determine the relative rights and preferences of the
shares of any series so established, to issue and sell any and all of the
authorized and unissued shares of Preference Stock as shares of any series
thereof established by action of the Board of Directors pursuant hereto,
and to create a sinking or purchase fund for the redemption or purchase of
shares of any series without the necessity of providing a sinking or
purchase fund for any other series.
PREFERENCE STOCK
General Provisions
------------------
The following provisions shall apply to all shares of the
Preference Stock irrespective of series:
(A) The shares of Preference Stock shall be
subordinate to the Preferred Stock but in preference to the
Common Stock as to the payment of dividends. The holders of
the Preference Stock of each series shall be entitled to
receive dividends, payable when and as declared by the Board
of Directors, at such rates as shall be determined for the
respective series, from the date upon which such share shall
have been originally issued, before any dividends shall be
declared or paid upon or set apart for the Common Stock or any
other stock of the Company not having preference over the
Preference Stock as to payment of dividends. Such dividends
shall be cumulative so that if for any dividend period or
periods dividends shall not have been paid or declared and set
apart for payment upon all outstanding Preference Stock at the
rates determined for the respective series, the deficiency
shall be fully paid, or declared and set apart for payment,
before any dividends shall be declared or paid upon the Common
Stock or any other stock of the Company not having preference
over the Preference Stock as to payment of dividends.
Dividends shall not be declared and set apart for payment, or
paid, on the Preference Stock of any one series, for any
dividend period, unless dividends have been or are
contemporaneously declared and set apart for payment or paid
on the Preference Stock of all series for all dividend periods
terminating on the same or an earlier date. As to all series
of Preference Stock, the term "dividend period" shall mean any
of the four calendar quarters in each year commencing,
respectively, the first day of January, April, July and
October and the first days of each such calendar quarter shall
be the dividend payment dates for the regular quarterly
dividends payable for the preceding dividend period of such
series.
(B) When full cumulative dividends as aforesaid upon
the Preference Stock of all series then outstanding for all
past dividend periods and for the current dividend periods
shall have been paid or declared and set apart for payment,
the Board of Directors may declare dividends on the Common
Stock or any other stock over which the Preference Stock has a
preference as to payment of dividends, and no holders of any
series of the Preference Stock as such shall be entitled to
share therein.
(C) The shares of Preference Stock shall be
subordinate to the Preferred Stock but in preference to the
Common Stock upon any dissolution, liquidation or winding up
of the Company, whether voluntary or involuntary. Upon any
such dissolution, liquidation or winding up of the Company,
whether voluntary or involuntary, the holders of Preference
Stock of each series, without any preference of the shares of
any series of Preference Stock over the shares of any other
series of Preference Stock, shall be entitled to receive out
of the assets of the Company, whether capital, surplus or
other, before any distribution of the assets to be distributed
shall be made to the holders of Common Stock or of any other
stock not having preference as to assets over the Preference
Stock, the amount determined to be payable on the shares of
such series in the event of voluntary or involuntary
liquidation, as the case may be. In case the assets shall not
be sufficient to pay in full the amounts determined to be
payable on all the shares of Preference Stock in the event of
voluntary or involuntary liquidation, as the case may be, then
the assets available for such payment shall be distributed
ratably among the holders of the Preference Stock of all
series in accordance with the amounts determined to be payable
on the shares of each series, in the event of voluntary or
involuntary liquidation, as the case may be, in proportion to
the full preferential amounts to which they are respectively
entitled. After payment to the holders of the Preference
Stock of the full preferential amounts hereinbefore provided
for, the holders of the Preference Stock as such shall have no
right or claim to any of the remaining assets of the Company,
either upon any distribution of such assets or upon
dissolution, liquidation or winding up, and the remaining
assets to be distributed, if any, upon a distribution of such
assets or upon dissolution, liquidation or winding up, may be
distributed among the holders of the Common Stock or of any
other stock over which the Preference Stock has preference as
to assets. Without limiting the right of the Company to
distribute its assets or to dissolve, liquidate or wind up in
connection with any sale, merger, or consolidation, the sale
of all the property of the Company to, or the merger or
consolidation of the Company into or with any other
corporation shall not be deemed to be a distribution of assets
or a dissolution, liquidation or winding up for the purposes
of this paragraph.
(D) At the option of the Board of Directors of the
Company, the Company may redeem any series of Preference Stock
determined to be redeemable, or any part of any series, at any
time at the redemption price determined for such series;
provided, however, that not less than thirty nor more than
sixty days previous to the date fixed for redemption a notice
of the time and place thereof shall be given to the holders of
record of the Preference Stock so to be redeemed, by mail or
publication, in such manner as may be prescribed by the By-
laws of the Company or by resolution of the Board of
Directors; and, provided, further, that in every case of
redemption of less than all of the outstanding shares of any
one series of Preference Stock, the shares of such series to
be redeemed shall be chosen by lot in such manner as may be
prescribed by resolution of the Board of Directors. At any
time after notice of redemption has been given in the manner
prescribed by the By-laws of the Company or by resolution of
the Board of Directors to the holders of stock so to be
redeemed, the Company may deposit, or may cause its nominee to
deposit, the aggregate redemption price with some bank or
trust Company named in such notice, payable on the date fixed
for redemption as aforesaid and in the amounts aforesaid to
the respective orders of the holders of the shares so to be
redeemed, on endorsement to the Company or its nominee, or
otherwise, as may be required, and upon surrender of the
certificates for such shares. Upon the deposit of said money
as aforesaid, or, if no such deposit is made, upon said
redemption date (unless the Company defaults in making payment
of the redemption price as set forth in such notice), such
holders shall cease to be shareholders with respect to said
shares and from and after the making of said deposit, or, if
no such deposit is made, after the redemption date (the
Company not having defaulted in making payment of the
redemption price as set forth in such notice), the said
holders shall have no interest in or claim against the
Company, or its nominee, with respect to said shares, but
shall be entitled only to receive said moneys on the date
fixed for redemption as aforesaid from said bank or trust
Company, or if no such deposit is made, from the Company,
without interest thereon, upon endorsement, if required, and
surrender of the certificates as aforesaid.
If such deposit shall be made by a nominee of the
Company as aforesaid, such nominee shall upon such deposit
become the owner of the shares with respect to which such
deposit was made and certificates of stock may be issued to
such nominee in evidence of such ownership.
In case the holder of any such Preference Stock shall
not, within six years after said deposit, claim the amount
deposited as above stated for the redemption thereof, the
Depositary shall upon demand pay over to the Company such
amounts so deposited and the Depositary shall thereupon be
relieved from all responsibility to the holder thereof.
Nothing herein contained shall limit any legal right of
the Company to purchase any shares of the Preference Stock.
(E-1) So long as any shares of the Preference Stock
are outstanding, the Company shall not, without the
affirmative vote in favor thereof of the holders of at least
66-2/3% of the shares of Preference Stock at the time
outstanding, adopt an amendment to these Articles if such
amendment would either (i) authorize or create, or increase
the authorized amount of, any class of stock, other than
shares of the Preferred Stock (whether now or hereafter
authorized), which is entitled to dividends or assets in
priority to the Preference Stock or (ii) change any of the
rights and preferences of the then outstanding Preference
Stock.
(E-2) So long as any shares of the Preference Stock
are outstanding, the Company shall not, without the
affirmative vote in favor thereof of the holders of at least a
majority of the shares of Preference Stock at the time
outstanding, adopt an amendment to these Articles if such
amendment would either (i) increase the authorized amount of
Preference Stock or (ii) authorize or create, or increase the
authorized amount of, any class of stock, which is entitled to
dividends or assets on a parity with the Preference Stock,
provided; however, that nothing in this paragraph or in
paragraph E-1 above contained shall authorize the adoption of
any amendment of these Articles by the vote of the holders of
a less number of shares of Preference Stock, or of any other
class of stock, or of all classes of stock, than is required
for such amendment by the laws of the State of Michigan at the
time applicable thereto.
PREFERENCE STOCK
Voting Powers
-------------
The holders of Preference Stock shall not have any right to
vote for the election of directors or for any other purpose, except as
otherwise provided by law, as set forth in the two immediately preceding
paragraphs and as set forth below. Whenever and as often as six quarterly
dividends payable on the Preference Stock of any series shall be in
default, in whole or in part, the holders of the Preference Stock of all
series shall have the exclusive right, voting separately and as a single
class, to vote for and to elect two directors, subject to the prior rights
of the holders of the Preferred Stock. In the event of defaults entitling
the Preference Stock to elect two directors as aforesaid, the holders of
the Common Stock shall have the exclusive right, voting separately and as
a class, to elect the remaining number of directors of the Company,
subject to the prior rights of the holders of the Preferred Stock. The
right of the holders of the Preference Stock to elect two directors,
however, shall cease when all defaults in the payment of dividends on
their stock shall have been cured, and such dividends shall be declared
and paid out of any funds legally available therefor as soon as, in the
judgment of the Board of Directors, is reasonably practicable. The terms
of office of all persons who may be directors of the Company at the time
when the right to elect two directors shall accrue to the holders of the
Preference Stock, as herein provided, shall terminate upon the election of
their successors at a meeting of the shareholders of the Company then
entitled to vote. Such election shall be held at the next annual meeting
of shareholders or may be held at a special meeting of shareholders, which
shall be held upon notice as provided in the By-laws of the Company for a
special meeting of the shareholders, at the request in writing of the
holders of not less than 1,000 shares of the then outstanding Preference
Stock addressed to the Secretary of the Company at its principal business
office. Any vacancy in the Board of Directors occurring during any period
when the Preference Stock shall have elected representatives on the Board
shall be filled by a majority vote of the remaining directors (or the one
director) representing the class of stock theretofore represented by the
director causing the vacancy. In the event of simultaneous vacancies
among directors elected by the holders of the Preference Stock, an
election, pursuant to the provisions of this paragraph, will be held.
Upon the termination of such exclusive right of the holders of the
Preference Stock to elect two directors of the Company, the terms of
office of all the directors of the Company shall terminate upon the
election of their successors at a meeting of the shareholders of the
Company then entitled to vote. Such election shall be held at the next
annual meeting of shareholders or may be held at a special meeting of
shareholders, which shall be held upon notice as provided in the By-laws
of the Company for a special meeting of the shareholders at the request in
writing of the holders of not less than 1,000 shares of the then
outstanding Common Stock addressed to the Secretary of the Company at its
principal business office.
At all meetings of the shareholders held for the purpose of
electing directors during such times as the holders of the Preference
Stock shall have the exclusive right to elect two of the directors of the
Company, the presence in person or by proxy of the holders of a majority
of the outstanding shares of Common Stock shall be required to constitute
a quorum of such class for the election of directors, and the presence in
person or by proxy of the holders of a majority of the outstanding shares
of Preference Stock of all series shall be required to constitute a quorum
of such class for the election of directors; provided, however, that the
absence of a quorum of the holders of stock of either class shall not
prevent the election at any such meeting, or adjournment thereof, of
directors by the other class if the necessary quorum of the holders of
stock of such class is present in person or by proxy at such meeting; and
provided, further, that, in the absence of a quorum of the holders of
stock of either class, a majority of those holders of such stock who are
present in person or by proxy shall have the power to adjourn the election
of those directors to be elected by that class from time to time without
notice, other than announcement at the meeting, until the requisite amount
of holders of stock of such class shall be present in person or by proxy.
At all elections of directors, each shareholder will be
entitled to as many votes as shall equal the number of his shares of stock
multiplied by the number of directors to be elected for whom such
shareholder may vote, and he may cast all of such votes for a single
director or may distribute them between the two directors to be voted for,
as he may see fit.
For the purposes of the foregoing provisions, the Preference
Stock of all series shall be deemed to be a single class.
PREFERENCE STOCK
Pre-emptive Rights
------------------
The holders of shares of Preference Stock shall have no pre-
emptive rights to subscribe for or purchase any additional issues of
shares of the capital stock of the Company of any class now or hereafter
authorized or any bonds, debentures or other obligations or rights or
options convertible into or exchangeable for or entitling the holder or
owner to subscribe for or purchase any shares of capital stock, or any
rights to exchange shares issued for shares to be issued.
ARTICLE VIII
Each director shall be a shareholder of the Company and any
Director ceasing to be a shareholder shall thereupon immediately cease to
be a Director.
Signed on February 28, 1994
CONSUMERS POWER COMPANY
By /s/William T. McCormick, Jr.
----------------------------
William T. McCormick, Jr.
Chairman of the Board
STATE OF MICHIGAN)
) SS.
COUNTY OF JACKSON)
On this 28th day of February 1994 before me appeared William T. McCormick,
Jr., to me personally known, who, being by me duly sworn, did say that he
is Chairman of the Board of Consumers Power Company, who executed the
foregoing instrument, and that the seal affixed to said instrument is the
corporate seal of said corporation, and that said instrument was signed
and sealed in behalf of said corporation by authority of its Board of
Directors, and said officer acknowledged said instrument to be the free
act and deed of said corporation.
/s/Renne E. Stephens
-----------------------------------
Renne E. Stephens
Notary Public for Jackson
County, State of Michigan.
My commission expires
April 4, 1994.
<PAGE>
<PAGE>
EXHIBIT (3)(d)
<PAGE>
<PAGE>
EXHIBIT (3)(d)
CONSUMERS POWER COMPANY
BYLAWS
ARTICLE I: LOCATION OF OFFICES
- -------------------------------
Section 1 - Registered Office: The registered office of
Consumers Power Company, (the "Company") shall be at such place
in the City of Jackson, County of Jackson, Michigan, or
elsewhere in the State of Michigan, as the Board of Directors
may from time to time designate.
Section 2 - Other Offices: The Company may have and maintain
other offices within or without the State of Michigan.
ARTICLE II: CORPORATE SEAL
- ---------------------------
Section 1 - Corporate Seal: The Company shall have a corporate
seal bearing the name of the Company. The form of the corporate
seal may be altered by the Board of Directors.
ARTICLE III: FISCAL YEAR
- -------------------------
Section 1 - Fiscal Year: The fiscal year of the Company shall
begin with the first day of January and end with the thirty-
first day of December of each year.
ARTICLE IV: SHAREHOLDERS' MEETINGS
- -----------------------------------
Section 1 - Annual Meetings: An annual meeting of the
shareholders for election of Directors and for such other
business as may come before the meeting shall be held at the
registered office of the Company or at such other place within
or without the State of Michigan, at 10:00 AM, Eastern Daylight
Saving Time, or at such other time on the fourth Friday in April
of each year or upon such other date as the Board of Directors
may designate, but in no event shall such date be more than
ninety days after the fourth Friday in April.
Section 2 - Special Meetings: Special meetings of the
shareholders may be called by the Board of Directors or by the
Chairman of the Board. Such meetings shall be held at the
registered office of the Company or at such other place within
or without the State of Michigan as the Board of Directors may
designate.
Section 3 - Notices: Except as otherwise provided by law,
written notice of any meeting of the shareholders shall be
given, either personally or by mail to each shareholder of
record entitled to vote at such meeting, not less than ten days
nor more than sixty days prior to date of the meeting, at their
last known address as the same appears on the stock records of
the Company. Written notice shall be considered given when
deposited, with postage thereon prepaid, in a post office or
official depository under the control of the United States
postal service. Such notice shall specify the time and place of
holding the meeting, the purpose or purposes for which such
meeting is called, and the record date fixed for the
determination of shareholders entitled to notice of and to vote
at such meeting. The Board of Directors shall fix a record date
for determining shareholders entitled to notice of and to vote
at a meeting of shareholders, which record date shall not be
more than sixty days nor less than ten days before the date of
the meeting. Such record date shall apply to any adjournment of
the meeting unless the Board of Directors shall fix a new record
date for purposes of the adjourned meeting.
No notice of an adjourned meeting shall be necessary if the
time and place to which the meeting is adjourned are announced
at the meeting at which the adjournment is taken. At the
adjourned meeting only such business may be transacted as might
have been transacted at the original meeting. If, after an
adjournment, the Board of Directors shall fix a new record date
for the adjourned meeting, a notice of the adjourned meeting
shall be mailed, in conformity with the provisions of the first
paragraph of this Section 3, to each shareholder of record on
the new record date entitled to vote at the adjourned meeting.
Section 4 - Quorum: Except as otherwise provided by law or by
the Articles of Incorporation of the Company, the holders of the
shares of stock of the Company entitled to cast a majority of
the votes at a meeting shall constitute a quorum for the
transaction of business at the meeting, but a lesser number may
convene any meeting and, by a majority vote of the shares
present at the meeting, may adjourn the same from time to time
until a quorum shall be present.
Section 5 - Voting: Shareholders may vote at all meetings in
person or by proxy in writing, but all proxies shall be filed
with the Secretary of the meeting before being voted upon.
The voting powers of the shares of Preferred Stock, Class A
Preferred Stock, Preference Stock and Common Stock shall be as
provided by law or set forth in the Articles of Incorporation of
the Company.
Section 6 - Inspectors: In advance of any meeting of
shareholders the Board of Directors shall appoint one or more
inspectors to act at such meeting or any adjournment thereof.
The inspectors shall have such powers and duties as are provided
by law.
ARTICLE V: DIRECTORS
- ---------------------
Section 1 - Number: The Board of Directors of the Company shall
consist of not less than seven nor more than seventeen members,
as fixed from time to time by resolution of the Board of
Directors.
Section 2 - Election: The Directors shall be elected annually
at the annual meeting of the shareholders or at any adjournment
thereof.
Section 3 - Term of Office: Subject to the provisions of the
Articles of Incorporation of the Company and unless otherwise
provided by law, the Directors shall hold office from the date
of their election until the next succeeding annual meeting and
until their successors are elected and shall qualify.
Section 4 - Vacancies: Any vacancy or vacancies in the Board of
Directors arising from any cause may be filled by the
affirmative vote of a majority of the Directors then in office
although less than a quorum. An increase in the number of
members shall be construed as creating a vacancy.
ARTICLE VI: DIRECTORS' MEETINGS
- --------------------------------
Section 1 - Organization Meeting: As soon as possible after
their election, the Board of Directors shall meet and organize
and may also transact other business.
Section 2 - Other Meetings: Meetings of the Board of Directors
may be held at any time upon call of the Secretary or an
Assistant Secretary made at the direction of the Chairman of the
Board, the President, a Vice Chairman, if any, or a Vice
President.
Section 3 - Place of Meeting: All meetings of Directors shall
be held at such place within or without the State of Michigan as
may be designated in the call therefor.
Section 4 - Notice: A reasonable notice of all meetings, in
writing or otherwise, shall be given to each Director or sent to
the Director's residence or place of business; provided,
however, that no notice shall be required for an organization
meeting if held on the same day as the shareholders' meeting at
which the Directors were elected.
No notice of the holding of an adjourned meeting shall be
necessary.
Notice of all meetings shall specify the time and place of
holding the meeting and unless otherwise stated any and all
business may be transacted at any such meeting.
Notice of the time, place and purpose of any meeting may be
waived in writing either before or after the holding thereof.
Section 5 - Quorum: At all meetings of the Board of Directors a
majority of the Board then in office shall constitute a quorum
but a majority of the Directors present may convene and adjourn
any such meeting from time to time until a quorum shall be
present; provided, that if the Board shall consist of ten and
not more than fifteen, then five members shall constitute a
quorum; and if the Board shall consist of more than fifteen,
then seven members shall constitute a quorum.
Section 6 - Voting: All questions coming before any meeting of
the Board of Directors for action shall be decided by a majority
vote of the Directors present at such meeting, unless otherwise
provided by law, the Articles of Incorporation of the Company or
by these Bylaws.
Section 7 - Participation by Communications Equipment: A
Director or a member of a Committee designated by the Board of
Directors may participate in a meeting by means of conference
telephone or similar communications equipment by means of which
all persons participating in the meeting can hear each other.
Participation in a meeting by such means shall constitute
presence in person at the meeting.
Section 8 - Action Without Meeting: Any action required or
permitted to be taken pursuant to authorization voted at a
meeting of the Board of Directors or a Committee thereof, may be
taken without a meeting if, before or after the action, all
members of the Board or of the Committee consent thereto in
writing. The written consents shall be filed with the minutes
of the proceedings of the Board or Committee, and the consents
shall have the same effect as a vote of the Board or Committee
for all purposes.
ARTICLE VII: EXECUTIVE AND OTHER COMMITTEES
- --------------------------------------------
Section 1 - Number and Qualifications: By resolution passed by
a majority of the whole Board, the Board of Directors may from
time to time designate one or more of their number to constitute
an Executive or any other Committee of the Board, as the Board
of Directors may from time to time determine to be desirable,
and may fix the number of and designate the Chairman of each
such Committee. Except as otherwise provided by law, the powers
of each such Committee shall be as defined in the resolution or
resolutions of the Board of Directors relating to the
authorizations of such Committee, and may include, if such
resolution or resolutions so provide, the power and authority to
declare a dividend or to authorize issuance of shares of stock
of the Company.
Section 2 - Appointment: The appointment of members of each
such Committee, or other action respecting any Committee, may
take place at any meeting of the Directors.
Section 3 - Term of Office: The members of each Committee shall
hold office at the pleasure of the Board of Directors.
Section 4 - Vacancies: Any vacancy or vacancies in any such
Committee arising from any cause shall be filled by resolution
passed by a majority of the whole Board of Directors. By like
vote the Board may designate one or more Directors to serve as
alternate members of a Committee, who may replace an absent or
disqualified member at a meeting of a Committee; provided,
however, in the absence or disqualification of a member of a
Committee, the members of the Committee present at a meeting and
not disqualified from voting, whether or not constituting a
quorum, may unanimously appoint another member of the Board of
Directors to act in the place of the absent or disqualified
member.
Section 5 - Minutes: Except as provided in Section 2 of Article
X hereof or as otherwise determined by the Board of Directors,
each such Committee shall make a written report or
recommendation following its meetings or keep minutes of all its
meetings.
Section 6 - Quorum: At all meetings of any duly authorized
Committee of the Board of Directors, a majority of the members
of such Committee shall constitute a quorum but a majority of
the members present may convene and adjourn any such meeting
from time to time until a quorum shall be present; provided,
that with respect to any Committee of the Board other than the
Executive Committee, if the membership of such Committee is four
or less, then two members of such Committee shall constitute a
quorum and one member may convene and adjourn any such meeting
from time to time until a quorum shall be present.
ARTICLE VIII: OFFICERS
- -----------------------
Section 1 - Election: The officers shall be chosen by the Board
of Directors. The Company shall have a Chairman of the Board, a
President, a Secretary and a Treasurer, and such other officers
as the Board of Directors may from time to time determine, who
shall have respectively such duties and authority as may be
provided by these Bylaws or as may be provided by resolution of
the Board of Directors not inconsistent herewith. Any two or
more of such offices may be held by the same person but no
officer shall execute, acknowledge or verify any instrument in
more than one capacity if such instrument is required by law, by
the Articles of Incorporation of the Company or by these Bylaws
to be executed, acknowledged or verified by two or more
officers.
Section 2 - Qualifications: The Chairman of the Board and Vice
Chairman, if any, shall be chosen from among the Board of
Directors, but the other officers need not be members of the
Board.
Section 3 - Vacancies: Any vacancy or vacancies among the
officers arising from any cause shall be filled by the Board of
Directors. In case of the absence of any officer of the Company
or for any other reason that the Board of Directors may deem
sufficient, the Board of Directors may delegate, for the time
being, the powers or duties, or any of them, of any officer to
any other officer or to any Director.
Section 4 - Term of Office: Each officer of the Company shall
hold office until the officer's successor is chosen and
qualified, or until the officer's resignation or removal. Any
officer appointed by the Board of Directors may be removed at
any time by the Board of Directors with or without cause.
Section 5 - Compensation: The compensation of the officers
shall be fixed by the Board of Directors.
ARTICLE IX: AGENTS
- -------------------
Section 1 - Resident Agent: The Company shall have and
continuously maintain a resident agent, which may be either an
individual resident in the State of Michigan whose business
office is identical with the Company's registered office or a
Michigan corporation or a foreign corporation authorized to
transact business in Michigan and having a business office
identical with the Company's registered office. The Board of
Directors shall appoint the resident agent.
Section 2 - Other Agents: The Board of Directors may appoint
such other agents as may in their judgment be necessary for the
proper conduct of the business of the Company.
ARTICLE X: POWERS AND DUTIES
- -----------------------------
Section 1 - Directors: The business and affairs of the Company
shall be managed by the Board of Directors which shall have and
exercise all of the powers and authority of the Company except
as otherwise provided by law, by the Articles of Incorporation
of the Company or by these Bylaws.
Section 2 - Executive Committee: In the interim between
meetings of the Board of Directors the Executive Committee shall
have and exercise all the powers and authority of the Board of
Directors except as otherwise provided by law. The Executive
Committee shall meet from time to time on the call of the
Chairman of the Board or the Chairman of the Committee. The
Secretary shall keep minutes in sufficient detail to advise
fully the Board of Directors of the actions taken by the
Committee and shall submit copies of such minutes to the Board
of Directors for its approval or other action at its next
meeting.
Section 3 - Chairman of the Board: The Chairman of the Board
shall preside at all meetings of Directors and shareholders;
shall perform and do all acts and things incident to the
position of Chairman of the Board; and shall perform such other
duties as may be assigned from time to time by the Board of
Directors or the Executive Committee.
Unless otherwise provided by the Board or the Executive
Committee, the Chairman of the Board shall have full power and
authority on behalf of the Company to execute any shareholders'
consents and to attend and act and to vote in person or by proxy
at any meetings of shareholders of any corporation in which the
Company may own stock and at any such meeting shall possess and
may exercise any and all the rights and powers incident to the
ownership of such stock and which, as the owner thereof, the
Company might have possessed and exercised if present. If the
Chairman of the Board shall not exercise such powers, or in the
absence or inability to act of the Chairman, the President may
exercise such powers. In the absence or inability to act of the
President, a Vice Chairman, if any, may exercise such powers.
In the absence or inability to act of a Vice Chairman, any Vice
President may exercise such powers. The Board of Directors or
Executive Committee by resolution from time to time may confer
like powers upon any other person or persons.
Section 4 - President: The President shall be the chief
executive officer of the Company and, subject to the supervision
of the Board of Directors and of the Executive Committee, shall
have general charge of the business and affairs of the Company;
shall perform and do all acts and things incident to such
position; and shall perform such other duties as may be assigned
from time to time by the Board of Directors, the Executive
Committee or the Chairman of the Board. In the absence of the
Chairman of the Board and a Vice Chairman, the President shall
preside at meetings of Directors. In the absence of the
Chairman of the Board, the President shall preside at meetings
of shareholders.
Section 5 - Vice Chairman: The Vice Chairman, if any, shall
perform such of the duties of the Chairman of the Board or the
President on behalf of the Company as may be respectively
assigned from time to time by the Board of Directors, the
Executive Committee, the Chairman of the Board or the President.
In the absence of the Chairman of the Board, the Vice Chairman
shall preside at meetings of Directors. In the absence of the
Chairman of the Board and the President, the Vice Chairman shall
preside at meetings of shareholders.
Section 6 - Vice Presidents: Vice Presidents, if any, shall
perform such of the duties of the Chairman of the Board or the
President or the Vice Chairman, if any, on behalf of the Company
as may be respectively assigned from time to time by the Board
of Directors, the Executive Committee, the Chairman of the Board
or the President or a Vice Chairman. The Board of Directors or
Executive Committee may designate one or more of the Vice
Presidents as Executive Vice President or Senior Vice President.
Section 7 - Controller: Subject to the Board of Directors, the
Executive Committee, the Chairman of the Board, the President
and the Vice President having general charge of accounting, the
Controller, if any, shall have charge of the supervision of the
accounting system of the Company, including the preparation and
filing of all tax returns and financial reports required by law
to be made to any and all public authorities and officials; and
shall perform such other duties as may be assigned, from time to
time, by the Board of Directors, the Executive Committee, the
Chairman of the Board, the President, a Vice Chairman, if any,
or Vice President having general charge of accounting.
Section 8 - Treasurer: It shall be the duty of the Treasurer to
have the care and custody of all the funds and securities,
including the investment thereof, of the Company which may come
into the Treasurer's hands, and to endorse checks, drafts and
other instruments for the payment of money for deposit or
collection when necessary or proper and to deposit the same to
the credit of the Company in such bank or banks or depository as
the Treasurer may designate, and the Treasurer may endorse all
commercial documents requiring endorsements for or on behalf of
the Company. The Treasurer may sign all receipts and vouchers
for the payments made to the Company; shall render an account of
transactions to the Board of Directors or the Executive
Committee as often as the Board or the Committee shall require;
and shall perform all acts incident to the position of
Treasurer, subject to the control of the Board of Directors, the
Executive Committee, the Chairman of the Board, the President
and a Vice Chairman, if any.
Section 9 - Secretary: The Secretary shall act as custodian of
and keep the minutes of all meetings of the Board of Directors,
of the Executive Committee, of the shareholders and of any
Committees of the Board of Directors which keep formal minutes;
shall attend to the giving and serving of all notices of the
Company; shall prepare or cause to be prepared the list of
shareholders required to be produced at any meeting; shall
attest the seal of the Company upon all contracts and
instruments executed under such seal and shall affix or cause to
be affixed the seal of the Company thereto and to all
certificates of shares of the capital stock; shall have charge
of the stock records of the Company and such other books and
papers as the Board of Directors, the Executive Committee, the
Chairman of the Board, the President or a Vice Chairman, if any,
may direct; and shall, in general, perform all the duties of
Secretary, subject to the control of the Board of Directors, the
Executive Committee, the Chairman of the Board, the President
and a Vice Chairman, if any.
Section 10 - General Counsel: The General Counsel, if any,
shall have charge of all matters of a legal nature involving the
Company.
Section 11 - Assistant Controllers,
Assistant Secretaries and
Assistant Treasurers: An Assistant Controller, an
Assistant Secretary or an Assistant Treasurer, if any, shall, in
the absence or inability to act or at the request of the
Controller, Secretary or Treasurer, respectively, perform the
duties of the Controller or Secretary or Treasurer,
respectively, and shall perform such other duties as may from
time to time be assigned by the Board of Directors, the
Executive Committee, the Chairman of the Board, the President or
a Vice Chairman, if any. The performance of any such duty shall
be conclusive evidence of their right to act.
Section 12 - Principal Financial Officer and
Principal Accounting Officer: The Board of
Directors or the Executive Committee may from time to time
designate officers of the Company to be the Principal Financial
Officer and the Principal Accounting Officer of the Company.
ARTICLE XI: STOCK
- ------------------
Section 1 - Stock Certificates: The shares of stock of the
Company shall be represented by certificates which shall be
numbered and shall be entered on the stock records of the
Company and registered as they are issued. Each certificate
shall state on its face that the Company is formed under the
laws of Michigan, the name of the person or persons to whom
issued, the number and class of shares and the designation of
the series the certificate represents, and the par value of each
share represented by the certificate; shall be signed by the
Chairman of the Board or a Vice Chairman or the President or one
of the Vice Presidents and also may be signed by the Treasurer
or an Assistant Treasurer or the Secretary or an Assistant
Secretary; and shall be sealed with the seal of the Company or a
facsimile thereof. When such certificates are countersigned by
a transfer agent or registered by a registrar, the signatures of
any such Chairman of the Board, Vice Chairman, President, Vice
President, Treasurer, Assistant Treasurer, Secretary or
Assistant Secretary may be facsimiles. In case any officer, who
shall have signed or whose facsimile signature shall have been
placed on any such certificate, shall cease to be such officer
of the Company before such certificate shall have been issued by
the Company, such certificate may nevertheless be issued by the
Company with the same effect as if the person, who signed such
certificate or whose facsimile signature shall have been placed
thereon, were such officer of the Company at the date of issue.
Each certificate shall set forth on its face or back or
state that the Company will furnish to a shareholder upon
request and without charge a full statement of the designations,
relative rights, preferences and limitations of the shares of
stock of each class authorized to be issued and of each series
so far as the same have been prescribed and the authority of the
Board of Directors to designate and prescribe the relative
rights, preferences and limitations of other series.
Section 2 - Stock Records: The shares of stock of the Company
shall be transferable on the stock records of the Company in
person or by proxy duly authorized and upon surrender and
cancellation of the old certificates therefor.
The Board of Directors may fix a date preceding the date
fixed for any meeting of the shareholders or any dividend
payment date or the date for the allotment of rights or the date
when any change, conversion or exchange of stock shall go into
effect or the date for any other action, as the record date for
the determination of the shareholders entitled to notice of and
to vote at such meeting or to receive payment of such dividend
or to receive such allotment of rights or to exercise such
rights in respect of any such change, conversion or exchange of
stock or to take such other action, as the case may be,
notwithstanding any transfer of shares on the records of the
Company or otherwise after any such record date fixed as
aforesaid. The record date so fixed by the Board shall not be
more than sixty nor less than ten days before the date of the
meeting of the shareholders, nor more than sixty days before any
other action. If the Board of Directors does not fix a date of
record, as aforesaid, the record date shall be as provided by
law.
Section 3 - Stock - Preferred, Class A Preferred, Preference and
Common: The Preferred Stock, Class A Preferred Stock,
Preference Stock and Common Stock of the Company shall consist
of shares having a par value of $100, no par value, $1 and $10
per share, respectively.
The designations, relative rights, preferences, limitations
and voting powers, or restrictions, or qualifications of the
shares of Preferred Stock, Class A Preferred Stock, Preference
Stock and Common Stock shall be as set forth in the Articles of
Incorporation of the Company.
Section 4 - Replacing Certificates: In case of the alleged
loss, theft or destruction of any certificate of shares of stock
and the submission of proper proof thereof, a new certificate
may be issued in lieu thereof upon delivery to the Company by
the owner or the owner's legal representative of a bond of
indemnity against any claim that may be made against the Company
on account of such alleged lost, stolen or destroyed certificate
or such issuance of a new certificate.
ARTICLE XII: AUTHORIZED SIGNATURES
- -----------------------------------
Section 1 - Authorized Signatures: All checks, drafts and other
negotiable instruments issued by the Company shall be made in
the name of the Company and shall be signed manually or signed
by facsimile signature by such one of the officers of the
Company or such other person as the Chairman of the Board may
from time to time designate.
ARTICLE XIII: AMENDMENTS OF BYLAWS
- -----------------------------------
Section 1 - Amendments, How Effected: These Bylaws may be
amended or repealed, or new Bylaws may be adopted, either by the
majority vote of the votes cast by the shareholders entitled to
vote thereon or by the majority vote of the Directors then in
office at any meeting of the Directors.
February 25, 1994
<PAGE>
<PAGE>
EXHIBIT (10)(b)<PAGE>
<PAGE>
EXHIBIT (10)(b)
[EXECUTION COPY]
__________________________________________________________________
$220,000,000
AMENDED AND RESTATED
CREDIT AGREEMENT
Dated as of November 30, 1992,
As Amended and Restated as of October 15, 1993
Among
CMS ENERGY CORPORATION
as Borrower
and
THE BANKS NAMED HEREIN
as Banks
and
CITIBANK, N.A. and
UNION BANK
as Co-Agents
_________________________________________________________________<PAGE>
<PAGE>
TABLE OF CONTENTS
Section Page
PRELIMINARY STATEMENT . . . . . . . . . . . . . . 1
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
1.01.Certain Defined Terms . . . . . . . . . . . 2
1.02.Computation of Time Periods . . . . . . . . 21
1.03.Accounting Terms . . . . . . . . . . . . . 21
ARTICLE II
COMMITMENTS
2.01.The Commitments . . . . . . . . . . . . . . 22
2.02.Fees . . . . . . . . . . . . . . . . . 22
2.03.Reduction of the Commitments . . . . . . . 23
2.04.Computations of Outstandings . . . . . . . 23
ARTICLE III
ADVANCES
3.01.Advances . . . . . . . . . . . . . . . . . 24
3.02.Conversion of Advances . . . . . . . . . . 25
3.03.Interest Periods . . . . . . . . . . . . . 26
3.04.Other Terms Relating to the
Making and Conversion of Advances . . . . 26
3.05.Repayment of Advances . . . . . . . . . . . 29
ARTICLE IV
LETTERS OF CREDIT
4.01.LC Banks . . . . . . . . . . . . . . . . . 30
4.02.Letters of Credit . . . . . . . . . . . . . 31
4.03.LC Bank Fees . . . . . . . . . . . . . . . 32
4.04.Reimbursement to LC Banks . . . . . . . . . 32
4.05.Obligations Absolute . . . . . . . . . . . 33
4.06.Liability of LC Banks and the Lenders . . . 34
ARTICLE V
PAYMENTS, COMPUTATIONS AND YIELD PROTECTION
5.01.Payments and Computations . . . . . . . . . 35
5.02.Interest Rate Determination . . . . . . . . 37
5.03.Prepayments . . . . . . . . . . . . . . . . 37
5.04.Yield Protection . . . . . . . . . . . . . 38
(a)Increased Costs . . . . . . . . . . . 38
(b)Eurodollar Reserves . . . . . . . . . 38
(c)Breakage . . . . . . . . . . . . . . . 39
(d)Capital . . . . . . . . . . . . . . . 39
(e)Notices . . . . . . . . . . . . . . . 40
(f)Survival of Obligations . . . . . . . 40
5.05.Sharing of Payments, Etc . . . . . . . . . 41
5.06.Taxes . . . . . . . . . . . . . . . . . 41
ARTICLE VI
CONDITIONS PRECEDENT
6.01.Conditions Precedent to Commitment Closing 43
6.02.Conditions Precedent to Financial Closing . 45
6.03.Conditions Precedent to Each Extension of Credit46
6.04.Reliance on Certificates . . . . . . . . . 48
ARTICLE VII
REPRESENTATIONS AND WARRANTIES
7.01.Representations and Warranties of the Borrower48
ARTICLE VIII
COVENANTS OF THE BORROWER
8.01.Affirmative Covenants . . . . . . . . . . . 52
8.02.Negative Covenants . . . . . . . . . . . . 55
8.03.Reporting Obligations . . . . . . . . . . . 61
ARTICLE IX
DEFAULTS
9.01.Events of Default . . . . . . . . . . . . . 65
9.02.Remedies . . . . . . . . . . . . . . . . . 67
ARTICLE X
THE AGENTS
10.01.Authorization and Action . . . . . . . . . 68
10.02.Agents' Reliance, Etc. . . . . . . . . . . 69
10.03.Citibank, Union Bank and Affiliates . . . . 69
10.04.Lender Credit Decision . . . . . . . . . . 70
10.05.Indemnification . . . . . . . . . . . . . . 70
10.06.Successor Agents . . . . . . . . . . . . . 70
10.07.Lenders and Agents Bound by Collateral
Agency and Intercreditor Agreement
and Pledge Agreements . . . . . . . . . . . 71
ARTICLE XI
MISCELLANEOUS
11.01.Amendments, Etc. . . . . . . . . . . . . . 72
11.02.Notices, Etc. . . . . . . . . . . . . . . . 73
11.03.No Waiver of Remedies . . . . . . . . . . . 73
11.04.Costs, Expenses and Indemnification . . . . 73
11.05.Right of Set-Off . . . . . . . . . . . . . 75
11.06.Binding Effect . . . . . . . . . . . . . . 76
11.07.Assignments and Participation . . . . . . . 76
11.08.Confidentiality . . . . . . . . . . . . . . 81
11.09.Waiver of Jury Trial . . . . . . . . . . . 82
11.10.Governing Law . . . . . . . . . . . . . . . 82
11.11.Relation of the Parties; No Beneficiary . . 82
11.12.Effectiveness; Reference to and Effect on the
Loan Documents . . . . . . . . . . . . . 82
11.13.Execution in Counterparts . . . . . . . . . 83
11.14.Survival of Agreement . . . . . . . . . . . 83
Exhibits
EXHIBIT 3.01- Form of Notice of Borrowing
EXHIBIT 3.02- Form of Notice of Conversion
EXHIBIT 5.03- Form of Cash Collateral Agreement
EXHIBIT 6.02A- Form of Note
EXHIBIT 6.02C- Form of Opinion of Sidley & Austin, counsel for
the Loan Parties
EXHIBIT 6.02D- Form of Opinion of Porter & Travers, counsel to
the Agents
EXHIBIT 6.02E- Form of Opinion of Loomis, Ewert, Ederer,
Parsley, Davis & Gotting, P.C., special Michigan
counsel for the Loan Parties
EXHIBIT 11.07- Form of Lender Assignment
Schedules
SCHEDULE I Applicable Lending Offices
SCHEDULE IIPermitted Debt
<PAGE>
<PAGE>
AMENDED AND RESTATED
CREDIT AGREEMENT
Dated as of November 30, 1992,
As Amended and Restated as of October 15, 1993
THIS AMENDED AND RESTATED CREDIT AGREEMENT is made by and among:
(i) CMS Energy Corporation, a Michigan corporation (the
"Borrower"),
(ii) the banks (the "Banks") listed on the signature pages
hereof and the other Lenders (as hereinafter defined) from
time to time party hereto,
(iii) Citibank, N.A. ("Citibank") and Union Bank ("Union Bank"),
as co-agents (individually a "Co-Agent" and collectively
the "Co-Agents") for the Lenders hereunder,
(iv) Citibank, as documentation agent (the "Documentation
Agent") for the Lenders hereunder, and
(v) Union Bank, as operational agent (the "Operational Agent")
for the Lenders hereunder.
PRELIMINARY STATEMENTS
The Borrower, the Banks, the Co-Agents, the Documentation Agent and
the Operational Agent have entered into the Existing Agreement (as
hereinafter defined), under which the Banks have agreed to provide the
credit facilities described therein in the amounts and on the terms
therein set forth.
The Borrower has requested the that the Existing Agreement be
amended in order to enable the Borrower to cause letters of credit to be
issued for its account thereunder, and to provide the Borrower with
certain additional rights. The Banks have agreed to such amendments, and
have determined that such amendments could best be effected by amending
and restating the Existing Agreement in its entirety.
As is the case with the Existing Agreement, the parties hereto
acknowledge and agree that, upon the effectiveness of this amendment and
restatement of the Existing Agreement, neither Consumers (as hereinafter
defined) nor any of its Subsidiaries (as hereinafter defined) will be a
party to, or will in any way bound by any provision of, this Agreement or
any other Loan Document (as hereinafter defined), and that no Loan
Document will be enforceable against Consumers or any of its Subsidiaries
or their respective assets; provided, that the foregoing in no way limits
the rights and remedies of the Documentation Agent and the Lenders under
the Borrower Pledge Agreement (as hereinafter defined) with respect to the
Pledged Collateral thereunder (which includes the common stock of
Consumers), as the same shall continue to secure the Obligations (as
defined in the Borrower Pledge Agreement).
Accordingly, the parties hereto hereby agree that the Existing
Agreement is amended and restated in its entirety as follows:
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
SECTION 1.01. Certain Defined Terms. As used in this Agreement,
the following terms shall have the following meanings (such meanings to be
applicable to the singular and plural forms of the terms defined):
"Act 144" means Act 144 of the Michigan Public Acts of 1909, as
amended (Michigan Compiled Laws Section 460.301 et seq.), and any
successor statute, together with the rules and regulations
thereunder, in each case as in effect from time to time.
"Advance" means an Advance by a Lender to the Borrower pursuant
to Section 3.01 (or deemed made pursuant to Section 4.04(d)), and
refers to a Base Rate Advance or a Eurodollar Rate Advance (each of
which shall be a "Type" of Advance). All Advances by a Lender of
the same Type, having the same Interest Period and made or
Converted on the same day shall be deemed to be a single Advance by
such Lender until repaid or next Converted.
"Affiliate" means, with respect to any Person, any other Person
directly or indirectly controlling (including but not limited to
all directors and officers of such Person), controlled by, or under
direct or indirect common control with such Person. A Person shall
be deemed to control another entity if such Person possesses,
directly or indirectly, the power to direct or cause the direction
of the management and policies of such entity, whether through the
ownership of voting securities, by contract, or otherwise.
"Agent" means, as the context may require, the Co-Agents, the
Operational Agent, the Documentation Agent or the Collateral Agent;
and "Agents" means any or all of the foregoing.
"Alternate Base Rate" means a fluctuating interest rate per
annum equal at all times to the highest of:
(a) the rate of interest announced publicly by Union Bank
in Los Angeles, California, from time to time, as the Union
Bank Reference Rate;
(b) 1/2 of one percent per annum above the latest
three-week moving average of secondary market morning offering
rates in the United States for three-month certificates of
deposit of major United States money market banks, such
three-week moving average being determined weekly by the
Operational Agent on the basis of such rates reported by
certificate of deposit dealers to and published by the Federal
Reserve Bank of New York or, if such publication shall be
suspended or terminated, on the basis of quotations for such
rates received by the Operational Agent from three New York
certificate of deposit dealers of recognized standing selected
by the Operational Agent, in either case adjusted to the
nearest 1/4 of one percent or, if there is no nearest 1/4 of
one percent, to the next higher 1/4 of one percent; and
(c) 1/2 of one percent per annum above the Federal Funds
Rate.
Each change in the Alternate Base Rate shall take effect
concurrently with any change in such base rate, moving average, or
Federal Funds Rate.
"Applicable Lending Office" means, with respect to each Lender,
(i) such Lender's Domestic Lending Office, in the case of a Base
Rate Advance, and (ii) such Lender's Eurodollar Lending Office, in
the case of a Eurodollar Rate Advance.
"Applicable Margin" means, on any date for a Base Rate Advance
or a Eurodollar Rate Advance, the percentage per annum set forth
below the column entitled "Base Rate" or "Eurodollar Rate", as
appropriate, opposite the period during which such date occurs:
Period Base Rate Eurodollar Rate
Prior to the Step-Down Date 1.00% 2.00%
From and after the Step- 0.25% 1.25%
Down Date
"Applicable Rate" means:
(i) in the case of each Base Rate Advance, a rate per
annum equal at all times to the sum of the Alternate Base Rate
in effect from time to time plus the Applicable Margin in
effect from time to time; and
(ii) in the case of each Eurodollar Rate Advance comprising
part of the same Borrowing, a rate per annum during each
Interest Period equal at all times to the sum of the Eurodollar
Rate for such Interest Period plus the Applicable Margin in
effect from time to time during such Interest Period.
"Available Commitment" means, for each Lender on any day, the
unused portion of such Lender's Commitment, computed after giving
effect to all Extensions of Credit or prepayments to be made on
such day and the application of proceeds therefrom, less such
Lender's Percentage of the Excess Debt Reduction.
"Available Commitments" means the aggregate of the Lenders'
Available Commitments hereunder.
"Base Rate Advance" means an Advance that bears interest as
provided in Section 3.05(b)(i).
"Borrower Pledge Agreement" means the Amended and Restated
Stock Pledge Agreement, dated as of October 8, 1992, as amended and
restated as of November 30, 1992, from the Borrower to the
Collateral Agent (on behalf of the Lenders and the Noteholders).
"Borrowing" means a borrowing consisting of Advances of the
same Type, having the same Interest Period and made or Converted on
the same day by the Lenders, ratably in accordance with their
respective Percentages. Any Borrowing consisting of Advances of a
particular Type may be referred to as being a Borrowing of such
"Type". All Advances of the same Type, having the same Interest
Period and made or Converted on the same day shall be deemed a
single Borrowing hereunder until repaid or next Converted.
"Business Day" means a day of the year on which banks are not
required or authorized to close in New York City, Los Angeles,
California, Chicago, Illinois and Detroit, Michigan, and, if the
applicable Business Day relates to any Eurodollar Rate Advance, on
which dealings are carried on in the London interbank market.
"Cash Collateral Agreement" means the Cash Collateral
Agreement, dated as of October 15, 1993, between the Borrower and
the Operational Agent, for the benefit of the Lenders,
substantially in the form of Exhibit 5.03.
"Collateral" means, collectively, the "Pledged Collateral"
under each of the Pledge Agreements.
"Collateral Agency and Intercreditor Agreement" means the
Collateral Agency and Intercreditor Agreement, dated as of
October 8, 1992, among NBD Bank, National Association (in its
capacity as Trustee for the Noteholders), the Borrower, the
Collateral Agent and the Operational Agent.
"Collateral Agent" has the meaning assigned to that term in the
Collateral Agency and Intercreditor Agreement.
"Collateral Release Date" means the first date (during the
absence of an Unmatured Default or Event of Default) by which both
of the following events shall have occurred:
(i) the Senior Notes shall (A) be rated the Required
Rating or higher by (1) any three of D&P, Fitch, Moody's and
S&P, or (2) both Moody's and S&P, and (B) not be watchlisted
for potential downgrade by any of the rating agencies utilized
to satisfy the condition set forth in clause (A), above; and
(ii) Consumers shall have a consolidated retained earnings
balance, as computed in accordance with generally accepted
accounting principles consistently applied, in excess of $18
million for each of the preceding three consecutive calendar
months.
"Commitment" means, for each Lender, the obligation of such
Lender to make Advances to the Borrower and to participate in
Extensions of Credit resulting from the issuance (or extension,
modification or amendment) of any Letter of Credit in an aggregate
amount no greater than the amount set forth opposite such Lender's
name on the signature pages hereof or, if such Lender has entered
into one or more Lender Assignments, set forth for such Lender in
the Register maintained by the Documentation Agent pursuant to
Section 11.07(c), in each such case as such amount may be reduced
from time to time pursuant to Section 2.03. "Commitments" means
the total of the Lenders' Commitments hereunder. The Commitments
shall in no event exceed $220 million.
"Commitment Closing" means the time at which each of the
conditions precedent enumerated in Section 6.01 shall have been
fulfilled to the satisfaction of the Lenders, the Co-Agents and the
Borrower. All transactions contemplated by the Commitment Closing
shall take place on or before November 30, 1992, at the offices of
Porter & Travers, 120 West 45th Street, New York, New York 10036,
at 10:00 A.M., or such other place or time as the parties hereto
may mutually agree.
"Confidential Information" has the meaning assigned to that
term in Section 11.08.
"Consolidated Capital" means, at any date of determination, the
sum of (a) Consolidated Debt, (b) consolidated equity of the common
stockholders of the Borrower and the Consolidated Subsidiaries, (c)
consolidated equity of the preference stockholders of the Borrower
and the Consolidated Subsidiaries and (d) consolidated equity of
the preferred stockholders of the Borrower and the Consolidated
Subsidiaries, in each case determined at such date in accordance
with generally accepted accounting principles; provided that,
solely for purposes of determining the Borrower's compliance with
the covenant contained in Section 8.01(i) for the fiscal year ended
December 31, 1992, there shall not be deducted from Consolidated
Capital any extraordinary write-offs (not to exceed $220 million)
taken by the Borrower for such fiscal year with respect to MCV cost
recovery issues; and provided further, that, solely for purposes of
determining the Borrower's compliance with the covenant contained
in Section 8.01(i) during the fiscal year ending December 31, 1993,
there shall not be deducted from Consolidated Capital any
write-offs (not to exceed $240 million) taken by the Borrower for
the fiscal year ended December 31, 1992 with respect to MCV cost
recovery issues.
"Consolidated Debt" means, at any date of determination, the
aggregate Debt of the Borrower and the Consolidated Subsidiaries
determined on a consolidated basis in accordance with generally
accepted accounting principles, provided that, for purposes of this
definition, (i) Debt shall not include any obligation of the
Guarantor and the Consolidated Subsidiaries to the extent to which
the obligation to pay, whether for property, services or otherwise,
has not yet arisen and (ii) clause (v) of the definition of
"Support Obligations" shall only include any potential liquidated
damage payments provided for in respect of the obligations referred
to therein.
"Consolidated Subsidiary" means any Subsidiary whose accounts
are or are required to be consolidated with the accounts of the
Borrower in accordance with generally accepted accounting
principles.
"Consumers" means Consumers Power Company, a Michigan
corporation, all of whose common stock is on the date hereof owned
by the Borrower.
"Conversion", "Convert" or "Converted" refers to a conversion
of Advances of one Type into Advances of another Type, or to the
selection of a new, or the renewal of the same, Interest Period for
Advances, as the case may be, pursuant to Section 3.02. "D&P"
means Duff & Phelps, Inc. or any successor thereto.
"Debt" means, for any Person, any and all indebtedness,
liabilities and other monetary obligations of such Person (whether
for principal, interest, fees, costs, expenses or otherwise, and
whether contingent or otherwise) (i) for borrowed money or
evidenced by bonds, debentures, notes or other similar instruments,
(ii) to pay the deferred purchase price of property or services
(except trade accounts payable arising in the ordinary course of
business which are not overdue), (iii) as lessee under leases which
shall have been or should be, in accordance with generally accepted
accounting principles, recorded as capital leases, (iv) under
reimbursement or similar agreements with respect to letters of
credit issued thereunder, (v) under any interest rate swap, "cap",
"collar" or other hedging agreements, and (vi) to pay rent or other
amounts under leases entered into in connection with sale and
leaseback transactions involving assets of such Person being sold
in connection therewith, and including, without limitation, (x)
Guaranty Obligations and (y) any accumulated funding deficiency (as
defined in Section 412(a) of the Internal Revenue Code of 1986, as
amended) for a Plan.
"Default Rate" means a rate per annum equal at all times to the
higher of (i) 2% per annum above the higher, from time to time, of
(A) the Applicable Rate for Eurodollar Rate Advances immediately
prior to such Default Rate becoming applicable and (B) the
Applicable Rate in effect from time to time for Base Rate Advances,
and (ii) the highest rate per annum payable pursuant to the
Indenture with respect to any principal amount of the Senior Notes
that is not paid when due.
"Dollars" and the sign "$" each means lawful money of the
United States.
"Domestic Lending Office" means, with respect to any Lender,
the office or affiliate of such Lender specified as its "Domestic
Lending Office" opposite its name on Schedule I hereto or in the
Lender Assignment pursuant to which it became a Lender, or such
other office or affiliate of such Lender as such Lender may from
time to time specify in writing to the Borrower and the Operational
Agent.
"Eligible Assignee" means (a) a commercial bank or trust
company organized under the laws of the United States, or any State
thereof; (b) a commercial bank organized under the laws of any
other country that is a member of the OECD, or a political
subdivision of any such country, provided that such bank is acting
through a branch or agency located in the United States; (c) the
central bank of any country that is a member of the OECD; and
(d) any other commercial bank or other financial institution
engaged generally in the business of extending credit or purchasing
debt instruments; provided, however, that (A) any such Person shall
also (i) have outstanding unsecured indebtedness that is rated A-
or better by S&P or A3 or better by Moody's (or an equivalent
rating by another nationally-recognized credit rating agency of
similar standing if neither of such corporations is then in the
business of rating unsecured indebtedness of entities engaged in
such businesses) or (ii) have combined capital and surplus (as
established in its most recent report of condition to its primary
regulator) of not less than $250,000,000 (or its equivalent in
foreign currency), (B) any Person described in clause (b), (c), or
(d), above, shall, on the date on which it is to become a Lender
hereunder, (i) be entitled to receive payments hereunder without
deduction or withholding of any United States Federal income taxes
(as contemplated by Section 5.06) and (ii) not be incurring any
losses, costs or expenses of the type for which such Person could
demand payment under Section 5.04(a) or (d) (except to the extent
that, in the absence of the making of an assignment to such Person,
the assigning Lender would have incurred an equal or greater amount
of such losses, costs or expenses and such losses, costs or
expenses would have been payable by the Borrower to such assigning
Lender hereunder), (C) any Person described in clauses (a), (b),
(c) and (d), above, which is not a Lender shall, in addition, be
acceptable to any LC Bank based upon its then-existing credit
criteria and (D) any Person described in clause (d), above, shall,
in addition, be acceptable to the Co-Agents.
"Enterprises" means CMS Enterprises Company, a Michigan
corporation, all of whose common stock is on the date hereof owned
by the Borrower.
"Enterprises Pledge Agreement" means the Amended and Restated
Stock Pledge Agreement, dated as of October 8, 1992, as amended and
restated as of November 30, 1992, from Enterprises to the
Collateral Agent (on behalf of the Lenders and the Noteholders).
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time.
"ERISA Affiliate" means, with respect to any Person, any trade
or business (whether or not incorporated) that is a "commonly
controlled entity" within the meaning of the regulations under
Section 414 of the Internal Revenue Code of 1986, as amended.
"Eurocurrency Liabilities" has the meaning assigned to that
term in Regulation D of the Board of Governors of the Federal
Reserve System, as in effect from time to time.
"Eurodollar Lending Office" means, with respect to any Lender,
the office or affiliate of such Lender specified as its "Eurodollar
Lending Office" opposite its name on Schedule I hereto or in the
Lender Assignment pursuant to which it became a Lender (or, if no
such office or affiliate is specified, its Domestic Lending
Office), or such other office or affiliate of such Lender as such
Lender may from time to time specify in writing to the Borrower and
the Operational Agent.
"Eurodollar Rate" means, for each Interest Period for each
Eurodollar Rate Advance made as part of the same Borrowing, an
interest rate per annum equal to the average (rounded upward to the
nearest whole multiple of 1/16 of 1% per annum, if such average is
not such a multiple) of the rate per annum at which deposits in
U.S. dollars are offered by the principal office of each of the
Reference Banks in London, England to prime banks in the London
interbank market at 11:00 A.M. (London time) two Business Days
before the first day of such Interest Period in an amount
substantially equal to such Reference Bank's Eurodollar Rate
Advance made as part of such Borrowing and for a period equal to
such Interest Period. The Eurodollar Rate for the Interest Period
for each Eurodollar Rate Advance made as part of the same Borrowing
shall be determined by the Operational Agent on the basis of
applicable rates furnished to and received by the Operational Agent
from the Reference Banks two Business Days before the first day of
such Interest Period, subject, however, to the provisions of
Sections 3.04(c) and 5.02.
"Eurodollar Rate Advance" means an Advance that bears interest
as provided in Section 3.05(b)(ii).
"Eurodollar Reserve Percentage" of any Lender for each Interest
Period for each Eurodollar Rate Advance means the reserve
percentage applicable during such Interest Period (or if more than
one such percentage shall be so applicable, the daily average of
such percentages for those days in such Interest Period during
which any such percentage shall be so applicable) under Regulation
D or other regulations issued from time to time by the Board of
Governors of the Federal Reserve System (or any successor) for
determining the maximum reserve requirement (including, without
limitation, any emergency, supplemental or other marginal reserve
requirement) for such Lender with respect to liabilities or assets
consisting of or including Eurocurrency Liabilities having a term
equal to such Interest Period.
"Event of Default" has the meaning specified in Section 9.01.
"Excess Debt Reduction" means, on any date of determination,
the excess of (i) the aggregate principal amount (or its
equivalent) of all Debt then outstanding pursuant to Section
8.02(b)(vi), over (ii) $130 million.
"Existing Agreement" means the Credit Agreement, dated as of
November 30, 1992, among the Borrower, the Banks, the Co-Agents,
the Documentation Agent and the Operational Agent, as in effect
immediately prior to the effectiveness of this Agreement.
"Extension of Credit" means (i) the making of a Borrowing,
(ii) the issuance of a Letter of Credit, or (iii) the amendment of
any Letter of Credit having the effect of extending the stated
termination date thereof, increasing the LC Outstandings
thereunder, or otherwise altering any of the material terms or
conditions thereof. For purposes of this Agreement, a Conversion
shall not constitute an Extension of Credit.
"Federal Funds Rate" means, for any period, a fluctuating
interest rate per annum equal for each day during such period to
the weighted average of the rates on overnight Federal funds
transactions with members of the Federal Reserve System arranged by
Federal funds brokers, as published for such day (or, if such day
is not a Business Day, for the next preceding Business Day) by the
Federal Reserve Bank of New York, or, if such rate is not so
published for any day which is a Business Day, the average of the
quotations for such day on such transactions received by the
Operational Agent from three Federal funds brokers of recognized
standing selected by the Operational Agent.
"Fee Letter" has the meaning assigned to that term in Section
2.02(d).
"Financial Closing" means the time at which each of the
conditions precedent enumerated in Section 6.02 have been fulfilled
to the satisfaction of the Lenders, the Co-Agents and the Borrower.
All transactions contemplated by the Financial Closing shall take
place on or before November 30, 1992, at the offices of Porter &
Travers, 120 West 45th Street, New York, New York 10036, at 10:00
A.M., or such other time as the parties hereto may mutually agree.
"Fitch" means Fitch's Investors Services or any successor
thereto.
"Governmental Approval" means any authorization, consent,
approval, license, permit, certificate, exemption of, or filing or
registration with, any governmental authority or other legal or
regulatory body, required in connection with either (i) the
execution, delivery, or performance of any Loan Document by any
Loan Party, (ii) the grant and perfection of any Lien contemplated
by the Security Documents or (iii) the exercise by any Agent (on
behalf of the Lenders or the Noteholders) of any right or remedy
provided for under any Security Document.
"Guarantor" means Enterprises.
"Guaranty" means the Guaranty, dated as of November 30, 1992,
by Enterprises in favor of the Documentation Agent and the Lenders.
"Guaranty Obligations" means (i) direct or indirect guaranties
in respect of, and obligations to purchase or otherwise acquire, or
otherwise to assure a creditor against loss in respect of, Debt of
any Person and (ii) other guaranty or similar obligations in
respect of the performance of others, including, without
limitation, Support Obligations.
"Hazardous Substance" means any waste, substance, or material
identified as hazardous, dangerous or toxic by any office, agency,
department, commission, board, bureau, or instrumentality of the
United States or of the State or locality in which the same is
located having or exercising jurisdiction over such waste,
substance or material.
"Indemnified Person" has the meaning assigned to that term in
Section 11.04(b).
"Indenture" means that certain Indenture, dated as of
September 15, 1992, between the Borrower and the Trustee, as
supplemented by the First Supplemental Indenture, dated as of
October 1, 1992, and the Second Supplemental Indenture, dated as of
October 1, 1992, as said Indenture may be further amended or
otherwise modified from time to time in accordance with its terms.
"Interest Period" has the meaning assigned to that term in
Section 3.03.
"LC Bank" means a Lender or other financial institution
designated by the Borrower, and acceptable to the Documentation
Agent and the Operational Agent, in accordance with Section
4.01(a), as the issuer of a Letter of Credit pursuant to an LC Bank
Agreement. It is understood and agreed that each Lender shall be
deemed to be acceptable to the Documentation Agent and the
Operational Agent for such purposes.
"LC Bank Agreement" means an agreement between an LC Bank and
the Borrower, in form and substance satisfactory to the
Documentation Agent and the Operational Agent, providing for the
issuance of one or more Letters of Credit, in form and substance
satisfactory to the Documentation Agent and the Operational Agent,
in support of a general corporate activity of the Borrower.
"LC Payment Notice" has the meaning assigned to that term in
Section 4.04(b).
"LC Outstandings" means, for any Letter of Credit on any date
of determination, the maximum amount available to be drawn under
such Letter of Credit (assuming the satisfaction of all conditions
for drawing enumerated therein).
"Lender Assignment" means an assignment and agreement entered
into by a Lender and an Eligible Assignee, and accepted by the
Documentation Agent, in substantially the form of Exhibit 11.07.
"Lenders" means the Banks listed on the signature pages hereof,
each Eligible Assignee that shall become a party hereto pursuant to
Section 11.07 and, if and to the extent so provided in Section
4.04(c), each LC Bank.
"Letter of Credit" means a letter of credit issued by an LC
Bank pursuant to Section 4.02, as such letter of credit may from
time to time be amended, modified or extended in accordance with
the terms of this Agreement and the LC Bank Agreement to which it
relates.
"Lien" has the meaning assigned to that term in Section
8.02(a).
"Loan Documents" means this Agreement, the Notes, the Security
Documents, the Collateral Agency and Intercreditor Agreement, the
Fee Letter, the Cash Collateral Agreement, the LC Bank Agreement(s)
and all other agreements, instruments and documents now or
hereafter executed and/or delivered pursuant hereto or thereto.
"Loan Party" means each of the Borrower and the Guarantor.
"Majority Lenders" means, on any date of determination, Lenders
that, collectively, on such date (i) have Percentages in the
aggregate of at least 66-2/3% and (ii) if the Commitments have been
terminated, hold at least 66-2/3% of the then aggregate unpaid
principal amount of the Advances owing to Lenders. Any
determination of those Lenders constituting the Majority Lenders
shall be made by the Co-Agents and shall be conclusive and binding
on all parties absent manifest error.
"MCV" means the Midland Cogeneration Venture Limited
Partnership.
"Moody's" means Moody's Investors Service, Inc. or any
successor thereto.
"Net Refinancing Proceeds" means the excess of (i) the gross
proceeds from any refinancing of the Senior Notes permitted by
Section 8.02(b)(iii) over (ii) the sum of (A) the aggregate
principal amount of the Senior Notes being refinanced and (B)
customary underwriting commissions, auditing and legal fees,
printing costs, rating agency fees and other customary and
reasonable fees and expenses incurred by the Borrower in connection
with such refinancing, but only to the extent that such excess
proceeds do not constitute permitted Debt under Section
8.02(b)(vi).
"Net Worth" means, with respect to any Person, the excess of
such Person's total assets over its total liabilities, total assets
and total liabilities each to be determined in accordance with
generally accepted accounting principles consistently applied.
"1991 Credit Agreement" means the Credit Agreement, dated as of
December 12, 1991, as amended, among the Borrower, the Lenders
named therein, Citibank and Union Bank, as Co-Agents, Citibank, as
Documentation Agent, and Union Bank, as Operational Agent.
"Nomeco" means NOMECO Oil & Gas Co., a Michigan corporation,
all of whose capital stock is on the date hereof owned by
Enterprises.
"Note" means a promissory note of the Borrower payable to the
order of a Lender, in substantially the form of Exhibit 6.02A.
"Noteholders" means, collectively, the owners of record from
time to time of the Senior Notes.
"Notice of Borrowing" has the meaning assigned to that term in
Section 3.01(a).
"OECD" means the Organization for Economic Cooperation and
Development.
"PBGC" means the Pension Benefit Guaranty Corporation (or any
successor entity) established under ERISA.
"Percentage" means, for any Lender on any date of
determination, the percentage obtained by dividing such Lender's
Commitment on such day by the total of the Commitments on such
date, and multiplying the quotient so obtained by 100%.
"Permitted Investments" means each of the following so long as
no such Permitted Investment shall have a final maturity later than
six months from the date of investment therein:
(i) direct obligations of the United States, or of any
agency thereof, or obligations guaranteed as to principal and
interest by the United States or any agency thereof;
(ii) certificates of deposit or bankers' acceptances
issued, or time deposits held, or investment contracts
guaranteed, by any Lender, any nationally-recognized securities
dealer or any other commercial bank, trust company, savings and
loan association or savings bank organized under the laws of
the United States, or any State thereof, or of any other
country which is a member of the OECD, or a political
subdivision of any such country, and in each case having
outstanding unsecured indebtedness that (on the date of
acquisition thereof) is rated AA- or better by S&P or Aa3 or
better by Moody's (or an equivalent rating by another
nationally-recognized credit rating agency of similar standing
if neither of such corporations is then in the business of
rating unsecured bank indebtedness);
(iii) obligations with any Lender, any other bank or trust
company described in clause (ii), above, or any
nationally-recognized securities dealer, in respect of the
repurchase of obligations of the type described in clause (i),
above, provided that such repurchase obligations shall be fully
secured by obligations of the type described in said clause (i)
and the possession of such obligations shall be transferred to,
and segregated from other obligations owned by, such Lender,
such other bank or trust company or such securities dealer;
(iv) commercial paper rated (on the date of acquisition
thereof) A-1 or P-1 or better by S&P or Moody's, respectively
(or an equivalent rating by another nationally-recognized
credit rating agency of similar standing if neither of such
corporations is then in the business of rating commercial
paper); and
(v) any eurodollar certificate of deposit issued by any
Lender or any other commercial bank, trust company, savings and
loan association or savings bank organized under the laws of
the United States, or any State thereof, or of any country
which is a member of the OECD, or a political subdivision of
any such country, and in each case having outstanding unsecured
indebtedness that (on the date of acquisition thereof) is rated
AA- or better by S&P or Aa3 or better by Moody's (or an
equivalent rating by another nationally-recognized credit
rating agency of similar standing if neither of such
corporations is then in the business of rating unsecured bank
indebtedness).
"Person" means an individual, partnership, corporation
(including a business trust), joint stock company, trust,
unincorporated association, joint venture or other entity, or a
government or any political subdivision or agency thereof.
"Plan" means, with respect to any Person, an employee benefit
plan (other than a Multiemployer Plan) maintained for employees of
such Person or any ERISA Affiliate of such Person and covered by
Title IV of ERISA.
"Plan Termination Event" means, with respect to any Person,
(i) a Reportable Event described in Section 4043 of ERISA and the
regulations issued thereunder (other than a Reportable Event not
subject to the provision for 30-day notice to the PBGC under such
regulations), or (ii) the withdrawal of such Person or any of its
ERISA Affiliates from a Plan during a plan year in which it was a
"substantial employer" as defined in Section 4001(a)(2) of ERISA,
or (iii) the filing of a notice of intent to terminate a Plan or
the treatment of a Plan under Section 4041 of ERISA, or (iv) the
institution of proceedings to terminate a Plan by the PBGC, or
(v) any other event or condition which is reasonably likely to
constitute grounds under Section 4042 of ERISA for the termination
of, or the appointment of a trustee to administer, any Plan.
"Pledge Agreements" means, collectively, the Borrower Pledge
Agreement and the Enterprises Pledge Agreement.
"Recipient" has the meaning assigned to that term in Section
11.08.
"Reference Banks" means Citibank, Union Bank and The
Toronto-Dominion Bank, or any additional or substitute Lenders as
may be selected from time to time to act as Reference Banks
hereunder by the Operational Agent, the Majority Lenders and the
Borrower.
"Register" has the meaning specified in Section 11.07(c).
"Request for Issuance" has the meaning assigned to that term in
Section 4.02(a).
"Required Lenders" means, on any date of determination, Lenders
that, collectively, on such date (i) hold at least 51% of the then
aggregate unpaid principal amount of the Advances owing to Lenders
and (ii) if no Advances are then outstanding, have Percentages in
the aggregate of at least 51%. Any determination of those Lenders
constituting the Required Lenders shall be made by the Co-Agents
and shall be conclusive and binding on all parties absent manifest
error.
"Required Rating" means, with respect to D&P, Fitch and S&P,
BBB- and, with respect to Moody's, Baa3.
"Restricted Subsidiary" means (i) Enterprises, (ii) any other
Subsidiary of the Borrower (other than Consumers and its
Subsidiaries) that, on a consolidated basis with any of its
Subsidiaries as of any date of determination, accounts for more
than 10% of the consolidated assets of the Borrower and its
Consolidated Subsidiaries, and (iii) any other Subsidiary of the
Borrower that is from time to time designated a Restricted
Subsidiary by the Borrower's Board of Directors, provided that (A)
no such Subsidiary may be so designated a Restricted Subsidiary if,
upon or immediately after giving effect to such designation, (1) an
Unmatured Default or Event of Default shall have occurred and be
continuing or (2) the Borrower and its Restricted Subsidiaries
would be prohibited by Section 8.02(b) from incurring any
additional Debt, (B) such designated Restricted Subsidiary must be
organized under the laws of the United States of America or any
State thereof, (C) more than 80% of the outstanding capital stock
having ordinary voting power of such designated Restricted
Subsidiary must be directly owned by B the Borrower or another
Restricted Subsidiary and (D) such designated Restricted Subsidiary
must be included in the consolidated financial statements of the
Borrower.
"S&P" means Standard & Poor's Corporation or any successor
thereto.
"Security Documents" means the Pledge Agreements, the Guaranty
and the Cash Collateral Agreement.
"Senior Note Debt" means, collectively, all principal
indebtedness of the Borrower to the Noteholders now or hereafter
existing under the Senior Notes, together with interest and
premiums, if any, thereon and other amounts payable in respect
thereof or in connection therewith in accordance with the terms of
the Senior Notes or the Indenture.
"Senior Notes" means the Series A Senior Deferred Coupon Notes
Due 1997 and the Series B Senior Deferred Coupon Notes Due 1999
issued by the Borrower pursuant to the Indenture.
"Step-Down Date" means the later to occur of (i) the first
anniversary of the date of the Financial Closing and (ii) the
Collateral Release Date.
"Subsidiary" means, with respect to any Person, any corporation
or unincorporated entity of which more than 50% of the outstanding
capital stock (or comparable interest) having ordinary voting power
(irrespective of whether at the time capital stock (or comparable
interest) of any other class or classes of such corporation or
entity shall or might have voting power upon the occurrence of any
contingency) is at the time directly or indirectly owned by said
Person (whether directly or through one or more other
Subsidiaries). In the case of an unincorporated entity, a Person
shall be deemed to have more than 50% of interests having ordinary
voting power only if such Person's vote in respect of such
interests comprises more than 50% of the total voting power of all
such interests in the unincorporated entity.
"Support Obligations" means any obligation, contingent or
otherwise, of any Person guaranteeing or otherwise supporting any
Debt or other obligation of any other Person in any manner, whether
directly or indirectly, and including, without limitation, any
obligation of such Person, direct or indirect, (i) to purchase or
pay (or advance or supply funds for the purchase or payment of)
such Debt or to purchase (or to advance or supply funds for the
purchase of) any security for the payment of such Debt, (ii) to
purchase property, securities or services for the purpose of
assuring the owner of such Debt of the payment of such Debt, (iii)
to maintain working capital, equity capital, available cash or
other financial statement condition of the primary obligor so as to
enable the primary obligor to pay such Debt, (iv) to provide equity
capital under or in respect of equity subscription arrangements, or
(v) to perform, or arrange for the performance of, any non-monetary
obligations or non-funded debt payment obligations (including,
without limitation, guaranties of capacity support payments under
power purchase or other similar arrangements) of the primary
obligor.
"Tax Sharing Agreement" means the Agreement for the Allocation
of Income Tax Liabilities and Benefits, dated as of January 1,
1990, by and among the Borrower, each of the members of the
Consolidated Group (as defined therein), and each of the
corporations that become members of the Consolidated Group.
"Termination Date" means the earlier to occur of (i) May 31,
1995 and (ii) the date of termination or reduction in whole of the
Commitments pursuant to Section 2.03 or 9.02.
"Trustee" has the meaning assigned to that term in the
Indenture.
"Type" has the meaning assigned to such term (i) in the
definition of "Advance" when used in such context and (ii) in the
definition of "Borrowing" when used in such context.
"Unmatured Default" means an event that, with the giving of
notice or lapse of time or both, would constitute an Event of
Default.
"Unsecured Notes" means any and all general unsecured term
notes issued by the Borrower from time to time. Proceeds from the
issuance of Unsecured Notes will be used for retirement of the
Borrower's higher cost debt securities and for general corporate
purposes.
"Unsecured Note Debt" means, collectively, all principal
indebtedness of the Borrower now or hereafter existing under the
Unsecured Notes, together with interest and premiums, if any,
thereon and other amounts payable in respect thereof or in
connection therewith in accordance with the terms of the Unsecured
Notes or the documentation pursuant to which the Unsecured Notes
are issued.
SECTION 1.02. Computation of Time Periods. Unless otherwise
indicated, each reference in this Agreement to a specific time of day is a
reference to New York City time. In the computation of periods of time
under this Agreement, any period of a specified number of days or months
shall be computed by including the first day or month occurring during
such period and excluding the last such day or month. In the case of a
period of time "from" a specified date "to" or "until" a later specified
date, the word "from" means "from and including" and the words "to" and
"until" each means "to but excluding".
SECTION 1.03. Accounting Terms. All accounting terms not
specifically defined herein shall be construed in accordance with
generally accepted accounting principles consistent with those applied in
the preparation of the financial statements referred to in Section
7.01(e).
ARTICLE II
COMMITMENTS
SECTION 2.01. The Commitments. Each Lender severally agrees, on
the terms and conditions hereinafter set forth, to make Advances to the
Borrower and to participate in the issuance of Letters of Credit (and the
LC Outstandings thereunder) during the period from the date of the
Financial Closing until the Termination Date in an aggregate outstanding
amount not to exceed on any day such Lender's Available Commitment (after
giving effect to all Extensions of Credit to be made on such day and the
application of the proceeds thereof). Within the limits hereinafter set
forth, the Borrower may request Extensions of Credit hereunder, prepay
Advances, or reduce or cancel Letters of Credit, and use the resulting
increase in the Available Commitments for further Extensions of Credit in
accordance with the terms hereof.
SECTION 2.02. Fees. (a) The Borrower agrees to pay to the
Operational Agent for the account of each Lender a commitment fee on the
average daily amount of such Lender's Available Commitment (without taking
into account such Lender's Percentage of the Excess Debt Reduction on any
date of determination) at the rate of 0.375% per annum, from the date
hereof, in the case of each Bank, and from the effective date specified in
the Lender Assignment pursuant to which it became a Lender, in the case of
each other Lender, until the Termination Date, payable quarterly in
arrears on the last day of each January, April, July and October,
commencing the first such date to occur following the date hereof, and on
the Termination Date.
(b)The Borrower agrees to pay to the Operational Agent for the
account of each Lender a participation fee equal to 1.00% of such Lender's
Commitment, such fee to be payable on the date of the Commitment Closing,
in the case of each Bank, and on the effective date specified in the
Lender Assignment pursuant to which it became a Lender, in the case of
each other Lender.
(c)The Borrower agrees to pay to the Operational Agent for the
account of each Lender a commission on the average daily aggregate amount
of the LC Outstandings from the date hereof until the Termination Date at
a rate per annum equal to the Applicable Margin with respect to Eurodollar
Rate Advances from time to time, payable quarterly in arrears on the last
day of each January, April, July and October, commencing on October 31,
1993, and on the Termination Date.
(d)In addition to the fees provided for in subsections (a), (b)
and (c), above, the Borrower shall pay to the Operational Agent, for the
account of the Co-Agents, such other fees as are provided for in that
certain letter agreement between the Borrower and the Co-Agents (the "Fee
Letter") entered into separately herefrom and dated November 30, 1992.
SECTION 2.03. Reduction of the Commitments. (a) The Borrower
may, upon at least five Business Days' notice to each Co-Agent, terminate
in whole or reduce ratably in part the unused portions of the Commitments;
provided that any such partial reduction shall be in the aggregate amount
of $10,000,000 or an integral multiple of $1,000,000 in excess thereof.
(b)On each date that the Borrower repurchases Senior Notes from
any Noteholder as the result of a Change in Control (as defined in the
Indenture), the Commitments of the Lenders shall automatically be ratably
reduced by an amount equal in the aggregate to the product of (i) the
Commitments on such date (after giving effect to all Extensions of Credit
to be made on such date and the application of the proceeds thereof) and
(ii) the percentage obtained by dividing (A) the aggregate principal
amount of such Senior Notes being repurchased by (B) the aggregate
principal amount of the Senior Note Debt then outstanding.
SECTION 2.04. Computations of Outstandings. Whenever reference is
made in this Agreement to the principal amount outstanding on any date
under this Agreement, such reference shall refer to the sum of (i) the
aggregate principal amount of all Advances outstanding on such date plus
(ii) the aggregate LC Outstandings of all Letters of Credit outstanding on
such date, in each case after giving effect to all Extensions of Credit to
be made on such date and the application of the proceeds thereof.
References to the unused portion of the Commitments shall refer to the
excess, if any, of the Commitments over the principal amount outstanding
hereunder; and references to the unused portion of any Lender's Commitment
shall refer to such Lender's Percentage of the unused Commitments.
ARTICLE III
ADVANCES
SECTION 3.01. Advances. (a) The Borrower may request a Borrowing
(other than a Conversion) by delivering a notice (a "Notice of Borrowing")
to the Operational Agent no later than 12:00 noon (New York City time) on
the fourth Business Day or, in the case of Base Rate Advances, on the
first Business Day, prior to the date of the proposed Borrowing. The
Operational Agent shall give each Lender prompt notice of each Notice of
Borrowing. Each Notice of Borrowing shall be in substantially the form of
Exhibit 3.01 and shall specify the requested (i) date of such Borrowing,
(ii) Type of Advances to be made in connection with such Borrowing and
(iii) Interest Period, if any, for such Advances. Each proposed Borrowing
shall conform to the requirements of Sections 3.03 and 3.04.
(b)Each Lender shall, before 12:00 noon (New York City time) on
the date of such Borrowing, make available for the account of its
Applicable Lending Office to the Operational Agent at the Operational
Agent's address referred to in Section 11.02, in same day funds, such
Lender's Percentage of such Borrowing. After the Operational Agent's
receipt of such funds and upon fulfillment of the applicable conditions
set forth in Article VI, the Operational Agent will make such funds
available to the Borrower at the Operational Agent's aforesaid address.
Notwithstanding the foregoing, unless the Operational Agent shall have
received notice from a Lender prior to the date of any Borrowing that such
Lender will not make available to the Operational Agent such Lender's
Percentage of such Borrowing, the Operational Agent may assume that such
Lender has made such Percentage available to the Operational Agent on the
date of such Borrowing in accordance with the first sentence of this
subsection (b), and the Operational Agent may, in reliance upon such
assumption, make available to the Borrower on such date a corresponding
amount.
(c)If and to the extent that any Lender (a "non-performing
Lender") shall not have made available to the Operational Agent, in
accordance with subsection (b), above, such Lender's Percentage of any
Borrowing, the non-performing Lender and the Borrower severally agree to
repay to the Operational Agent forthwith on demand corresponding amounts,
together with interest thereon for each day from the date such amount is
made available to the Borrower until the date such amount is repaid to the
Operational Agent, at (i) in the case of the Borrower, the interest rate
applicable at the time to Advances made in connection with such Borrowing
and (ii) in the case of such Lender, the Federal Funds Rate. Within the
limits of each Lender's Available Commitment hereunder and subject to the
other terms and conditions set forth in this Agreement for the making of
Advances, the Borrower may request (and the Lenders shall honor) one or
more additional Borrowings from the performing Lenders to fund such
repayment to the Operational Agent. If a non-performing Lender shall
repay to the Operational Agent such corresponding amount in full (with
interest as above provided), (x) the Operational Agent shall apply such
corresponding amount and interest to the repayment to the Operational
Agent (or repayment of Advances made to fund such repayment to the
Operational Agent), and shall make any remainder available to the Borrower
and (y) such amount so repaid shall be deemed to constitute such Lender's
Advance, made as part of such Borrowing for purposes of this Agreement as
if funded concurrently with the other Advances made as part of such
Borrowing, and such Lender shall forthwith cease to be deemed a
non-performing Lender; if and so long as such non-performing Lender shall
not repay such amount, and unless and until an Eligible Assignee shall
have assumed and performed the obligations of such non-performing Lender,
all computations by the Operational Agent of Percentages, Commitments and
payments hereunder shall be made without regard to the Commitments, or
outstanding Advances, of such non-performing Lender, and any amounts paid
to the Operational Agent for the account of such non-performing Lender
shall be held by the Operational Agent in trust for such Lender in a
non-interest-bearing special purpose account. Nothing herein shall in any
way limit, waive or otherwise reduce any claims that any party hereto may
have against any non-performing Lender. The failure of any Lender to make
the Advance to be made by it as part of any Borrowing shall not relieve
any other Lender of its obligation, if any, hereunder to make its Advance
on the date of such Borrowing, but no Lender shall be responsible for the
failure of any other Lender to make the Advance to be made by such other
Lender on the date of any Borrowing.
SECTION 3.02. Conversion of Advances. The Borrower may from time
to time Convert any Advance (or portion thereof) of any Type to one or
more Advances of the same or any other Type by delivering a notice of such
Conversion (a "Notice of Conversion") to the Operational Agent no later
than 12:00 noon (New York City time) on (x) the fourth Business Day prior
to the date of any proposed Conversion into a Eurodollar Rate Advance and
(y) the first Business Day prior to the date of any proposed Conversion
into a Base Rate Advance. The Operational Agent shall give each Lender
prompt notice of each Notice of Conversion. Each Notice of Conversion
shall be in substantially the form of Exhibit 3.02 and shall specify the
requested (i) date of such Conversion, (ii) Type of, and Interest Period,
if any, applicable to, the Advances (or portions thereof) proposed to be
Converted, (iii) Type of Advances to which such Advances (or portions
thereof) are proposed to be Converted, (iv) initial Interest Period, if
any, to be applicable to the Advances resulting from such Conversion and
(v) aggregate amount of Advances (or portions thereof) proposed to be
Converted. Each proposed Conversion shall be subject to the provisions of
Sections 3.03 and 3.04.
SECTION 3.03. Interest Periods. The period between the date of
each Eurodollar Rate Advance and the date of payment in full of such
Advance shall be divided into successive periods of months or days
("Interest Periods") for purposes of computing interest applicable
thereto. The initial Interest Period for each such Advance shall begin on
the day such Advance is made, and each subsequent Interest Period shall
begin on the last day of the immediately preceding Interest Period for
such Advance. The duration of each Interest Period shall be 1, 2, 3, or 6
months, as the Borrower may, in accordance with Section 3.01 or 3.02,
select; provided, however, that:
(i)the Borrower may not select any Interest Period that ends
after the Termination Date; and
(ii) whenever the last day of any Interest Period would
otherwise occur on a day other than a Business Day, the last day of
such Interest Period shall occur on the next succeeding Business
Day, provided that if such extension would cause the last day of
such Interest Period to occur in the next following calendar month,
the last day of such Interest Period shall occur on the next
preceding Business Day.
SECTION 3.04. Other Terms Relating to the Making and Conversion of
Advances. (a) Notwithstanding anything in Section 3.01 or 3.02 to the
contrary:
(i)each Borrowing (other than a Borrowing deemed made under
Section 4.04(d)) shall be in an aggregate amount not less than the
product of (A) $1,000,000 and (B) the number of Lenders existing at
the time of such Borrowing, or an integral multiple of $1,000,000
in excess thereof (or such lesser amount as shall be equal to the
total amount of the Available Commitments on such date, after
giving effect to all other Extensions of Credit to be made on such
date) and shall consist of Advances of the same Type, having the
same Interest Period and made or Converted on the same day by the
Lenders ratably according to their respective Percentages;
provided, however, that the initial Borrowing shall be in an
aggregate amount sufficient to repay in full all outstanding
principal, accrued interest and other amounts owing under the 1991
Credit Agreement as of the date of the Financial Closing;
(ii) the Borrower may request that more than one Borrowing be
made on the same day;
(iii) at no time shall more than ten different Borrowings
comprising Eurodollar Rate Advances be outstanding hereunder;
(iv) no Eurodollar Rate Advance may be Converted on a date
other than the last day of the Interest Period applicable to such
Advance unless the corresponding amounts, if any, payable to the
Lenders pursuant to Section 5.04(c) are paid contemporaneously with
such Conversion;
(v)if the Borrower shall either fail to give a timely Notice
of Conversion pursuant to Section 3.02 in respect of any Advances
or fail, in any Notice of Conversion that has been timely given, to
select the duration of any Interest Period for Advances to be
Converted into Eurodollar Rate Advances in accordance with Section
3.03, such Advances shall, on the last day of the then existing
Interest Period therefor, automatically Convert into, or remain as,
as the case may be, Base Rate Advances; and
(vi) if, on the date of any proposed Conversion, any Event of
Default or Unmatured Default shall have occurred and be continuing,
all Advances then outstanding shall, on such date, automatically
Convert into, or remain as, as the case may be, Base Rate Advances.
(b)If any Lender shall notify the Operational Agent that the
introduction of or any change in or in the interpretation of any law or
regulation makes it unlawful, or that any central bank or other
governmental authority asserts that it is unlawful, for such Lender or its
Applicable Lending Office to perform its obligations hereunder to make, or
to fund or maintain, Eurodollar Rate Advances hereunder, (i) to the extent
that any such notice shall be given at least three Business Days before
the date of any requested Borrowing, the right of the Borrower to select
Eurodollar Rate Advances for such Borrowing or any subsequent Borrowing
from such Lender shall be forthwith suspended until the earlier to occur
of the date upon which (A) such Lender shall cease to be a party hereto
and (B) it is no longer unlawful for such Lender to make, fund or maintain
Eurodollar Rate Advances, and (ii) if the maintenance of Eurodollar Rate
Advances then outstanding through the last day of the Interest Period
therefor would cause such Lender to be in violation of such law,
regulation or assertion, the Borrower shall either prepay or Convert all
Eurodollar Rate Advances from such Lender within five days after such
notice. Promptly upon becoming aware that the circumstances that caused
such Lender to deliver such notice no longer exist, such Lender shall
deliver notice thereof to the Operational Agent (but the failure to do so
shall impose no liability upon such Lender). Promptly upon receipt of such
notice from such Lender (or upon such Lender's assigning all of its
Commitments, Advances, participation and other rights and obligations
hereunder to an Eligible Assignee), the Operational Agent shall deliver
notice thereof to the Borrower and the Lenders and such suspension shall
terminate.
(c)If (i) only one, or none, of the Reference Banks furnishes
timely information to the Operational Agent for determining the Eurodollar
Rate for Eurodollar Rate Advances to be made in connection with any
proposed Borrowing or (ii) the Majority Lenders shall, at least one
Business Day before the date of any requested Borrowing, notify the
Operational Agent that the Eurodollar Rate for Eurodollar Rate Advances to
be made in connection with such Borrowing will not adequately reflect the
cost to such Majority Lenders of making, funding or maintaining their
respective Eurodollar Rate Advances for such Borrowing, the right of the
Borrower to select Eurodollar Rate Advances for such Borrowing and any
subsequent Borrowing shall be suspended until the Operational Agent shall
notify the Borrower and the Lenders that the circumstances causing such
suspension no longer exist, and each Advance to be made or Converted in
connection with such Borrowing shall be a Base Rate Advance.
(d)If any Lender shall have delivered a notice to the Operational
Agent described in Section 3.04(b), or shall become a non-performing
Lender under Section 3.01(c) or Section 4.04(c), and if and so long as
such Lender shall not have withdrawn such notice or corrected such
non-performance in accordance with said Section 3.01(c) or Section
4.04(c), the Borrower or the Co-Agents may demand that such Lender assign
in accordance with Section 11.07, to one or more Eligible Assignees
designated by the Borrower or the Co-Agents, all (but not less than all)
of such Lender's Commitment, Advances, participation and other rights and
obligations hereunder; provided that any such demand by the Borrower
during the continuance of an Event of Default or Unmatured Default shall
be ineffective without the consent of the Majority Lenders. If, within 30
days following any such demand by the Co-Agents or the Borrower, any such
Eligible Assignee so designated shall fail to consummate such assignment
on terms reasonably satisfactory to such Lender, or the Borrower and the
Co-Agents shall have failed to designate any such Eligible Assignee, then
such demand by the Borrower or the Co-Agents shall become ineffective, it
being understood for purposes of this provision that such assignment shall
be conclusively deemed to be on terms reasonably satisfactory to such
Lender, and such Lender shall be compelled to consummate such assignment
forthwith, if such Eligible Assignee (i) shall agree to such assignment in
substantially the form of the Lender Assignment attached hereto as Exhibit
11.07 and (ii) shall tender payment to such Lender in an amount equal to
the full outstanding dollar amount accrued in favor of such Lender
hereunder (as computed in accordance with the records of the Operational
Agent).
(e)Each Notice of Borrowing and Notice of Conversion shall be
irrevocable and binding on the Borrower. In the case of any Borrowing
which the related Notice of Borrowing or Notice of Conversion specifies is
to be comprised of Eurodollar Rate Advances, the Borrower shall indemnify
each Lender against any loss, cost or expense incurred by such Lender as a
result of any failure to fulfill, on or before the date specified in such
Notice of Borrowing or Notice of Conversion for such Borrowing, the
applicable conditions (if any) set forth in this Article III (other than
failure pursuant to the provisions of Section 3.04(b) or (c) hereof) or in
Article VI, including, without limitation, any such loss (including loss
of anticipated profits), cost or expense incurred by reason of the
liquidation or reemployment of deposits or other funds acquired by such
Lender to fund the Advance to be made by such Lender when such Advance, as
a result of such failure, is not made on such date.
SECTION 3.05. Repayment of Advances. (a) Principal. The Borrower
shall repay the principal amount of the Advances on the Termination Date.
(b) Interest. The Borrower shall pay interest on the unpaid principal
amount of each Advance owing to each Lender from the date of such Advance
until such principal amount shall be paid in full, at the Applicable Rate
for such Advance (except as otherwise provided in this subsection (b)),
payable as follows:
(i)Base Rate Advances. If such Advance is a Base Rate
Advance, interest thereon shall be payable quarterly in arrears on
the last day of each January, April, July and October, on the date
of any Conversion of such Base Rate Advance and on the date such
Base Rate Advance shall become due and payable or shall otherwise
be paid in full; provided that any amount of principal that is not
paid when due (whether at stated maturity, by acceleration or
otherwise) shall bear interest, from the date on which such amount
is due until such amount is paid in full, payable on demand, at a
rate per annum equal at all times to the Default Rate.
(ii) Eurodollar Rate Advances. If such Advance is a Eurodollar
Rate Advance, interest thereon shall be payable on the last day of
such Interest Period and, if the Interest Period for such Advance
has a duration of more than three months, on that day of each third
month during such Interest Period that corresponds to the first day
of such Interest Period (or, if any such month does not have a
corresponding day, then on the last day of such month); provided
that any amount of principal that is not paid when due (whether at
stated maturity, by acceleration or otherwise) shall bear interest,
from the date on which such amount is due until such amount is paid
in full, payable on demand, at a rate per annum equal at all times
to the Default Rate.
ARTICLE IV
LETTERS OF CREDIT
SECTION 4.01. LC Banks. (a) Subject to the terms and conditions
hereof, the Borrower may from time to time identify and arrange for one or
more financial institutions to act as LC Banks hereunder. Any such
designation by the Borrower shall be notified to the Documentation Agent
and the Operational Agent at least five Business Days prior to the first
date upon which the Borrower proposes that such LC Bank issue its first
Letter of Credit, so as to provide adequate time for such proposed LC Bank
to be approved by such Agents hereunder. In that regard, the Borrower
agrees to use its best efforts to so identify and arrange for Lenders to
serve in such capacity, provided that nothing contained herein shall be
deemed to require any Lender to agree to act as an LC Bank, if it does not
so desire. Within two Business Days following the receipt of any such
designation of a proposed LC Bank (other than any Lender so designated),
the Documentation Agent and the Operational Agent shall notify the
Borrower as to whether such designee is acceptable to such Agents.
(b)The aggregate amount of all LC Outstandings in respect of all
Letters of Credit outstanding on any date of determination shall not
exceed an amount equal to 50% of the then aggregate amount of the
Commitments.
SECTION 4.02. Letters of Credit. (a) Each Letter of Credit shall
be issued (or the stated maturity thereof extended or terms thereof
modified or amended) on not less than three Business Days' prior written
notice thereof to the Operational Agent (which shall promptly distribute
copies thereof to the Lenders) and the relevant LC Bank. Each such notice
(a "Request for Issuance") shall specify (i) the date (which shall be a
Business Day) of issuance of such Letter of Credit (or the date of
effectiveness of such extension, modification or amendment) and the stated
expiry date thereof (which shall be no later than the Termination Date),
(ii) the proposed stated amount of such Letter of Credit (which shall not
be less than $250,000) and (iii) such other information as shall
demonstrate compliance of such Letter of Credit with the requirements
specified therefor in this Agreement and the relevant LC Bank Agreement.
Each Request for Issuance shall be irrevocable unless modified or
rescinded by the Borrower not less than two days prior to the proposed
date of issuance (or effectiveness) specified therein. Not later than
12:00 noon (New York City time) on the proposed date of issuance (or
effectiveness) specified in such Request for Issuance, and upon
fulfillment of the applicable conditions precedent and the other
requirements set forth herein and in the relevant LC Bank Agreement, such
LC Bank shall issue (or extend, amend or modify) such Letter of Credit and
provide notice and a copy thereof to the Operational Agent, which shall
promptly furnish copies thereof to the Lenders.
(b)Each Lender severally agrees with such LC Bank to participate
in the Extension of Credit resulting from the issuance (or extension,
modification or amendment) of such Letter of Credit, in the manner and the
amount provided in Section 4.04(b), and the issuance of such Letter of
Credit shall be deemed to be a confirmation by such LC Bank and each
Lender of such participation in such amount.
SECTION 4.03. LC Bank Fees. The Borrower shall pay directly to
each LC Bank the letter of credit fees, if any, specified to be paid
pursuant to the terms of the LC Bank Agreement to which such LC Bank is a
party at the times, and in the manner, specified in such LC Bank
Agreement.
SECTION 4.04. Reimbursement to LC Banks. (a) The Borrower hereby
agrees to pay to the Operational Agent for the account of each LC Bank, on
demand made by such LC Bank to the Borrower and the Operational Agent, on
and after each date on which such LC Bank shall pay any amount under the
Letter of Credit issued by such LC Bank, a sum equal to the amount so paid
plus interest on such amount from the date so paid by such LC Bank until
repayment to such LC Bank in full at a fluctuating interest rate per annum
equal at all times to the interest rate hereunder for Base Rate Advances.
(b)If any LC Bank shall not have been reimbursed in full for any
payment made by such LC Bank under the Letter of Credit issued by such LC
Bank on the date of such payment, such LC Bank shall give the Operational
Agent and each Lender prompt notice thereof (an "LC Payment Notice") no
later than 12:00 noon (New York City time) on the Business Day immediately
succeeding the date of such payment by such LC Bank. Each Lender
severally agrees to purchase a participation in the reimbursement
obligation of the Borrower to such LC Bank under subsection (a), above, by
paying to the Operational Agent for the account of such LC Bank an amount
equal to such Lender's Percentage of such unreimbursed amount paid by such
LC Bank, plus interest on such amount at a rate per annum equal to the
Federal Funds Rate from the date of such payment by such LC Bank to the
date of payment to such LC Bank by such Lender. Each such payment by a
Lender shall be made not later than 3:00 P.M. (New York City time) on the
later to occur of (i) the Business Day immediately following the date of
such payment by such LC Bank and (ii) the Business Day on which such
Lender shall have received an LC Payment Notice from such LC Bank. Each
Lender's obligation to make each such payment to the Operational Agent for
the account of such LC Bank shall be several and shall not be affected by
the occurrence or continuance of an Unmatured Default or Event of Default
or the failure of any other Lender to make any payment under this Section
4.04. Each Lender further agrees that each such payment shall be made
without any offset, abatement, withholding or reduction whatsoever.
(c)The failure of any Lender to make any payment to the
Operational Agent for the account of an LC Bank in accordance with
subsection (b), above, shall not relieve any other Lender of its
obligation to make payment, but no Lender shall be responsible for the
failure of any other Lender. If any Lender (a "non-performing Lender")
shall fail to make any payment to the Operational Agent for the account of
an LC Bank in accordance with subsection (b), above, within five Business
Days after the LC Payment Notice relating thereto, then, for so long as
such failure shall continue, such LC Bank shall be deemed, for purposes of
Section 5.05 and Article IX hereof and the Security Documents, to be a
Lender hereunder owed an Advance in an amount equal to the outstanding
principal amount due and payable by such Lender to the Operational Agent
for the account of such LC Bank pursuant to subsection (b), above.
(d)Each participation purchased by a Lender under subsection (b),
above, shall constitute a Base Rate Advance deemed made by such Lender to
the Borrower on the date of such payment by the relevant LC Bank under the
Letter of Credit issued by such LC Bank (irrespective of the Borrower's
noncompliance, if any, with the conditions precedent for Advances
hereunder); and all such payments by the Lenders in respect of any one
such payment by such LC Bank shall constitute a single Borrowing
hereunder.
SECTION 4.05. Obligations Absolute. The payment obligations of
each Lender under Section 4.04(b) and of the Borrower under this Agreement
in respect of any payment under any Letter of Credit and any Advance made
under Section 4.04(d) shall be unconditional and irrevocable, and shall be
paid strictly in accordance with the terms of this Agreement under all
circumstances, including, without limitation, the following circumstances:
(i)any lack of validity or enforceability of any Loan Document
or any other agreement or instrument relating thereto or to such
Letter of Credit;
(ii) any amendment or waiver of, or any consent to departure
from, all or any of the Loan Documents;
(iii) the existence of any claim, set-off, defense or other
right which the Borrower may have at any time against any
beneficiary, or any transferee, of such Letter of Credit (or any
Persons for whom any such beneficiary or any such transferee may be
acting), any LC Bank, or any other Person, whether in connection
with this Agreement, the transactions contemplated herein or by
such Letter of Credit, or any unrelated transaction;
(iv) any statement or any other document presented under such
Letter of Credit proving to be forged, fraudulent, invalid or
insufficient in any respect or any statement therein being untrue
or inaccurate in any respect;
(v)payment in good faith by any LC Bank under the Letter of
Credit issued by such LC Bank against presentation of a draft or
certificate which does not comply with the terms of such Letter of
Credit; or
(vi) any other circumstance or happening whatsoever, whether or
not similar to any of the foregoing.
SECTION 4.06. Liability of LC Banks and the Lenders. The Borrower
assumes all risks of the acts and omissions of any beneficiary or
transferee of any Letter of Credit. Neither the LC Bank that has issued
such Letter of Credit, the Lenders nor any of their respective officers,
directors, employees, agents or Affiliates shall be liable or responsible
for (a) the use that may be made of such Letter of Credit or any acts or
omissions of any beneficiary or transferee thereof in connection
therewith; (b) the validity, sufficiency or genuineness of documents, or
of any endorsement thereon, even if such documents should prove to be in
any or all respects invalid, insufficient, fraudulent or forged; (c)
payment by such LC Bank against presentation of documents that do not
comply with the terms of such Letter of Credit, including failure of any
documents to bear any reference or adequate reference to such Letter of
Credit; or (d) any other circumstances whatsoever in making or failing to
make payment under such Letter of Credit, except that the Borrower shall
have the right to bring suit against such LC Bank, and such LC Bank shall
be liable to the Borrower and any Lender, to the extent of any direct, as
opposed to consequential, damages suffered by the Borrower or such Lender
which the Borrower or such Lender proves were caused by such LC Bank's
wilful misconduct or gross negligence, including such LC Bank's wilful
failure to make timely payment under such Letter of Credit following the
presentation to it by the beneficiary thereof of a draft and accompanying
certificate(s) which strictly comply with the terms and conditions of such
Letter of Credit. In furtherance and not in limitation of the foregoing,
any LC Bank may accept sight drafts and accompanying certificates
presented under the Letter of Credit issued by such LC Bank that appear on
their face to be in order, without responsibility for further
investigation, regardless of any notice or information to the contrary.
Notwithstanding the foregoing, no Lender shall be obligated to indemnify
the Borrower for damages caused by any LC Bank's wilful misconduct or
gross negligence, and the obligation of the Borrower to reimburse the
Lenders hereunder shall be absolute and unconditional, notwithstanding the
gross negligence or wilful misconduct of any LC Bank.
ARTICLE V
PAYMENTS, COMPUTATIONS AND
YIELD PROTECTION
SECTION 5.01. Payments and Computations. (a) The Borrower shall
make each payment hereunder and under the other Loan Documents not later
than 11:00 A.M. (New York City time) on the day when due in U.S. Dollars
to the Operational Agent at its address referred to in Section 11.02 in
same day funds; any payment received after 2:00 P.M. (New York City time)
shall be deemed to have been received at the start of business on the next
succeeding Business Day, unless the Operational Agent shall have received
from, or on behalf of, the Borrower a Federal Reserve reference number
with respect to such payment before 3:00 P.M. (New York City time). The
Operational Agent will promptly thereafter cause to be distributed like
funds relating to the payment of principal, interest, fees or other
amounts payable to the Lenders, to the respective Lenders to which the
same are payable, for the account of their respective Applicable Lending
Offices, in each case to be applied in accordance with the terms of this
Agreement. If and to the extent that any distribution of any payment from
the Borrower required to be made to any Lender pursuant to the preceding
sentence shall not be made in full by the Operational Agent on the date
such payment was received by the Operational Agent, the Operational Agent
shall pay to such Lender, upon demand, interest on the unpaid amount of
such distribution, at a rate per annum equal to the Federal Funds Rate,
from the date of such payment by the Borrower to the Operational Agent to
the date of payment in full by the Operational Agent to such Lender of
such unpaid amount. Upon the Operational Agent's acceptance of a Lender
Assignment and recording of the information contained therein in the
Register pursuant to Section 11.07, from and after the effective date
specified in such Lender Assignment, the Operational Agent shall make all
payments hereunder and under the Notes in respect of the interest assigned
thereby to the Lender assignee thereunder, and the parties to such Lender
Assignment shall make all appropriate adjustments in such payments for
periods prior to such effective date directly between themselves.
(b)The Borrower hereby authorizes the Operational Agent, each
Lender and each LC Bank, if and to the extent payment owed to the
Operational Agent, such Lender or such LC Bank, as the case may be, is not
made when due hereunder (or, in the case of a Lender, under the Note held
by such Lender), to charge from time to time against any or all of the
Borrower's accounts with the Operational Agent, such Lender or such LC
Bank, as the case may be, any amount so due.
(c)All computations of interest based on the Alternate Base Rate
and of fees payable pursuant to Section 2.02(a) shall be made by the
Operational Agent on the basis of a year of 365 or 366 days, as the case
may be. All other computations of interest and fees hereunder (including
computations of interest based on the Eurodollar Rate and the Federal
Funds Rate) shall be made by the Operational Agent on the basis of a year
of 360 days. In each such case, such computation shall be made for the
actual number of days (including the first day but excluding the last day)
occurring in the period for which such interest or fees are payable. Each
such determination by the Operational Agent or a Lender shall be
conclusive and binding for all purposes, absent manifest error.
(d)Whenever any payment hereunder or under any other Loan Document
shall be stated to be due on a day other than a Business Day, such payment
shall be made on the next succeeding Business Day, and such extension of
time shall in such case be included in the computation of payment of
interest and fees hereunder; provided, however, that if such extension
would cause payment of interest on or principal of Eurodollar Rate
Advances to be made in the next following calendar month, such payment
shall be made on the next preceding Business Day and such reduction of
time shall in such case be included in the computation of payment of
interest hereunder.
(e)Unless the Operational Agent shall have received notice from
the Borrower prior to the date on which any payment is due to the Lenders
hereunder that the Borrower will not make such payment in full, the
Operational Agent may assume that the Borrower has made such payment in
full to the Operational Agent on such date, and the Operational Agent may,
in reliance upon such assumption, cause to be distributed to each Lender
on such due date an amount equal to the amount then due such Lender. If
and to the extent the Borrower shall not have so made such payment in full
to the Operational Agent, such Lender shall repay to the Operational Agent
forthwith on demand such amount distributed to such Lender, together with
interest thereon, for each day from the date such amount is distributed to
such Lender until the date such Lender repays such amount to the
Operational Agent, at the Federal Funds Rate.
(f)Any amount payable by the Borrower hereunder or under any of
the Notes that is not paid when due (whether at stated maturity, by
acceleration or otherwise) shall (to the fullest extent permitted by law)
bear interest, from the date when due until paid in full, at a rate per
annum equal at all times to the Default Rate payable on demand.
SECTION 5.02. Interest Rate Determination. (a) Each Reference
Bank agrees to furnish to the Operational Agent timely information for the
purpose of determining the Eurodollar Rate for each Interest Period. If
any one or more of the Reference Banks shall not furnish such timely
information to the Operational Agent for the purpose of determining any
such interest rate, the Operational Agent shall determine such interest
rate on the basis of timely information furnished by the remaining
Reference Banks, subject to Section 3.04(b).
(b)The Operational Agent shall give prompt notice to the Borrower
and the Lenders of the applicable interest rate determined by the
Operational Agent for purposes of Section 3.05(b)(i) or (ii), and the
Eurodollar Rate, if any, furnished by each Reference Bank for the purpose
of determining the applicable interest rate under Section 3.05(b)(ii).
SECTION 5.03. Prepayments. The Borrower shall have no right to
prepay any principal amount of any Advances other than as provided in
subsections (a) and (b), below.
(a)The Borrower may, upon at least five Business Days' notice
to the Operational Agent stating the proposed date and aggregate
principal amount of the prepayment, and if such notice is given,
the Borrower shall, prepay the outstanding principal amounts of
Advances made as part of the same Borrowing, in whole or ratably in
part, together with (i) accrued interest to the date of such
prepayment on the principal amount prepaid and (ii) in the case of
Eurodollar Rate Advances, any amount payable to the Lenders
pursuant to Section 5.04(c); provided, however, that each partial
prepayment shall be in an aggregate principal amount not less than
the product of (x) $1,000,000 and (y) the number of Lenders
existing at the time of such prepayment.
(b)On the date of any termination or optional or mandatory
reduction of the Commitments pursuant to Section 2.03, the Borrower
shall pay or prepay so much of the principal amount outstanding
under this Agreement as shall be necessary in order that such
aggregate principal amount outstanding will not exceed the
Commitments following such termination or reduction, together with
(i) accrued interest to the date of such prepayment on the
principal amount repaid and (ii) in the case of prepayments of
Eurodollar Rate Advances, any amount payable to the Lenders
pursuant to Section 5.04(c). Any prepayments required by this
subsection (b) shall be applied to outstanding Base Rate Advances
up to the full amount thereof before they are applied, first, to
outstanding Eurodollar Rate Advances and, second, as cash
collateral, pursuant to the Cash Collateral Agreement, to secure LC
Outstandings.
SECTION 5.04. Yield Protection. (a) Increased Costs. If, due to
either (i) the introduction of or any change in or in the interpretation
of any law or regulation after the date hereof, or (ii) the compliance
with any guideline or request from any central bank or other governmental
authority (whether or not having the force of law) issued or made after
the date hereof, there shall be reasonably incurred any increase in (A)
the cost to any Lender of agreeing to make or making, funding or
maintaining Eurodollar Rate Advances, or of participating in the issuance,
maintenance or funding of any Letter of Credit, or (B) the cost to any LC
Bank of issuing or maintaining any Letter of Credit, then the Borrower
shall from time to time, upon demand by such Lender or LC Bank, as the
case may be (with a copy of such demand to the Operational Agent), pay to
the Operational Agent for the account of such Lender or LC Bank, as the
case may be, additional amounts sufficient to compensate such Lender or LC
Bank, as the case may be, for such increased cost. A certificate as to
the amount of such increased cost and giving a reasonable explanation
thereof, submitted to the Borrower and the Operational Agent by such
Lender or such LC Bank, as the case may be, shall constitute such demand
and shall be conclusive and binding for all purposes, absent manifest
error.
(b)Eurodollar Reserves. The Borrower shall pay to the Operational
Agent for the account of each Lender, so long as such Lender shall be
required under regulations of the Board of Governors of the Federal
Reserve System to maintain reserves with respect to liabilities or assets
consisting of or including Eurocurrency Liabilities, additional interest
on the unpaid principal amount of each Eurodollar Rate Advance of such
Lender, from the date of such Advance until such principal amount is paid
in full, at an interest rate per annum equal at all times to the remainder
obtained by subtracting (i) the Eurodollar Rate for the Interest Period
for such Advance from (ii) the rate obtained by dividing such Eurodollar
Rate by a percentage equal to 100% minus the Eurodollar Reserve Percentage
of such Lender for such Interest Period, payable on each date on which
interest is payable on such Advance. Such additional interest shall be
determined by such Lender and notified to the Borrower and the Operational
Agent. A certificate as to the amount of such additional interest,
submitted to the Borrower and the Operational Agent by such Lender, shall
be conclusive and binding for all purposes, absent manifest error.
(c)Breakage. If, due to any prepayment pursuant to Section 5.03,
an acceleration of maturity of the Advances pursuant to Section 9.01, or
any other reason, any Lender receives payments of principal of any
Eurodollar Rate Advance other than on the last day of the Interest Period
relating to such Advance, or if the Borrower shall Convert any Eurodollar
Rate Advances on any day other than the last day of the Interest Period
therefor, the Borrower shall, promptly after demand by such Lender (with a
copy of such demand to the Operational Agent), pay to the Operational
Agent for the account of such Lender any amounts required to compensate
such Lender for additional losses, costs, or expenses (including
anticipated lost profits) that such Lender may reasonably incur as a
result of such payment or Conversion, including, without limitation, any
loss, cost or expense incurred by reason of the liquidation or
reemployment of deposits or other funds acquired by such Lender to fund or
maintain such Advance. For purposes of this subsection (c), a certificate
setting forth the amount of such additional losses, costs, or expenses and
giving a reasonable explanation thereof, submitted to the Borrower and the
Operational Agent by such Lender, shall constitute such demand and shall
be conclusive and binding for all purposes, absent manifest error.
(d)Capital. If any Lender or LC Bank determines that
(i) compliance with any law or regulation or any guideline or request from
any central bank or other governmental authority (whether or not having
the force of law) affects or would affect the amount of capital required
or expected to be maintained by such Lender or LC Bank, whether directly,
or indirectly as a result of commitments of any corporation controlling
such Lender or LC Bank (but without duplication), and (ii) the amount of
such capital is increased by or based upon (1) the existence of such
Lender's or LC Bank's commitment to lend or issue or participate in any
Letter of Credit hereunder, or (2) the participation in or issuance or
maintenance of any Letter of Credit or Advance and (3) other similar such
commitments, then, upon demand by such Lender or LC Bank, the Borrower
shall immediately pay to the Operational Agent for the account of such
Lender or LC Bank from time to time as specified by such Lender or LC Bank
additional amounts sufficient to compensate such Lender or LC Bank in the
light of such circumstances, to the extent that such Lender or LC Bank
reasonably determines such increase in capital to be allocable to the
transactions contemplated hereby. A certificate as to such amounts and
giving a reasonable explanation thereof (to the extent permitted by law),
submitted to the Borrower and the Operational Agent by such Lender or LC
Bank, shall be conclusive and binding for all purposes, absent manifest
error.
(e)Notices. Each Lender hereby agrees to use its best efforts to
notify the Borrower of the occurrence of any event referred to in
subsection (a), (b), (c) or (d) of this Section 5.04 promptly after
becoming aware of the occurrence thereof. The failure of any Lender to
provide such notice or to make demand for payment under said subsection
shall not constitute a waiver of such Lender's rights hereunder; provided
that, notwithstanding any provision to the contrary contained in this
Section 5.04, the Borrower shall not be required to reimburse any Lender
for any amounts or costs incurred under (i) subsection (a), (c) or (d),
above, more than 90 days prior to the date that such Lender notifies the
Borrower in writing thereof, and (ii) subsection (b), above, more than 180
days prior to the date that such Lender notifies the Borrower in writing
thereof, in each case unless, and to the extent that, any such amounts or
costs so incurred shall relate to the retroactive application of any event
notified to the Borrower which entitles such Lender to such compensation.
If any Lender shall subsequently determine that any amount demanded and
collected under this Section 5.04 was done so in error, such Lender will
promptly return such amount to the Borrower.
(f)Survival of Obligations. Subject to subsection (e), above, the
Borrower's obligations under this Section 5.04 shall survive the repayment
of all other amounts owing to the Lenders, the Agents and the LC Banks
under the Loan Documents and the termination of the Commitments. If and
to the extent that the obligations of the Borrower under this Section 5.04
are unenforceable for any reason, the Borrower agrees to make the maximum
contribution to the payment and satisfaction thereof which is permissible
under applicable law.
SECTION 5.05. Sharing of Payments, Etc. If any Lender shall
obtain any payment (whether voluntary, involuntary, through the exercise
of any right of set-off, or otherwise) on account of the Advances owing to
it (other than pursuant to Section 5.04) in excess of its ratable share of
payments obtained by all the Lenders on account of the Advances of such
Lenders, such Lender shall forthwith purchase from the other Lenders such
participation in the Advances owing to them as shall be necessary to cause
such purchasing Lender to share the excess payment ratably with each of
them; provided, however, that if all or any portion of such excess payment
is thereafter recovered from such purchasing Lender, such purchase from
each Lender shall be rescinded and such Lender shall repay to the
purchasing Lender the purchase price to the extent of such recovery
together with an amount equal to such Lender's ratable share (according to
the proportion of (i) the amount of such Lender's required repayment to
(ii) the total amount so recovered from the purchasing Lender) of any
interest or other amount paid or payable by the purchasing Lender in
respect of the total amount so recovered. The Borrower agrees that any
Lender so purchasing a participation from another Lender pursuant to this
Section 5.05 may, to the fullest extent permitted by law, exercise all its
rights of payment (including the right of set-off) with respect to such
participation as fully as if such Lender were the direct creditor of the
Borrower in the amount of such participation. Notwithstanding the
foregoing, if any Lender shall obtain any such excess payment
involuntarily, such Lender may, in lieu of purchasing participations from
the other Lenders in accordance with this Section 5.05, on the date of
receipt of such excess payment, return such excess payment to the
Operational Agent for distribution in accordance with Section 5.01(a).
SECTION 5.06. Taxes. (a) All payments by the Borrower hereunder
and under the other Loan Documents shall be made in accordance with
Section 5.01, free and clear of and without deduction for all present or
future taxes, levies, imposts, deductions, charges or withholdings, and
all liabilities with respect thereto, excluding, in the case of each
Lender, each LC Bank and each Agent, taxes imposed on its overall net
income, and franchise taxes imposed on it by the jurisdiction under the
laws of which such Lender, LC Bank or Agent (as the case may be) is
organized or any political subdivision thereof and, in the case of each
Lender, taxes imposed on its overall net income, and franchise taxes
imposed on it by the jurisdiction of such Lender's Applicable Lending
Office or any political subdivision thereof (all such non-excluded taxes,
levies, imposts, deductions, charges, withholdings and liabilities being
hereinafter referred to as "Taxes"). If the Borrower shall be required by
law to deduct any Taxes from or in respect of any sum payable hereunder or
under any other Loan Document to any Lender, LC Bank or Agent, (i) the sum
payable shall be increased as may be necessary so that after making all
required deductions (including deductions applicable to additional sums
payable under this Section 5.06) such Lender, LC Bank or Agent (as the
case may be) receives an amount equal to the sum it would have received
had no such deductions been made, (ii) the Borrower shall make such
deductions and (iii) the Borrower shall pay the full amount deducted to
the relevant taxation authority or other authority in accordance with
applicable law.
(b)In addition, the Borrower agrees to pay any present or future
stamp or documentary taxes or any other excise or property taxes, charges
or similar levies that arise from any payment made hereunder or under any
other Loan Document or from the execution, delivery or registration of, or
otherwise with respect to, this Agreement or any other Loan Document
(hereinafter referred to as "Other Taxes").
(c)The Borrower will indemnify each Lender, LC Bank and Agent for
the full amount of Taxes and Other Taxes (including, without limitation,
any Taxes and any Other Taxes imposed by any jurisdiction on amounts
payable under this Section 5.06) paid by such Lender, LC Bank or Agent (as
the case may be) and any liability (including penalties, interest and
expenses) arising therefrom or with respect thereto, whether or not such
Taxes or Other Taxes were correctly or legally asserted. This
indemnification shall be made within 30 days from the date such Lender, LC
Bank or Agent (as the case may be) makes written demand therefor;
provided, that such Lender, LC Bank or Agent (as the case may be) shall
not be entitled to demand payment under this Section 5.06 for an amount if
such demand is not made within one year following the date upon which such
Lender, LC Bank or Agent (as the case may be) shall have been required to
pay such amount.
(d)Within 30 days after the date of any payment of Taxes, the
Borrower will furnish to the Documentation Agent, at its address referred
to in Section 11.02, the original or a certified copy of a receipt
evidencing payment thereof.
(e)Each Bank represents and warrants that either (i) it is
organized under the laws of a jurisdiction within the United States or
(ii) it has delivered to the Borrower or the Operational Agent duly
completed copies of such form or forms prescribed by the Internal Revenue
Service indicating that such Bank is entitled to receive payments without
deduction or withholding of any United States federal income taxes, as
permitted by the Internal Revenue Code of 1986, as amended. Each other
Lender agrees that, on or prior to the date upon which it shall become a
party hereto, and upon the reasonable request from time to time of the
Borrower or the Operational Agent, such Lender will deliver to the
Borrower and the Operational Agent either (A) a statement that it is
organized under the laws of a jurisdiction within the United States or (B)
duly completed copies of such form or forms as may from time to time be
prescribed by the United States Internal Revenue Service, indicating that
such Lender is entitled to receive payments without deduction or
withholding of any United States federal income taxes, as permitted by the
Internal Revenue Code of 1986, as amended. Each Bank that has delivered,
and each other Lender that hereafter delivers, to the Borrower and the
Operational Agent the form or forms referred to in the two preceding
sentences further undertakes to deliver to the Borrower and the
Operational Agent further copies of such form or forms, or successor
applicable form or forms, as the case may be, as and when any previous
form filed by it hereunder shall expire or shall become incomplete or
inaccurate in any respect. Each Lender represents and warrants that each
such form supplied by it to the Operational Agent and the Borrower
pursuant to this subsection (e), and not superseded by another form
supplied by it, is or will be, as the case may be, complete and accurate.
ARTICLE VI
CONDITIONS PRECEDENT
SECTION 6.01. Conditions Precedent to Commitment Closing. The
Commitments of the Lenders to make, or to participate in, as the case may
be, Extensions of Credit under Article III hereof shall not become
effective until the following conditions precedent shall have been
fulfilled:
(a)The Documentation Agent shall have received the following, each
dated the date of the Commitment Closing (unless otherwise specified
below), in form and substance satisfactory to the Lenders and in
sufficient copies for each Lender:
(i)Certified copies of the resolutions of the Board of
Directors of the Borrower authorizing the Borrower to enter into
this Agreement, the Notes and the other Loan Documents to which it
is, or is to be, a party, and of all documents evidencing other
necessary corporate action and governmental approvals, if any, with
respect to this Agreement, the Notes and such Loan Documents.
(ii) A certificate of the Secretary or an Assistant Secretary
of the Borrower certifying the names, true signatures and
incumbency of (A) the officers of the Borrower authorized to sign
this Agreement, the Notes and the other Loan Documents to which it
is, or is to be, a party, and the other documents to be delivered
hereunder and thereunder and (B) the representatives of the
Borrower authorized to sign notices to be provided under this
Agreement and the other Loan Documents to which it is, or is to be,
a party, which representatives shall be acceptable to the
Co-Agents.
(iii) Copies of the Certificate of Incorporation (or comparable
charter document) and by-laws of the Borrower, together with all
amendments thereto, certified by the Secretary or an Assistant
Secretary of the Borrower.
(iv) An irrevocable notice from the Borrower requesting
termination of the "Commitments" under the 1991 Credit Agreement
effective automatically on such date upon the satisfaction (or
waiver) of the other conditions precedent set forth in this Section
6.01.
(v)Such other approvals, opinions and documents as any Lender,
through the Documentation Agent, may reasonably request as to the
legality, validity, binding effect or enforceability of this
Agreement and the other Loan Documents to which the Borrower is, or
is to be, a party, or the financial condition, results of
operations, properties or business, of the Borrower and its
Consolidated Subsidiaries.
(b)The following statements shall be true and the Documentation
Agent shall have received a certificate of a duly authorized officer of
the Borrower, dated the date of the Commitment Closing and in sufficient
copies for each Lender, stating that:
(i)the representations and warranties set forth in Section
7.01 of this Agreement are true and correct on and as of the date
of the Commitment Closing as though made on and as of such date,
and (ii) no event has occurred and is continuing that constitutes
an Unmatured Default or an Event of Default.
(c)The Borrower shall have paid all fees under or referenced in
Section 2.02 hereof, to the extent then due and payable.
(d)The Commitment Closing shall have occurred on or prior to
November 30, 1992. It is acknowledged that all conditions precedent set
forth in this Section 6.01 were fulfilled, and the Commitment Closing
occurred, on November 30, 1992.
SECTION 6.02. Conditions Precedent to Financial Closing. The
obligation of each Lender to make its initial Extension of Credit is
subject to the fulfillment of the conditions precedent that the
Documentation Agent shall have received, on or before the day of the
initial Extension of Credit, the following, each dated such day (except
where specified otherwise below), in form and substance satisfactory to
each Lender (except where otherwise specified below) and (except for the
Notes) in sufficient copies for each Lender:
(i)A Note, payable to the order of each Lender then party
hereto, duly executed by the Borrower.
(ii) The Security Documents duly executed by the respective
parties named therein as guarantors, grantors or pledgors, together
with evidence of the completion of all other actions as may be
necessary or, in the opinion of the Co-Agents and counsel for the
Co-Agents, desirable to perfect the security interests and liens
created by the Security Documents.
(iii) The Fee Letter, duly executed by the Borrower.
(iv) Certified copies of (A) the resolutions of the Board of
Directors of Enterprises authorizing Enterprises to enter into the
Loan Documents to which it is a party and (B) all other corporate
or similar action required to authorize the execution, delivery and
performance thereof on behalf of Enterprises.
(v)A certificate of the Secretary or Assistant Secretary of
Enterprises certifying the names and true signatures of (A) the
officers of Enterprises authorized to sign the Loan Documents to
which it is a party and all other documents to be delivered in
connection herewith or therewith on behalf of Enterprises and (B)
the representatives of Enterprises authorized to sign notices to be
provided under the Loan Documents to which it is a party, which
representatives shall be acceptable to the Co-Agents.
(vi) A certified copy of Schedule II hereto, in form and
substance reasonably satisfactory to the Co-Agents.
(vii) Favorable opinions of:
(A) Sidley & Austin, counsel for the Loan Parties, in
substantially the form of Exhibit 6.02C and as to such other
matters as the Majority Lenders, through the Documentation
Agent, may reasonably request;
(B) Porter & Travers, counsel to the Agents, in
substantially the form of Exhibit 6.02D and as to such other
matters as the Majority Lenders, through the Documentation
Agent, may reasonably request; and
(C) Loomis, Ewert, Ederer, Parsley, Davis & Gotting, P.C.,
special Michigan counsel for the Loan Parties, in substantially
the form of Exhibit 6.02E and as to such other matters as the
Majority Lenders, through the Documentation Agent, may
reasonably request.
It is acknowledged that all conditions precedent set forth in this
Section 6.02 (other than the execution and delivery of the Cash
Collateral Agreement) were fulfilled, and the Financial Closing
occurred, on November 30, 1992.
SECTION 6.03. Conditions Precedent to Each Extension of Credit.
The obligation of each Lender or LC Bank, as the case may be, to make an
Extension of Credit (including the initial Extension of Credit) shall be
subject to the further conditions precedent that, on the date of such
Extension of Credit and after giving effect thereto:
(a)the following statements shall be true (and each of the
giving of the applicable notice or request with respect thereto and
the making of such Extension of Credit without prior correction by
the Borrower shall (to the extent that such correction has been
previously consented to by the Lenders and the LC Banks) constitute
a representation and warranty by the Borrower that, on the date of
such Extension of Credit, such statements are true):
(i) the representations and warranties contained in
Section 7.01 of this Agreement (other than those contained in
subsections (e)(i) and (e)(ii) thereof), in Section 4 of each
of the Pledge Agreements, in Section 7 of the Cash Collateral
Agreement and in Section 6 of the Guaranty (other than those
contained in subsections (f)(i) and (f)(ii) thereof) are
correct on and as of the date of such Extension of Credit,
before and after giving effect to such Extension of Credit and
to the application of the proceeds thereof, as though made on
and as of such date;
(ii) solely with respect to the initial Extension of
Credit, the representations and warranties contained in Section
7.01(e)(i) and (ii) hereof and in Section 6(f)(i) and (ii) of
the Guaranty are correct on and as of the date of such
Extension of Credit, before and after giving effect to such
Extension of Credit and the application of the proceeds
thereof, as though made on and as of such date;
(iii) with respect to each Extension of Credit other than
the initial Extension of Credit, since September 30, 1992,
except as disclosed in the Borrower's Current Reports on Form
8-K filed with the Securities and Exchange Commission on
March 31, 1993 and April 6, 1993, (A) there has been no
material adverse change in the Borrower's ability to perform
its obligations under this Agreement or any other Loan Document
to which it is or will be a party, or in the Guarantor's
ability to perform its obligations under the Guaranty, and (B)
there has been no order or decision issued by any Federal or
state regulatory authority which would reasonably be expected
to have a material adverse effect on the business, financial
condition or results of operations of the Borrower; and
(iv) no Unmatured Default or Event of Default has occurred
and is continuing, or would result from such Extension of
Credit or the application of the proceeds thereof; and
(b)the Documentation Agent shall have received such other
approvals, opinions and documents as any Lender or LC Bank, through
the Documentation Agent, may reasonably request as to the legality,
validity, binding effect or enforceability of the Loan Documents or
the financial condition, results of operations, properties or
business of the Borrower and its Consolidated Subsidiaries.
SECTION 6.04. Reliance on Certificates. The Lenders, the LC Banks
and each Agent shall be entitled to rely conclusively upon the
certificates delivered from time to time by officers of the Borrower and
the other Loan Parties as to the names, incumbency, authority and
signatures of the respective persons named therein until such time as the
Documentation Agent may receive a replacement certificate, in form
acceptable to the Documentation Agent, from an officer of such Person
identified to the Documentation Agent as having authority to deliver such
certificate, setting forth the names and true signatures of the officers
and other representatives of such Person thereafter authorized to act on
behalf of such Person.
ARTICLE VII
REPRESENTATIONS AND WARRANTIES
SECTION 7.01. Representations and Warranties of the Borrower. The
Borrower represents and warrants as follows:
(a)The Borrower, each of its Restricted Subsidiaries and Consumers
is a corporation duly organized, validly existing and in good standing
under the laws of the state of its incorporation and is duly qualified to
do business in, and is in good standing in, all other jurisdictions where
the nature of its business or the nature of property owned or used by it
makes such qualification necessary.
(b)The execution, delivery and performance by the Borrower of each
Loan Document to which it is or will be a party (i) are within the
Borrower's corporate powers, (ii) have been duly authorized by all
necessary corporate action and (iii) do not and will not (A) require any
consent or approval of the stockholders of the Borrower, (B) violate any
provision of the charter or by-laws of the Borrower or of law, (C) violate
any legal restriction binding on or affecting the Borrower, (D) result in
a breach of, or constitute a default under, any indenture or loan or
credit agreement or any other agreement, lease or instrument to which the
Borrower is a party or by which it or its properties may be bound or
affected, or (E) result in or require the creation of any Lien (other than
pursuant to the Loan Documents) upon or with respect to any of its
properties.
(c)No Governmental Approval is required.
(d)This Agreement is, and each other Loan Document to which the
Borrower will be a party when executed and delivered hereunder will be,
legal, valid and binding obligations of the Borrower enforceable against
the Borrower in accordance with their respective terms; subject to the
qualification, however, that the enforcement of the rights and remedies
herein and therein is subject to bankruptcy and other similar laws of
general application affecting rights and remedies of creditors and the
application of general principles of equity (regardless of whether
considered in a proceeding in equity or at law).
(e)(i) The consolidated balance sheet of the Borrower and its
Consolidated Subsidiaries as at December 31, 1991, and the related
consolidated statements of income, retained earnings and cash flows of the
Borrower and its Consolidated Subsidiaries for the fiscal year then ended,
together with the report thereon of Arthur Andersen & Co. included in the
Borrower's Annual Report on Form 10-K for the fiscal year ended
December 31, 1991 (as revised and amended pursuant to Forms 8 dated
April 29, 1992, July 15, 1992 and August 17, 1992), and the unaudited
consolidated balance sheet of the Borrower and its Consolidated
Subsidiaries as at September 30, 1992 and the related unaudited
consolidated statements of income, retained earnings and cash flows for
the 9-month period then ended, copies of each of which have been furnished
to each Lender, fairly present (subject, in the case of such balance
sheets and statements of income for the 9 months ended September 30, 1992,
to year-end adjustments) the financial condition of the Borrower and its
Consolidated Subsidiaries as at such dates and the results of operations
of the Borrower and its Consolidated Subsidiaries for the periods ended on
such dates, all in accordance with generally accepted accounting
principles consistently applied. (ii) Since September 30, 1992, except as
disclosed in the Borrower's Quarterly Report on Form 10-Q for the period
ended September 30, 1992, there has been no material adverse change in the
business, financial condition or results of operations of the Borrower and
its Subsidiaries, considered as a whole, or in the Borrower's ability to
perform its obligations under this Agreement or any other Loan Document to
which it is or will be a party. (iii) The Borrower has no material
liabilities or obligations except as reflected in the foregoing financial
statements and in Schedule II hereto, as evidenced by the Loan Documents
and as may be incurred, in accordance with the terms of this Agreement, in
the ordinary course of business (as presently conducted) following the
date of this Agreement.
(f)Except as disclosed in the Borrower's Quarterly Report on Form
10-Q for the period ended September 30, 1992, there are no pending or
threatened actions, suits or proceedings against or, to the knowledge of
the Borrower, affecting the Borrower or any of its Subsidiaries or the
properties of the Borrower or any of its Subsidiaries before any court,
governmental agency or arbitrator, that would, if adversely determined,
reasonably be expected to materially adversely affect the financial
condition, properties, business or operations of the Borrower and it
Subsidiaries, considered as a whole, or affect the legality, validity or
enforceability of this Agreement or any other Loan Document.
(g)All insurance required by Section 8.01(b) is in full force and
effect.
(h)No Plan Termination Event has occurred nor is reasonably
expected to occur with respect to any Plan of the Borrower or any of its
ERISA Affiliates which would result in a material liability to the
Borrower, except as disclosed and consented to by the Majority Lenders in
writing from time to time. Since the date of the most recent Schedule B
(Actuarial Information) to the annual report of the Borrower (Form 5500
Series), if any, there has been no material adverse change in the funding
status of the Plans referred therein and no "prohibited transaction" has
occurred with respect thereto which is reasonably expected to result in a
material liability to the Borrower. Neither the Borrower nor any of its
ERISA Affiliates has incurred nor reasonably expects to incur any material
withdrawal liability under ERISA to any Multiemployer Plan, except as
disclosed and consented to by the Majority Lenders in writing from time to
time.
(i)None of the material properties, business or operations of the
Borrower, Consumers or any Restricted Subsidiary are materially adversely
affected by any fire, explosion, accident, strike, lockout or other labor
disputes, drought, storm, hail, earthquake, embargo, act of God or of the
public enemy or other casualty (except for any such circumstance, if any,
which is covered by insurance which coverage has been confirmed and not
disputed by the relevant insurer).
(j)The Borrower and its Subsidiaries have filed all tax returns
(Federal, state and local) required to be filed and paid all taxes shown
thereon to be due, including interest and penalties, or, to the extent the
Borrower or any of its Subsidiaries is contesting in good faith an
assertion of liability based on such returns, has provided adequate
reserves for payment thereof in accordance with generally accepted
accounting principles.
(k)No extraordinary judicial, regulatory or other legal
constraints exist which limit or restrict Consumers' ability to declare or
pay cash dividends with respect to its capital stock.
(l)The Borrower owns 100% of the outstanding shares of common
stock of Consumers and Enterprises.
(m)Nomeco is a Subsidiary of Enterprises, and Enterprises owns
100% of the outstanding shares of common stock thereof, except for such
shares sold, transferred or otherwise disposed of after the Collateral
Release Date pursuant to any transaction permitted by Section 8(h)(iii) of
the Guaranty.
(n)The pro forma statements of sources and uses of funds
previously delivered by the Borrower to the Co-Agents are based upon
assumptions that the Borrower believes were reasonable at the time such
statements were delivered, and all other financial information previously
delivered by the Borrower to the Co-Agents are true and correct in all
material respects as at the dates and for the periods indicated therein.
(o)The executed and delivered Security Documents create valid,
perfected, first priority Liens in the Collateral described therein,
subject only to Liens permitted by Section 8.02(a), and all filings and
other actions necessary to perfect and protect such security interests
have been taken.
(p)The Borrower is not engaged in the business of extending credit
for the purpose of buying or carrying margin stock (within the meaning of
Regulation U issued by the Board of Governors of the Federal Reserve
System), and no proceeds of any Advance or any drawing under any Letter of
Credit will be used to buy or carry any margin stock or to extend credit
to others for the purpose of buying or carrying any margin stock.
(q)The Borrower is not an investment company (within the meaning
of the Investment Company Act of 1940, as amended).
(r)No proceeds of any Extension of Credit or any drawing under any
Letter of Credit will be used (i) to acquire any equity security of a
class that is registered pursuant to Section 12 of the Securities Exchange
Act of 1934 or (ii) in contravention of Act 144.
(s)The Borrower is not engaged in, and will not engage in, any of
the public utility activities that are the subject of Act 144.
(t)Following application of the proceeds of each Extension of
Credit, not more than 25 percent of the value of the assets of the
Borrower and its Subsidiaries on a consolidated basis will be margin stock
(within the meaning of Regulation U issued by the Board of Governors of
the Federal Reserve System).
ARTICLE VIII
COVENANTS OF THE BORROWER
SECTION 8.01. Affirmative Covenants. So long as any Note shall
remain unpaid, any Letter of Credit shall remain outstanding or any Lender
shall have any Commitment:
(a)Payment of Taxes, Etc. The Borrower shall pay and discharge,
and each of its Subsidiaries shall pay and discharge, before the same
shall become delinquent, all taxes, assessments and governmental charges,
royalties or levies imposed upon it or upon its property except, in the
case of taxes, to the extent the Borrower or any Subsidiary, as the case
may be, is contesting the same in good faith and by appropriate
proceedings and has set aside adequate reserves for the payment thereof in
accordance with generally accepted accounting principles.
(b)Maintenance of Insurance. The Borrower shall maintain, and
each of its Restricted Subsidiaries and Consumers shall maintain,
insurance covering the Borrower, each of its Restricted Subsidiaries,
Consumers and their respective properties in effect at all times in such
amounts and covering such risks as is usually carried by companies engaged
in similar businesses and owning similar properties in the same general
geographical area in which the Borrower, its Restricted Subsidiaries and
Consumers operates, either with reputable insurance companies or, in whole
or in part, by establishing reserves of one or more insurance funds,
either alone or with other corporations or associations.
(c)Preservation of Existence, Etc. The Borrower shall preserve
and maintain, and each of its Restricted Subsidiaries and Consumers shall
preserve and maintain, its corporate existence, material rights (statutory
and otherwise) and franchises, and take such other action as may be
necessary or advisable to preserve and maintain its right to conduct its
business in the states where it shall be conducting its business.
(d)Compliance with Laws, Etc. The Borrower shall comply, and each
of its Restricted Subsidiaries and Consumers shall comply, in all material
respects with the requirements of all applicable laws, rules, regulations
and orders of any governmental authority, including without limitation any
such laws, rules, regulations and orders relating to zoning, environmental
protection, use and disposal of Hazardous Substances, land use,
construction and building restrictions, and employee safety and health
matters relating to business operations.
(e)Inspection Rights. Subject to the requirements of laws or
regulations applicable to the Borrower or its Subsidiaries, as the case
may be, and in effect at the time, at any time and from time to time upon
reasonable notice, the Borrower shall permit (i) the Co-Agents and their
respective agents and representatives to examine and make copies of and
abstracts from the records and books of account of, and the properties of,
the Borrower or any of its Subsidiaries and (ii) the Co-Agents, each of
the Lenders, and their respective agents and representatives to discuss
the affairs, finances and accounts of the Borrower and its Subsidiaries
with the Borrower and its Subsidiaries and their respective officers,
directors and accountants, in each case, to the extent that any
out-of-pocket expenses are incurred in connection therewith at such time
as no Event of Default or Unmatured Default shall have occurred and be
continuing, at the expense of the Co-Agents, each of the Lenders, or their
respective agents and representatives, as the case may be.
(f)Keeping of Books. The Borrower shall keep, and each of its
Subsidiaries shall keep, proper records and books of account, in which
full and correct entries shall be made of all financial transactions of
the Borrower and its Subsidiaries and the assets and business of the
Borrower and its Subsidiaries, in accordance with generally accepted
accounting principles consistently applied.
(g)Maintenance of Properties, Etc. The Borrower shall maintain,
and each of its Restricted Subsidiaries shall maintain, in substantial
conformity with all laws and material contractual obligations, good and
marketable title to all of its properties which are used or useful in the
conduct of its business; provided, however, that the foregoing shall not
restrict the sale of any asset of the Borrower or any Restricted
Subsidiary to the extent not prohibited by Section 8.02(i). In addition,
the Borrower shall preserve, maintain, develop, and operate, and each of
its Subsidiaries shall preserve, maintain, develop and operate, in
substantial conformity with all laws and material contractual obligations,
all of its material properties which are used or useful in the conduct of
its business in good working order and condition, ordinary wear and tear
excepted.
(h)Use of Proceeds. The Borrower shall apply all proceeds of the
initial Extension of Credit to the repayment in full and termination of
all outstanding obligations under the 1991 Credit Agreement, whether for
principal, interest, fees, or otherwise (and, in furtherance thereof, the
Borrower hereby expressly and irrevocably authorizes the Operational Agent
to so apply such proceeds to such repayment), and use all subsequent
Extensions of Credit for general corporate purposes (subject to the terms
and conditions of this Agreement).
(i)Consolidated Leverage Ratio. The Borrower shall maintain a
ratio of Consolidated Debt to Consolidated Capital of 0.75 to 1 or less,
and cause Enterprises to maintain a ratio of Consolidated Debt to
Consolidated Capital of 0.55 to 1 or less.
(j)Performance of Indenture Covenants. The Borrower and its
Subsidiaries shall comply with all covenants and similar obligations set
forth in the Indenture and all other documents evidencing the Senior Note
Debt and any refinancings or restructurings thereof (it being understood
and agreed that all such covenants and obligations are hereby incorporated
herein by reference in favor of the Lenders and the Agents and that no
amendment, modification or waiver of any such covenant or obligation which
may be agreed to by the Trustee, any Noteholder or any other Person shall
be deemed to constitute an amendment, modification or waiver of such
covenant or obligation as so incorporated, except as otherwise agreed by
the Required Lenders).
(k)Further Assurances. The Borrower shall promptly execute and
deliver all further instruments and documents, and take all further
action, that may be necessary or that any Lender through the Documentation
Agent may reasonably request in order to give effect fully to the
interests and properties purported to be covered by the Security
Documents. In addition, the Borrower will use all reasonable efforts to
duly obtain or make Governmental Approvals required from time to time on
or prior to such date as the same may become legally required.
SECTION 8.02. Negative Covenants. So long as any Note shall
remain unpaid, any Letter of Credit shall remain outstanding or any Lender
shall have any Commitment, the Borrower shall not, without the written
consent of the Majority Lenders:
(a)Liens, Etc. Create, incur, assume or suffer to exist, or
permit any of its Restricted Subsidiaries to create, incur, assume or
suffer to exist, any lien, security interest, or other charge or
encumbrance (including the lien or retained security title of a
conditional vendor) of any kind, or any other type of arrangement intended
or having the effect of conferring upon a creditor a preferential interest
upon or with respect to any of its properties of any character (including,
without limitation, capital stock of any of its directly-owned
Subsidiaries and accounts) (any of the foregoing being referred to herein
as a "Lien"), whether now owned or hereafter acquired, or sign or file, or
permit any of its Restricted Subsidiaries to sign or file, under the
Uniform Commercial Code of any jurisdiction a financing statement which
names the Borrower or any Restricted Subsidiary as debtor, sign, or permit
any of its Restricted Subsidiaries to sign, any security agreement
authorizing any secured party thereunder to file such financing statement,
or assign, or permit any of its Restricted Subsidiaries to assign,
accounts, excluding, however, from the operation of the foregoing
restrictions the Liens created under the Loan Documents and the following:
(i)Liens for taxes, assessments or governmental charges or
levies to the extent not past due;
(ii) pledges or deposits to secure (A) obligations under
workmen's compensation laws or similar legislation, (B) public or
statutory obligations of the Borrower or any of its Restricted
Subsidiaries, or (C) Support Obligations of the Borrower permitted
by Section 8.02(b)(vi), provided that the aggregate amount of
pledges or deposits securing such Support Obligations shall not
exceed $20 million at any one time outstanding;
(iii) Liens imposed by law, such as materialmen's, mechanics',
carriers', workmen's and repairmen's liens and other similar Liens
arising in the ordinary course of business securing obligations
which are not overdue or which have been fully bonded and are being
contested in good faith; and
(iv) purchase money Liens or purchase money security interests
upon or in property acquired or held by the Borrower or any of its
Restricted Subsidiaries in the ordinary course of business to
secure the purchase price of such property or to secure
indebtedness incurred solely for the purpose of financing the
acquisition of any such property to be subject to such Liens or
security interests, or Liens or security interests existing on any
such property at the time of acquisition, or extensions, renewals
or replacements of any of the foregoing for the same or a lesser
amount, provided that no such Lien or security interest shall
extend to or cover any property other than the property being
acquired and no such extension, renewal or replacement shall extend
to or cover property not theretofore subject to the Lien or
security interest being extended, renewed or replaced, and
provided, further, that the aggregate principal amount of the Debt
at any one time outstanding secured by Liens permitted by this
clause (iv) shall not exceed $10,000,000.
(b)Debt. Create, incur, assume or suffer to exist, or permit any
of its Restricted Subsidiaries to create, incur, assume or suffer to
exist, any Debt other than:
(i)Debt hereunder and under the other Loan Documents;
(ii) Guaranty Obligations (A) arising by reason of the
endorsement of negotiable instruments for deposit or collection or
similar transactions in the ordinary course of the Borrower's or
such Restricted Subsidiary's business, and (B) in the form of
indemnities in respect of unfiled mechanics' liens and Liens
permitted under Section 8.02(a)(iii);
(iii) the Senior Note Debt and any refinancings thereof;
provided, however, that (A) any Net Refinancing Proceeds shall
immediately upon the receipt thereof by the Borrower be applied by
the Borrower pursuant to Section 2.03(a) and 5.03(a)(ii) to reduce
permanently the Commitments; (B) with respect to any debentures,
notes, bonds or other debt securities that are to be issued in
connection with any refinancing of the Senior Notes and that are to
be secured by the Collateral (as defined in the Collateral Agency
and Intercreditor Agreement), the Lenders shall, in accordance with
Section 11.01, have consented to the issuance of such debentures,
notes, bonds or other debt securities prior to the date of issuance
thereof; (C) any Trustee with respect to any of the debentures,
notes, bonds or other debt securities referred to in clause (B),
above, shall have agreed, in a writing in form and substance
satisfactory to the Documentation Agent, to be bound by the terms
and conditions of the Collateral Agency and Intercreditor
Agreement; and (D) in connection with any such refinancing, the
maturity thereof shall be no sooner than 91 days after the
then-scheduled Termination Date;
(iv) Debt set forth in Schedule II hereto;
(v)the Unsecured Note Debt (in addition to any Unsecured Note
Debt incurred by the Borrower pursuant to clause (iii), above, or
clause (vi), below) in an aggregate amount not to exceed $10
million at any one time outstanding; and
(vi) other Debt (up to $20 million of which may be secured by
pledges and deposits as provided in Section 8.02(a)(ii)) in an
aggregate amount not to exceed the sum of $130 million and the then
aggregate amount of the Available Commitments of the Lenders
(determined immediately prior to the incurrence of any such Debt)
at any one time outstanding.
(c)Lease Obligations. Create, incur, assume or suffer to exist,
or permit any of its Restricted Subsidiaries to create, incur, assume or
suffer to exist, any obligations as lessee for the rental or hire of real
or personal property of any kind under leases or agreements to lease
(other than leases which constitute Debt) having an original term of one
year or more which would cause the aggregate direct or contingent
liabilities of the Borrower and its Restricted Subsidiaries in respect of
all such obligations payable in any period of 12 consecutive calendar
months to exceed $10,000,000.
(d)Investments in Other Persons. Upon the occurrence and during
the continuance of an Unmatured Default or an Event of Default, make, or
permit any of its Restricted Subsidiaries to make, any loan or advance to
any Person or purchase or otherwise acquire any capital stock, obligations
or other securities of, make any capital contribution to, or otherwise
invest in, any Person, other than Permitted Investments.
(e)Restricted Payments. Declare or pay, or permit any of its
Restricted Subsidiaries to declare or pay, directly or indirectly, any
dividend, payment or other distribution of assets, properties, cash,
rights, obligations or securities on account of any share of any class of
capital stock of the Borrower or any of its Restricted Subsidiaries (other
than (1) stock splits and dividends payable solely in nonconvertible
equity securities of the Borrower and (2) distributions made to the
Borrower or a Restricted Subsidiary), or purchase, redeem, retire, or
otherwise acquire for value, or permit any of its Restricted Subsidiaries
to purchase, redeem, retire, or otherwise acquire for value, any shares of
any class of capital stock of the Borrower or any of its Restricted
Subsidiaries or any warrants, rights, or options to acquire any such
shares, now or hereafter outstanding, or make, or permit any of its
Restricted Subsidiaries to make, any distribution of assets to any of its
shareholders (other than distributions to the Borrower or a Restricted
Subsidiary) (any such dividend, payment, distribution, purchase,
redemption, retirement or acquisition being hereinafter referred to as a
"Restricted Payment"), unless (i) no Unmatured Default or Event of Default
has occurred and is continuing or would occur as a result of such
Restricted Payment, and (ii) after giving effect thereto, the aggregate
amount of all such Restricted Payments made since September 30, 1992 shall
not have exceeded the sum of (A) $40,000,000, (B) 100% of Consolidated Net
Income (as defined in the Indenture) accrued during the period (treated as
one accounting period) from September 30, 1992 to the end of the most
recent fiscal quarter of the Borrower ending at least 45 days prior to the
date of such Restricted Payment (or, in case such amount shall be a
deficit, minus 100% of such deficit), and (C) the aggregate Net Proceeds
(as defined in the Indenture) received by the Borrower from any issuance
or sale of, or contribution with respect to, its capital stock subsequent
to the date of the Indenture; provided, however, that the foregoing shall
not prohibit (1) any purchase or redemption of capital stock of the
Borrower made by exchange for, or out of the proceeds of the substantially
concurrent sale of, capital stock of the Borrower (other than Redeemable
Stock or Exchangeable Stock (as such terms are defined in the Indenture)),
provided that such purchase or redemption shall be excluded from the
calculation of the amount of Restricted Payments permitted by this
subsection (e); (2) dividends or other distributions paid in respect of
any class of the Borrower's capital stock issued in respect of the
acquisition of any business or assets by the Borrower or a Restricted
Subsidiary where the dividends or other distributions with respect to such
capital stock are payable solely from the net earnings of such business or
assets; (3) dividends paid within 60 days after the date of declaration
thereof if at such date of declaration such dividend would have complied
with this subsection (e), provided that at the time of payment of such
dividend, no Unmatured Default or Event of Default shall have occurred and
be continuing (or result therefrom), and provided further that such
dividends shall be included (without duplication) in the calculation of
the amount of Restricted Payments permitted by this subsection (e); or (4)
payments made by the Borrower or any Restricted Subsidiary pursuant to the
Tax Sharing Agreement. For purposes of this subsection (e), the amount of
any Restricted Payment not in the form of cash shall be the fair market
value of such Restricted Payment as determined in good faith by the Board
of Directors of the Borrower, provided that if the value of the non-cash
portion of such Restricted Payment as determined by the Borrower's Board
of Directors is in excess of $25 million, such value shall be based on an
opinion from a nationally-recognized firm acceptable to the Co-Agents
experienced in the appraisal of similar types of property or transactions.
(f)Compliance with ERISA. (i) Permit to exist any "accumulated
funding deficiency" (as defined in Section 412(a) of the Internal Revenue
Code of 1986), (ii) terminate, or permit any ERISA Affiliate to terminate,
any Plan so as to result in any material (in the opinion of the Majority
Lenders) liability of the Borrower, any Restricted Subsidiary or Consumers
to the PBGC, or (iii) permit to exist any occurrence of any Reportable
Event (as defined in Title IV of ERISA), or any other event or condition,
which presents a material (in the opinion of the Majority Lenders) risk of
such a termination by the PBGC of any Plan and such a material liability
to the Borrower, any Restricted Subsidiary or Consumers.
(g)Transactions with Affiliates. Enter into, or permit any of its
Subsidiaries to enter into, any transaction with any of its Affiliates
unless such transaction is on terms no less favorable to the Borrower or
such Subsidiary than if the transaction had been negotiated in good faith
on an arm's-length basis with a non-Affiliate.
(h)Mergers, Etc. Merge with or into or consolidate with or into,
or permit any of its Restricted Subsidiaries, Consumers or Nomeco to merge
with or into or consolidate with or into, any other Person, except that
(1) any Restricted Subsidiary (other than Enterprises) may merge into any
other Restricted Subsidiary; (2) Nomeco may merge with or into Enterprises
or the Borrower; (3) after the Collateral Release Date, Nomeco may merge
with or into any other Person, provided that, in connection with such
merger, Enterprises shall have received fair consideration (as determined
by the Board of Directors of Enterprises or the Borrower); (4) any
Restricted Subsidiary may merge with or into the Borrower, and the
Borrower may merge with any other Person, provided that, immediately after
giving effect to any such merger, (A) no event shall occur and be
continuing which constitutes an Unmatured Default or an Event of Default,
(B) the Borrower is the surviving corporation, and (C) the Borrower shall
not be liable with respect to any Debt or allow its property to be subject
to any Lien which it could not become liable with respect to or allow its
property to become subject to under this Agreement or any other Loan
Document on the date of such transaction; and (5) subject to the terms of
the Borrower Pledge Agreement, Consumers may merge with any other Person,
provided that, immediately after giving effect thereto, (A) no event shall
occur and be continuing which constitutes an Unmatured Default or an Event
of Default, (B) Consumers is the surviving corporation, and (C) Consumers'
Net Worth shall be equal to or greater than its Net Worth immediately
prior to such merger.
(i)Sales, Etc., of Assets. Sell, lease, transfer, assign, or
otherwise dispose of all or any substantial part of its assets, or permit
any of its Restricted Subsidiaries to sell, lease, transfer, or otherwise
dispose of all or any substantial part of its assets, except (i) to give
effect to a transaction permitted by subsection (h), above, and (ii)
Enterprises may sell, lease, transfer, assign, or otherwise dispose of all
or any substantial part of its assets (A) to give effect to a sale,
transfer or other disposition of the common stock of Nomeco after the
Collateral Release Date pursuant to any transaction permitted by Section
8(h)(iii) of the Guaranty and (B) to any other Restricted Subsidiary (in
each case subject to compliance with Section 7(h) of the Guaranty
immediately after giving effect to any such transaction).
(j)Maintenance of Ownership of Subsidiaries. Except as permitted
under the Pledge Agreements, sell, transfer, assign or otherwise dispose
of any shares of capital stock of any of its Restricted Subsidiaries or
Consumers (other than preferred or preference stock of Consumers) or any
warrants, rights or options to acquire such capital stock, or permit any
Restricted Subsidiary or Consumers to issue, sell, transfer, assign or
otherwise dispose of any shares of its capital stock (other than preferred
or preference stock of Consumers) or the capital stock of any other
Restricted Subsidiary or any warrants, rights or options to acquire such
capital stock, except to give effect to a transaction permitted by
subsection (h), above, and Section 8(h)(iii) of the Guaranty.
(k)Amendment of Tax Sharing Agreement. Directly or indirectly,
amend, modify, supplement, waive compliance with, seek a waiver under, or
assent to noncompliance with, any term, provision or condition of the Tax
Sharing Agreement if the effect of such amendment, modification,
supplement, waiver or assent is to (i) reduce materially any amounts
otherwise payable to, or increase materially any amounts otherwise owing
or payable by, the Borrower thereunder, or (ii) change materially the
timing of any payments made by or to the Borrower thereunder.
SECTION 8.03. Reporting Obligations. So long as any Note shall
remain unpaid, any Letter of Credit shall remain outstanding or any Lender
shall have any Commitment, the Borrower will, unless the Majority Lenders
shall otherwise consent in writing, furnish to each Lender, the following:
(a)as soon as possible and in any event within five days after
the Borrower knows or should have reason to know of the occurrence
of each Unmatured Default or Event of Default continuing on the
date of such statement, a statement of the chief financial officer
or chief accounting officer of the Borrower setting forth details
of such Unmatured Default or Event of Default and the action that
the Borrower proposes to take with respect thereto;
(b)as soon as available and in any event within 60 days after
the end of each of the first three quarters of each fiscal year of
the Borrower, a consolidated balance sheet of the Borrower and its
Subsidiaries as at the end of such quarter and consolidated
statements of income and retained earnings and of cash flows of the
Borrower and its Subsidiaries for the period commencing at the end
of the previous fiscal year and ending with the end of such quarter
(which requirement shall be deemed satisfied by the delivery of the
Borrower's quarterly report on Form 10-Q for such quarter), all in
reasonable detail and duly certified (subject to year-end audit
adjustments) by the chief financial officer or chief accounting
officer of the Borrower as having been prepared in accordance with
generally accepted accounting principles consistent with those
applied in the preparation of the financial statements referred to
in Section 7.01(e), together with (A) a schedule in form
satisfactory to the Majority Lenders of the computations used by
the Borrower in determining compliance with the covenant contained
in Section 8.01(i), and (B) a certificate of said officer stating
that no Unmatured Default or Event of Default has occurred and is
continuing or, if an Unmatured Default or Event of Default has
occurred and is continuing, a statement as to the nature thereof
and the action that the Borrower proposes to take with respect
thereto;
(c)as soon as available and in any event within 120 days after
the end of each fiscal year of the Borrower and its Subsidiaries, a
copy of the Annual Report on Form 10-K (or any successor form) for
the Borrower and its Subsidiaries for such year, including therein
a consolidated balance sheet of the Borrower and its Subsidiaries
as of the end of such fiscal year and consolidated statements of
income and retained earnings and of cash flows of the Borrower and
its Subsidiaries for such fiscal year, accompanied by a report
thereon of Arthur Andersen & Co. or another nationally-recognized
independent public accounting firm, together with a schedule in
form satisfactory to the Majority Lenders of the computations used
by such accounting firm in determining, as of the end such fiscal
year, compliance with the covenant contained in Section 8.01(i);
(d)as soon as available and in any event within 60 days after
the end of each of the first three quarters of each fiscal year of
the Borrower, a balance sheet of the Borrower as at the end of such
quarter and statements of income and retained earnings and of cash
flows of the Borrower for the period commencing at the end of the
previous fiscal year and ending with the end of such quarter, all
in reasonable detail and duly certified (subject to year-end audit
adjustments) by the chief financial officer or chief accounting
officer of the Borrower as having been prepared in accordance with
generally accepted accounting principles consistent with those
applied in the preparation of the financial statements referred to
in Section 7.01(e);
(e)as soon as available and in any event within 120 days after
the end of each fiscal year of the Borrower, a balance sheet of the
Borrower as at the end of such fiscal year and statements of income
and retained earnings and of cash flows of the Borrower for such
fiscal year, all in reasonable detail and duly certified (subject
to year-end audit adjustments) by the chief financial officer or
chief accounting officer of the Borrower as having been prepared in
accordance with generally accepted accounting principles consistent
with those applied in the preparation of the financial statements
referred to in Section 7.01(e);
(f)as soon as possible and in any event (A) within 30 days
after the Borrower knows or has reason to know that any Plan
Termination Event described in clause (i) of the definition of Plan
Termination Event with respect to any Plan of the Borrower or any
ERISA Affiliate of the Borrower has occurred and could reasonably
be expected to result in a material liability to the Borrower and
(B) within 10 days after the Borrower knows or has reason to know
that any other Plan Termination Event with respect to any Plan of
the Borrower or any ERISA Affiliate of the Borrower has occurred
and could reasonably be expected to result in a material liability
to the Borrower, a statement of the chief financial officer or
chief accounting officer of the Borrower describing such Plan
Termination Event and the action, if any, which the Borrower
proposes to take with respect thereto;
(g)promptly after receipt thereof by the Borrower or any of
its ERISA Affiliates from the PBGC copies of each notice received
by the Borrower or any such ERISA Affiliate of the PBGC's intention
to terminate any Plan or to have a trustee appointed to administer
any Plan;
(h)promptly and in any event within 30 days after the filing
thereof with the Internal Revenue Service, copies of each Schedule
B (Actuarial Information) to the annual report (Form 5500 Series)
with respect to each Plan (if any) to which the Borrower is a
contributing employer;
(i)promptly after receipt thereof by the Borrower or any of
its ERISA Affiliates from a Multiemployer Plan sponsor, a copy of
each notice received by the Borrower or any of its ERISA Affiliates
concerning the imposition or amount of withdrawal liability in an
aggregate principal amount of at least $250,000 pursuant to Section
4202 of ERISA in respect of which the Borrower is reasonably
expected to be liable;
(j)promptly after the Borrower becomes aware of the occurrence
thereof, notice of all actions, suits, proceedings or other events
of the type described in Section 7.01(f);
(k)promptly after the sending or filing thereof, copies of all
proxy statements, financial statements and reports which the
Borrower sends to its public security holders (if any), and copies
of all regular, periodic and special reports, and all registration
statements and periodic or special reports, if any, which the
Borrower files with the Securities and Exchange Commission or any
governmental authority which may be substituted therefor, or with
any national securities exchange;
(l)as soon as possible and in any event within five days after
the occurrence of any material default under any material agreement
to which the Borrower or any of its Subsidiaries is a party, which
default would materially adversely affect the financial condition,
business, results of operations or property of the Borrower and its
Subsidiaries, considered as a whole, any of which is continuing on
the date of such certificate, a certificate of the chief financial
officer of the Borrower setting forth the details of such material
default and the action which the Borrower or any such Subsidiary
proposes to take with respect thereto;
(m)promptly upon their becoming available, copies of each
report or statement required to be provided to the Trustee or any
Noteholder pursuant to the Indenture, to the extent such reports or
statements are not otherwise required to be delivered pursuant to
this Section 8.03; and
(n)promptly after requested, such other information respecting
the business, properties, condition or operations, financial or
otherwise, of the Borrower and its Subsidiaries as any Agent or the
Majority Lenders may from time to time reasonably request in
writing.
ARTICLE IX
DEFAULTS
SECTION 9.01. Events of Default. If any of the following events
(each an "Event of Default") shall occur and be continuing after the
applicable grace period and notice requirement (if any), the Co-Agents and
the Lenders shall be entitled to exercise the remedies set forth in
Section 9.02:
(a)The Borrower shall fail to pay any principal of, or interest
on, any Note when due; or
(b)Any representation or warranty made by or on behalf of any Loan
Party in any Loan Document or certificate or other writing delivered
pursuant thereto shall prove to have been incorrect in any material
respect when made or deemed made; or
(c)The Borrower or any of its Subsidiaries shall fail to perform
or observe any term or covenant on its part to be performed or observed
contained in Section 8.01(c), (h), (i) or (j) or in Section 8.02 hereof,
or the Guarantor shall fail to perform or observe any term or covenant on
its part to be performed or observed contained in Sections 7(h), 7(j) or 8
of the Guaranty (and the Borrower, each Lender and each Agent hereby
agrees that an Event of Default under this subsection (c) shall be given
effect as if the defaulting Subsidiary were a party to this Agreement); or
(d)The Borrower or any of its Subsidiaries shall fail to perform
or observe any other term or covenant on its part to be performed or
observed contained in any Loan Document and any such failure shall remain
unremedied, after written notice thereof shall have been given to the
Borrower by the Documentation Agent, for a period of 10 days (and the
Borrower, each Lender and each Agent hereby agrees that an Event of
Default under this subsection (d) shall be given effect as if the
defaulting Subsidiary were a party to this Agreement); or
(e)Any Loan Party, any Restricted Subsidiary or Consumers shall
fail to pay any of its Debt (including any interest or premium thereon but
excluding Debt evidenced by the Notes) (i) aggregating, in the case of
each Loan Party and each Restricted Subsidiary, $3,000,000 or more or, in
the case of Consumers, $10,000,000 or more, or (ii) arising under the
Indenture or any Senior Note, when due (whether by scheduled maturity,
required prepayment, acceleration, demand or otherwise) and such failure
shall continue after the applicable grace period, if any, specified in any
agreement or instrument relating to such Debt; or any other default under
any agreement or instrument relating to any such Debt, or any other event,
shall occur and shall continue after the applicable grace period, if any,
specified in such agreement or instrument, if the effect of such default
or event is to accelerate, or to permit the acceleration of, the maturity
of such Debt; or any such Debt shall be declared to be due and payable, or
required to be prepaid (other than by a regularly scheduled required
prepayment) prior to the stated maturity thereof; unless in each such case
the obligee under or holder of such Debt shall have waived in writing such
circumstance so that such circumstance is no longer continuing; or
(f)(i) Any Loan Party, any Restricted Subsidiary or Consumers
shall generally not pay its debts as such debts become due, or shall admit
in writing its inability to pay its debts generally, or shall make an
assignment for the benefit of creditors; or (ii) any proceeding shall be
instituted by or against any Loan Party, any Restricted Subsidiary or
Consumers seeking to adjudicate it a bankrupt or insolvent, or seeking
liquidation, winding up, reorganization, arrangement, adjustment,
protection, relief, or composition of its debts under any law relating to
bankruptcy, insolvency, or reorganization or relief of debtors, or seeking
the entry of an order for relief or the appointment of a receiver,
trustee, or other similar official for it or for any substantial part of
its property and, in the case of a proceeding instituted against any Loan
Party, either such proceeding shall remain undismissed or unstayed for a
period of 60 days or any of the actions sought in such proceeding
(including without limitation the entry of an order for relief against
such Loan Party, a Restricted Subsidiary or Consumers or the appointment
of a receiver, trustee, custodian or other similar official for such Loan
Party, such Restricted Subsidiary or Consumers or any of its property)
shall occur; or (iii) any Loan Party, any Restricted Subsidiary or
Consumers shall take any corporate or other action to authorize any of the
actions set forth above in this subsection (f); or
(g)Any judgment or order for the payment of money in excess of
$3,000,000 shall be rendered against any Loan Party or its properties and
either (i) enforcement proceedings shall have been commenced by any
creditor upon such judgment or order or (ii) there shall be any period of
10 consecutive days during which a stay of enforcement of such judgment or
order, by reason of a pending appeal or otherwise, shall not be in effect;
or
(h)Any material provision of any Loan Document, after execution
hereof or delivery thereof under Article VI, shall for any reason other
than the express terms hereof or thereof cease to be valid and binding on
any party thereto; or any Loan Party shall so assert in writing; or
(i)The Security Documents after delivery under Article VI hereof
shall for any reason, except to the extent permitted by the terms thereof
or due to any failure by any Agent to take any action on its part to be
performed under applicable law in order to maintain such perfection, cease
to create valid and perfected first priority Liens (to the extent
purported to be granted by such documents) in any of the Collateral; or
(j)At any time any LC Bank shall have been served with or
otherwise subjected to a court order, injunction, or other process or
decree issued or granted at the instance of the Borrower restraining or
seeking to restrain such LC Bank from paying any amount under any Letter
of Credit issued by it and either (i) there has been a drawing under such
Letter of Credit which such LC Bank would otherwise be obligated to pay or
(ii) the stated expiration date or any reduction of the stated amount of
such Letter of Credit has occurred but the right of the beneficiary to
draw thereunder has been extended in connection with the pendency of the
related court action or proceeding.
SECTION 9.02. Remedies. If any Event of Default has occurred and
is continuing, then the Co-Agents shall at the request, or may with the
consent, of the Required Lenders, upon notice to the Borrower (i) declare
the Commitments and the obligation of each Lender to make Advances (other
than Advances under Section 4.04 hereof) and of any LC Bank to issue a
Letter of Credit to be terminated, whereupon the same shall forthwith
terminate, (ii) declare the Notes, all interest thereon and all other
amounts payable under this Agreement and the other Loan Documents to be
forthwith due and payable, whereupon the Notes, all such interest and all
such amounts shall become and be forthwith due and payable, without
presentment, demand, protest or further notice of any kind, all of which
are hereby expressly waived by the Borrower, (iii) provide from the
proceeds of any Collateral for cash collateralization of LC Outstandings,
and (iv) exercise in respect of any and all collateral, in addition to the
other rights and remedies provided for herein and in the Security
Documents or otherwise available to the Co-Agents or the Lenders, all the
rights and remedies of a secured party on default under the Uniform
Commercial Code in effect in the State of New York and in effect in any
other jurisdiction in which collateral is located at that time; provided,
however, that in the event of an actual or deemed entry of an order for
relief with respect to the Borrower under the Federal Bankruptcy Code, (A)
the Commitments and the obligation of each Lender to make Advances and of
any LC Bank to issue any Letter of Credit shall automatically be
terminated and (B) the Notes, all such interest and all such amounts shall
automatically become and be due and payable, without presentment, demand,
protest or any notice of any kind, all of which are hereby expressly
waived by the Borrower. Notwithstanding anything to the contrary
contained herein, no notice given or declaration made by the Co-Agents
pursuant to this Section 9.02 shall affect (i) the obligation of any LC
Bank to make any payment under any Letter of Credit issued by such LC Bank
in accordance with the terms of such Letter of Credit or (ii) the
participatory interest of each Lender in each such payment.
ARTICLE X
THE AGENTS
SECTION 10.01. Authorization and Action. Each Lender and LC Bank
hereby appoints and authorizes each of the Agents to take such action as
agent on its behalf and to exercise such powers under this Agreement and
the Collateral Agency and Intercreditor Agreement as are delegated to such
Agents by the terms hereof and thereof, together with such powers as are
reasonably incidental thereto. The Operational Agent is hereby expressly
authorized on behalf of each Lender and each LC Bank, without hereby
limiting any implied authority, to receive on behalf of each of the
Lenders any payment of principal of, or interest on, the Notes and all
other amounts accrued thereunder or hereunder paid to the Operational
Agent, and promptly to distribute in accordance with Section 5.01(a) to
each Lender its proper share of all payments so received. Each Agent is
hereby expressly authorized on behalf of each Lender and each LC Bank,
without hereby limiting any implied authority, to distribute to each
Lender copies of all notices, agreements and other materials as provided
for in this Agreement and any other Loan Document received by such Agent.
As to any matters not expressly provided for by this Agreement (including,
without limitation, enforcement or collection of the Notes) or the
Collateral Agency and Intercreditor Agreement, the Agents shall not be
required to exercise any discretion or take any action, but shall be
required to act or to refrain from acting (and shall be fully protected in
so acting or refraining from acting) upon the instructions of the Majority
Lenders, and such instructions shall be binding upon all Lenders, all LC
Banks and all holders of Notes; provided, however, that the Agents shall
not be required to take any action that exposes any Agent to personal
liability or that is contrary to this Agreement or applicable law. Each
Agent agrees to give to each Lender prompt notice of each notice given to
it by the Borrower pursuant to the terms of this Agreement.
SECTION 10.02. Agents' Reliance, Etc. Neither any Agent nor any
of its directors, officers, agents or employees shall be liable for any
action taken or omitted to be taken by it or them under or in connection
with any Loan Document, except for its or their own gross negligence or
wilful misconduct. Without limitation of the generality of the foregoing:
(i) each Agent may treat the payee of any Note as the holder thereof until
the Documentation Agent receives and accepts a Lender Assignment entered
into by the Lender which is the payee of such Note, as assignor, and an
Eligible Assignee, as assignee, as provided in Section 11.07; (ii) each
Agent may consult with legal counsel (including counsel for the Borrower),
independent public accountants and other experts selected by it and shall
not be liable for any action taken or omitted to be taken in good faith by
it in accordance with the advice of such counsel, accountants or experts;
(iii) the Agents make no warranty or representation to any Lender and
shall not be responsible to any Lender for any statements, warranties or
representations made in or in connection with any Loan Document; (iv) no
Agent shall have any duty to ascertain or to inquire as to the performance
or observance of any of the terms, covenants or conditions of any Loan
Document on the part of the Borrower or to inspect any property (including
the books and records) of the Borrower; (v) no Agent shall be responsible
to any Lender for the due execution, legality, validity, enforceability,
genuineness, sufficiency or value of any Loan Document; and (vi) no Agent
shall incur liability under or in respect of any Loan Document by acting
upon any notice, consent, certificate or other instrument or writing
(which may be by telegram, cable, telex, telecopy or other
teletransmission) believed by it to be genuine and signed or sent by the
proper party or parties.
SECTION 10.03. Citibank, Union Bank and Affiliates. With respect
to its Commitment and the Note issued to it, each of Citibank and Union
Bank shall have the same rights and powers under this Agreement as any
other Lender and may exercise the same as though it were not an Agent; and
the term "Lender" or "Lenders" shall, unless otherwise expressly
indicated, include Citibank and Union Bank each in its individual
capacity. Citibank and Union Bank and their respective Affiliates may
accept deposits from, lend money to, act as trustee under indentures of,
and generally engage in any kind of business with, the Borrower, any of
its Subsidiaries, its Affiliates and any Person who may do business with
or own securities of the Borrower or any such Subsidiary or Affiliate, all
as if Citibank and Union Bank were not an Agent and without any duty to
account therefor to the Lenders.
SECTION 10.0E. Lender Credit Decision. Each Lender acknowledges
that it has, independently and without reliance upon the Agents or any
other Lender and based on the financial information referred to in Section
7.01(e) and such other documents and information as it has deemed
appropriate, made its own credit analysis and decision to enter into this
Agreement. Each Lender also acknowledges that it will, independently and
without reliance upon the Agents or any other Lender and based on such
documents and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking action
under this Agreement.
SECTION 10.05. Indemnification. The Lenders agree to indemnify
the Agents (to the extent not reimbursed by the Borrower), ratably
according to the respective principal amounts of the Notes then held by
each of them (or if no Notes are at the time outstanding or if any Notes
are held by Persons which are not Lenders, ratably according to the
respective Percentages of the Lenders), from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements of any kind or nature whatsoever
which may be imposed on, incurred by, or asserted against the Agents in
any way relating to or arising out of this Agreement or any action taken
or omitted by the Agents under this Agreement, provided that no Lender
shall be liable for any portion of such liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or
disbursements resulting from the Agents' gross negligence or willful
misconduct. Without limitation of the foregoing, each Lender agrees to
reimburse the Agents promptly upon demand for its ratable share of any
out-of-pocket expenses (including counsel fees) incurred by the Agents in
connection with the preparation, execution, delivery, administration,
modification, amendment or enforcement (whether through negotiations,
legal proceedings or otherwise) of, or legal advice in respect of rights
or responsibilities under, this Agreement to the extent that the Agents
are entitled to reimbursement for such expenses pursuant to Section 11.04
but are not reimbursed for such expenses by the Borrower.
SECTION 10.06. Successor Agents. Each Agent (other than the
Collateral Agent, whose resignation and removal is governed by Section
6(k) of the Collateral Agency and Intercreditor Agreement) may resign at
any time by giving written notice thereof to the Lenders and the Borrower
and may be removed at any time with or without cause by the Majority
Lenders, with any such resignation or removal to become effective only
upon the appointment of a successor Agent in such capacity, pursuant to
this Section 10.06. Upon any such resignation or removal, the Majority
Lenders shall have the right to appoint a successor Agent in such capacity
which shall be a Lender or another commercial bank or trust company
reasonably acceptable to the Borrower organized under the laws of the
United States, or of any State thereof. If no successor Agent shall have
been so appointed by the Majority Lenders, and shall have accepted such
appointment, within 30 days after the retiring Agent's giving of notice of
resignation or the Majority Lenders' removal of the retiring Agent, then
the retiring Agent may, on behalf of the Lenders, appoint a successor
Agent in such capacity, which shall be a Lender or shall be another
commercial bank or trust company organized under the laws of the United
States or of any State thereof reasonably acceptable to the Borrower.
Upon the acceptance of any appointment as an Agent hereunder by a
successor Agent and the execution and delivery by the Borrower and the
successor Agent of an agreement relating to the fees to be paid to the
successor Agent under Section 2.02(c) hereof in connection with its acting
as an Agent hereunder, such successor Agent shall thereupon succeed to and
become vested with all the rights, powers, privileges and duties of the
retiring Agent and the retiring Agent shall be discharged from its duties
and obligations under this Agreement. After any retiring Agent's
resignation or removal hereunder as an Agent, the provisions of this
Article X shall inure to its benefit as to any actions taken or omitted to
be taken by it while it was an Agent in such capacity under this
Agreement.
SECTION 10.07. Lenders, LC Banks and Agents Bound by Collateral
Agency and Intercreditor Agreement and Pledge Agreements. The Borrower,
the Lenders, each LC Bank and the Agents hereby agree and acknowledge that
(a) this Agreement constitutes a "Replacement Facility" under the
Collateral Agency and Intercreditor Agreement and the Pledge Agreements
and (b) the obligations of the Borrower now or hereafter existing under
this Agreement, the Notes and the other Loan Documents, whether for
principal, interest, fees, expenses or otherwise, constitute "Bank Debt"
under the Collateral Agency and Intercreditor Agreement and that such
obligations are subject to the provisions thereof. In furtherance of the
foregoing, (i) each Lender and LC Bank agrees to be bound by the terms and
conditions of the Collateral Agency and Intercreditor Agreement and of
each of the Pledge Agreements and that it shall constitute a "Lender" for
all purposes thereunder, (ii) each of the Operational Agent, the
Documentation Agent and the Co-Agents agrees to be bound by the terms and
conditions thereof and that it shall constitute a "Co-Agent" or "Agent",
as the case may be, for all purposes thereunder and (iii) each 1991 Lender
agrees that the Borrower Pledge Agreement and the Enterprises Pledge
Agreement (as such terms are defined in the 1991 Credit Agreement) were,
immediately prior to the effectiveness of this Agreement, amended and
restated in the forms of Exhibits 6.02F and 6.02G hereto, respectively.
Any capitalized terms contained in the Collateral Agency and Intercreditor
Agreement or in either Pledge Agreement and not otherwise defined therein,
or defined by reference to the 1991 Credit Agreement, shall have the
meaning specified in this Agreement.
ARTICLE XI
MISCELLANEOUS
SECTION 11.01. Amendments, Etc. Subject to Sections 2(h) and 10
of the Collateral Agency and Intercreditor Agreement, no amendment or
waiver of any provision of any Loan Document, nor consent to any departure
by the Borrower therefrom, shall in any event be effective unless the same
shall be in writing and signed by the Majority Lenders, and then such
waiver or consent shall be effective only in the specific instance and for
the specific purpose for which given; provided, however, that no
amendment, waiver or consent shall, unless in writing and signed by all
the Lenders, do any of the following: (i) waive, modify or eliminate any
of the conditions specified in Article VI, (ii) increase the Commitments
of the Lenders that may be maintained hereunder or subject the Lenders to
any additional obligations, (iii) reduce the principal of, or interest on,
the Notes, any Applicable Margin or any fees or other amounts payable
hereunder (other than fees payable to the Operational Agent pursuant to
Section 2.02(c)), (iv) postpone any date fixed for any payment of
principal of, or interest on, the Notes or any fees or other amounts
payable hereunder (other than fees payable to the Operational Agent
pursuant to Section 2.02(c)), (v) change the percentage of the Commitments
or of the aggregate unpaid principal amount of the Notes, or the number of
Lenders which shall be required for the Lenders or any of them to take any
action hereunder, (vi) amend any Loan Document in a manner intended to
prefer one or more Lenders over any other Lenders, (vii) amend Section
2.03(b) or this Section 11.01, or (viii) release any collateral or change
any provision of any Security Document providing for the release of
collateral; and provided, further, that no amendment, waiver or consent
shall, unless in writing and signed by each Agent in addition to the
Lenders required above to take such action, affect the rights or duties of
any Agent under this Agreement or any Note. Any request from the Borrower
for any amendment, waiver or consent under this Section 11.01 shall be
addressed to the Documentation Agent.
SECTION 11.02. Notices, Etc. All notices and other communications
provided for hereunder and under the other Loan Documents shall be in
writing (including telegraphic, facsimile, telex or cable communication)
and mailed, telegraphed, telecopied, telexed, cabled or delivered, (i) if
to the Borrower, at its address at Fairlane Plaza South, 330 Town Center
Drive, Suite 1100, Dearborn, Michigan 48126, Attention: Rodger A.
Kershner, Esq., with a copy to Doris F. Galvin, Director of Treasury and
Assistant Treasurer, 212 West Michigan Avenue, Jackson, Michigan 49201;
(ii) if to any Bank, at its Domestic Lending Office specified opposite its
name on Schedule I hereto; (iii) if to any LC Bank, at its address
specified in the LC Bank Agreement to which it is a party; (iv) if to any
Lender other than a Bank, at its Domestic Lending Office specified in the
Lender Assignment pursuant to which it became a Lender; (v) if to the
Operational Agent, at its address at 445 South Figueroa Street, 15th
Floor, Los Angeles, California 90071, Attention: Utilities Department
Head; and (vi) if to the Documentation Agent, at its address at 399 Park
Avenue, New York, New York 10043, Attention: Utilities Department Head;
or, as to each party, at such other address as shall be designated by such
party in a written notice to the other parties. All such notices and
communications shall, when mailed, telegraphed, telecopied, telexed or
cabled, be effective five days after when deposited in the mails, or when
delivered to the telegraph company, telecopied, confirmed by telex
answerback or delivered to the cable company, respectively, except that
notices and communications to any Agent pursuant to Article II, III, or X
shall not be effective until received by such Agent.
SECTION 11.03. No Waiver of Remedies. No failure on the part of
the Borrower, any Lender, any LC Bank or any Agent to exercise, and no
delay in exercising, any right hereunder or under any Note shall operate
as a waiver thereof; nor shall any single or partial exercise of any such
right preclude any other or further exercise thereof or the exercise of
any other right. The remedies herein provided are cumulative and not
exclusive of any remedies provided by law.
SECTION 11.04. Costs, Expenses and Indemnification. (a) The
Borrower agrees to pay on demand (i) all reasonable costs and expenses of
each Agent (including, without limitation, reasonable fees and expenses of
counsel to the Agents and of special Michigan counsel to the Lenders) in
connection with (A) the preparation, negotiation, execution and delivery
of the Loan Documents and (B) the care and custody of any and all
collateral, and any proposed modification, amendment, or consent relating
to any Loan Document, and (ii) all reasonable costs and expenses of each
Agent and, on and after the date upon which the Notes become or are
declared to be due and payable pursuant to Section 9.02 or an Event of
Default specified in Section 9.01(a) shall have occurred and be
continuing, each Lender (including, without limitation, reasonable fees
and expenses of counsel to the Agents, special Michigan counsel to the
Lenders and, from and after such date, counsel for each Lender (including
the allocated costs and expenses of in-house counsel)) in connection with
the enforcement (whether through negotiations, legal proceedings or
otherwise) of this Agreement, the Notes and the other documents to be
delivered hereunder.
(b)The Borrower hereby agrees to indemnify and hold each Lender,
each Agent, each LC Bank and their respective officers, directors,
employees, professional advisors and affiliates (each, an "Indemnified
Person") harmless from and against any and all claims, damages, losses,
liabilities, costs or expenses (including reasonable attorney's fees and
expenses, whether or not such Indemnified Person is named as a party to
any proceeding or is otherwise subjected to judicial or legal process
arising from any such proceeding) which any of them may incur or which may
be claimed against any of them by any Person:
(i)by reason of or in connection with the execution, delivery
or performance of any of the Loan Documents or any transaction
contemplated thereby, or the use by the Borrower of the proceeds of
any Extension of Credit;
(ii) in connection with any documentary taxes, assessments or
charges made by any governmental authority by reason of the
execution and delivery of any of the Loan Documents; or
(iii) in connection with or resulting from the utilization,
storage, disposal, treatment, generation, transportation, release
or ownership of any Hazardous Substance (i) at, upon or under any
property of the Borrower or any of its Affiliates or (ii) by or on
behalf of the Borrower or any of its Affiliates at any time and in
any place;
provided, however, that nothing contained in this subsection (b) shall
constitute a relinquishment or waiver of the Borrower's rights to any
independent claim that the Borrower may have against any Indemnified
Person for such Indemnified Person's gross negligence or wilful
misconduct, but no Lender shall be liable for any such conduct on the part
of any Agent or any other Lender, and no Agent shall be liable for any
such conduct on the part of any Lender.
(c)The Borrower's other obligations under this Section 11.04 shall
survive the repayment of all amounts owing to the Lenders, the LC Banks
and the Agents under the Loan Documents and the termination of the
Commitments. If and to the extent that the obligations of the Borrower
under this Section 11.04 are unenforceable for any reason, the Borrower
agrees to make the maximum contribution to the payment and satisfaction
thereof which is permissible under applicable law.
SECTION 11.05. Right of Set-off. (a) Upon (i) the occurrence and
during the continuance of any Event of Default and (ii) the making of the
request or the granting of the consent specified by Section 9.02 to
authorize the Co-Agents to declare the Notes due and payable pursuant to
the provisions of Section 9.02, each Lender and LC Bank is hereby
authorized at any time and from time to time, to the fullest extent
permitted by law, to set off and apply any and all deposits (general or
special, time or demand, provisional or final) at any time held and other
indebtedness at any time owing by such Lender or LC Bank to or for the
credit or the account of the Borrower, against any and all of the
obligations of the Borrower now or hereafter existing under this Agreement
and the Note held by such Lender or the LC Bank Agreement to which such LC
Bank is a party, as the case may be, irrespective of whether or not such
Lender or LC Bank shall have made any demand under this Agreement or such
Note or such LC Bank Agreement and although such obligations may be
unmatured. Each Lender and LC Bank agrees to notify promptly the Borrower
after any such set-off and application made by such Lender or LC Bank,
provided that the failure to give such notice shall not affect the
validity of such set-off and application. The rights of each Lender and
LC Bank under this Section 11.05 are in addition to other rights and
remedies (including, without limitation, other rights of set-off) which
such Lender and LC Bank may have.
(b)The Borrower agrees that it shall have no right of off-set,
deduction or counterclaim in respect of its obligations hereunder, and
that the obligations of the Lenders hereunder are several and not joint.
Nothing contained herein shall constitute a relinquishment or waiver of
the Borrower's rights to any independent claim that the Borrower may have
against any Agent or any Lender for such Agent's or such Lender's, as the
case may be, gross negligence or wilful misconduct, but no Lender shall be
liable for any such conduct on the part of any Agent or any other Lender,
and no Agent shall be liable for any such conduct on the part of any
Lender.
SECTION 11.06. Binding Effect. This Agreement shall become
effective when it shall have been executed by the Borrower and the Agents
and when the Documentation Agent shall have been notified by each Bank
that such Bank has executed it and thereafter shall be binding upon and
inure to the benefit of the Borrower, the Agents and each Lender and their
respective successors and assigns, except that the Borrower shall not have
the right to assign its rights hereunder or any interest herein without
the prior written consent of the Lenders.
SECTION 11.07. Assignments and Participation. (a) Each Lender may
assign to one or more banks or other entities all or a portion of its
rights and obligations under this Agreement and the other Loan Documents
(including, without limitation, all or a portion of its Commitment, the
Advances owing to it and the Note or Notes held by it); provided, however,
that (i) each such assignment shall be of a constant, and not a varying,
percentage of all of the assigning Lender's rights and obligations under
this Agreement, (ii) the amount of the Commitment of the assigning Lender
being assigned pursuant to each such assignment (determined as of the date
of the Lender Assignment with respect to such assignment) shall in no
event be less than the lesser of the amount of such Lender's Commitment
and $10,000,000 and shall be an integral multiple of $5,000,000, (iii)
each such assignment shall be to an Eligible Assignee, and (iv) the
parties to each such assignment shall execute and deliver to the
Documentation Agent (with a copy to the Operational Agent), for its
acceptance and recording in the Register, a Lender Assignment, together
with any Note or Notes subject to such assignment and a processing and
recordation fee of $2,500. Upon such execution, delivery, acceptance and
recording, from and after the effective date specified in each Lender
Assignment, which effective date shall be at least five Business Days
after the execution thereof, (A) the assignee thereunder shall be a party
hereto and, to the extent that rights and obligations hereunder have been
assigned to it pursuant to such Lender Assignment, have the rights and
obligations of a Lender hereunder and (B) the Lender assignor thereunder
shall, to the extent that rights and obligations hereunder have been
assigned by it to an Eligible Assignee pursuant to such Lender Assignment,
relinquish its rights and be released from its obligations under this
Agreement (and, in the case of a Lender Assignment covering all or the
remaining portion of an assigning Lender's rights and obligations under
this Agreement, such Lender shall cease to be a party hereto); provided,
however, that the limitation set forth in clause (iii), above, shall not
apply if an Event of Default shall have occurred and be continuing and the
Co-Agents shall have declared all Advances to be immediately due and
payable hereunder. The Documentation Agent agrees to give prompt notice to
the Lenders and the Borrower of any assignment or participation of its
rights and obligations as a Bank hereunder. Notwithstanding anything to
the contrary contained in this Agreement, any Lender may at any time
assign all or any portion of the Advances owing to it to any Affiliate of
such Lender. The assigning Lender shall promptly notify the Borrower of
any such assignment. No such assignment, other than to an Eligible
Assignee, shall release the assigning Lender from its obligations
hereunder.
(b)By executing and delivering a Lender Assignment, the Lender
assignor thereunder and the assignee thereunder confirm to and agree with
each other and the other parties hereto as follows: (i) other than as
provided in such Lender Assignment, such assigning Lender makes no
representation or warranty and assumes no responsibility with respect to
any statements, warranties or representations made in or in connection
with any Loan Document or the execution, legality, validity,
enforceability, genuineness, sufficiency or value of any Loan Document or
any other instrument or document furnished pursuant thereto; (ii) such
assigning Lender makes no representation or warranty and assumes no
responsibility with respect to the financial condition of the Borrower or
the performance or observance by the Borrower of any of its obligations
under any Loan Document or any other instrument or document furnished
pursuant thereto; (iii) such assignee confirms that it has received a copy
of each Loan Document, together with copies of the financial statements
referred to in Section 7.01(e) and such other documents and information as
it has deemed appropriate to make its own credit analysis and decision to
enter into such Lender Assignment; (iv) such assignee will, independently
and without reliance upon the Agents, such assigning Lender or any other
Lender and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in
taking or not taking action under the Loan Documents; (v) such assignee
confirms that it is an Eligible Assignee (unless an Event of Default shall
have occurred and be continuing and the Co-Agents shall have declared all
Advances to be immediately due and payable hereunder, in which case no
such confirmation is necessary); (vi) such assignee appoints and
authorizes each Agent to take such action as agent on its behalf and to
exercise such powers under the Loan Documents as are delegated to each
Agent by the terms thereof, together with such powers as are reasonably
incidental thereto; and (vii) such assignee agrees that it will perform in
accordance with their terms all of the obligations which by the terms of
the Loan Documents are required to be performed by it as a Lender.
(c)The Documentation Agent shall maintain at its address referred
to in Section 11.02 a copy of each Lender Assignment delivered to and
accepted by it and a register for the recordation of the names and
addresses of the Lenders and the Commitment of, and principal amount of
the Advances owing to, each Lender from time to time (the "Register").
The entries in the Register shall be conclusive and binding for all
purposes, absent manifest error, and the Borrower, the Agents and the
Lenders may treat each Person whose name is recorded in the Register as a
Lender hereunder for all purposes of this Agreement. The Register shall be
available for inspection by the Borrower or any Lender at any reasonable
time and from time to time upon reasonable prior notice.
(d)Upon its receipt of a Lender Assignment executed by an
assigning Lender and an assignee representing that it is an Eligible
Assignee, together with any Note or Notes subject to such assignment, the
Documentation Agent shall, if such Lender Assignment has been completed
and is in substantially the form of Exhibit 11.07, (i) accept such Lender
Assignment, (ii) record the information contained therein in the Register
and (iii) give prompt notice thereof to the Borrower. Within five
Business Days after its receipt of such notice, the Borrower, at its own
expense, shall execute and deliver to the Documentation Agent in exchange
for the surrendered Note or Notes a new Note to the order of such Eligible
Assignee in an amount equal to the Commitment assumed by it pursuant to
such Lender Assignment and, if the assigning Lender has retained a
Commitment hereunder, a new Note to the order of the assigning Lender in
an amount equal to the Commitment retained by it hereunder. Such new Note
or Notes shall be in an aggregate principal amount equal to the aggregate
principal amount of such surrendered Note or Notes, shall be dated the
effective date of such Lender Assignment and shall otherwise be in
substantially the form of Exhibit 6.02A.
(e)Each Lender may sell participations to one or more banks or
other entities in or to all or a portion of its rights and obligations
under the Loan Documents (including, without limitation, all or a portion
of its Commitment, the Advances owing to it and the Note or Notes held by
it); provided, however, that (i) such Lender's obligations under this
Agreement (including, without limitation, its Commitment to the Borrower
hereunder) shall remain unchanged, (ii) such Lender shall remain solely
responsible to the other parties hereto for the performance of such
obligations, (iii) such Lender shall remain the holder of any such Note
for all purposes of this Agreement, and (iv) the Borrower, the Agents and
the other Lenders shall continue to deal solely and directly with such
Lender in connection with such Lender's rights and obligations under this
Agreement.
(f)Any Lender may, in connection with any assignment or
participation or proposed assignment or participation pursuant to this
Section 11.07, disclose to the assignee or participant or proposed
assignee or participant, any information relating to the Borrower
furnished to such Lender by or on behalf of the Borrower; provided that,
prior to any such disclosure, the assignee or participant or proposed
assignee or participant shall agree, in accordance with the terms of
Section 11.08, to preserve the confidentiality of any Confidential
Information received by it from such Lender.
(g)If any Lender (or any bank or other entity to which such Lender
has sold a participation) shall make any demand for payment under Section
5.04(a) or (d), then within 30 days after any such demand (if, but only
if, such demanded payment has been made by the Borrower) or notice, the
Borrower may, with the approval of the Agents (which approval shall not be
unreasonably withheld) and provided that no Event of Default or Unmatured
Default shall then have occurred and be continuing, demand that such
Lender assign in accordance with this Section 11.07 to one or more
Eligible Assignees designated by the Borrower all (but not less than all)
of such Lender's Commitment and the Advances owing to it within the period
ending on the later to occur of such 30th day and the last day of the
longest of the then current Interest Periods for such Advances. If any
such Eligible Assignee designated by the Borrower shall fail to consummate
such assignment on terms acceptable to such Lender, or if the Borrower
shall fail to designate any such Eligible Assignees for all or part of
such Lender's Commitment or Advances, then such demand by the Borrower
shall become ineffective; it being understood for purposes of this
subsection (g) that such assignment shall be conclusively deemed to be on
terms acceptable to such Lender, and such Lender shall be compelled to
consummate such assignment to an Eligible Assignee designated by the
Borrower, if such Eligible Assignee (i) shall agree to such assignment by
entering into a Lender Assignment with such Lender and (ii) shall offer
compensation to such Lender in an amount equal to all amounts then owing
by the Borrower to such Lender hereunder and under the Note made by the
Borrower to such Lender, whether for principal, interest, fees, costs or
expenses (other than the demanded payment referred to above and payable by
the Borrower as a condition to the Borrower's right to demand such
assignment), or otherwise. In addition, in the case of any amount
demanded for payment by any Lender (or such a participant) pursuant to
Section 5.04(a) or (d), the Borrower may, in the case of any such Lender,
with the approval of the Agents (which approval shall not be unreasonably
withheld) and provided that no Event of Default or Unmatured Default shall
then have occurred and be continuing, terminate all (but not less than
all) such Lender's Commitment and prepay all (but not less than all) such
Lender's Advances not so assigned, together with all interest accrued
thereon to the date of such prepayment and all fees, costs and expenses
and other amounts then owing by the Borrower to such Lender hereunder and
under the Note made by the Borrower to such Lender, at any time from and
after such later occurring day in accordance with Sections 2.03 and 5.03
hereof (but without the requirement stated therein for ratable treatment
of the other Lenders), if and only if, after giving effect to such
termination and prepayment, the sum of the aggregate principal amount of
the Advances of all Lenders then outstanding does not exceed the then
remaining Commitments of the Lenders. Notwithstanding anything set forth
above in this subsection (g) to the contrary, the Borrower shall not be
entitled to compel the assignment by any Lender demanding payment under
Section 5.04(a) of its Commitment and Advances or terminate and prepay the
Commitment and Advances of such Lender if, prior to or promptly following
any such demand by the Borrower, such Lender shall have changed or shall
change, as the case may be, its Applicable Lending Office for its
Eurodollar Rate Advances so as to eliminate the further incurrence of such
increased cost. In furtherance of the foregoing, any such Lender
demanding payment or giving notice as provided above agrees to use
reasonable efforts to so change its Applicable Lending Office if, to do
so, would not result in the incurrence by such Lender of additional costs
or expenses which it deems material or, in the sole judgment of such
Lender, be inadvisable for regulatory, competitive or internal management
reasons.
(h)Anything in this Section 11.07 to the contrary notwithstanding,
any Lender may assign and pledge all or any portion of its Commitment and
the Advances owing to it to any Federal Reserve Bank (and its transferees)
as collateral security pursuant to Regulation A of the Board of Governors
of the Federal Reserve System and any Operating Circular issued by such
Federal Reserve Bank. No such assignment shall release the assigning
Lender from its obligations hereunder.
SECTION 11.08. Confidentiality. In connection with the
negotiation and administration of this Agreement and the other Loan
Documents, the Loan Parties have furnished and will from time to time
furnish to the Agents and the Lenders (each, a "Recipient") written
information which is identified to the Recipient when delivered as
confidential (such information, other than any such information which
(i) was publicly available, or otherwise known to the Recipient, at the
time of disclosure, (ii) subsequently becomes publicly available other
than through any act or omission by the Recipient or (iii) otherwise
subsequently becomes known to the Recipient other than through a Person
whom the Recipient knows to be acting in violation of his or its
obligations to such Loan Party, being hereinafter referred to as
"Confidential Information"). The Recipient will not knowingly disclose
any such Confidential Information to any third party (other than to those
persons who have a confidential relationship with the Recipient), and will
take all reasonable steps to restrict access to such information in a
manner designed to maintain the confidential nature of such information,
in each case until such time as the same ceases to be Confidential
Information or as such Loan Party may otherwise instruct. It is
understood, however, that the foregoing will not restrict the Recipient's
ability to freely exchange such Confidential Information with prospective
participants in or assignees of the Recipient's position herein, but the
Recipient's ability to so exchange Confidential Information shall be
conditioned upon any such prospective participant's entering into an
agreement as to confidentiality similar to this Section 11.08. It is
further understood that the foregoing will not prohibit the disclosure of
any or all Confidential Information if and to the extent that such
disclosure may be required (i) by a regulatory agency or otherwise in
connection with an examination of the Recipient's records by appropriate
authorities, (ii) pursuant to court order, subpoena or other legal process
or (iii) otherwise, as required by law; in the event of any required
disclosure under clause (ii) or (iii), above, the Recipient agrees to use
reasonable efforts to inform the Borrower as promptly as practicable to
the extent not prohibited by law.
SECTION 11.09. Waiver of Jury Trial. THE BORROWER, THE AGENTS,
THE LC BANKS AND THE LENDERS EACH HEREBY IRREVOCABLY WAIVES ALL RIGHT TO
TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR ANY OTHER
INSTRUMENT OR DOCUMENT DELIVERED HEREUNDER OR THEREUNDER.
SECTION 11.10. Governing Law. This Agreement and the Notes shall
be governed by, and construed in accordance with, the laws of the State of
New York. The Borrower, the Lenders, the LC Banks and the Agents each
(i) irrevocably submits to the jurisdiction of any New York State court or
Federal court sitting in New York City in any action arising out of any
Loan Document, (ii) agrees that all claims in such action may be decided
in such court, (iii) waives, to the fullest extent it may effectively do
so, the defense of an inconvenient forum and (iv) consents to the service
of process by mail. A final judgment in any such action shall be
conclusive and may be enforced in other jurisdictions. Nothing herein
shall affect the right of any party to serve legal process in any manner
permitted by law or affect its right to bring any action in any other
court.
SECTION 11.11. Relation of the Parties; No Beneficiary. No term,
provision or requirement, whether express or implied, of any Loan
Document, or actions taken or to be taken by any party thereunder, shall
be construed to create a partnership, association, or joint venture
between such parties or any of them. No term or provision of the Loan
Documents shall be construed to confer a benefit upon, or grant a right or
privilege to, any Person other than the parties hereto and, in the case of
the Pledge Agreements and the Collateral Agency and Intercreditor
Agreement, the Noteholders.
SECTION 11.12. Effectiveness; Reference to and Effect on the Loan
Documents. (a) This Amended and Restated Credit Agreement shall become
effective as of the date first above written when and if (i) the consent
attached hereto shall have been executed and delivered by Enterprises,
(ii) counterparts of this Agreement shall have been executed by the each
of the Lenders, the Agents and the Borrower and (iii) the Documentation
Agent shall have received (A) an opinion of counsel for the Loan Parties,
in form, scope and substance satisfactory to the Co-Agents, (B) the Cash
Collateral Agreement, duly executed by the Borrower, and (C) a certificate
of a duly authorized officer of the Borrower (the statements in which
shall be true) as to the statements contained in Section 6.03(a)(i), (iii)
and (iv) (assuming, solely for purposes of such certificate, that this
amendment and restatement constitutes an Extension of Credit).
(b)Upon the effectiveness of this Agreement, on and after the date
hereof each reference in the other Loan Documents to "the Credit
Agreement", "thereunder", "thereof" or words of like import referring to
the Credit Agreement, shall mean and be a reference to the Credit
Agreement, as amended and restated hereby.
(c)Except as specifically amended above, the Credit Agreement and
the Notes, and all other Loan Documents, are and shall continue to be in
full force and effect and are hereby in all respects ratified and
confirmed. Without limiting the generality of the foregoing, the Security
Documents and all of the Collateral described therein do and shall
continue to secure the payment of all obligations of the Borrower under
the Credit Agreement, the Notes and the other Loan Documents, in each case
as amended and restated hereby.
(d)The execution, delivery and effectiveness of this Agreement
shall not, except as expressly provided herein, operate as a waiver of any
right, power or remedy of any Lender or the Agents under any of the Loan
Documents, nor constitute a waiver of any provision of any of the Loan
Documents.
SECTION 11.13. Execution in Counterparts. This Agreement may be
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed shall be deemed to
be an original and all of which taken together shall constitute one and
the same Agreement.
SECTION 11.14. Survival of Agreement. All covenants, agreements,
representations and warranties made herein and in the certificates
pursuant hereto shall be considered to have been relied upon by the Agents
and the Lenders and shall survive the making by the Lenders of the
Extensions of Credit and the execution and delivery to the Lenders of the
Notes evidencing the Extensions of Credit and shall continue in full force
and effect so long as any Note or any amount due hereunder is outstanding
and unpaid or any Commitment of any Lender has not been terminated.
84
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be executed by their respective officers thereunto duly authorized, as
of the date first above written.
CMS ENERGY CORPORATION
By /s/ A M Wright
______________________________
Senior Vice President and
Chief Financial Officer
CITIBANK, N.A.,
as Co-Agent and Documentation
Agent
By /s/ Anita J. Brickell
______________________________
Vice President
UNION BANK,
as Co-Agent and Operational Agent
By /s/ PSaggan
______________________________
Vice President
<PAGE>
<PAGE>
Commitment Bank
- ---------- ----
$28,000,000.00 CITIBANK, N.A.
By /s/ Anita J. Brickell
______________________________
Vice President
<PAGE>
<PAGE>
Commitment Bank
- ---------- ----
$28,000,000.00 UNION BANK
By /s/ John M. Edmonston
______________________________
Vice President
<PAGE>
<PAGE>
Commitment Bank
- ---------- ----
$25,000,000.00 BARCLAYS BANK PLC
By /s/ John P Bock
______________________________
Title: Associate Director
<PAGE>
<PAGE>
Commitment Bank
- ---------- ----
$25,000,000.00 THE CHASE MANHATTAN BANK, N.A.
By /s/ Richard W. Cortwright, Jr.
______________________________
Title: V P
<PAGE>
<PAGE>
Commitment Bank
- ---------- ----
$25,000,000.00 THE FIRST NATIONAL BANK OF CHICAGO
By /s/ Christine S. Frank
______________________________
Title: Vice President
<PAGE>
<PAGE>
Commitment Bank
- ---------- ----
$23,000,000.00 THE LONG-TERM CREDIT BANK
OF JAPAN, LTD.
By /s/ Brady S. Sadek
______________________________
Title: Vice President &
Deputy General Manager
<PAGE>
<PAGE>
Commitment Bank
- ---------- ----
$18,000,000.00 MICHIGAN NATIONAL BANK
By /s/ Mark Aben
______________________________
Title: Vice President
<PAGE>
<PAGE>
Commitment Bank
- ---------- ----
$18,000,000.00 THE TORONTO-DOMINION BANK
By /s/ Debbie A. Greene
______________________________
Title:
Debbie A. Greene
Mgr. Cr. Admin.
<PAGE>
<PAGE>
Commitment Bank
- ---------- ----
$15,000,000.00 CANADIAN IMPERIAL BANK OF
COMMERCE
By /s/ Margaret E. McTigue
______________________________
Title: Authorized Signatory
<PAGE>
<PAGE>
Commitment Bank
- ---------- ----
$15,000,000.00 NATIONAL WESTMINSTER BANK PLC
By /s/ Karen N. Grafe
______________________________
Title: Vice President
<PAGE>
<PAGE>
EXHIBIT 3.01
FORM OF NOTICE OF BORROWING
Union Bank, as Operational
Agent for the Lenders parties
to the Credit Agreement
referred to below
Attention: Paula Maguire Reese
Assistant Vice President
[Date]
Ladies and Gentlemen:
The undersigned, CMS Energy Corporation, refers to the Amended
and Restated Credit Agreement, dated as of November 30, 1992, as amended
and restated as of October 15, 1993 (as so amended and restated and as it
amy be further amended, modified or supplemented from time to time, the
"Credit Agreement", the terms defined therein and not otherwise defined
herein being used herein as therein defined), among the Borrower, the
Lenders named therein, the Co-Agents, the Documentation Agent and the
Operational Agent, and hereby gives you notice, irrevocably, pursuant to
Section 3.01 of the Credit Agreement that the undersigned hereby requests
a Borrowing under the Credit Agreement, and in that connection sets forth
below the information relating to such Borrowing (the "Proposed
Borrowing") as required by Section 3.01(a) of the Credit Agreement:
(i) The Business Day of the Proposed Borrowing is
____________, 19___.
(ii)The Type of Advances comprising the Proposed Borrowing is
[Base Rate Advances] [Eurodollar Rate Advances].
(iii)The aggregate amount of the Proposed Borrowing is
$___________.
1[(iv) The initial Interest Period for each Advance made as part
of the Proposed Borrowing is ____ months.]
The undersigned hereby acknowledges that the delivery of this
Notice of Borrowing shall constitute a representation and warranty by the
Borrower that, on the date of the Proposed Borrowing, the statements
contained in Section 5.03(a) [(other than clause (ii) thereof)]2 [(other
than clause (iii) thereof)]3 of the Credit Agreement are true.
Very truly yours,
CMS ENERGY CORPORATION
By ____________________________
Title:
____________________
1 To be included for a Proposed Borrowing comprised of Eurodollar Rate
Advances.
2 To be included for all Extensions of Credit other than the initial
Extension of Credit.
3 To be included for the initial Extension of Credit.
<PAGE>
<PAGE>
EXHIBIT 3.02
FORM OF NOTICE OF CONVERSION
Union Bank, as Operational
Agent for the Lenders parties
to the Credit Agreement
referred to below
Attention: Paula Maguire Reese
Assistant Vice President
[Date]
Ladies and Gentlemen:
The undersigned, CMS Energy Corporation, refers to the Amended
and Restated Credit Agreement, dated as of November 30, 1992 as amended
and restated as of October 15, 1993 (as so amended and restated and as it
may be further amended, modified or supplemented from time to time, the
"Credit Agreement", the terms defined therein and not otherwise defined
herein being used herein as therein defined), among the Borrower, the
Lenders named therein, the Co-Agents, the Documentation Agent and the
Operational Agent, and hereby gives you notice, irrevocably, pursuant to
Section 3.02 of the Credit Agreement that the undersigned hereby requests
a Conversion under the Credit Agreement, and in that connection sets forth
below the information relating to such Conversion (the "Proposed
Conversion") as required by Section 3.02 of the Credit Agreement:
(i) The Business Day of the Proposed Conversion is
____________________, _____.
(ii)The Type of Advances comprising the Proposed Conversion is
[Base Rate Advances] [Eurodollar Rate Advances].
(iii)The aggregate amount of the Proposed Conversion is
$_________________.
(iv)The Type of Advances to which such Advances are proposed
to be Converted is [Base Rate Advances] [Eurodollar Rate Advances].
(v) The Interest Period for each Advance made as part of the
Proposed Conversion is ____ month(s).*
The undersigned hereby certifies that the following statements
are true on the date hereof, and will be true on the date of the Proposed
Conversion:
(A) The Borrower's request for the Proposed Conversion is made
in compliance with Sections 3.02, 3.03 and 3.04 of the Credit
Agreement; and
(B) No Unmatured Default or Event of Default has occurred and
is continuing.
Very truly yours,
CMS ENERGY CORPORATION
By ______________________________
Title:
_____________________________
* Delete for Base Rate Advances
<PAGE>
<PAGE>
EXHIBIT 5.03
FORM OF CASH COLLATERAL AGREEMENT
CASH COLLATERAL AGREEMENT, dated as of October ___, 1993, made
by CMS ENERGY CORPORATION, a Michigan corporation (the "Pledgor"), to
Union Bank ("Union Bank"), as operational agent (the "Operational Agent")
for the lenders (the "Lenders") parties to the Credit Agreement (as
hereinafter defined).
PRELIMINARY STATEMENTS
----------------------
(1) Citibank, N.A. and Union Bank, as Co-Agents, and the
Lenders have entered into a Credit Agreement, dated as of November 30,
1992, as amended and restated as of October 15, 1993 (said Agreement, as
so amended and restated and as it may hereafter be amended or otherwise
modified from time to time, being the "Credit Agreement", the terms
defined therein and not otherwise defined herein being used herein as
therein defined), with the Pledgor.
(2) Pursuant to Section 5.03(b) of the Credit Agreement, any
prepayments required by such subsection are to be applied to outstanding
Base Rate Advances up to the full amount thereof before they are applied,
first, to outstanding Eurodollar Rate Advances and, second, as cash
collateral, pursuant to this Agreement, to secure LC Outstandings.
(3) The cash collateral referenced in preliminary statement
(2), above, shall be deposited by the Operational Agent in a special
non-interest-bearing cash collateral account (the "Account") with the
Operational Agent at its office at 445 South Figueroa Street, 15th Floor,
Los Angeles, California 90071, Account No. 2200411911 (or at such other
office of the Operational Agent as the Operational Agent may, from time to
time, notify the Pledgor), in the name of the Pledgor but under the sole
control and dominion of the Operational Agent and subject to the terms of
this Agreement.
NOW THEREFORE, in consideration of the premises and for other
good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the Pledgor hereby agrees with the Operational Agent
for its benefit and the ratable benefit of the Lenders as follows:
SECTION 1. Pledge and Assignment. The Pledgor hereby pledges
and assigns to the Operational Agent for its benefit and the ratable
benefit of the Lenders, and grants to the Operational Agent for its
benefit and the ratable benefit of the Lenders a security interest in, the
following collateral (the "Collateral"):
(i) the Account, all funds held therein and all certificates
and instruments, if any, from time to time representing or evidencing
the Account;
(ii)all Investments (as hereinafter defined) from time to
time, and all certificates and instruments, if any, from time to time
representing or evidencing the Investments;
(iii)all notes, certificates of deposit, deposit accounts,
checks and other instruments from time to time hereafter delivered to
or otherwise possessed by the Operational Agent for or on behalf of
the Pledgor in substitution for or in addition to any or all of the
then existing Collateral;
(iv)all interest, dividends, cash, instruments and other
property from time to time received, receivable or otherwise
distributed in respect of or in exchange for any or all of the then
existing Collateral; and
(v) all proceeds of any and all of the foregoing Collateral.
SECTION 2. Security for Obligations. This Agreement secures
the payment of all reimbursement obligations of the Borrower now or
hereafter existing with respect to LC Outstandings, and all obligations of
the Pledgor now or hereafter existing under this Agreement (all such
obligations of the Borrower and the Pledgor being the "Obligations").
Without limiting the generality of the foregoing, this Agreement secures
the payment of all amounts which constitute part of the Obligations and
would be owed by the Borrower to the Operational Agent or the Lenders
under the Credit Agreement and the Notes but for the fact that they are
unenforceable or not allowable due to of the existence of a bankruptcy,
reorganization or similar proceeding involving the Borrower. The
Obligations secured by this Agreement are subject to the terms of the
Collateral Agency and Intercreditor Agreement.
SECTION 3. Delivery of Collateral. All certificates or
instruments, if any, representing or evidencing the Collateral shall be
delivered to and held by or on behalf of the Operational Agent pursuant
hereto and shall be in suitable form for transfer by delivery, or shall be
accompanied by duly executed instruments of transfer or assignment in
blank, all in form and substance satisfactory to the Operational Agent.
The Operational Agent shall have the right, at any time upon the
occurrence and during the continuance of an Event of Default or an
Unmatured Default, in its discretion and without notice to the Pledgor, to
transfer to or to register in the name of the Operational Agent or any of
its nominees any or all of the Collateral. In addition, the Operational
Agent shall have the right at any time to exchange certificates or
instruments representing or evidencing Collateral for certificates or
instruments of smaller or larger denominations.
SECTION 4. Maintaining the Account. So long as any Lender has
any Commitment or any Note shall remain unpaid:
(a) The Pledgor will maintain the Account with the Operational
Agent.
(b) It shall be a term and condition of the Account,
notwithstanding any term or condition to the contrary in any other
agreement relating to the Account and except as otherwise provided by
the provisions of Section 6 and Section 13, that no amount (including
interest on the Account, if any) shall be paid or released to or for
the account of, or withdrawn by or for the account of, the Pledgor or
any other Person (other than the Operational Agent and the Lenders)
from the Account.
The Account shall be subject to such applicable laws, and such applicable
regulations of the Board of Governors of the Federal Reserve System and of
any other appropriate banking or governmental authority, as may now or
hereafter be in effect.
SECTION 5. Investing of Amounts in the Account. If requested
by the Pledgor, the Operational Agent will, subject to the provisions of
Section 6 and Section 13, from time to time (a) invest amounts on deposit
in the Account in such Permitted Investments as the Pledgor may select and
the Operational Agent may approve and (b) invest interest paid on the
Permitted Investments referred to in clause (a), above, and reinvest other
proceeds of any such Permitted Investments which may mature or be sold, in
each case in such Permitted Investments as the Pledgor may select and the
Operational Agent may approve (the Permitted Investments referred to in
clauses (a) and (b), above, being collectively "Investments"). Interest
and proceeds that are not invested or reinvested in Investments as
provided above shall be deposited and held in the Account.
SECTION 6. Release of Amounts. So long as no Event of Default
or Unmatured Default shall have occurred and be continuing, the
Operational Agent will pay and release to the Pledgor or at its order,
upon the request of the Pledgor, (a) amounts of credit balance of the
Account and of principal of any other Collateral when matured or sold to
the extent that (i) the sum of the credit balance of the Account plus the
aggregate outstanding principal amount of all other Collateral exceeds
(ii) the aggregate amount of LC Outstandings in respect of all Letters of
Credit and all other amounts owing by the Pledgor hereunder, (b) all
amounts in the Account if the Commitments exceed the aggregate amount of
LC Outstandings in respect of all Letters of Credit and all other amounts
owing by the Pledgor hereunder and (c) all interest and earnings on the
Investments deposited and held in the Account.
SECTION 7. Representations and Warranties. The Pledgor
represents and warrants as follows:
(a) The Pledgor is the legal and beneficial owner of the
Collateral free and clear of any lien, security interest, option or other
charge or encumbrance except for the security interest created by this
Agreement.
(b) The pledge and assignment of the Collateral pursuant to
this Agreement creates a valid and perfected first priority security
interest in theCollateral, securing the payment of the Obligations.
(c) No consent of any other Person and no authorization,
approval, or other action by, and no notice to or filing with, any
governmental authority or regulatory body is required (i) for the pledge
and assignment by the Pledgor of the Collateral pursuant to this Agreement
or for the execution, delivery or performance of this Agreement by the
Pledgor, (ii) for the perfection or maintenance of the security interest
created hereby (including the first priority nature of such security
interest) or (iii) for the exercise by the Operational Agent of its rights
and remedies hereunder.
(d) There are no conditions precedent to the effectiveness of
this Agreement that have not been satisfied or waived.
(e) The Pledgor has, independently and without reliance upon
the Operational Agent or any Lender and based on such documents and
information as it has deemed appropriate, made its own credit analysis and
decision to enter into this Agreement.
SECTION 8. Further Assurances. The Pledgor agrees that at any
time and from time to time, at the expense of the Pledgor, the Pledgor
will promptly execute and deliver all further instruments and documents,
and take all further action, that may be necessary or desirable, or that
the Operational Agent may reasonably request, in order to perfect and
protect any security interest granted or purported to be granted hereby or
to enable the Operational Agent to exercise and enforce its rights and
remedies hereunder with respect to any Collateral.
SECTION 9. Transfers and Other Liens. The Pledgor agrees that
it will not (i) sell, assign (by operation of law or otherwise) or
otherwise dispose of, or grant any option with respect to, any of the
Collateral, or (ii) create or permit to exist any lien, security interest,
option or other charge or encumbrance upon or with respect to any of the
Collateral, except for the security interest under this Agreement.
SECTION 10. Operational Agent Appointed Attorney-in-Fact. The
Pledgor hereby appoints the Operational Agent the Pledgor's
attorney-in-fact, with full authority in the place and stead of the
Pledgor and in the name of the Pledgor or otherwise, from time to time
upon the occurrence and during the continuance of an Event of Default or
Unmatured Default or otherwise to the extent that the Operational Agent
shall reasonably deem any action to be necessary in order to maintain its
security interest in the Collateral, in the Operational Agent's
discretion, to take any action and to execute any instrument which the
Operational Agent may deem necessary or advisable to accomplish the
purposes of this Agreement, including, without limitation, to receive,
indorse and collect all instruments made payable to the Pledgor
representing any interest payment, dividend or other distribution in
respect of the Collateral or any part thereof and to give full discharge
for the same.
SECTION 11. Operational Agent May Perform. If the Pledgor
fails to perform any agreement contained herein, the Operational Agent may
itself perform, or cause performance of, such agreement, and the expenses
of the Operational Agent incurred in connection therewith shall be payable
by the Pledgor under Section 14.
SECTION 12. The Operational Agent's Duties. The powers
conferred on the Operational Agent hereunder are solely to protect its
interest in the Collateral and shall not impose any duty upon it to
exercise any such powers. Except for the safe custody of any Collateral
in its possession and the accounting for moneys actually received by it
hereunder, the Operational Agent shall have no duty as to any Collateral,
as to ascertaining or taking action with respect to calls, conversions,
exchanges, maturities, tenders or other matters relative to any
Collateral, whether or not the Operational Agent or any Lender has or is
deemed to have knowledge of such matters, or as to the taking of any
necessary steps to preserve rights against any parties or any other rights
pertaining to any Collateral. The Operational Agent shall be deemed to
have exercised reasonable care in the custody and preservation of any
Collateral in its possession if such Collateral is accorded treatment
substantially equal to that which the Operational Agent accords its own
property.
SECTION 13. Remedies upon Default. If any Event of Default
shall have occurred and be continuing:
(a) The Operational Agent may, without notice to the Pledgor
except as required by law and at any time or from time to time,
charge, set-off and otherwise apply all or any part of the Account
against the Obligations or any part thereof.
(b) The Operational Agent may also exercise in respect of the
Collateral, in addition to other rights and remedies provided for
herein or otherwise available to it, all the rights and remedies of a
secured party on default under the Uniform Commercial Code in effect
in the State of New York at that time (the "Code") (whether or not
the Code applies to the affected Collateral), and may also, without
notice except as specified below, sell the Collateral or any part
thereof in one or more parcels at public or private sale, at any of
the Operational Agent's offices or elsewhere, for cash, on credit or
for future delivery, and upon such other terms as the Operational
Agent may deem commercially reasonable. The Pledgor agrees that, to
the extent notice of sale shall be required by law, at least ten
days' notice to the Pledgor of the time and place of any public sale
or the time after which any private sale is to be made shall
constitute reasonable notification. The Operational Agent shall not
be obligated to make any sale of Collateral regardless of notice of
sale having been given. The Operational Agent may adjourn any public
or private sale from time to time by announcement at the time and
place fixed therefor, and such sale may, without further notice, be
made at the time and place to which it was so adjourned.
(c) Any cash held by the Operational Agent as Collateral and
all cash proceeds received by the Operational Agent in respect of any
sale of, collection from, or other realization upon all or any part
of the Collateral may, in the discretion of the Operational Agent, be
held by the Operational Agent as collateral for, and/or then or at
any time thereafter be applied (after payment of any amounts payable
to the Operational Agent pursuant to Section 14) in whole or in part
by the Operational Agent for the ratable benefit of the Lenders
against, all or any part of the Obligations in such order as the
Operational Agent shall elect. Any surplus of such cash or cash
proceeds held by the Operational Agent and remaining after payment in
full of all the Obligations shall be paid over to the Pledgor or to
whomsoever may be lawfully entitled to receive such surplus.
SECTION 14. Expenses. The Pledgor will upon demand pay to the
Operational Agent the amount of any and all reasonable expenses, including
the reasonable fees and expenses of its counsel and of any experts and
agents, which the Operational Agent may incur in connection with (i) the
administration of this Agreement, (ii) the custody or preservation of, or
the sale of, collection from, or other realization upon, any of the
Collateral, (iii) the exercise or enforcement of any of the rights of the
Operational Agent or the Lenders hereunder or (iv) the failure by the
Pledgor to perform or observe any of the provisions hereof.
SECTION 15. Amendments, Etc. No amendment or waiver of any
provision of this Agreement, and no consent to any departure by the
Pledgor herefrom shall in any event be effective unless the same shall be
in writing and signed by the Operational Agent, and then such waiver or
consent shall be effective only in the specific instance and for the
specific purpose for which given.
SECTION 16. Addresses for Notices. All notices and other
communications provided for hereunder shall be in writing (including
telegraphic, facsimile, telex or cable communication) and mailed,
telegraphed, telecopied, telexed, cabled or delivered, if to the Pledgor,
at its address at Fairlane Plaza South, 330 Town Center Drive, Suite 1100,
Dearborn, Michigan 48126, Attention: Rodger A. Kershner, Esq., with a copy
to Doris F. Galvin, Vice President, 212 West Michigan Avenue, Jackson,
Michigan 49201, and if to the Operational Agent, at its address specified
in the Credit Agreement, or, as to either party, at such other address as
shall be designated by such party in a written notice to the other party.
All such notices and communications shall, when mailed, telegraphed,
telecopied, telexed or cabled, be effective five days after when deposited
in the mails, or when delivered to the telegraph company, telecopied,
confirmed by telex answerback or delivered to the cable company,
respectively.
SECTION 17. Continuing Security Interest; Assignments under
Credit Agreement. This Agreement shall create a continuing security
interest in the Collateral and shall (i) remain in full force and effect
until the later of (x) the payment in full of the Obligations and all
other amounts payable under this Agreement and (y) the expiration or
termination of the Commitments, (ii) be binding upon the Pledgor, its
successors and assigns, and (iii) inure to the benefit of, and be
enforceable by, the Operational Agent, the Lenders and their respective
successors, transferees and assigns. Without limiting the generality of
the foregoing clause (iii), any Lender may assign or otherwise transfer
all or any portion of its rights and obligations under the Credit
Agreement (including, without limitation, all or any portion of its
Commitment, the Advances owing to it and any Note held by it) to any other
Person, and such other Person shall thereupon become vested with all the
benefits in respect thereof granted to such Lender herein or otherwise,
subject, however, to the provisions of Article X (concerning the Agents)
and Section 11.07 of the Credit Agreement. Upon the later of the payment
in full of the Obligations and all other amounts payable under this
Agreement and the expiration or termination of the Commitments, the
security interest granted hereby shall terminate and all rights to the
Collateral shall revert to the Pledgor. Upon any such termination, the
Operational Agent will, at the Pledgor's expense, return to the Pledgor
such of the Collateral as shall not have been sold or otherwise applied
pursuant to the terms hereof and execute and deliver to the Pledgor such
documents as the Pledgor shall reasonably request to evidence such
termination.
SECTION 18. Governing Law; Terms. This Agreement shall be
governed by and construed in accordance with the laws of the State of New
York, except to the extent that perfection of the security interest
hereunder, or remedies hereunder, in respect of any particular Collateral
are governed by the laws of a jurisdiction other than the State of New
York. Unless otherwise defined herein or in the Credit Agreement, terms
defined in Article 9 of the Code are used herein as therein defined.
IN WITNESS WHEREOF, the Pledgor has caused this Agreement to be
duly executed and delivered by its officer thereunto duly authorized as of
the date first above written.
CMS ENERGY CORPORATION
By _______________________________
Title:
ACCEPTED AND AGREED:
UNION BANK, as Operational Agent
By ___________________________________
Vice President
<PAGE>
<PAGE>
EXHIBIT 6.02A
FORM OF PROMISSORY NOTE
U.S.$__________ Dated: __________, 19__
FOR VALUE RECEIVED, the undersigned, CMS ENERGY CORPORATION, a
Michigan corporation (the "Borrower"), HEREBY PROMISES TO PAY to the order
of ____________________ (the "Lender") for the account of its Applicable
Lending Office (as defined in the Credit Agreement referred to below) the
principal sum of U.S.$[amount of the Lender's Commitment in figures] or,
if less, the aggregate principal amount of all Advances (as defined below)
made by the Lender to the Borrower pursuant to the Credit Agreement
outstanding on the Termination Date (as defined in the Credit Agreement).
The Borrower promises to pay interest on the unpaid principal
amount of each Advance from the date of such Advance until such principal
amount is paid in full, at such interest rates, and payable at such times,
as are specified in the Credit Agreement.
Both principal and interest are payable in lawful money of the
United States of America to Union Bank, as Operational Agent, at its
offices at 445 South Figueroa Street, 15th Floor, Los Angeles, California
90071, in same day funds. Each Advance made by the Lender to the Borrower
pursuant to the Credit Agreement, and all payments made on account of the
principal amount thereof, shall be recorded by the Lender and, prior to
any transfer hereof, endorsed on the grid attached hereto which is part of
this Promissory Note, provided that the failure to so record any Advance
or any payment on account thereof shall not affect the payment obligations
of the Borrower hereunder or under the Credit Agreement.
This Promissory Note is one of the Notes referred to in, and is
entitled to the benefits of, the Credit Agreement, dated as of
November 30, 1992 (as amended, modified or supplemented from time to time,
the "Credit Agreement", the terms defined therein and not otherwise
defined herein being used herein as therein defined), among the Borrower,
the Lender and certain other Lenders parties thereto, the Co-Agents, the
Documentation Agent and the Operational Agent, and the Security Documents
referred to therein and entered into pursuant thereto. The Credit
Agreement, among other things, (i) provides for the making of advances
(the "Advances") by the Lender to the Borrower from time to time in an
aggregate amount not to exceed the U.S. dollar amount first above
mentioned, the indebtedness of the Borrower resulting from each such
Advance being evidenced by this Promissory Note, and (ii) contains
provisions for acceleration of the maturity hereof upon the happening of
certain stated events and also for prepayments on account of principal
hereof prior to the maturity hereof upon the terms and conditions therein
specified.
The obligations evidenced by this Promissory Note are subject to
the terms of the Collateral Agency and Intercreditor Agreement.
CMS ENERGY CORPORATION
By _______________________________
Senior Vice President and
Chief Financial Officer<PAGE>
<PAGE>
ADVANCES AND PAYMENTS OF PRINCIPAL
__________________________________________________________________________
Amount of
Amount Principal Unpaid
of Paid or Principal Notation
Date Advance Prepaid Balance Made By
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
<PAGE>
<PAGE>
EXHIBIT 6.02C
FORM OF OPINION OF COUNSEL FOR THE LOAN PARTIES
[Date of Initial Extension of Credit]
To each of the Lenders parties
to the Credit Agreement referred
to below, and to Citibank, N.A.
and Union Bank, as Agents under
the Credit Agreement
CMS Energy Corporation
Ladies and Gentlemen:
This letter is furnished to you pursuant to Section 5.02(vii)(A)
of the Credit Agreement, dated as of November 30, 1992 (the "Credit
Agreement"), among CMS Energy Corporation (the "Borrower"), the Banks
parties thereto and the other Lenders from time to time parties thereto,
Citibank, N.A. and Union Bank, as Co-Agents, Citibank, N.A., as
Documentation Agent, and Union Bank, as Operational Agent. Capitalized
terms not defined herein have the meanings ascribed thereto in the Credit
Agreement and the other Loan Documents (as defined in the Credit
Agreement). Certain other terms, as noted herein, are used as defined in
the Uniform Commercial Code as presently in effect in the State of New
York (the "UCC").
We have acted as counsel for the Borrower and the Guarantor in
connection with the preparation, execution and deliver of, and the initial
Extension of Credit made under, the Credit Agreement and the other Loan
Documents.
In that capacity, we have examined:
(a) The Credit Agreement;
(b) The Notes;
(c) The Borrower Pledge Agreement;
(d) The Enterprises Pledge Agreement;
(e) The Guaranty;
(f) The Collateral Agency and Intercreditor Agreement;
(g) Certificates representing the Pledged Shares and undated
stock powers duly executed by the appropriate Pledgor with
respect thereto;
(h) The Articles of Incorporation of the Borrower and all
amendments thereto (the "Borrower Charter");
(i) The by-laws of the Borrower and all amendments thereto
(the "Borrower By-laws");
(j) The Articles of Incorporation of Enterprises and all
amendments thereto (the "Enterprises Charter"); and
(k) The by-laws of Enterprises and all amendments thereto (the
"Enterprises By-laws").
In addition, we have examined the originals, or copies certified
to our satisfaction, of such other corporate records of the Borrower and
of Enterprises, certificates of public officials and of officers of the
Borrower and of Enterprises, and agreements, instruments and other
documents, as we have deemed necessary as a basis for the opinions
expressed below. As to various questions of fact material to such
opinions, we have, when relevant facts were not independently established
by us, relied upon the representations of the Borrower and Enterprises in
the Loan Documents, and upon certificates of the Borrower and Enterprises
of their respective officers or of public officials.
We have assumed (i) the due execution and delivery, pursuant to
due authorization, of each document referred to in clauses (a) through (f)
above by all parties to such document (other than the Loan Parties),
(ii) the authenticity of all such documents submitted to us as originals,
(iii) the genuineness of all signatures (other than those of the Loan
Parties), and (iv) the conformity to the originals of all such documents
submitted to us as copies.
Based upon the foregoing and upon such investigation as we have
deemed necessary, we are of the following opinion:
1. Each of the Borrower and Enterprises is a corporation duly
organized, validly existing and in good standing under the laws of
the State of Michigan.
2. The execution, delivery and performance by the Borrower of
the Credit Agreement, the Notes and the other Loan Documents to which
it is, or is to be, a party, and the performance by the Borrower of
the Collateral Agency and Intercreditor Agreement, are within the
corporate power and authority of the Borrower, have been duly
authorized by all necessary corporate action, and do not contravene
(a) the Borrower Charter or the Borrower By-laws, (b) any provision
of applicable law or (c) any legal or contractual restriction of
which we have knowledge, after due inquiry, binding on the Borrower
or its properties; and such execution, delivery and performance do
not result in or require the creation or imposition of any mortgage,
deed of trust, pledge, or Lien upon or with respect to any of its
properties (other than under the Security Documents). The Credit
Agreement, the Notes and the Borrower Pledge Agreement have been duly
executed and delivered on behalf of the Borrower.
3. The execution, delivery and performance by Enterprises of
the Guaranty and the Enterprises Pledge Agreement are within the
corporate power and authority of Enterprises, have been duly
authorized by all necessary corporate action, and do not contravene
(a) the Enterprises Charter or the Enterprises By-laws, (b) any
provision of applicable law or (c) any legal or contractual
restriction of which we have knowledge, after due inquiry, binding on
Enterprises or its properties; and such execution, delivery and
performance do not result in or require the creation or imposition of
any mortgage, deed or trust, pledge, or Lien upon or with respect to
any of its properties (other than under the Security Documents). The
Guaranty and the Enterprises Pledge Agreement have been duly executed
and delivered on behalf of Enterprises.
4. No authorization or approval or other action by, and no
notice to or filing with, any governmental authority or regulatory
body is required for (a) the valid execution, delivery and
performance by (i) the Borrower of the Credit Agreement and the other
Loan Documents to which it is, or is to be, a party, or
(ii) Enterprises of the Guaranty and the Enterprises Pledge
Agreement, or (b) the creation of any Lien purported to be granted or
created pursuant to any Security Document or the exercise by the
Collateral Agent (on behalf of the Lenders and the Noteholders) or
any Agent (on behalf of the Lenders) of any right or remedy in
respect of any Pledged collateral under the Pledge Agreements, except
for such authorizations, approvals and filings as have been duly
obtained or made and which are in full force and effect on the date
hereof and not subject to appeal.
5. The Credit Agreement, the Notes, the Borrower Pledge
Agreement and the Collateral Agency and Intercreditor Agreement
constitute legal, valid and binding obligations of the Borrower,
enforceable against the Borrower in accordance with their respective
terms.
6. The Guaranty and the Enterprises Pledge Agreement
constitute legal, valid and binding obligations of Enterprises,
enforceable against Enterprises in accordance with their respective
terms.
7. Except as disclosed in the Borrower's Quarterly Report on
Form 10-Q for the period ended September 30, 1992, we are not aware,
after due inquiry, of any pending or threatened action or proceeding
against the Borrower or its properties before any court, governmental
agency or arbitrator, that could, if adversely determined, reasonably
be expected to materially adversely affect the financial condition,
properties, business or operations of the Borrower, the legality,
validity or enforceability of the Creditor Agreement or any other
Loan Document to which the Borrower is, or is to be, a party, or the
validity, enforceability, perfection or priority of any Lien
purported to be granted by or under any Security Document to which
the Borrower is, or is to be, a party.
8. Except as disclosed in the Borrower's Quarterly Report on
Form 10-Q for the period ended September 30, 1992, we are not aware,
after due inquiry, of any pending or threatened action or proceeding
against Enterprises or its properties before any court, governmental
agency or arbitrator, that could, if adversely determined, reasonably
be expected to materially adversely affect the financial condition,
properties, business or operations of Enterprises, the legality,
validity or enforceability of the Guaranty or the Enterprises Pledge
Agreement, or the validity, enforceability, perfection or priority of
any Lien purported to be granted by or under the Enterprises Pledge
Agreement.
9. The Pledged Shares (as defined in the Borrower Pledge
Agreement) have been duly authorized and validly issued, are fully
paid and non-assessable, and constitute 100% of the issued and
outstanding shares of common stock of Consumers and Enterprises.
10. The Pledged Shares (as defined in the Enterprises Pledge
Agreement) have been duly authorized and validly issued, are fully
paid and non-assessable, and constitute 100% of the issued and
outstanding shares of common stock of Nomeco.
11. When the Collateral Agent takes delivery in the State of
New York of the certificates representing the Pledged Shares (as
defined in the Borrower Pledge Agreement) and stock powers duly
executed by the Borrower with respect thereto, and for so long as the
Collateral Agent shall maintain possession of such certificates in
such State, the Borrower Pledge Agreement creates a valid security
interest in favor of the Collateral Agent for the benefit of the
Lenders and the Noteholders in all Pledged Collateral (as defined
therein) in which the Borrower has rights to the extent that the UCC
is applicable thereto, as security for the payment of the Obligations
(as defined therein) and the Collateral Agent shall have a perfected
security interest in all right, title and interest of the Borrower in
such Pledged Shares, prior to other security interest and prior to
any other adverse claims (as defined in Section 8-302(2) of the UCC),
if any, to the extent that such Pledged Shares continue to constitute
certificated securities (as defined in Section 8-102(1)(a) of the
UCC).
12. When the Collateral Agent takes deliver in the State of
New York of the certificates representing the Pledged Shares (as
defined in the Enterprises Pledge Agreement) and stock powers duly
executed by Enterprises with respect thereto, and for so long as the
Collateral Agent shall maintain possession of such certificates in
such State, the Enterprises Pledge Agreement creates a valid security
interest in favor of the Collateral Agent for the benefit of the
Lenders and the Noteholders in all Pledged Collateral (as defined
therein) in which Enterprises has rights to the extent that the UCC
is applicable thereto, as security for the payment of the Obligations
(as defined therein) and the Collateral Agent shall have a perfected
security interest in all right, title and interest of Enterprises in
such Pledged Shares, prior to other security interests and prior to
any other adverse claims (as defined in Section 8-302(2) of the UCC),
if any, to the extent that such Pledged Shares continue to constitute
certificated securities (as defined in Section 8-102(1)(a) of the
UCC).
Due inquiry with respect to the forgoing opinions consisted of
interviewing certain officers of the Borrower and Enterprises and
reviewing such records and documents of the Borrower and Enterprises as we
deemed appropriate to render such opinions.
The opinions set forth in paragraphs 5, 6, 11 and 12, above, are
subject to the following qualifications:
(a) In connection with the opinions expressed in paragraphs 5,
6, 11 and 12, the enforceability of the security interests described
therein, the enforceability of the Borrower's obligations under the
Credit Agreement, the Notes and the other Loan Documents to which it
is, or is to be, a party, and the enforceability of Enterprises'
obligations under the Guaranty and the Enterprises Pledge Agreement,
are or, in the case of any Loan Document executed and delivered by
the Borrower after the date hereof, will be, subject to the effect of
any applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws affecting creditors' rights generally. We further
note that certain of the rights and remedies set forth in the
Security Documents are or may be unenforceable under the laws of the
State of New York, but the inclusion of such provisions does not
affect the validity of such Security Documents, and such security
Documents contain adequate provisions, if properly invoked, for the
enforcement under New York law of the security interests granted
therein.
(b) In connection with the opinions expressed in paragraphs 5,
6, 11 and 12, as to the enforceability of the security interests
described therein, the enforceability of the Borrower's obligations
under the Credit Agreement, the Notes and the other Loan Documents to
which it is, or is to be, a party, and the enforceability of
Enterprises' obligations under the Guaranty and the Enterprises
Pledge Agreement, are subject to general principles of equity
(regardless of whether such enforceability is considered in a
proceeding in equity or at law). Such principles of equity are of
general application and, in applying such principles, a court, among
other things, might not allow a contracting party to exercise
remedies in respect of a default deemed immaterial, or might decline
to order an obligor to perform covenants. Such principles would
include an expectation that parties act with reasonableness and in
good faith, and might be applied, for example, to provisions which
purport to grant a party with the authority to exercise sole
discretion or make conclusive determinations.
(c) We note further that, in addition to the application of
equitable principles described above, courts have imposed an
obligation or contracting parties to act reasonably and in good faith
in the exercise of their contractual rights and remedies, and may
also apply public policy considerations in limiting the right of
parties seeking to obtain indemnification under circumstances where
the conduct of such parties in the circumstances in question is
determined to have constituted negligence.
(d) In connection with the opinions expressed in paragraphs 11
and 12, above, and as to cash proceeds of "Pledged Collateral", we
point out that in the case of proceeds, continuation of the
perfection of the security interests therein of the Collateral Agent
is limited to the extent set forth in Section 9-306 of the UCC.
(e) In connection with the opinions expressed in paragraphs 11
and 12, above, we have assumed that, at the time that the Collateral
Agent takes delivery of the certificates representing the Pledged
Shares, the Collateral Agent, on behalf of itself, each Lender and
each Noteholder, has taken possession of such certificates in good
faith (on the part of the Collateral Agent, each Lender and each
Noteholder) in the absence of notice (to the Collateral Agent, any
Lender or any Noteholder) of any adverse claim (as defined in Section
8-302(2) of the UCC) with respect thereto.
(f) With respect to the opinions set forth in paragraphs 11
and 12, above, we have assumed that none of the pledgors has granted
or permitted, nor does there otherwise exist, any execution or
attachment on any of the Collateral or any other Lien therein or
thereon which does not require steps for perfection under the UCC of
any jurisdiction to be enforceable against third parties.
(g) We express no opinion herein as to:
(i) any Loan Party's rights in or title to any Pledged
Collateral, or the authenticity or enforceability thereof;
(ii)the priority of the security interest created or
purported to be created by any Security Document in any of the
Pledged Collateral as against any claim or lien in favor of the
United States of America or any agency or instrumentality
thereof, including, without limitation, any Federal tax lien
created under the Internal Revenue Code of 1986 or lien created
under Title IV of ERISA;
(iii) the effect of the law of any jurisdiction (other
than the State of New York), wherein any Lender may be located
which limits rates of interest that may be charged or collected
by such Lender;
(iv)the compliance with, or applicability of, Federal or
state securities laws insofar s they may apply to the pledge or
enforcement of the Pledged Shares or other securities (as
defined in Section 8-102(1)(c) of the UCC) under the Pledge
Agreements:
(v) the priority of any security interests, except to the
extent specifically addressed by paragraphs 11 and 12;
(vi)the priority of security interests in any Pledged
Collateral relative to any claim (including for taxes) in favor
of any state or of its respective agencies, authorities,
municipalities or political subdivisions, which claim (or any
lien therefore) is given priority under any law of any state; or
(vii) the priority of security interests in any Pledged
Collateral as against any lien creditor (as such term is defined
in Article 9 of the UCC), to the extent that the security
interests therein purport to secure any advances or other
extensions of credit other than Advances made pursuant to
existing Commitments under the Credit Agreement.
(h) In addition, the opinions set forth in paragraphs 11 and
12, above, are subject to the limitations with respect to purchasers
of instruments of securities imposed by Sections 9-308, 9-309 and
8-301 of the UCC.
Our opinions expressed herein are limited to the laws of the
States of New York and Michigan and the Federal laws of the United States
of America. As to matters of Michigan law involved in the opinions
expressed herein, we have consulted with Rodger A. Kershner, Esq.,
Assistant General Counsel to the Borrower and Vice President and General
Counsel to Enterprises, who is licensed to practice law in the State of
Michigan. Mr. Kershner has confirmed to us that, insofar as matters of
Michigan law are involved in the opinions expressed herein, such opinions
are, in his opinion, correct. We believe that you and we are justified in
relying on Mr. Kershner's opinion for such purposes.
Except as otherwise specified herein, this opinion is being
delivered solely for the benefit of the parties to whom it is addressed.
Accordingly, it may not be quoted, filed with any governmental authority
or otherwise circulated or utilized for any other purpose without our
prior written consent.
Very truly yours,
<PAGE>
<PAGE>
EXHIBIT 6.02D
FORM OF OPINION OF COUNSEL TO THE AGENTS
[Date of Initial Extension of Credit]
To the Banks listed on Schedule A
hereto, and to Citibank, N.A. and
Union Bank, as Agents
CMS Energy Corporation
Ladies and Gentlemen:
We have acted as special New York counsel to Citibank, N.A. and
Union Bank, individually and as Agents, in connection with the execution
and delivery of, and the making of the initial Extension of Credit on this
date under, the Credit Agreement, dated as of November 30, 1992 (the
"Credit Agreement"), among CMS Energy Corporation, the Banks parties
thereto and the other Lenders from time to time parties thereto, Citibank,
N.A. and Union Bank, as Co-Agents, Citibank, N.A., as Documentation Agent,
and Union Bank, as Operational Agent. Terms defined in the Credit
Agreement are used herein as therein defined.
In this connection, we have examined an executed counterpart of
the Credit Agreement, together with the other Loan Documents and other
documents listed on Schedule B hereto.
In our examination of the documents referred to above, we have
assumed the authenticity of all such documents submitted to us as
originals, the genuineness of all signatures, the due authority of the
parties executing such documents and the conformity to the originals of
all such documents submitted to us as copies. We have further assumed
that you have evaluated, and are satisfied with, the creditworthiness of
the Borrower and the Guarantor and the business and financial terms
evidenced by the Loan Documents. We have relied, as to factual matters,
on the documents we have examined.
Our opinions expressed below are limited to the law of the State
of New York and the Federal law of the United States, and we do not
express any opinions concerning any other law.
Based upon and subject to the foregoing and upon such
investigation as we have deemed necessary, and while we have not
independently considered the matters covered by the opinions listed on
Schedule B hereto to the extent necessary to enable us to express the
conclusions stated therein, we are of the opinion that (a) the Credit
Agreement, the Notes and the Guaranty are in substantially acceptable
legal form, and (b) the other Loan Documents and the opinions and other
documents listed on Schedule B hereto are substantially responsive to the
requirements of the corresponding subsections of Sections 5.01 and 5.02 of
the Credit Agreement pursuant to which the same have been delivered. In
connection with our review of the opinion of Loomis, Ewert, Ederer,
Parsley, Davis & Gotting, P.C., special Michigan counsel for the Loan
Parties, listed as item ___ on Schedule B hereto, we have relied upon the
opinion of Dickinson, Wright, Moon, Van Dusen & Freeman, special Michigan
counsel to the Lenders, a copy of which is attached as Exhibit A hereto.
Very truly yours
<PAGE>
<PAGE>
Schedule A
List of Banks
-------------
<PAGE>
<PAGE>
Schedule B
List of Documents Examined
--------------------------
<PAGE>
<PAGE>
EXHIBIT 6.02E
FORM OF OPINION OF SPECIAL MICHIGAN COUNSEL
FOR THE LOAN PARTIES
[Date of Initial Extension of Credit]
To each of the Lenders parties
to the Credit Agreement referred
to below, and to Citibank, N.A.
and Union Bank, as Agents under
the Credit Agreement
CMS Energy Corporation
Ladies and Gentlemen:
This letter is furnished to you pursuant to Section 5.02(vii)(C)
of the Credit Agreement, dated as of November 30, 1992 (the "Credit
Agreement"), among CMS Energy Corporation (the "Borrower"), the Banks
parties thereto and the other Lenders from time to time parties thereto,
Citibank, N.A. and Union Bank, as Co-Agents, Citibank, N.A., as
Documentation Agent, and Union Bank, as Operational Agent. Capitalized
terms not defined herein have the meanings ascribed thereto in the Credit
Agreement and the Security Documents (as defined in the Credit Agreement).
We have acted as special Michigan counsel for the Loan Parties
in connection with the preparation, execution and delivery of, and the
initial Extension of Credit made under, the Credit Agreement and the other
Loan Documents.
In that capacity, we have examined:
(a) The Credit Agreement;
(b) The Notes;
(c) The Borrower Pledge Agreement;
(d) The Enterprises Pledge Agreement;
(e) The Guaranty; and
(f) The Collateral Agency and Intercreditor Agreement.
In addition, we have examined the originals, or copies certified
to our satisfaction, of such other corporate records of the Borrower and
Enterprises, certificates of public officials and of officers of the
Borrower and Enterprises, and agreements, instruments and other documents
as we have deemed necessary as a basis for the opinions expressed below.
As to various questions of fact material to such opinions, we have, when
relevant facts were not independently established by us, relied upon the
representations of the Borrower and Enterprises in the Loan Documents, and
upon certificates of the Borrower and Enterprises or their respective
officers or of public officials.
We have assumed (i) the due execution and delivery, pursuant to
due authorization, of each document referred to in clauses (a) through (f)
above by all parties to such document, (ii) the authenticity of all such
documents submitted to us as originals, (iii) the genuineness of all
signatures and (iv) the conformity to the originals of all such documents
submitted to us as copies. In addition, it is our understanding that the
Credit Agreement, the Notes and the other Loan Documents will be delivered
in the State of New York, payments pursuant to the Notes will be made in a
state other than the State of Michigan, and the principal place of
business of the Collateral Agent is located in the State of New York.
Our opinions expressed herein are limited to the laws of the
State of Michigan.
Based upon the foregoing and upon such investigation as we have
deemed necessary, we are of the following opinion:
1. In any action or proceeding arising out of or relating to
the Credit Agreement, the Notes or any other Loan Document to which
the Borrower or Enterprises is, or is to be, a party in any Michigan
state court or any Federal court sitting in the State of Michigan,
such court would recognize and give effect to the provisions of the
Credit Agreement, the Notes or such other Loan Document, as the case
may be, wherein the parties thereto agree that the Credit Agreement,
the Notes or such other Loan Document, as the case may be, shall be
governed by, and construed in accordance with, the laws of the State
of New York, except in the case of those provisions set forth in the
Credit Agreement, the Notes and the other Loan Documents the
enforcement of which would contravene a fundamental policy of the
State of Michigan. In the course of our review of the Credit
Agreement, the Notes and the other Loan Documents, nothing has come
to our attention to indicate that any of such provisions would do so.
2. No authorization or approval or other action by, and no
notice to or filing with, any Michigan governmental authority or
regulatory body (including, without limitation, the Michigan Public
Service Commission) is required for (a) the valid execution, delivery
and performance by (i) the Borrower of the Credit Agreement and the
other Loan Documents to which it is, or is to be, a party, or
(ii) Enterprises of the Guaranty and the Enterprises Pledge
Agreement, or (b) the creation of any Lien purported to be granted or
created pursuant to any Security Document or the exercise by the
Collateral Agent (on behalf of the Lenders and the Noteholders) of
any right or remedy in respect of any Pledged collateral under the
Pledge Agreements.
Very truly yours,
<PAGE>
<PAGE>
EXHIBIT 11.07
FORM OF LENDER ASSIGNMENT
Dated ____________, 19___
Reference is made to the Amended and Restated Credit Agreement,
dated as of November 30, 1992, as amended and restated as of October 15,
1993 (said Agreement, as so amended and restated and as it may hereafter
be amended or otherwise modified from time to time, being the "Credit
Agreement", the terms defined therein and not otherwise defined herein
being used herein as therein defined), among the Borrower, the Lenders,
the Co-Agents, the Documentation Agent and the Operational Agent.
Pursuant to the Credit Agreement, ____________ (the "Assignor") has
committed to make advances ("Advances") to the Borrower, which Advances
are evidenced by a promissory note (the "Note") issued by the Borrower to
the Assignor.
The Assignor and ____________ (the "Assignee") agree as follows:
1. The Assignor hereby sells and assigns to the Assignee, and
the Assignee hereby purchases and assumes from the Assignor, that interest
in and to all of the Assignor's rights and obligations under the Credit
Agreement as of the date hereof which represents the percentage interest
specified on Schedule 1 of all outstanding rights and obligations under
the Credit Agreement (the "Assigned Interest"), including, without
limitation, such interest in the Assignor's Commitment, the Advances owing
to the Assignor and the Note held by the Assignor. After giving effect to
such sale and assignment, the Assignee's Commitment and the amount of the
Advances owing to the Assignee will be as set forth in Section 2 of
Schedule 1. The effective date of this sale and assignment shall be the
date specified on Schedule 1 hereto (the "Effective Date").
2. On ____________, 19___, the Assignee will pay to the
Assignor, in same day funds, at such address and account as the Assignor
shall advise the Assignee, $_________, and the sale and assignment
contemplated hereby shall thereupon become effective as of the Effective
Date. From and after the Effective Date, the Assignor agrees that the
Assignee shall be entitled to all rights, powers and privileges of the
Assignor under the Credit Agreement and the Note to the extent of the
Assigned Interest, including without limitation (i) the right to receive
all payments in respect of the Assigned Interest for the period from and
after the Effective Date, whether on account of principal, interest, fees,
indemnities in respect of claims arising after the Effective Date,
increased costs, additional amounts or otherwise, (ii) the right to vote
and to instruct the Agents under the Credit Agreement according to its
Percentage based on the Assigned Interest, (iii) the right to set-off and
to appropriate and apply deposits of the Borrower as set forth in the
Credit Agreement and (iv) the right to receive notices, requests, demands
and other communications. The Assignor agrees that it will promptly remit
to the Assignee any amount received by it in respect of the Assigned
Interest (whether from the Borrower, any Agent or otherwise) in the same
funds in which such amount is received by the Assignor.
3. The Assignor (i) represents and warrants that it is the
legal and beneficial owner of the interest being assigned by it hereunder
and that such interest is free and clear of any adverse claim; (ii) makes
no representation or warranty and assumes no responsibility with respect
to any statements, warranties or representations made in or in connection
with the Credit Agreement or the execution, legality, validity,
enforceability, genuineness, sufficiency or value of the Credit Agreement
or any other instrument or document furnished pursuant thereto; and
(iii) makes no representation or warranty and assumes no responsibility
with respect to the financial condition of the Borrower or the performance
or observance by the Borrower of any of its obligations under the Credit
Agreement or any other instrument or document furnished pursuant thereto.
Except as specified in this Section 3, the assignment of the Assigned
Interest contemplated hereby shall be without recourse to the Assignor.
4. The Assignee (i) confirms that it has received a copy of
the Credit Agreement, together with copies of the financial statements
referred to in Section 6.01(e)(i) thereof and such other documents and
information as it has deemed appropriate to make its own credit analysis
and decision to enter into this Assignment and purchase the Assigned
Interest, (ii) agrees that it will independently and without reliance upon
the Assignor and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in
taking or not taking action under the Credit Agreement, (iii) confirms
that it satisfies the requirements of an Eligible Assignee, (iv) appoints
and authorizes each Agent to take such action as agent on its behalf and
to exercise such powers under the Loan Documents as are delegated to each
Agent by the terms thereof, together with such powers as are reasonably
incidental thereto, (v) agrees that it will perform in accordance with
their terms all of the obligations which by the terms of the Loan
Documents are required to be performed by it as a Lender and (vi) agrees
and acknowledges that (a) the Credit Agreement constitutes a "Replacement
Facility" under the Collateral Agency and Intercreditor Agreement and the
Pledge Agreements and (b) the obligations of the Borrower how or hereafter
existing under the Credit Agreement, the Notes and the other Loan
Documents, whether for principal, interest, fees, expenses or otherwise,
constitute "Bank Debt" under the Collateral Agency and Intercreditor
Agreement and that such obligations are subject to the provisions thereof.
In furtherance of the provisions of clause (vi), above, the Assignee
agrees to be bound by the terms and conditions of the Collateral Agency
and Intercreditor Agreement and of each of the Pledge Agreements and that
it shall constitute a "Lender" for all purposes thereunder.
5. This Assignment may be executed in any number of
counterparts and by different parties in separate counterparts, each of
which when so executed shall be deemed to be an original and all of which
taken together shall constitute but one and the same instrument.
6. This Assignment shall be governed by, and construed in
accordance with, the laws of the State of New York.
IN WITNESS WHEREOF, the parties hereto have caused this
Assignment to be executed by their respective officers thereunto duly
authorized, as of the date first above written, such execution being made
on Schedule 1 hereto.
<PAGE>
<PAGE>
Schedule 1
to
Assignment Agreement
Dated ________, 19__
Section 1.
Percentage Interest: _____%
Section 2.
Assignee's Commitment: $____
Aggregate Outstanding
Principal Amount of
Advances owing to the Assignee:$____
Section 3.
Effective Date: ________, 19__
[NAME OF ASSIGNOR]
By:____________________
Title:
[NAME OF ASSIGNEE]
By:____________________
Title:
<PAGE>
<PAGE>
Schedule I
CMS ENERGY CORPORATION
Amended and Restated Credit Agreement, dated as of November 30, 1992,
as amended and restated as of October 15, 1993,
among CMS Energy Corporation, the Banks named therein,
Citibank, N.A. and Union Bank, as Co-Agents,
Citibank, N.A., as Documentation Agent, and
Union Bank, as Operational Agent
Name of Bank Domestic Lending Office Eurodollar
Lending Office
- ------------ ----------------------- ---------------
Barclays 75 Wall Street -Same-
Bank PLC New York, New York 10265
Telephone: 212.412.3571
Telecopier: 212.412.5002
Telex: 12-6946 BARCLADOM
Canadian Imperial 200 Galleria Parkway, N.W. -Same-
Bank of Commerce Suite 650
Atlanta, Georgia 30339
Telephone: 404.916.7031
Telecopier: 404.955.1185
Telex: 54-2413
Attention: Clare Coyne
Senior Associate
The Chase 1 Chase Manhattan Plaza -Same-
Manhattan 3rd Floor
Bank, N.A. Global Power Group
New York, New York 10081
Telephone: 212.552.7518
Telecopier: 212.552.1687
Attention: Mr. Richard Cortright
Citibank, N.A. 399 Park Avenue, 4th Floor -Same-
New York, New York 10043
Telephone: 212.559.2027
Telecopier:212.832.9859
Attention: Mr. Joseph W. Casson
The First National The First National Bank -Same-
Bank of Chicago of Chicago
One First National Plaza
Chicago, Illinois 60670
Telephone: 312.732.5443
Telecopier: 312.732.3055
Attention: Mr. Michael Murphy
The Long-Term 190 South LaSalle Street -Same-
Credit Bank of Suite 800
Japan, Ltd., Chicago, Illinois 60603
Chicago Branch Telephone: 312.704.1700
Telecopier: 312.704.8505
Michigan National 124 West Allegan -Same-
Bank Michigan National Tower
Commercial Loan Department 98-03
Lansing, Michigan 48933
Telephone: 517.377.3368
Telecopier: 517.377.3102
Attention: Mr. Mark Aben
National 175 Water Street -Same-
Westminster New York, New York
Bank PLC Telephone: 212.602.4149
Telecopier: 212.602.4118
Attention: Robert Passarello
The Toronto- Houston Agency -Same-
Dominion Bank Suite 1700
909 Fannin
Houston, Texas 77010
Telephone: 713.653.8245
Telecopier: 713.951.9921
Attention: Ms. Debbie A. Greene
Union Bank 445 South Figueroa Street -Same-
Los Angeles, California 90071
Telephone: 213.236.5809
Telecopier: 213.236.4096
Attention: John M. Edmonston<PAGE>
<PAGE>
SCHEDULE II
INDEBTEDNESS OF CMS ENERGY
As of August 30, 1993
I.CMS GENERATION
A. CMS Energy Guaranty to Comerica in connection with letters of
credit entered into by CMS Generation Filer City, Inc. required
to cover debt service reserve, for Series A ($4,300,000) and
Series B ($585,000) debt originally dated as of August 29, 1990.
Beneficiary - Prudential Insurance Company.
B. CMS Energy Guaranty to Chase Manhattan in connection with Letter
of Credit Reimbursement Agreement entered into by CMS Generation
Grayling Company for equity and project cost overrun funding
dated as of August 23, 1991. Beneficiary - Barclays Bank
(outstanding Letter of Credit as of October 22, 1992 was
$10,000,000).
C. CMS Energy Parent Guaranty of CMS Generation Filer City Inc.'s
working capital loan obligation dated September 5, 1990
(estimated potential exposure up to $500,000).
D. CMS Energy Guaranty to Chase Manhattan in connection with the
letter of credit reimbursement by CMS Generation San Nicolas
Company for equity and project costs/fundings as required, as of
April 16, 1993 (outstanding as of August 30, 1993 was
$2,400,000).
E. CMS Energy Guaranty to Chase Manhattan in connection with the
letter of credit reimbursement by CMS Generation S.A. (Hidronor
Project) for $68,431,964 dated as of July 14, 1993 (outstanding
as of August 30, 1993 was $59,431,964).
II.CMS ENTERPRISES CO.
A. CMS Energy Guaranty of gas purchases of CMS Gas Marketing to
PG&E resources Company dated April 5, 1993 for an amount not to
exceed $200,000.
B. CMS Energy Guaranty to NBD guaranteeing payment of construction
completion costs, if any, in connection with Antrim CO2 removal
plant. (Total construction costs estimated to be $12.3MM, CMS
Share 60%).
C. CMS Energy Guaranty of CMS Gas Marketing Company transportation
obligations to Great Lakes Gas Transmission Company dated
October 31, 1990.
D. CMS Energy Guaranty for transportation service between ANR and
CMS Gas Marketing Company dated as of June 2, 1988.
E. CMS Energy Guaranty to Comerica in connection with a letter of
credit entered into by CMS Saginaw Bay Company required for cash
distributions from the partnership; dated as of February 6,
1992. Beneficiary - Mellon Bank, NA (outstanding Letter of
Credit as of August 30, 1993 was $1,028,000).
F. CMS Energy Guaranty to Union Oil Company for purchases of
natural gas, dated July 16, 1992 (estimated potential exposure
up to $600,000).
G. Master Lease Agreement, dated as of November 1, 1988, and
Supplement No. 2 thereto, dated October 1, 1991, between CMS
Enterprises and Meridian Leasing Corporation (outstanding as of
August 30, 1993 was $473,410.40).
H. Master Lease Agreement dated as of August 1, 1988 between CMS
Enterprises and BLC Corp., as supplemental (outstanding lease
obligations as of August 30, 1993 were $57,338.64).
I. Letter Agreement, dated as of August 29, 1990, among CMS
Enterprises and Comerica for the Filer City Project (outstanding
Letter of Credit as of August 30, 1993 was $4,649,324).
J. CMS Enterprises' letter agreement dated November 14, 1990
indemnifying Barclays Bank from expenses incurred in connection
with bond documentation submitted to the Michigan Strategic Fund
in connection with the Cadillac project.
III.CMS CAPITAL CORP.
Master Lease Agreement, dated as of December 27, 1989, and Supplement
No. 1 thereto, dated as of January 19, 1990, as amended, between CMS
Capital Corp. and Meridian Leasing; sublease to CMS Energy dated
June 29, 1990 (outstanding lease obligations as of August 30, 1993
were $4,125,554.00).
IV.MCV-RELATED AGREEMENTS
Pursuant to the terms of the Unwind Agreement among CMS Energy,
Midland Group, Ltd., Consumers Power Company ("Consumers Power"), CMS
Midland, Inc. ("CMS Midland"), MEC Development Corp. ("MDC"), and CMS
Midland Holdings Company ("CMS Holdings") made as of December 10,
1991, (1) Consumers Power assumed and agreed to discharge all
obligations of CMS Energy under the agreement described in Section
V.A. below, and (2) CMS Midland and CMS Holdings assumed and agreed
to discharge all obligations of CMS Energy under the agreements
described in Sections V.B. through and including V.G. below.
A. Amended and Restated Investor Partners Tax Indemnification
Agreement dated as of June 1, 1990 (CMS Holdings). CMS Holdings
agrees to indemnify the Investor Partners for certain tax
matters, including adverse tax consequences of the failure by
MDC to dispose of all MCV and Owner Trust Notes and Bonds by
December 31, 1992, backed by a CMS Energy Guaranty.
B. Stand-by Working Capital Facility dated as of June 14, 1990 (CMS
Energy as Participating Partner Affiliate). Under certain
circumstances CMS Energy agrees to provide MCV with, in an
aggregate amount not to exceed $5,261,000, for a working capital
loan ($5.2MM represents CMS Energy's interest of the total loan
commitment).
C. Parent Guaranty dated as of June 1, 1990 (CMS Energy as
Guarantor, as Parent of CMS Holdings). CMS Energy guarantees
both the payment and performance by CMS Holdings of its
obligations under the Investor Partners Tax Indemnification
Agreement and the First Midland Partnership Agreement and the
performance by First Midland Partnership of certain obligations
under the Participation Agreement and the Tax Indemnification
Agreement (estimated potential exposure up to $7,700,000).
D. Stipulated AGE Release Amount Payment between CMS Energy,
Consumers Power and Dow Chemical Company dated as of June 1,
1990. If Dow exercises its right to acquire the Alternate
Generating Equipment (AGE) under the Back-up SEPA (Steam and
Electric Purchase Agreement): (a) Consumers Power will pay the
amount, up to $85 million, by which Dow's cost of obtaining the
AGE exceeds the present value of the Dow Note under the Back-up
SEPA. (b) CMS Energy will pay the amount by which Dow's cost to
acquire the AGE (excluding the cost of discharging
non-consensual liens) exceeds $85 million or the Fair Market
Value of the AGE.
E. (1) Environmental Agreement by CMS Energy to United States
Trust Company of New York, Meridian Trust Company and the
Bondholders dated as of June 1, 1990. CMS Energy agrees
to indemnify the Debt for costs relating to certain
environmental matters.
(2) Environmental Agreement by CMS Energy to The Connecticut
National Bank dated as of June 1, 1990. CMS Energy agrees
to indemnify the Equity for costs relating to certain
environmental matters.
(3) Indemnity Agreement by CMS Energy to MCV dated as of
June 1, 1990. CMS Energy agrees to indemnify MCV for
costs relating to certain environmental matters.
F. Obligations of CMS Energy pursuant to the Expense Reimbursement
Agreement dated June 14, 1990, to reimburse First Midland
Limited Partnership for certain expenses.
G. Engagement Agreements with Morgan Stanley with respect to
private placement of sale leaseback debt and Salomon Brothers
and Drexel with respect to placement of lease equity. CMS
Energy indemnifies the investment bankers with respect to
expenses and liabilities arising in connection with these
transactions.
H. CMS Energy Indemnification of Stone & Webster in connection with
Feasibility Study and Gas Assurance Report prepared by Stone &
Webster.
I. Customary indemnification and contribution obligations in favor
of underwriters provided in connection with the offering and
sale of the MCV Bonds under (i) Senior Underwriting Agreement
dated November 1, 1991; (ii) Subordinated Underwriting Agreement
dated November 22, 1991; and (iii) Placement Agency Agreement
dated as of October 9, 1991.
<PAGE>
<PAGE>
CONSENT
The undersigned, as Guarantor and Pledgor under the Guaranty,
dated as of November 30, 1992, and under the Pledge Agreement, dated as of
October 8, 1992, as amended and restated as of November 30, 1992, in favor
of the Documentation Agent and the Collateral Agent, respectively, for the
benefit of the parties to the Existing Agreement referred to in the
foregoing Amended and Restated Credit Agreement, hereby consents to said
Amended and Restated Credit Agreement and hereby confirms and agrees that
(i) each of the Guaranty and the Pledge Agreement is, and shall continue
to be, in full force and effect and is hereby confirmed and ratified in
all respects except that, on and after the effective date of said Amended
and Restated Credit Agreement, each reference in the Guaranty and the
Pledge Agreement to "the Credit Agreement", "thereunder", "thereof" or
words of like import referring to the Credit Agreement shall mean and be a
reference to the Amended and Restated Credit Agreement, and (ii) the
Pledge Agreement and all of the Collateral described therein do,
and shall continue to, secure the payment of all of the Obligations (as
defined therein).
CMS ENTERPRISES COMPANY
By /s/ MRWalicki
_____________________________
Title: Vice President-Finance
<PAGE>
<PAGE>
[EXECUTION COPY]
CASH COLLATERAL AGREEMENT
CASH COLLATERAL AGREEMENT, dated as of October 15, 1993, made by
CMS ENERGY CORPORATION, a Michigan corporation (the "Pledgor"), to Union
Bank ("Union Bank"), as operational agent (the "Operational Agent") for
the lenders (the "Lenders") parties to the Credit Agreement (as
hereinafter defined).
PRELIMINARY STATEMENTS
(1) Citibank, N.A. and Union Bank, as Co-Agents, and the
Lenders have entered into a Credit Agreement, dated as of November 30,
1992, as amended and restated as of October 15, 1993 (said Agreement, as
so amended and restated and as it may hereafter be amended or otherwise
modified from time to time, being the "Credit Agreement", the terms
defined therein and not otherwise defined herein being used herein as
therein defined), with the Pledgor.
(2) Pursuant to Section 5.03(b) of the Credit Agreement, any
prepayments required by such subsection are to be applied to outstanding
Base Rate Advances up to the full amount thereof before they are applied,
first, to outstanding Eurodollar Rate Advances and, second, as cash
collateral, pursuant to this Agreement, to secure LC Outstandings.
(3) The cash collateral referenced in preliminary statement
(2), above, shall be deposited by the Operational Agent in a special
non-interest-bearing cash collateral account (the "Account") with the
Operational Agent at its office at 445 South Figueroa Street, 15th Floor,
Los Angeles, California 90071, Account No. 2200411911 (or at such other
office of the Operational Agent as the Operational Agent may, from time to
time, notify the Pledgor), in the name of the Pledgor but under the sole
control and dominion of the Operational Agent and subject to the terms of
this Agreement.
NOW THEREFORE, in consideration of the premises and for other
good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the Pledgor hereby agrees with the Operational Agent
for its benefit and the ratable benefit of the Lenders as follows:
SECTION 1. Pledge and Assignment. The Pledgor hereby pledges
and assigns to the Operational Agent for its benefit and the ratable
benefit of the Lenders, and grants to the Operational Agent for its
benefit and the ratable benefit of the Lenders a security interest in, the
following collateral (the "Collateral"):
(i) the Account, all funds held therein and all
certificates and instruments, if any, from time to time
representing or evidencing the Account;
(ii)all Investments (as hereinafter defined) from time to
time, and all certificates and instruments, if any, from time to
time representing or evidencing the Investments;
(iii) all notes, certificates of deposit, deposit
accounts, checks and other instruments from time to time
hereafter delivered to or otherwise possessed by the Operational
Agent for or on behalf of the Pledgor in substitution for or in
addition to any or all of the then existing Collateral;
(iv)all interest, dividends, cash, instruments and other
property from time to time received, receivable or otherwise
distributed in respect of or in exchange for any or all of the
then existing Collateral; and
(v) all proceeds of any and all of the foregoing
Collateral.
SECTION 2. Security for Obligations. This Agreement secures
the payment of all reimbursement obligations of the Borrower now or
hereafter existing with respect to LC Outstandings, and all obligations of
the Pledgor now or hereafter existing under this Agreement (all such
obligations of the Borrower and the Pledgor being the "Obligations").
Without limiting the generality of the foregoing, this Agreement secures
the payment of all amounts which constitute part of the Obligations and
would be owed by the Borrower to the Operational Agent or the Lenders
under the Credit Agreement and the Notes but for the fact that they are
unenforceable or not allowable due to of the existence of a bankruptcy,
reorganization or similar proceeding involving the Borrower. The
Obligations secured by this Agreement are subject to the terms of the
Collateral Agency and Intercreditor Agreement.
SECTION 3. Delivery of Collateral. All certificates or
instruments, if any, representing or evidencing the Collateral shall be
delivered to and held by or on behalf of the Operational Agent pursuant
hereto and shall be in suitable form for transfer by delivery, or shall be
accompanied by duly executed instruments of transfer or assignment in
blank, all in form and substance satisfactory to the Operational Agent.
The Operational Agent shall have the right, at any time upon the
occurrence and during the continuance of an Event of Default or an
Unmatured Default, in its discretion and without notice to the Pledgor, to
transfer to or to register in the name of the Operational Agent or any of
its nominees any or all of the Collateral. In addition, the Operational
Agent shall have the right at any time to exchange certificates or
instruments representing or evidencing Collateral for certificates or
instruments of smaller or larger denominations.
SECTION 4. Maintaining the Account. So long as any Lender has
any Commitment or any Note shall remain unpaid:
(a) The Pledgor will maintain the Account with the
Operational Agent.
(b) It shall be a term and condition of the Account,
notwithstanding any term or condition to the contrary in any
other agreement relating to the Account and except as otherwise
provided by the provisions of Section 6 and Section 13, that no
amount (including interest on the Account, if any) shall be paid
or released to or for the account of, or withdrawn by or for the
account of, the Pledgor or any other Person (other than the
Operational Agent and the Lenders) from the Account.
The Account shall be subject to such applicable laws, and such applicable
regulations of the Board of Governors of the Federal Reserve System and of
any other appropriate banking or governmental authority, as may now or
hereafter be in effect.
SECTION 5. Investing of Amounts in the Account. If requested
by the Pledgor, the Operational Agent will, subject to the provisions of
Section 6 and Section 13, from time to time (a) invest amounts on deposit
in the Account in such Permitted Investments as the Pledgor may select and
the Operational Agent may approve and (b) invest interest paid on the
Permitted Investments referred to in clause (a), above, and reinvest other
proceeds of any such Permitted Investments which may mature or be sold, in
each case in such Permitted Investments as the Pledgor may select and the
Operational Agent may approve (the Permitted Investments referred to in
clauses (a) and (b), above, being collectively "Investments"). Interest
and proceeds that are not invested or reinvested in Investments as
provided above shall be deposited and held in the Account.
SECTION 6. Release of Amounts. So long as no Event of Default
or Unmatured Default shall have occurred and be continuing, the
Operational Agent will pay and release to the Pledgor or at its order,
upon the request of the Pledgor, (a) amounts of credit balance of the
Account and of principal of any other Collateral when matured or sold to
the extent that (i) the sum of the credit balance of the Account plus the
aggregate outstanding principal amount of all other Collateral exceeds
(ii) the aggregate amount of LC Outstandings in respect of all Letters of
Credit and all other amounts owing by the Pledgor hereunder, (b) all
amounts in the Account if the Commitments exceed the aggregate amount of
LC Outstandings in respect of all Letters of Credit and all other amounts
owing by the Pledgor hereunder and (c) all interest and earnings on the
Investments deposited and held in the Account.
SECTION 7. Representations and Warranties. The Pledgor
represents and warrants as follows:
(a) The Pledgor is the legal and beneficial owner of the
Collateral free and clear of any lien, security interest, option or other
charge or encumbrance except for the security interest created by this
Agreement.
(b) The pledge and assignment of the Collateral pursuant to
this Agreement creates a valid and perfected first priority security
interest in the Collateral, securing the payment of the Obligations.
(c) No consent of any other Person and no authorization,
approval, or other action by, and no notice to or filing with, any
governmental authority or regulatory body is required (i) for the pledge
and assignment by the Pledgor of the Collateral pursuant to this Agreement
or for the execution, delivery or performance of this Agreement by the
Pledgor, (ii) for the perfection or maintenance of the security interest
created hereby (including the first priority nature of such security
interest) or (iii) for the exercise by the Operational Agent of its rights
and remedies hereunder.
(d) There are no conditions precedent to the effectiveness of
this Agreement that have not been satisfied or waived.
(e) The Pledgor has, independently and without reliance upon
the Operational Agent or any Lender and based on such documents and
information as it has deemed appropriate, made its own credit analysis and
decision to enter into this Agreement.
SECTION 8. Further Assurances. The Pledgor agrees that at any
time and from time to time, at the expense of the Pledgor, the Pledgor
will promptly execute and deliver all further instruments and documents,
and take all further action, that may be necessary or desirable, or that
the Operational Agent may reasonably request, in order to perfect and
protect any security interest granted or purported to be granted hereby or
to enable the Operational Agent to exercise and enforce its rights and
remedies hereunder with respect to any Collateral.
SECTION 9. Transfers and Other Liens. The Pledgor agrees that
it will not (i) sell, assign (by operation of law or otherwise) or
otherwise dispose of, or grant any option with respect to, any of the
Collateral, or (ii) create or permit to exist any lien, security interest,
option or other charge or encumbrance upon or with respect to any of the
Collateral, except for the security interest under this Agreement.
SECTION 10. Operational Agent Appointed Attorney-in-Fact. The
Pledgor hereby appoints the Operational Agent the Pledgor's
attorney-in-fact, with full authority in the place and stead of the
Pledgor and in the name of the Pledgor or otherwise, from time to time
upon the occurrence and during the continuance of an Event of Default or
Unmatured Default or otherwise to the extent that the Operational Agent
shall reasonably deem any action to be necessary in order to maintain its
security interest in the Collateral, in the Operational Agent's
discretion, to take any action and to execute any instrument which the
Operational Agent may deem necessary or advisable to accomplish the
purposes of this Agreement, including, without limitation, to receive,
indorse and collect all instruments made payable to the Pledgor
representing any interest payment, dividend or other distribution in
respect of the Collateral or any part thereof and to give full discharge
for the same.
SECTION 11. Operational Agent May Perform. If the Pledgor
fails to perform any agreement contained herein, the Operational Agent may
itself perform, or cause performance of, such agreement, and the expenses
of the Operational Agent incurred in connection therewith shall be payable
by the Pledgor under Section 14.
SECTION 12. The Operational Agent's Duties. The powers
conferred on the Operational Agent hereunder are solely to protect its
interest in the Collateral and shall not impose any duty upon it to
exercise any such powers. Except for the safe custody of any Collateral
in its possession and the accounting for moneys actually received by it
hereunder, the Operational Agent shall have no duty as to any Collateral,
as to ascertaining or taking action with respect to calls, conversions,
exchanges, maturities, tenders or other matters relative to any
Collateral, whether or not the Operational Agent or any Lender has or is
deemed to have knowledge of such matters, or as to the taking of any
necessary steps to preserve rights against any parties or any other rights
pertaining to any Collateral. The Operational Agent shall be deemed to
have exercised reasonable care in the custody and preservation of any
Collateral in its possession if such Collateral is accorded treatment
substantially equal to that which the Operational Agent accords its own
property.
SECTION 13. Remedies upon Default. If any Event of Default
shall have occurred and be continuing:
(a) The Operational Agent may, without notice to the
Pledgor except as required by law and at any time or from time
to time, charge, set-off and otherwise apply all or any part of
the Account against the Obligations or any part thereof.
(b) The Operational Agent may also exercise in respect of
the Collateral, in addition to other rights and remedies
provided for herein or otherwise available to it, all the rights
and remedies of a secured party on default under the Uniform
Commercial Code in effect in the State of New York at that time
(the "Code") (whether or not the Code applies to the affected
Collateral), and may also, without notice except as specified
below, sell the Collateral or any part thereof in one or more
parcels at public or private sale, at any of the Operational
Agent's offices or elsewhere, for cash, on credit or for future
delivery, and upon such other terms as the Operational Agent may
deem commercially reasonable. The Pledgor agrees that, to the
extent notice of sale shall be required by law, at least ten
days' notice to the Pledgor of the time and place of any public
sale or the time after which any private sale is to be made
shall constitute reasonable notification. The Operational Agent
shall not be obligated to make any sale of Collateral regardless
of notice of sale having been given. The Operational Agent may
adjourn any public or private sale from time to time by
announcement at the time and place fixed therefor, and such sale
may, without further notice, be made at the time and place to
which it was so adjourned.
(c) Any cash held by the Operational Agent as Collateral
and all cash proceeds received by the Operational Agent in
respect of any sale of, collection from, or other realization
upon all or any part of the Collateral may, in the discretion of
the Operational Agent, be held by the Operational Agent as
collateral for, and/or then or at any time thereafter be applied
(after payment of any amounts payable to the Operational Agent
pursuant to Section 14) in whole or in part by the Operational
Agent for the ratable benefit of the Lenders against, all or any
part of the Obligations in such order as the Operational Agent
shall elect. Any surplus of such cash or cash proceeds held by
the Operational Agent and remaining after payment in full of all
the Obligations shall be paid over to the Pledgor or to
whomsoever may be lawfully entitled to receive such surplus.
SECTION 14. Expenses. The Pledgor will upon demand pay to the
Operational Agent the amount of any and all reasonable expenses, including
the reasonable fees and expenses of its counsel and of any experts and
agents, which the Operational Agent may incur in connection with (i) the
administration of this Agreement, (ii) the custody or preservation of, or
the sale of, collection from, or other realization upon, any of the
Collateral, (iii) the exercise or enforcement of any of the rights of the
Operational Agent or the Lenders hereunder or (iv) the failure by the
Pledgor to perform or observe any of the provisions hereof.
SECTION 15. Amendments, Etc. No amendment or waiver of any
provision of this Agreement, and no consent to any departure by the
Pledgor herefrom shall in any event be effective unless the same shall be
in writing and signed by the Operational Agent, and then such waiver or
consent shall be effective only in the specific instance and for the
specific purpose for which given.
SECTION 16. Addresses for Notices. All notices and other
communications provided for hereunder shall be in writing (including
telegraphic, facsimile, telex or cable communication) and mailed,
telegraphed, telecopied, telexed, cabled or delivered, if to the Pledgor,
at its address at Fairlane Plaza South, 330 Town Center Drive, Suite 1100,
Dearborn, Michigan 48126, Attention: Rodger A. Kershner, Esq., with a
copy to Doris F. Galvin, Vice President, 212 West Michigan Avenue,
Jackson, Michigan 49201, and if to the Operational Agent, at its address
specified in the Credit Agreement, or, as to either party, at such other
address as shall be designated by such party in a written notice to the
other party. All such notices and communications shall, when mailed,
telegraphed, telecopied, telexed or cabled, be effective five days after
when deposited in the mails, or when delivered to the telegraph company,
telecopied, confirmed by telex answerback or delivered to the cable
company, respectively.
SECTION 17. Continuing Security Interest; Assignments under
Credit Agreement. This Agreement shall create a continuing security
interest in the Collateral and shall (i) remain in full force and effect
until the later of (x) the payment in full of the Obligations and all
other amounts payable under this Agreement and (y) the expiration or
termination of the Commitments, (ii) be binding upon the Pledgor, its
successors and assigns, and (iii) inure to the benefit of, and be
enforceable by, the Operational Agent, the Lenders and their respective
successors, transferees and assigns. Without limiting the generality of
the foregoing clause (iii), any Lender may assign or otherwise transfer
all or any portion of its rights and obligations under the Credit
Agreement (including, without limitation, all or any portion of its
Commitment, the Advances owing to it and any Note held by it) to any other
Person, and such other Person shall thereupon become vested with all the
benefits in respect thereof granted to such Lender herein or otherwise,
subject, however, to the provisions of Article X (concerning the Agents)
and Section 11.07 of the Credit Agreement. Upon the later of the payment
in full of the Obligations and all other amounts payable under this
Agreement and the expiration or termination of the Commitments, the
security interest granted hereby shall terminate and all rights to the
Collateral shall revert to the Pledgor. Upon any such termination, the
Operational Agent will, at the Pledgor's expense, return to the Pledgor
such of the Collateral as shall not have been sold or otherwise applied
pursuant to the terms hereof and execute and deliver to the Pledgor such
documents as the Pledgor shall reasonably request to evidence such
termination.
SECTION 18. Governing Law; Terms. This Agreement shall be
governed by and construed in accordance with the laws of the State of New
York, except to the extent that perfection of the security interest
hereunder, or remedies hereunder, in respect of any particular Collateral
are governed by the laws of a jurisdiction other than the State of New
York. Unless otherwise defined herein or in the Credit Agreement, terms
defined in Article 9 of the Code are used herein as therein defined.
IN WITNESS WHEREOF, the Pledgor has caused this Agreement to be
duly executed and delivered by its officer thereunto duly authorized as of
the date first above written.
CMS ENERGY CORPORATION
By /s/ A. M. Wright
------------------------------
Title: Senior Vice President
and Chief Financial
Officer
ACCEPTED AND AGREED:
UNION BANK, as Operational Agent
By /s/ P Saggan
-------------------------------
Vice President
<PAGE>
<PAGE>
CMS Energy Corporation
Officer's Certificate
I, Alan M. Wright, Senior Vice President and Chief Financial
Officer of CMS Energy Corporation, a Michigan corporation (the
"Borrower"), DO HEREBY CERTIFY, in connection with the Amended and
Restated Credit Agreement, dated as of November 30, 1992, as amended and
restated as of October 15, 1993 (the "Credit Agreement", the terms defined
therein being used herein as therein defined), among the Borrower, the
Lenders named therein, Citibank, N.A. and Union Bank, as Co-Agents,
Citibank, N.A., as Documentation Agent, and Union Bank, as Operational
Agent, that:
1. The representations and warranties contained in Section
7.01 of the Credit Agreement (other than those contained
in subsections (e)(i) and (d)(ii) thereof), in Section 4
of each of the Pledge Agreements, in Section 7 of the Cash
Collateral Agreement and in Section 6 of the Guaranty
(other than those contained in subsections (f)(i) and
(f)(ii) thereof) are correct on and as of the date hereof.
2. Since September 30, 1992, except as disclosed in the
Borrower's Current Reports on Form 8-K filed with the
Securities and Exchange Commission on March 31, 1993 and
April 6, 1993, (A) there has been no material adverse
change in the Borrower's ability to perform its
obligations under the Credit Agreement or any other Loan
Document to which it is or will be a party, or in the
Guarantor's ability to perform its obligations under the
Guaranty, and (B) there has been no order or decision
issued by any Federal or state regulatory authority which
would reasonably be expected to have a material adverse
effect on the business, financial condition or results of
operations of the Borrower.
3. No Unmatured Default or Event of Default has occurred and
is continuing.
Date: October 15, 1993
CMS ENERGY CORPORATION
By /s/ A M Wright
______________________________
Senior Vice President and
Chief Financial Officer<PAGE>
<PAGE>
CMS ENERGY
Rodger A. Kershner
Assistant General Counsel
October 15, 1993
To each of the Lenders parties
to the Credit Agreement referred
to below, and to Citibank, N.A.
and Union Bank, as agents under
the Credit Agreement
CMS Energy Corporation
Ladies and Gentlemen:
This opinion is furnished to you pursuant to Section 11.12(a)(iii)(A)
of the Amended and Restated Credit Agreement, dated as of November 30,
1992, as amended and restated as of the date hereof (the "Credit
Agreement"), among CMS Energy Corporation (the "Borrower"), the Banks
parties thereto and the other Lenders from time to time parties thereto,
Citibank, N.A. and Union Bank, as Co-Agents, Citibank, N.A., as
Documentation Agent, and Union Bank, as Operational Agent. Capitalized
terms not defined herein have the meanings ascribed thereto in the Credit
Agreement and the other Loan Documents (as defined in the Credit
Agreement).
I am Assistant General Counsel to the Borrower and have acted as such
in connection with the preparation, execution and delivery of the Credit
Agreement and the other Loan Documents. In connection with the opinions
expressed below, I have examined, or have arranged for the examination by
an attorney or attorneys under my general supervision, of:
(a) The Credit Agreement;
(b) The Cash Collateral Agreement;
(c) The other Loan Documents;
(d) The Articles of Incorporation of the Borrower and all amendments
thereto (the "Charter"); and
(e) The by-law of the Borrower and all amendments thereto (the
"By-Laws").
In Addition, I, or an attorney or attorneys under my general
supervision, have examined and relied upon the originals, or copies
certified to my or their satisfaction, of such other corporate records of
the Borrower, certificates of public officials and of officers of the
Borrower, and agreements, instruments and documents as I have deemed
necessary as a basis for the opinions hereinafter expressed. As to
questions of fact material to such opinions, I or such attorneys have,
when relevant facts were not independently established by me or by them,
relied upon certificates of the Borrower or its officers or of public
officials. I have assumed the due execution and deliver, pursuant to due
authorization, of the Credit Agreement and the other Loan Documents by all
parties thereto other than the Loan Parties.
Based upon and subject to the foregoing and the further
qualifications set forth below, I am of the opinion that:
1. The Borrower is a corporation duly organized, validly
existing and in good standing under the laws of the State
of Michigan.
2. The execution, delivery and performance by the Borrower of
the Credit Agreement and the Cash Collateral Agreement are
within the corporate power and authority of the Borrower,
have been duly authorized by all necessary corporate
action, and do not contravene (i) the Borrower Charter or
the Borrower By-laws, (ii) any provision of applicable law
or (iii) any legal or contractual restriction binding on
the Borrower or its properties; and such execution,
delivery and performance do not result in or require the
creation or imposition of any mortgage, deed of trust,
pledge, or Lien upon or with respect to any of its
properties (other than under the Security Documents). The
Credit Agreement and the Cash Collateral Agreement have
been duly executed and delivered on behalf of the
Borrower.
3. No authorization or approval or other action by, and no
notice to or filing with, any governmental authority or
regulatory body is required for (a) the valid execution,
delivery and performance by the Borrower of the Credit
Agreement and the Cash Collateral Agreement or (b) the
creation of any Lien purported to be granted or created
pursuant to the Cash Collateral Agreement or the exercise
by the Operational Agent (on behalf of the Lenders) of any
right or remedy in respect of any Collateral under the
Cash Collateral Agreement, except for such authorizations,
approvals and filings as have been duly obtained or made
and which are in full force and effect on the date hereof
and not subject to appeal.
4. In any action or proceeding arising out of or relating to
the Credit Agreement or the Cash Collateral Agreement in
any court of the State of Michigan, or in any Federal
court sitting in the State of Michigan, such court would
recognize and give effect to the provisions of Section
11.10 of the Credit Agreement and Section 18 of the Cash
Collateral Agreement wherein the Borrower, the Agents and
the Lenders agree that the Credit Agreement and the Cash
Collateral Agreement, respectively, shall be governed by,
and construed in accordance with, the laws of the State of
New York. However, if a court were to hold that the
Credit Agreement or the Cash Collateral Agreement is
governed by, and is to be construed in accordance with,
the laws of the State of Michigan, the Credit Agreement
and the Cash Collateral Agreement would be, under the laws
of the State of Michigan, the legal, valid and binding
obligations of the Borrower, enforceable against the
Borrower (in all other respects) in accordance with their
respective terms.
5. Except as disclosed in the Borrower's Quarterly Report on
Form 10-Q for the period ended September 30, 1992, there
are no pending or threatened actions or proceedings
against the Borrower or its properties before any court,
governmental agency or arbitrator, that could, if
adversely determined, reasonably be expected to materially
adversely affect the financial condition, properties,
business or operations of the Borrower, the legality,
validity or enforceability of the Credit Agreement or any
other Loan Document to which the Borrower is, or is to be,
a party, or the validity, enforceability, perfection or
priority of any Lien purported to be granted by or under
any Security Document to which the Borrower is, or is to
be, a party.
6. The Cash Collateral Agreement creates a valid security
interest in the Collateral described therein, securing
payment of the Obligations (as defined therein).
The opinions set forth in paragraphs 4 and 6, above, are subject to
the following qualifications:
(a) The enforceability of the security interests described therein
and the enforceability of the Borrower's obligations under the
Credit Agreement and the Cash Collateral Agreement are subject
to (i) the effect of any applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting
creditors' rights generally, (ii) to general principles of
equity (regardless of whether such enforceability is considered
in a proceeding in equity or at law) and (iii) applicable
securities laws to the extent such opinions relate to the
enforceability of rights to indemnification, although such
limitations or enforceability and the exercise of remedies in my
judgment do not make the remedies provided for therein, taken as
a whole, inadequate for the substantial realization of the
benefits afforded thereby.
(b) In connection with the opinion expressed in paragraph 6, above,
I point out that in the case of proceeds, continuation of the
perfection of the security interest therein of the Operational
Agent is limited to the extent set forth in Section 9-306 of the
Uniform Commercial Code as in effect in the State of Michigan.
I am a member of the bar of the State of Michigan and I express no
opinion as to the laws of any jurisdiction other than the State of
Michigan and the Federal law of the United States of America.
Very truly yours,
/s/ Rodger Kershner
<PAGE>
<PAGE>
EXHIBIT (10)(m)
<PAGE>
<PAGE> 1
EXHIBIT (10)(m)
CMS DEFERRED SALARY SAVINGS PLAN
The objective of the CMS Deferred Salary Savings Plan (Plan) is to in some
measure replace benefits which have been taken away by the discriminary
requirements applicable to qualified savings plans, which prevent benefits
with respect to salaries greater than $150,000 (as adjusted by an amount
determined by the Secretary of the Treasury).
This Plan was originally effective on December 1, 1989 and included
amendments through January 1, 1994, and is applicable to all Employees of
the Company who are eligible in accordance with its provisions.
SECTION 1. DEFINITIONS
1.1 Definitions. Whenever used in this Plan, the following terms shall
have the respective meanings set forth below, unless the context indicates
otherwise:
"Company" CMS Energy Corporation and its subsidiaries which
are directly or indirectly wholly-owned.
"Compensation" A Participant's regular salary from an Employer,
before any adjustment for Deferrals under this
Plan or any other deferred compensation plan of
the Company, Elective Employer Contributions under
the Employees' Savings and Incentive Plan of
Consumers Power Company, or deductions for taxes,
Social Security, etc., which, as so defined, shall
continue to be used by the Company in the
administration of salary and related benefit
programs where applicable.
"Compensation Rate" The amount of a Participant's Compensation per pay
period.
"Deferrals" Moneys deferred by a Participant pursuant to
Section 4.
"Employee" Any person, employed by CMS Energy Corporation or
any of its subsidiaries which are directly or
indirectly wholly-owned, whose annualized
Compensation Rate exceeds the Threshold Limit.
"Employer Matching Money or property added to the Participant's
Amounts" account as provided in Section 4.3.
"Fiscal Year" A period commencing on January 1 of any year and
ending on December 31, of such year.
"Former Participant" A Participant who has died, has reached his
Retirement Date, has had his employment with an
Employer terminated on account of a Disability, or
otherwise has terminated his employment with an
Employer, or who, because of change in the
Threshold Limit, or change in employment status or
salary with an Employer, is no longer eligible as
an Employee under the Plan.
"Inactive Participant" A Participant who is not currently making
Deferrals under the Plan.
"Member" A Participant, Inactive Participant, or Former
Participant.
"Participant" Any Employee who meets the eligibility
requirements of the Plan, who elects to enroll
under the Plan, and for whom Deferrals are
currently being made under the Plan.
"Retirement Date" The Valuation Date immediately preceding the date
a Member actually retires from employment on his
Normal, Early or Deferred Retirement Date as set
forth below:
(a) Normal Retirement Date. The first day of
the month after the month in which the
Employee reaches "Retirement Age" as
defined in Section 216(1) of the Social
Security Act, as amended and in effect on
June 1, 1989.
(b) Early Retirement Date. The date, which
shall be the first day of a month, on which
an Employee retires at his election on or
after the date which is 120 months
preceding Normal Retirement Date.
(c) Deferred Retirement Date. The date, which
shall be the first day of a month, or
retirement after Normal Retirement Date.
"Threshold Limit" $150,000 per year (or such other cost-of-living
adjusted amount as determined by the Secretary of
the Treasury) above which annual compensation is
disregarded for qualified plans.
"Threshold Rate" The Threshold Limit divided by the number of
regular pay periods for the Participant in a
calendar year.
"Valuation Date" The last business day or any other business day of
each calendar month designated by the Company.
1.2 Gender. Any masculine terminology used herein shall also include the
feminine.
SECTION 2. ELIGIBILITY
2.1 Eligibility. Each Employee is eligible to become a Participant on
date of employment. If a Former Participant is re-employed by an Employer
as an Employee, he shall be eligible to become a Participant on the first
pay date next following the date of such re-employment.
SECTION 3. ENROLLMENT
3.1 Enrollment. An Employee eligible to become a Participant may enroll
under the Plan by making an application in writing on a form supplied by
his Employer and, upon receipt by the Plan administrators, such enrollment
shall become effective on a pay date following the date he is eligible to
become a Participant.
3.2 Acceptance of Plan by Participant. The filing of an application for
enrollment with the Plan administrators under the Plan shall constitute an
acceptance of the terms and provisions of the Plan.
SECTION 4. DEFERRALS & PAYMENTS
4.1 Deferrals. Each Participant may elect, on a form provided by his
Employer, to defer each pay period, a portion of his Compensation which is
not less than one percent (1%) nor more than six percent (6%) of the
amount by which his Compensation Rate exceeds the Threshold Rate. Also,
each Participant, when his Compensation exceeds the Threshold Limit, may
elect, on a form provided by his Employer, to defer a portion of his
Compensation up to the amount which will bring the percentage of his total
Deferral under the Plan for the Fiscal Year-to-date to not more than six
percent (6%) of the amount by which his Compensation for the Fiscal Year-
to-date exceeds the Threshold Limit. The amounts deferred will be
deferred in accordance with this Section 4.
4.2 Designation of Investment Treatment. At the time of designation of a
Deferral under the Plan, each Participant shall specify the proportions of
his Deferral to be treated by the Company as if invested in one or more
investment funds of the Employees' Savings and Incentive Plan of Consumers
Power Company for the purpose of determining the value of the Deferral.
Changes in the allocation of a Participant's future Deferrals among these
options may be effected at any time by giving his Employer advance notice
in writing of each such change. All or a part of a Member's past
Deferrals, which are in a Member's account on a Valuation Date, may be
reallocated to be treated as if invested in other investment funds on a
Valuation Date by giving the Company advance notice in writing of such
change and reallocation will be accomplished in the same manner as if the
amounts were invested in the Consumers Power company's Employees' Savings
and Incentive Plan. A Member may not select a Valuation Date which
precedes the date of such request for a change in allocation of such
Deferrals. A Member may not reallocate any past Deferrals in his account
more often than once in any calendar quarter.
4.3 Employer Matching Amounts. Each month the Company shall add an
amount to the Participant's Deferral for the month, which is equal to
fifty percent (50%) of the amount deferred by the Participant that month.
This Employer Matching Amount will be treated as if it were invested in
Fund C of the Employees' Savings and Incentive Plan of Consumers Power
Company for the purpose of determining the future value of the Deferrals,
and the payment option elected by the Participant for the amount deferred
by the Participant will also govern the payment to the Participant of
Employer Matching Amounts, except that no such payment may be made prior
to the January following the Participant's retirement or termination of
employment.
4.4 Inactive Participants. Each Participant whose Deferrals have been
discontinued in accordance with the provisions of this Section 4 shall
thereupon become an Inactive Participant.
4.5 Changes in Employment Status. If a Member's employment status with
an Employer is changed so that he is no longer eligible as an Employee
under the Plan, he shall be a Former Participant and, as such, he may not
make or have made by his Employer any Deferrals under the Plan. However,
his account shall continue to be treated as if invested in the Consumers
Power Company's Employees' Savings and Incentive Plan. If such Former
Participant's employment status is again changed so that he is eligible as
an Employee under the Plan, he may resume participation as of a pay date
following the date of such later change in employment status.
4.6 Payment Election. At the time of designation of a Deferral under the
Plan, each Participant shall irrevocably elect one of the following cash
payment schedules:
a. Payment on or before January 20 of the January following
retirement under a pension plan applicable to Company
Employees or termination of employment.
b. Payment in five annual installments payable on or before
January 20, of five successive years beginning with the
January following retirement under a pension plan
applicable to Company Employees or termination of
employment. The first payment will be for on-fifth (1/5)
of the January 1 balance for that year; the second payment
shall be for one-fourth (1/4) of the January 1 balance for
that year; the third payment shall be for one-third (1/3)
of the January 1 balance for that year; the fourth payment
shall be for one-half (1/2) of the January 1 balance for
that year; and the fifth payment shall be for the remaining
balance.
c. Payment in ten annual installments payable on or before
January 20, of ten successive years beginning with the
January following retirement under a pension plan
applicable to Company Employees or termination of
employment. The first payment will be for on-tenth (1/10)
of the January 1 balance for that year; the second payment
shall be for one-ninth (1/9) of the January 1 balance for
that year; the third payment shall be for one-eighth (1/8)
of the January 1 balance for that year; the fourth payment
shall be for one-seventh (1/7) of the January 1 balance for
that year; the fifth payment shall be for one-sixth (1/6)
of the January 1 balance for that year; the sixth payment
shall be for one-fifth (1/5) of the January 1 balance for
that year; the seventh payment shall be for one-fourth
(1/4) of the January 1 balance for that year; the eighth
payment shall be for one-third (1/3) of the January 1
balance for that year; the ninth payment shall be for one-
half (1/2) of the January 1 balance for that year; and the
tenth payment shall be for the remaining balance.
A Participant shall have no right to modify the schedule for cash payments
under this Plan, as specified in his election pursuant to this subsection.
However, upon a written request, the Plan administrators, in their sole
discretion, may, after discussion with a Participant, coincident with or
following his retirement or other termination of employment, change the
time for payment of any one or more amounts remaining unpaid. The
discussion with a Participant is for the purpose of assuring the Plan
administrators of accurate current information for use in making their
independent decision as to whether to change the time of payments. In
making their independent decision, the Plan administrators may take into
account any financial hardship of the Participant, the health or
disability of the Participant, and/or any other factors they consider
relevant. The final decision of the Plan administrators shall be in their
sole discretion and shall be final, binding and conclusive.
4.7 General Fund. Amounts deferred under this Plan will be satisfied
from general funds which are subject to the claims of creditors. The
Company may establish a fund, as part of the general assets of the
Company, to provide for the payments required under this Supplemental
Plan.
4.8 Amendment, Modification or Termination of the Plan. This Plan maybe
amended, modified or terminated at any time by action of the Board of
Directors of the Company.
4.9 Payment on Death. Upon the death of a Member, at any time prior to
receipt of the entire balance of his account under the Plan, there shall
be paid to the beneficiary or beneficiaries designated by the Member in a
lump sum, in cash, the entire value of his account as of the Valuation
Date next succeeding or coincident with his date of death.
SECTION 5. MEMBER ACCOUNTS
5.1 Accounts and Records. The accounts and records of the Plan shall be
maintained by the company and will disclose the status of the accounts of
members. The Company will furnish each Member having an account balance,
a report not less frequently than each three months, a statement setting
for the Member's account balance under the Plan, showing the value of
amounts deferred by both valuation treatment and payment options. Such
statement will be deemed to have been accepted as correct unless written
notice of specific objections thereto is received by the Company within
thirty (30) days after mailing to the Member, or date furnished if not
mailed.
SECTION 6. BENEFICIARY DESIGNATION
6.1 Beneficiary Designation. The designation, if any, by an Employee of
a beneficiary or beneficiaries under the Employees' Savings and Incentive
Plan of Consumers Power Company will be effective as the same beneficiary
or beneficiaries under the same conditions set forth in that Plan, under
this CMS Deferred Salary Savings Plan.
IN WITNESS WHEREOF, this Plan is executed as of January 1, 1994.
CMS ENERGY CORPORATION
By: William T. McCormick, Jr.
-------------------------
Chairman of the Board
ATTEST:
Thomas A. McNish
----------------
Secretary
<PAGE>
EXHIBIT (10)(n)<PAGE>
<PAGE>
CONSUMERS POWER COMPANY
ANNUAL EXECUTIVE INCENTIVE
COMPENSATION PLAN
As Amended March 1994<PAGE>
<PAGE> 1
CONSUMERS POWER COMPANY
Annual Executive Incentive Compensation Plan
I. PURPOSE
The purpose of the Annual Executive Incentive Compensation
Plan (Plan) is to:
A. Provide an equitable and competitive level of
compensation that will permit the Company to attract,
retain and motivate highly competent Officers and key
employees.
B. Provide a financial incentive for Officers and key
employees to achieve expected levels of individual
performance and thereby assist in the achievement of
Company objectives.
II. EFFECTIVE DATE
The effective date of the Plan is January 1, 1986.
III. ELIGIBILITY
Officers and key employees in Salary Grades 11 and above are
eligible for participation in the Plan.
IV. ADMINISTRATION OF THE PLAN
The Plan will be administered by the Chairman & CEO of CMS
Energy and the Vice President -- Human Resources under the
general direction of the Committee on Organization and
Compensation (Committee) of the Board of Directors of CMS
Energy.
The Committee, no later than March of the Performance Year,
will approve performance goals for the Plan year and will
determine the total Annual Award Fund that will provide a
reasonable and competitive level of awards when "standard"
performance goals are achieved.
The Committee, no later than March following the Performance
Year, will review for approval the total Annual Award Fund to
be allocated to the Plan participants for the previous
calendar year. This fund will be based on the Company's
performance and the recommendation by the Committee.
Individual incentive compensation awards for all participants,
except the Chairman & CEO, will be recommended by the Chief
Executive Officer, subject to approval of the Committee. The
incentive award for the Chairman & CEO will be recommended by
the Chairman of the Committee.
The Committee reserves the right to modify the performance
goals or otherwise exercise discretion with respect to
individual awards as they deem necessary to maintain the
spirit and intent of the Plan.
V. PERFORMANCE GOALS
The performance goal for the Plan shall consist of three
factors: (1) the net income of CMS Energy Corporation;
(2) the pre-tax operating income of the Company and (3) the
Company's gas and electric rates for customers as compared
with those of other major investor-owned utilities in the
Midwest and the United States. In the event less than 80% of
the CMS Energy income goal is achieved, there will not be a
payout under that portion of the Plan. In the event less than
80% of the CPCo pre-tax operating income goal is achieved,
there will not be a payout under the Plan.
A. CMS Energy Net Income Award (After Preferred &
Preference Dividends) -- An income goal will be set
each year. For each 1% (or fraction thereof) increase
achieved in net income above 80% of goal, there will
be a corresponding 2.5% (or pro rata part) increase in
the award up to 100% after which there will be a
corresponding 1% (or pro rata part) increase in the
award for each additional 1% (or fraction thereof)
increase in net income above goal. The maximum award
is 120%.
B. CPCo Pre-Tax Operating Income Award -- An operating
income goal will be set each year. For each 1% (or
fraction thereof) increase achieved in pre-tax
operating income above 80% of goal, there will be a
corresponding 2.5% (or pro rata part) increase in the
award up to 100% after which there will be a
corresponding 1% (or pro rata part) increase in the
award for each additional 1% (or fraction thereof)
increase in net income above goal. The maximum award
is 120%.
Actual Net or Operating Income Percent of
as a Percent of Goal Award Granted
-------------------- -------------
Less Than 80.0% 0
80.0% 50.0%
85.0% 62.5%
90.0% 75.0%
95.0% 87.5%
100.0% 100.0%
105.0% 105.0%
110.0% 110.0%
115.0% 115.0%
120.0% and Above 120.0%
C. Energy Rates Award -- A comparison will be made
between the Company's electric rate (average revenue
per kilowatt-hour sold -- $/kWh) and gas rate (average
revenue per thousand cubic feet sold -- $/Mcf) and
rates of comparable utilities. One-half of the energy
rates award portion of the performance goal will be
adjusted by the electric rate comparison and the other
half by the gas rate comparison.
If less than 50% of the comparison companies have
rates exceeding Consumers Power Company, the payout
will be zero for the electric or gas rate award. If
50% of the rate comparison companies exceed the
Company, 50% of the award is granted. For each 1% (or
fraction thereof) increase in the ranking above 50%,
there will be a corresponding 2.5% (or pro rata part)
increase in the award up to a 70% ranking after which
there will be a corresponding 1% (or pro rata part)
increase in the award for each 1% (or fraction
thereof) increase achieved in rank above 70%. The
maximum award is 120%.
Electric or Gas Ranking
(Percent of Companies Whose Percent of
Rates Exceed the Company's) Award
--------------------------- ----------
Less Than 50.0% 0
50.0% 50.0%
55.0% 62.5%
60.0% 75.0%
65.0% 87.5%
70.0% 100.0%
75.0% 105.0%
80.0% 110.0%
85.0% 115.0%
90.0% and Above 120.0%
<PAGE>
<PAGE> 4
For the comparison, the individual average rates of a
number of the largest investor-owned utilities in the
United States and Midwest for both gas and electric
comparisons will be measured against the average
Company electric and gas rates.
VI. ANNUAL AWARD FUND
Standard incentive awards for each eligible executive will
amount to a percentage of the midpoint of his/her salary grade
in the Performance Year. The midpoints and salary ranges are
determined each year and are subject to review and approval by
the Committee. The percentage will vary by position level as
indicated below:
Standard
Salary Incentive Award as a %
Position Grade of Salary Grade Midpoint Formula*
----------------- ------ ------------------------ -------
Chairman & CEO E-9 75.0 I
Vice Chairman,
President E-8 65.0 I
President,
Executive Vice
President E-7 60.0 I
President,
Executive Vice
President E-6 55.0 II
Senior Vice
President E-5 50.0 II
Vice President E-4 45.0 II
Vice President E-3 40.0 II
Other Officers/Senior
Managers/
Directors E-2 35.0 III
Senior Managers/
Directors E-1 30.0 III
Managers/Directors 13 25.0 III
Managers/Directors 12 20.0 III
Managers/Directors
and Equivalent 11 15.0 III
*Generally the top five Officers plus four other Officers with
multi-Company responsibilities participate in Formula I. All
other Officers participate in Formula II and all others
participate in Formula III. The formulas are found on Page 5.
The award for individual participants will be based on either
two or three factors: (1) Company performance as measured by
achievement of the net income of CMS Energy; (2) pre-tax
operating income of CPCo and energy rate relationship goals;
and (3) individual performance; ie, performance must be fully
effective or better to be eligible for an award. Assuming a
minimum of fully effective performance, individual awards may
be adjusted in a range from 70% to 130% of the Company
performance level in order to take into account individual
performance. Each individual's performance will be measured
against specific, quantifiable objectives for the Performance
Year as established and approved by each participant's
immediate supervisor. Accordingly, each year the levels will
be as follows:
115-130% Exceptional
100-115% Exceeds
70-100% Fully Effective
0 Unacceptable
The Chairman & CEO will review and approve each Officer's
objectives for the Performance Year. Final individual awards,
depending on formula designation, will be calculated as
follows:
Formula I
---------
Individual = Standard x CMS Net x Individual
Award Award Income Award Performance
Formula II
----------
Individual = Standard x .50 x CMS Net + .35 x
Award Award Income Award
CPCo Pre-Tax + .15 x Rates x Individual
Opr Income Award Award Performance
Formula III
-----------
Individual = Standard x .25 x CMS Net + .53 x
Award Award Income Award
CPCo Pre-Tax + .22 x Rates x Individual
Opr Income Award Award Performance
VII. PAYMENT OF AWARDS
CURRENT AWARDS
All awards for the Performance Year will be paid in cash no
later than March of the following year after review and
approval by the Committee. The amounts required by law to be
withheld for income tax and Social Security taxes will be
deducted from the award payments.
DEFERRED AWARDS
The payment of all or one-half of each award may be deferred
at the election of the individual participants in the Plan. A
separate irrevocable election must be made each year prior to
the beginning of the Performance Year. Any award granted
after termination of employment or retirement is not eligible
for deferral and will be paid in full in the year in which the
award is made.
The deferred awards may be paid out in a lump sum or in five
or ten annual installments beginning in the January following
retirement or termination of employment. If awards are paid
in annual installments, each year the payment will be a
fraction of the balance equal to one over the number of annual
installments remaining. In the event of the participant's
death, all deferred amounts will be paid in total the
following January.
At the time of electing to defer payment, the participant must
elect whether the sum deferred shall be treated by the Company
in accordance with Paragraph A or Paragraph B below.
A. The deferred award will be credited with sums in lieu
of interest from the first day of the month following
the month in which the award was granted to the date
of payment. The "interest rate" will be equivalent to
the prime rate of interest set by Citibank, NA,
compounded quarterly as of the first day of January,
April, July and October of each year during the
deferral period. The prime rate in effect on the
first day of January, April, July and October shall be
the prime rate in effect for that quarterly period.
B. The deferred award will be treated as if it were
invested as an optional cash payment under the CMS
Energy Corporation's Dividend Reinvestment and Common
Stock Purchase Plan. The value of the deferred sum at
the time of payment shall be equal to the number of
dollars such an investment would have been worth as
measured by the purchase price of shares of Common
Stock using the average closing price (NYSE --
composite transactions) for the first five trading
days in the December previous to a payout.
The amounts deferred are to be satisfied from the general
Corporate funds which are subject to the claims of creditors.
PAYMENT IN THE EVENT OF DEATH
Participants may name the beneficiary of their choice in the
event they die prior to receipt of either a current or
deferred award. In the event a beneficiary is not named, the
payment will be made to the first surviving class as follows:
1. Widow or Widower
2. Children
3. Parents
4. Brothers and Sisters
5. Executor or Administrator
Participants may change beneficiary at any time and the change
will be effective as of the date the participants complete and
sign the beneficiary form, whether or not they are living at
the time the request is received by the Company. However, the
Company will not be liable for any payments it makes before
receiving a written request.
VIII. CHANGE OF STATUS
A. SALARY GRADE CHANGE
Individual awards will be based on the salary grade
level in effect as of the beginning of the Performance
Year or such later date on which an employee becomes a
participant in the Plan except that an eligible
employee promoted to a higher eligible salary position
during the award year may be recommended for an award
based upon the percentage of the Performance Year the
employee is in each participating position.
B. NEW HIRE, TRANSFER, PROMOTION
A newly hired employee or an employee promoted during
the Performance Year to a position qualifying for
participation may be recommended for a pro rata award
based on the percentage of the Performance Year the
employee is in the participating position.
C. DEMOTION
No award will be made to an employee who has been
demoted during the Performance Year because of
performance. If the demotion is due to an
organization change, a pro rata award may be made
provided the employee otherwise qualifies for an
award.
D. TERMINATION
An employee whose services are terminated during the
Performance Year for reasons of misconduct, failure to
perform, or other performance-related reasons, shall
not be considered for an award. If the termination is
due to other reasonssuch as reorganization, transfer
to a subsidiary, etc, and the termination is not due
to a fault of the employee, the employee may be
considered for a pro rata award.
E. RESIGNATION
An employee who resigns to accept employment elsewhere
during or after a performance year, (including self-
employment) will not be eligible for an award. If the
resignation is due to other reasons; eg, ill health in
the immediate family, etc, the employee may be
considered for a pro rata award.
F. DEATH, DISABILITY, RETIREMENT, LEAVE OF ABSENCE
An employee whose status as an active employee is
changed during the Performance Year for any of the
reasons cited, may be considered for a pro rata award.
IX. IMPACT ON BENEFIT PLANS
Payments made under this program will be considered as
earnings for the Supplemental Executive Retirement Plan
(Salary Grades E-1 through E-9) and for life insurance, but
not for purposes of the Employees' Savings Plan, Pension Plan,
or other employee benefit programs.
X. TERMINATION OR AMENDMENT OF THE PLAN
The Company at any time may, in writing, terminate or amend
the Plan.
<PAGE>
<PAGE>
EXHIBIT (10)(o)<PAGE>
<PAGE>
EXHIBIT (10)(o)
TABLE OF CONTENTS
Page
Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Eligibility . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Earnings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Amount of Supplemental Executive
Retirement Income . . . . . . . . . . . . . . . . . . . . . . . 2
Estimating Your Supplemental
Executive Retirement Income . . . . . . . . . . . . . . . . . . 4
Early Retirement. . . . . . . . . . . . . . . . . . . . . . . . . 5
Pre-Retirement Surviving Spouse Benefit . . . . . . . . . . . . . 5
Post-Retirement Optional Payment Methods. . . . . . . . . . . . . 6
Termination of Service. . . . . . . . . . . . . . . . . . . . . . 6
Disability Pension Supplement . . . . . . . . . . . . . . . . . . 7
TEXT OF PENSION PLAN FOR EMPLOYEES
DEFINITIONS - SECTION I . . . . . . . . . . . . . . . . . . . . . 9
ELIGIBILITY - SECTION II. . . . . . . . . . . . . . . . . . . . .11
DETERMINATION OF PREFERENCE
SERVICE - SECTION III . . . . . . . . . . . . . . . . . . . . . .11
RETIREMENT - SECTION IV . . . . . . . . . . . . . . . . . . . . .13
SUPPLEMENTAL EXECUTIVE
RETIREMENT INCOME - SECTION V . . . . . . . . . . . . . . . . . .13
PROVISIONAL PAYEE OPTIONS AND
PRE-RETIREMENT SURVIVING SPOUSE
BENEFIT - SECTION VI. . . . . . . . . . . . . . . . . . . . . . .19
TERMINATION OF SERVICE -
SECTION VII . . . . . . . . . . . . . . . . . . . . . . . . . . .20
FORFEITURE - SECTION VIII . . . . . . . . . . . . . . . . . . . .20
NON-ALIENATION OF BENEFITS -
SECTION IX. . . . . . . . . . . . . . . . . . . . . . . . . . . .20
LIMITATION OF RIGHTS - SECTION X. . . . . . . . . . . . . . . . .21
ADMINISTRATION OF SUPPLEMENTAL
PLAN - SECTION XI . . . . . . . . . . . . . . . . . . . . . . . .22
AMENDMENT, MODIFICATION OR
TERMINATION OF THE SUPPLEMENTAL
PLAN - SECTION XII. . . . . . . . . . . . . . . . . . . . . . . .22
<PAGE>
<PAGE>
CONSUMERS POWER COMPANY
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
INTRODUCTION
The description on the following pages is a summary of the Supplemental
Executive Retirement Plan for Consumers Power Company amended as of
November 1, 1990 and explains in general terms the principal features of
the Plan. For your convenience, the complete text of the Plan is also
included in this booklet if you should wish to review it in greater
detail. If you wish further clarification of the terms of the Plan, you
may contact the Chairman of the Retirement Board, Consumers Power Company,
212 West Michigan Avenue, Jackson, Michigan 49201 or call (517) 788-1030.
This description uses certain terms which are defined in the Pension Plan
of Consumers Power Company which is not contained in this booklet. When
used, these terms are capitalized.
IF THERE ARE ANY INCONSISTENCIES BETWEEN THE PLAN LANGUAGE AND STATEMENTS
APPEARING IN THE SUMMARY PORTION OF THIS BOOKLET OR MADE BY ANY PERSON,
THE ACTUAL PROVISIONS OF THE PLAN SHALL GOVERN.
ELIGIBILITY
Officers and other executives in Salary Grades E-1 and above.
SERVICE
For each month of actual service, in the first 10 years of service in
Grade E-1 and above, you will be credited with an additional month of
service.
After the first 10 years of executive service, additional months of actual
service will be added to the base of 20 years.
For example, if all years of service are at that level, your service will
be credited as:
8 years of service = 16 years
10 years of service = 20 years
15 years of service = 25 years
25 years of service = 35 years
EARNINGS
Awards under the Executive Incentive Compensation Plan and amounts
deferred under the Executive Salary Deferral Program are added to your
regular salary to determine the best 5 years of Earnings.
AMOUNT OF SUPPLEMENTAL
EXECUTIVE RETIREMENT INCOME
Your supplemental executive retirement income will be based on Final Pay x
Service Percentage less Social Security component and less Retirement
Income from the Company's Pension Plan.
FINAL PAY
Monthly average of 5 highest years of Earnings.
SERVICE PERCENTAGE
2.1% for each of first 20 years of combined years
of service.
1.4% for each of next 15 years of combined years
of service.
SOCIAL SECURITY OFFSET
The lesser of (1) .5% for each year of combined service times 1/12th of
your "Final Average Compensation" up to "Covered Compensation" (as those
terms are used in Section 401(1) of the Internal Revenue Code), (2) 1/2 of
the benefit that would be provided prior to the application of the offset,
with respect to your Final Pay up to Covered Compensation, or (3) the
maximum offset allowed under Section 401(1) of the Internal Revenue Code.
PENSION PLAN RETIREMENT INCOME
Calculated under Pension Plan and as may be limited by law for that Plan.
ESTIMATING YOUR SUPPLEMENTAL
EXECUTIVE RETIREMENT INCOME
For an executive with 20 years of service (including 10 years of executive
service), with the following earnings, a monthly Social Security Covered
Compensation of $1,527, retiring at age 65 during 1990, the monthly
Supplemental Executive Retirement Income payable at Normal Retirement Age
(age 65 for this example) would be:
5 Highest Yrs Exec Incentive
Reg Salary Comp Award Total
- ------------ -------------- ---------
$ 80,000 $ 8,000 $ 88,000
90,000 9,000 99,000
100,000 10,000 110,000
110,000 11,000 121,000
120,000 12,000 132,000
--------
$550,000
60
--------
Final Executive Pay $ 9,166
Service Percentage (20 yrs = 30 yrs) x 56%
--------
$ 5,133
Social Security - $1,527 x .50%
x 30 yrs - 229
--------
TOTAL MONTHLY RETIREMENT BENEFIT $ 4,904
Retirement Income from Pension Plan - 3,369
--------
Monthly Supplemental Executive
Retirement Income $ 1,535
========
EARLY RETIREMENT
You may elect to retire on the first day of the month which is 10 years
before your Normal Retirement Date or the first day of any month
thereafter.
Supplemental Executive Retirement Income is reduced by 5% for each year
you elect to retire which is more than three years before your Normal
Retirement Date.
If Normal Retirement Date is 65
Examples: Age 55 - 65% of computed benefit
Age 60 - 90% of computed benefit
PRE-RETIREMENT SURVIVING
SPOUSE BENEFIT
If you die before the first of the month which is ten years before your
Normal Retirement Date and if you are vested, your spouse will receive
under the Pre-Retirement Surviving Spouse Benefit a 50% benefit for life
beginning on the first day of the month following the date which would
have been ten years before your Normal Retirement Date.
If you die after the first day of the month which is ten years before your
Normal Retirement Date while employed, your spouse will receive under the
Pre-Retirement Surviving Spouse Benefit a 50% benefit for life beginning
on the first of the following month.
POST-RETIREMENT OPTIONAL
PAYMENT METHOD
Your election under the Pension Plan also applies to this Plan, i.e.,
(a) 100% survivor option, (b) 50% survivor option, (c) 10-year certain
option.
When you retire, the Retirement Board may decide to pay you the present
value of your Supplemental Executive Retirement Income in a single sum.
On your death your beneficiary (with the agreement of the Retirement
Board) may elect to receive the present value of payments, or the normal
monthly payments under the option you had selected.
TERMINATION OF SERVICE
You will be vested only after completing 5 years of actual service.
If your service is terminated before your earliest possible Early
Retirement Date (the date which precedes your Normal Retirement Date by
ten years) but you are vested, you may elect monthly payments to begin on
the first day of any month on or after the date which precedes your Normal
Retirement Date by ten years, with an actuarial reduction. Example: Age
55 (assuming Normal Retirement Date of age 65) - 38.3% of computed amount,
instead of 65%, if you had retired directly from service with the Company.
DISABILITY PENSION SUPPLEMENT
If because of total disability you do not accumulate Accredited Service
under the Company's Pension Plan, you will be eligible to receive a
supplement to your Retirement Income and Supplemental Executive Retirement
Income as if Accredited Service and Preference Service were credited
during the period of disability and by adjusting your Final Executive Pay
to reflect the effects of inflation.
SUPPLEMENTAL EXECUTIVE RETIREMENT
PLAN FOR EMPLOYEES OF
CONSUMERS POWER COMPANY
INTRODUCTION
The objective of the Supplemental Executive Retirement Plan (hereinafter
referred to as the "Supplemental Plan") is to attract and motivate top
level executives, including those recruited in mid- or late-career whose
normal pension would result in inadequate compensation, by providing
additional retirement income to supplement that provided by the Pension
Plan of the Company.
The Supplemental Executive Retirement Plan became effective on January 1,
1982 and is applicable to all employees of the Company who are eligible in
accordance with the provisions of this Supplemental Plan.
This instrument describes the Supplemental Plan for employees who retire,
die or whose services are terminated on or after November 1, 1990. The
rights of employees who, prior to November 1, 1990, retired, died or whose
services were terminated are governed by the provisions of the instrument
in effect at such time. This Supplemental Plan is an unfunded, unsecured
promise to pay benefits at a later date. Subject to the provisions of
this Supplemental Plan, Participants have no greater rights than the
general creditors of the Company.
SECTION I. DEFINITIONS
Whenever used in this Supplemental Plan, the following terms shall have
the respective meanings set forth below, unless the context clearly
indicates otherwise. The definitions set forth in Section 1 of the
Pension Plan are hereby adopted and made a part of this Supplemental Plan.
"Accrued Means the Supplemental Executive Retirement Income
Supplemental beginning at Normal Retirement Date which would be
Executive payable to a Participant at the rates provided in
Retirement subsection 1 Section V, on the basis of his Accredited
Income" Service and Preference Service rendered to the date of
computation.
"Disability Means the pension supplement, provision for which is made
Service in Section V, subsection 9 of this Supplemental Executive
Pension Retirement Plan.
Supplement"
"Executive Means the annual amount, if any, awarded the Participant
Incentive under the Executive Incentive Compensation Plan of the
Compensation" Company.
"Final Means 1/12th of the average of the Earnings plus Executive
Executive Incentive Compensation earned (if any) of a Participant,
Pay" for his 5 years of highest totals of Earnings plus
Executive Incentive Compensation (if any) earned (received
or allocated and deferred), of his Accredited Service, (or
the average of his monthly Earnings plus such Executive
Incentive Compensation earned over his Accredited Service
if the Participant has fewer than 5 years of Accredited
Service).
For purposes of determining Final Executive Pay, Earnings
shall include amounts, if any, which would have been
included in Earnings, for such years, in the absence of a
written agreement between the Participant and the Company
to defer payment of such amounts until a later date(s).
"Participant" Means an employee of the Company included in the
Supplemental Plan pursuant to Section II.
"Plan" or Means the Pension Plan for Employees of Consumers Power
"Pension Company, as amended.
Plan"
"Preference Means the period of service credited to a Participant
Service" pursuant to Section III.
"Supplemental Means the monthly retirement income provided for by this
Executive Supplemental Plan.
Retirement
Income"
"Supplemental Means the Supplemental Executive Retirement Plan as it is
Plan" described in this instrument.
The masculine pronoun wherever used herein shall mean or include the
feminine pronoun.
SECTION II. ELIGIBILITY
1. Employees included on January 1, 1982. Each officer or other
executive of the Company in Salary Grades E-1 and above on January 1,
1982, who is eligible for inclusion in the Pension Plan on that date, will
be included in the Supplemental Plan as of January 1, 1982.
2. Employees included after January 1, 1982. Each officer or other
executive of the Company who is eligible for inclusion in the Pension Plan
and is appointed to a position at Salary Grade E-1 or above after
January 1, 1982, will be included in the Supplemental Plan on the first
day of the month after he assumes such a position.
SECTION III. DETERMINATION OF
PREFERENCE SERVICE
1. Preference Service. Each Participant shall be credited with one month
of Preference Service for each month of Accredited Service credited to him
under the Pension Plan for the first 10 years during which he holds a
position at Salary Grade E-1 or above; provided, however, Preference
Service will be reduced by the amount (if any) by which the total period
of Preference Service when added to the total period of Accredited Service
exceeds 35 years.
2. Transfers to or from Affiliated Companies. In the case of the
transfer of a Participant to any company now affiliated or associated with
the Company which has at the time of transfer a pension plan with
substantially the same terms as the Pension Plan, and a supplemental plan
with substantially the same terms as this Supplemental Plan, such
Participant, if and when he commences to receive retirement income under
the pension plan of the company to which he transferred, should also
receive supplemental executive retirement income from that company based
upon the Earnings and Executive Incentive Compensation received from the
Company as if such Earnings and Executive Incentive Compensation had been
received from the company to which the Participant transferred.
In the case of the transfer to this Company of any participant employed by
any company now affiliated or associated with the Company which has at the
time of transfer a pension plan with substantially the same terms as the
Pension Plan, and a supplemental plan with substantially the same terms as
this Supplemental Plan, such Participant, if and when he commences to
receive Retirement Income under the Pension Plan, will also receive
Supplemental Executive Retirement Income from the Company based upon the
earnings and executive incentive compensation received from the company
from which he transferred as if such earnings and executive incentive
compensation were Earnings and Executive Incentive Compensation received
from the Company.
In the event of a transfer or transfers as set forth above, the right of
the Participant to receive benefits under this Supplemental Plan or a
supplemental plan with substantially the same terms maintained by an
affiliated or associated Company will be suspended until such time as the
Participant commences to receive supplemental executive retirement income
under such other plan or the Participant commences to receive Supplemental
Executive Retirement Income under this Plan, at which time the Participant
shall receive all supplemental executive retirement income and
Supplemental Executive Retirement Income to which the Participant is
entitled under this plan or a plan maintained by an affiliated or
associated Company.
SECTION IV. RETIREMENT
Retirement dates for the purposes of this Supplemental Plan shall be the
same as set forth in the retirement provisions of the Pension Plan.
SECTION V. SUPPLEMENTAL
EXECUTIVE RETIREMENT INCOME
While the Company hopes and expects to continue the Supplemental Plan
indefinitely, it reserves the right to terminate or modify it at any time.
1. Normal or Deferred Supplemental Executive Retirement Income. The
monthly Supplemental Executive Retirement Income payable to a Participant
who, at Normal Retirement Date or a Deferred Retirement Date, retires on
or after November 1, 1990, pursuant to the provisions of the Pension Plan
from the service of the Company, will be an amount equal to the product of
the Participant's Final Executive Pay times the sum of the percentages
determined below, minus (i) a portion of the Participant's estimated
primary Social Security benefit, as determined pursuant to the Pension
Plan, equal to the lesser of (1) .5% multiplied by 1/12th of the
Participant's "Final Average Compensation" up to "Covered Compensation"
(as those terms are used in Section 401(1) of the Internal Revenue Code)
for each year of Accredited Service and Preference Service, (2) 1/2 of the
benefit that would be provided prior to the application of the offset,
with respect to Participant's Final Pay up to Covered Compensation, or
(3) the maximum offset allowed under Section 401(1) of the Internal
Revenue Code, and (ii) the Retirement Income provided by the Pension Plan:
2.1% for each of the first 20 years of Accredited Service and Preference
Service.
1.4% for each of the next 15 years of Accredited Service and Preference
Service.
2. Early Supplemental Executive Retirement Income. The monthly
Supplemental Executive Retirement Income payable to a Participant who, on
an Early Retirement Date, retires from the service of the Company, will be
the amount of his Accrued Supplemental Executive Retirement Income on the
date his retirement commences, reduced by 5/12th of 1% for each month by
which his Early Retirement Date precedes his Normal Retirement Date by
more than 36 months.
3. Limitation as to Months for which Payment may be Made. The Company
shall pay to a Participant, or to his Provisional Payee, if applicable,
Supplemental Executive Retirement Income in the amount determined pursuant
to this Supplemental Plan only for a month in which the Participant or his
Provisional Payee is entitled to receive Retirement Income under the
provisions of the Pension Plan. Payment of Supplemental Executive
Retirement Income shall terminate when payment of Retirement Income is
terminated pursuant to the Pension Plan.
4. The payments provided for in this Supplemental Plan shall be made by
the Company at such times as required under this Supplemental Plan;
provided, however, that while the Company hopes and expects to make the
payments provided for this Plan, such payment is not guaranteed.
5. The Company may establish a fund, as part of the general assets of the
Company, to provide for the payments required under this Supplemental
Plan.
6. Maximum Permissible Retirement Income. Notwithstanding any other
provision of this Plan, if the Retirement Income payable to a retired
employee under provisions of subsection 7 of Section V of the Pension Plan
is a greater amount than permitted by section 415 of the Internal Revenue
Code to be paid by qualified plans, then such excess Retirement Income
shall be payable to such retired employee under this Plan; subject
however, to approval by the Board of Directors of the Company for each
such employee.
7. Single Sum Payment. The Retirement Board, after discussion with a
retiring Participant, may pay in a single sum to such Participant, who
retires on or after February 1, 1991, at the time of the Participant's
retirement with benefits under the Pension Plan, the present value of the
Participant's Supplemental Executive Retirement Income. The present value
of that part of the Participant's Supplemental Executive Retirement Income
which represents payment to make up Retirement Income lost under the
Pension Plan because of the Maximum Retirement Income provision thereof
(Section V, subsection 6 of the Plan), will not be paid in a lump sum
unless the Participant has elected to receive a single sum payment under
the Pension Plan. The present value will be actuarially determined using
the Pension Benefit Guaranty Corporation Immediate Annuity Rate, as of the
date of the distribution, increased to 120% for distributions over
$25,000. The discussion with a retiring Participant is for the purpose of
assuring the Retirement Board of accurate current information for use in
making its independent decision as to whether or not to make payment in a
single sum. In making its independent decision, the Retirement Board may
take into account any financial hardship of the Participant, the health or
disability of the Participant, and/or any other factor it considers
relevant. The decision of the Retirement Board shall be in the sole
discretion of said Board and shall be final, binding and conclusive.
Discussion with respect to such a payment and the decision with respect
thereto will take place at least three months before Early Retirement
Date, Normal Retirement Date or Deferred Retirement Date.
8. Retired Participants. The Supplemental Executive Retirement Income of
retired Participants may be increased from time to time by such reasonable
amounts as determined by the Board of Directors of the Company, to counter
the effects of inflation, provided that the percentage amount of such
increases will be made uniformly for all retired Participants, or for
retired Participants within such reasonable classes, as may be determined
by the Board of Directors.
9. Disability Service Pension Supplement. If a Participant is totally
disabled (unable to perform the Participant's regular job because of
disease or injury) and, as a result, fails to accumulate Accredited
Service under the Pension Plan for some period of time (Disability
Service), a Disability Service Pension Supplement will be calculated and
paid as if Accredited Service and applicable Preference Service were
credited during such period subject to the following:
A. The Participant must have retired with Retirement Income under the
Pension Plan.
B. The period of Disability Service begins when the Participant stops
accumulating Accredited Service under the Pension Plan as a result
of the Participant's total disability, provided that the Participant
has not undertaken other employment.
C. The period of Disability Service ends when the Participant first:
1. Begins again to accumulate Accredited Service under the Pension
Plan,
2. Undertakes other employment,
3. Retires on an Early Retirement Date, or,
4. Attains the Participant's Normal Retirement Date.
D. The "Final Executive Pay" of the Participant, for purposes of
determining the Disability Pension Supplement only, will be
calculated as if the Participant were earning during the period of
Disability Service the sum of (1) the Participant's last monthly
rate of basic earnings prior to the period of Disability Service,
and (2) 1/12th of the average of the Executive Incentive
Compensation (if any) earned (received or allocated and deferred)
for the five years of Accredited Service immediately preceding the
period of Disability Service (or the monthly average of Executive
Incentive Compensation earned over the Participant's Accredited
Service if the Participant has fewer than five years of Accredited
Service), increased or decreased each July 1, following the
beginning of the Participant's period of Disability Service,
according to the change in the Bureau of Labor Statistics Consumer
Price Index (CPI-W) for the preceding 12-month period of Disability
Service (or lesser period of Disability Service, if applicable).
However, no July 1 increase will exceed an amount which could result
in an increase greater than a 5% compounded annual increase since
the beginning of the Participant's period of Disability Service, nor
in a reduction in the Participant's Final Executive Pay to an amount
less than the Participant's Final Executive Pay prior to the period
of Disability Service. For purposes of this provision, the Consumer
Price Index for the second month previous to any measurement date
will be deemed to be in effect on such date.
E. The amount of the Disability Service Pension Supplement is the
Supplemental Executive Retirement Income, calculated using Final
Executive Pay as determined in Section V, subsection 9.D above, and
giving credit for Accredited Service and applicable Preference
Service for any period of Disability Service, less:
1. The Supplemental Executive Retirement Income calculated without
regard to the Disability Service Pension Supplement,
2. The Retirement Income provided by the Pension Plan, and
3. Any amount paid to a retired Participant for lost benefits under
the Pension Plan, for the period of Disability Service, under an
insurance policy, the premiums for which were paid in whole or
in part for CMS Energy Corporation or any of its directly or
indirectly wholly-owned subsidiaries.
F. Payments will begin as of the latter of:
1. The Participant's Normal Retirement Date.
2. The first day of the month following the cessation of any Long
Term Disability payments pursuant to any plan or insurance
policy, the premiums for which were paid in whole or in part by
CMS Energy Corporation, or any of its directly or indirectly
wholly-owned subsidiaries.
SECTION VI. PROVISIONAL PAYEE OPTIONS AND PRE-RETIREMENT SURVIVING SPOUSE
BENEFIT
1. Post-Retirement. The provisions of Section VI of the Pension Plan,
pertaining to Provisional Payee Options are adopted as part of this
Supplemental Plan and any option which is elected by or otherwise
applicable to a Participant under the Pension Plan will be identically
applicable under the provisions of this Supplemental Plan. A Participant
may not have a Provisional Payee Option under this Supplemental Plan which
differs from such option or options elected by or otherwise applicable to
him under the Pension Plan. Nevertheless, a Provisional Payee may elect,
upon the death of the Participant and the agreement of the Retirement
Board, to then receive the present value of the amount of the payments to
which he otherwise would be entitled, as determined by the Retirement
Board using such actuarial tables and interest assumptions as may be
adopted for this purpose by the Retirement Board and in use at the time of
the Participant's death.
2. Pre-Retirement Surviving Spouse Benefit. Provisions of Section VI,
subsection 2 of the Pension Plan of Consumers Power Company pertaining to
Pre-Retirement Surviving Spouse Benefits are adopted as part of this
Supplemental Plan.
SECTION VII. TERMINATION OF SERVICE
If the services of a Participant included in the Supplemental Plan
terminate for any reason other than death, or transfer to an affiliated or
associated company as provided by subsection 2 of Section III of this
Supplemental Plan, or retirement as provided by Section IV of the Pension
Plan, and if the Participant is later entitled to receive Retirement
Income pursuant to Section VII of the Pension Plan, then, the Participant
will be eligible at the same time to receive Supplemental Executive
Retirement Income pursuant to the provisions of this Supplemental Plan.
If the Accrued Retirement Income is actuarially reduced because of retire-
ment at an Early Retirement Date, the Accrued Supplemental Executive
Retirement Income will be reduced by an identical percentage.
SECTION VIII. FORFEITURE
A Participant who is discharged by the Company for cause, or an employee
who is subsequently convicted of any felony committed while in the course
of his employment with the Company, which felony involved theft, malicious
destruction or misuse of the property of the Company or the embezzlement
or misapplication of the funds of the Company, or who makes an admission
in writing of the commission of such felony, shall be ineligible for and
forfeit Supplemental Executive Retirement Income.
SECTION IX. NON-ALIENATION OF BENEFITS
No benefit under the Supplemental Plan shall be subject in any manner to
anticipation, alienation, sale, transfer, assignment, pledge, encumbrance,
charge, renunciation, or reduction and any attempt so to anticipate,
alienate, sell, transfer, assign, pledge, encumber, charge, renounce, or
reduce the same shall be void, nor shall any such benefit be in any manner
liable for or subject to the debts, contracts, liabilities, engagements or
torts of the person entitled to such benefit.
If any Participant or retired Participant or any Provisional Payee under
the Supplemental Plan is adjudicated bankrupt or attempts to anticipate,
alienate, sell, transfer, assign, pledge, encumber, charge, renounce, or
reduce any benefit under the Supplemental Plan, except as specifically
provided in the Supplemental Plan, then such benefit shall cease and
terminate and in that event the Retirement Board shall hold or apply the
same or any part thereof to or for the benefit of such Participant or
retired Participant or Provisional Payee in such manner as the Retirement
Board may think proper, provided the Retirement Board shall not act in any
manner as would perpetuate the alienations prohibited by this Section.
SECTION X. LIMITATION OF RIGHTS
Neither the establishment of this Supplemental Plan, nor any modification
thereto, nor the payment of any benefits, shall be construed as giving to
any Participant, other employee, or other person any legal or equitable
rights against the Company, or any officer or employee thereof, or the
Retirement Board, except as herein provided. Under no circumstances shall
the terms of employment of any employee be modified or in any way affected
hereby. Inclusion under the Supplemental Plan will not give any
Participant or any Provisional Payee any right to claim a Supplemental
Executive Retirement Income except to the extent such right is specifi-
cally fixed under the terms of the Supplemental Plan. Subject to the
provisions of this Supplemental Plan and the Supplemental Executive
Retirement Trust the Participant shall have no rights greater than those
of a general, unsecured creditor of the Company.
SECTION XI. ADMINISTRATION
OF SUPPLEMENTAL PLAN
The general administration of this Supplemental Plan shall be placed in
the Retirement Board provided for in the Pension Plan and the provisions
of Section XII of the Pension Plan will govern the administration of this
Supplemental Plan as far as applicable.
The claim procedure of this Supplemental Plan shall be the same as the
claim procedure provided in the Pension Plan.
SECTION XII. AMENDMENT, MODIFICATION OR TERMINATION OF THE SUPPLEMENTAL
PLAN
This Supplemental Plan may be amended, modified or terminated at any time
by action of the Board of Directors of the Company.
IN WITNESS WHEREOF, execution is hereby affected this 1st day of November
1990.
CONSUMERS POWER COMPANY
William T. McCormick, Jr.
------------------------------
Chairman of the Board
ATTEST:
Thomas A. McNish
- ----------------
Secretary
<PAGE>
<PAGE>
EXHIBIT (21)(a)
<PAGE>
<PAGE>
EXHIBIT 21(a)
SUBSIDIARIES OF CMS ENERGY CORPORATION
at December 31, 1993
Percent Voting
Stock Owned
by CMS Energy Incorporated
------------- ------------
Consumers Power Company ("CPCo") 98 Michigan
ES Services Company 0 Michigan
(100* Owned by CPCo)
Huron Hydrocarbons, Inc. 0 Michigan
(100% Owned by CPCo)
Michigan Gas Storage Company 0 Michigan
(100% Owned by CPCo)
Midland Group, Ltd. ("Midland Group") 0 Michigan
(100% Owned by CPCo)
CMS Midland Holdings Company 0 Michigan
(100% Owned by Midland Group)
CMS Midland, Inc. 0 Michigan
(100% Owned by Midland Group)
MEC Development Corp. 0 Michigan
(100% Owned by Midland Group)
Sheridan Leasing Corporation 0 Delaware
(100% Owned by CPCo)
CMS Enterprises Company ("Enterprises") 100 Michigan
CMS Engineering Co. 0 Michigan
(100% Owned by Enterprises)
CMS Generation Co. ("Generation") 0 Michigan
(100% Owned by Enterprises)
CMS Generation Altoona Company 0 Michigan
(100% Owned by Generation)
CMS Generation Cadillac Company 0 Michigan
(100% Owned by Generation)
CMS Generation Cadillac Holdings 0 Michigan
Company (100% Owned by Generation)
CMS Generation Filer City, Inc. 0 Michigan
(100% Owned by Generation)
CMS Generation Filer City 0 Michigan
Operating Company
(100% Owned by Generation)
CMS Generation Genesee Company 0 Michigan
(100% Owned by Generation
CMS Generation GP Company 0 Michigan
(100% Owned by Generation)
CMS Generation Grayling Company 0 Michigan
(100% Owned by Generation)
CMS Generation Grayling Holdings 0 Michigan
Company (100% Owned by Generation)
CMS Generation Holdings Company 0 Michigan
(100% Owned by Generation)
CMS Generation Honey Lake Company 0 Michigan
(100% Owned by Generation)
CMS Generation Mon Valley Company 0 Michigan
(100% Owned by Generation)
CMS Generation Operating Company 0 Michigan
(100% Owned by Generation)
CMS Generation Recycling Company 0 Michigan
(100% Owned by Generation)
CMS Midland II, Inc. 0 Michigan
(100% Owned by Generation)
CMS Oxford Development Company 0 Michigan
(100% Owned by Generation)
Oxford Tire Recycling of 0 Delaware
Bloomfield, Inc.
(100% Owned by Generation)
Oxford Tire Recycling of 0 Delaware
Massachusetts, Inc.
(100% Owned by Generation)
Oxford Tire Supply, Inc. 0 Delaware
(100% Owned by Generation)
Oxford Tire Recycling, Inc. 0 Delaware
(100% Owned by Generation)
Oxford Tire Recycling of 0 Delaware
Northern California, Inc.
(100% Owned by Generation)
Oxford Tire Recycling of 0 Delaware
Southern California, Inc.
(100% Owned by Generation)
CMS Resource Development Company 0 Michigan
(100% Owned by Enterprises)
CMS Utility Services, Inc. 0 Michigan
("Utility Services")
CMS A/R Services, Inc. 0 Michigan
(100% Owned by Utility Services)
KJL Limited, Inc. 0 Delaware
(100% Owned by Enterprises)
NOMECO Oil & Gas Co. ("NOMECO") 0 Michigan
(100% Owned by Enterprises)
NOMECO Columbia Oil company 0 Michigan
(100% Owned by NOMECO)
NOMECO Argentina LDC 0 Michigan
(100% Owned by nomeco)
NOMECO Ecuador Exploration, Inc. 0 Michigan
(100% Owned By NOMECO)
NOMECO PNG Oil Co. 0 Michigan
(100% Owned By NOMECO)
NOMECO China Oil Co. 0 Michigan
(100% Owned by NOMECO)
NOMECO Exploration (Thailand) 0 Thailand
Limited
(100% Owned by NOMECO)
NOMECO Australia Pty. Limited 0 Australia
(100% Owned by NOMECO)
NOMECO Ecuador Oil Company 0 Michigan
(100% Owned by NOMECO)
NOMECO Thailand Oil Company 0 Michigan
(100% Owned by NOMECO)
Alkek Pipeline Company 0 Michigan
(100% Owned by NOMECO)
NOMECO Pipeline Company 0 Michigan
(100% Owned by NOMECO)
NOMECO Holdings Ltd. 0 Caymen Islands
(100% Owned by NOMECO)
NOMECO International Ltd. 0 Michigan
(100% Owned by NOMECO)
NOMECO Equatorial Guinea Oil 0 Michigan
& Gas Co.
(100% Owned by NOMECO)
NOMECO Oil Belorus, Inc. 0 Michigan
(100% Owned by NOMECO)
CMS Gas Transmission Company 0 Michigan
("Gas Transmission")
(100% Owned by Enterprises)
CMS Antrim Gas Company 0 Michigan
(100% Owned by Gas Transmission)
CMS Arkoma Pipeline Company 0 Michigan
(100% Owned by Gas Transmission)
CMS Jackson Pipeline Company 0 Michigan
(100% Owned by Gas Transmission)
CMS Saginaw Bay Company 0 Michigan
(100% Owned by Gas Transmission)
CMS Saginaw Bay Lateral Company 0 Michigan
(100% Owned by Gas Transmission)
CMS Gas Marketing Company 0 Michigan
(100% Owned by Enterprises)
Monarch Management Company 0 Michigan
(100% Owned by Enterprises)
CMS ENCOM, Inc. 0 Michigan
(100% Owned by Monarch)
CMS Gas Storage Co. 0 Michigan
(100% Owned by Enterprises)
CMS Capital Corp. 100 Michigan
CMS Arcadia Land Management Co. 100 Michigan
CMS Land Company 100 Michigan
CMS Shoreside Resort Co. 100 Michigan
<PAGE>
<PAGE>
EXHIBIT (21)(b)
<PAGE>
EXHIBIT 21(b)
SUBSIDIARIES OF CONSUMERS POWER COMPANY
at December 31, 1993
Percent Voting
Stock Owned
by CMS Energy Incorporated
-------------- ------------
ES Services Company 100 Michigan
Huron Hydrocarbons, Inc. 100 Michigan
Michigan Gas Storage Company 100 Michigan
Midland Group, Ltd. ("Midland Group") 100 Michigan
CMS Midland Holdings Company 0 Michigan
(100% Owned by Midland Group)
CMS Midland, Inc. 0 Michigan
(100% Owned by Midland Group)
MEC Development Corp. 0 Michigan
(100% Owned by Midland Group)
Sheridan Leasing Corporation ("Sheridan") 100 Delaware
<PAGE>
<PAGE>
EXHIBIT (23)
<PAGE>
<PAGE>
EXHIBIT (23)
Arthur Andersen & Co.
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
of our reports included or incorporated by reference in this Form 10-K,
into CMS Energy Corporation's previously filed Registration Statements No.
33-9732, No. 33-29681, No. 33-47629, No. 33-64044 and No. 33-51877, and
Consumers Power Company's previously filed Registration Statement No. 33-
52159.
Arthur Andersen & Co.
Detroit, Michigan,
March 14, 1994.
<PAGE>
<PAGE>
- -------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
CMS ENERGY CORPORATION
AND
CONSUMERS POWER COMPANY
FORM 10-K
EXHIBITS
FOR FISCAL YEAR ENDED DECEMBER 31, 1993
- -------------------------------------------------------------------------
<PAGE>
<PAGE>
The following exhibits are applicable to CMS Energy and Consumers except
where otherwise indicated "CMS ONLY":
CMS Energy
and Consumers
Exhibit Numbers
- ---------------
(1)-(2) - Not applicable.
(3)(a) (CMS ONLY) - Articles of Incorporation of CMS Energy
Corporation, as Amended. (Designated in CMS
Energy Corporation's Form S-8 dated
June 30, 1989, File No 1-9513, as Exhibit
(4).)
(3)(b) (CMS ONLY) - Copy of the By-Laws of CMS Energy Corporation.
(3)(c) - Restated Articles of Incorporation of
Consumers Power Company.
(3)(d) - Copy of By-Laws of Consumers Power Company.
(4)(a) - Composite Working Copy of Indenture dated as
of September 1, 1945, between Consumers Power
Company and Chemical Bank (successor to
Manufacturers Hanover Trust Company), as
Trustee, including therein indentures
supplemental thereto through the Forty-third
Supplemental Indenture dated as of May 1,
1979. (Designated in Consumers Power
Company's Registration No 2-65973 as
Exhibit (b)(1)-4.)
Indentures Supplemental thereto:
Consumers
Power Company
Sup Ind/Dated as of File Reference Exhibit
------------------- ---------------- -------
44th 11/15/79 Reg No 2-65973 (b)(1)-7
45th 01/15/80 Reg No 2-68900 (b)(1)-5
46th 01/15/80 Reg No 2-69704 (4)(b)
47th 06/15/80 Form 10-K for
year end Dec 31,
1980, File
No 1-5611 (4)(b)
48th 03/15/81 Reg No 2-73741 (4)(b)
49th 11/01/81 Reg No 2-75542 (4)(b)
50th 03/01/82 Form 10-K for
year end Dec 31,
1981, File
No 1-5611 (4)(b)
51st 08/10/82 Reg No 2-78842 (4)(f)
52nd 08/31/82 Reg No 2-79390 (4)(f)
53rd 12/01/82 Reg No 2-81077 (4)(f)
54th 05/01/83 Reg No 2-84172 (4)(e)
55th 09/15/83 Reg No 2-86751 (4)(e)
56th 10/15/83 Reg No 2-87735 (4)(e)
57th 03/01/84 Reg No 2-89215 (4)(e)
58th 07/16/84 Form 10-Q for
quarter ended
June 30, 1984,
File No 1-5611 (4)(f)
59th 10/01/84 Reg No 2-93438 (4)(c)
60th 06/01/85 Form 10-Q for
quarter ended
June 30, 1985,
File No 1-5611 (4)(f)
61st 10/15/86 Reg No 33-9732 (4)(e)
63rd 04/15/87 Form 10-Q for
quarter ended
June 30, 1987
File No 1-5611 (4)(f)
64th 06/15/87 Form 10-Q for
quarter ended
June 30, 1987
File No 1-5611 (4)(g)
65th 02/15/88 Form 8-K dated
Feb 18, 1988
File No 1-5611 (4)
66th 04/15/88 Form 10-Q for
quarter ended
March 31, 1988
File No 1-5611 (4)(d)
67th 11/15/89 Reg No 33-31866 (4)(d)
68th 06/15/93 Reg No 33-41126 (4)(c)
69th 09/15/93 Form 8-K dated
September 21,
1993 File No
1-5611 (4)
(4)(b) (CMS ONLY) - Indenture between CMS Energy Corporation and
NBD Bank, National Association, as Trustee.
(Designated in CMS Energy's Form S-3
Registration Statement filed May 1, 1992, File
No. 33-47629, as Exhibit (4)(a).)
First Supplemental Indenture dated as of
October 1, 1992 between CMS Energy Corporation
and NBD Bank, National Association, as
Trustee. (Designated in CMS Energy's Form 8-K
dated October 1, 1992, File No. 1-9513, as
Exhibit (4).)
Second Supplemental Indenture dated as of
October 1, 1992 between CMS Energy Corporation
and NBD Bank, National Association, as
Trustee. (Designated in CMS Energy's Form 8-K
dated October 1, 1992, File No. 1-9513, as
Exhibit (4).)
(5)-(9) - Not applicable.
(10)(a) - Credit Agreement dated as of May 1, 1989 among
Consumers Power Company, the Co-Managers, as
defined therein, the Banks, as defined
therein, the Lenders, as defined therein, and
Citibank, NA, as Agent, and the Exhibits
thereto. (Designated in Consumers Power
Company's Form 10-Q for the quarter ended
March 31, 1989, File No 1-5611, as
Exhibit (19).)
Letter amendment dated as of December 11,
1991. (Designated in Consumers Power
Company's Form 10-K for the year ended
December 30, 1991, File No. 1-5611, as Exhibit
(3)(d).)
(10)(b) (CMS ONLY) - Amended and Restated Credit Agreement dated as
of November 30, 1992 as Amended and Restated
as of October 15, 1993, among CMS Energy
Corporation, the Banks, the Co-Agents, the
Documentation Agent and the Operational Agent,
all as defined therein, and the Exhibits
thereto.
(10)(c) - Employment Agreement dated as of August 1,
1990 among Consumers Power Company, CMS Energy
Corporation and William T. McCormick, Jr.
(Designated in CMS Energy Corporation's Form
10-K for the year ended December 31, 1990,
File No 1-9513, as Exhibit (10)(c).)
(10)(d) - Employment contract effective as of March 1,
1987 among CMS Energy Corporation, Consumers
Power Company and S. Kinnie Smith, Jr.
(Designated in Consumers Power Company's
Form 10-K for the year ended December 31,
1987, File No 1-5611, as Exhibit (10)(g).)
(10)(e) - Employment Agreement effective as of June 15,
1988 among Consumers Power Company, CMS Energy
Corporation and Victor J. Fryling.
(Designated in Consumers Power Company's
Form 10-K for the year ended December 31,
1988, File No 1-5611, as Exhibit (10)(i).)
(10)(f) - Employment Agreement dated May 26, 1989
between Consumers Power Company and Michael G.
Morris. (Designated in Consumers Power
Company's Form 10-K for the year ended
December 31, 1990, File No 1-5611, as
Exhibit (10)(f).)
(10)(g) - Employment Agreement dated May 26, 1989
between Consumers Power Company and David A.
Mikelonis. (Designated in Consumers Power
Company's Form 10-K for the year ended
December 31, 1991, File No. 1-5611, as Exhibit
10(h).)
(10)(h) - Employment Agreement dated May 26, 1989 among
Consumers Power Company, CMS Energy
Corporation and John W. Clark. (Designated in
CMS Energy Corporation's Form 10-K for the
year ended December 31, 1990, File No 1-9513,
as Exhibit (10)(f).)
(10)(i) - Employment Agreement dated March 25, 1992
between Consumers Power Company and Alan M.
Wright. (Designated in Consumers Power
Company's Form 10-K for the year ended
December 31, 1992, File No. 1-5611, as Exhibit
10(j).)
(10)(j) - Employment Agreement dated March 25, 1992
between Consumers Power Company and Paul A.
Elbert. (Designated in Consumers Power
Company's Form 10-K for the year ended
December 31, 1992, File No. 1-5611, as Exhibit
10(k).)
(10)(k) - Consumers Power Company's Executive Stock
Option and Stock Appreciation Rights Plan
effective December 1, 1989. (Designated in
Consumers Power Company's Form 10-K for the
year ended December 31, 1990, File No 1-5611,
as Exhibit (10)(g).)
(10)(l) - CMS Energy Corporation's Performance Incentive
Stock Plan effective as of December 1, 1989.
(Designated in CMS Energy Corporation's
Form 10-K for the year ended December 31,
1990, File No 1-9513, as Exhibit (10)(h).)
(10)(m) - CMS Deferred Salary Savings Plan effective
January 1, 1994.
(10)(n) - Consumers Power Company's Annual Executive
Incentive Compensation Plan effective February
1993, as amended March 1994.
(10)(o) - Consumers Power Company's Supplemental
Executive Retirement Plan effective
November 1, 1990.
(10)(p) - Senior Trust Indenture, Leasehold Mortgage and
Security Agreement dated as of June 1, 1990
between The Connecticut National Bank and
United States Trust Company of New York.
(Designated in Midland Cogeneration Venture
Limited Partnership's Form S-1 filed November
23, 1990, File No 33-37977, as Exhibit 4.1.)
Indenture Supplemental thereto:
Supplement No. 1 dated as of June 1, 1990.
(Designated in Midland Cogeneration Venture
Limited Partnership's Form S-1 filed November
23, 1990, File No 33-37977, as Exhibit 4.2.)
(10)(q) - Collateral Trust Indenture dated as of June 1,
1990 among Midland Funding Corporation I,
Midland Cogeneration Venture Limited
Partnership and United States Trust Company of
New York, Trustee. (Designated in CMS Energy
Corporation's Form 10-Q for the quarter ended
June 30, 1990, File No 1-9513, as
Exhibit (28)(b).)
Indenture Supplemental thereto:
Supplement No 1 dated as of June 1, 1990.
(Designated in Midland Cogeneration Venture
Limited Partnership's Form S-1 filed
November 23, 1990, File No 33-37977, as
Exhibit 4.4.)
(10)(r) - Amended and Restated Investor Partner Tax
Indemnification Agreement dated as of June 1,
1990 among Investor Partners, CMS Midland
Holdings Corporation as Indemnitor and CMS
Energy Corporation as Guarantor. (Designated
in CMS Energy Corporation's Form 10-K for the
year ended December 31, 1990, File No 1-9513,
as Exhibit (10)(v).)
(10)(s) - Environmental Agreement dated as of June 1,
1990 made by CMS Energy Corporation to The
Connecticut National Bank and Others.
(Designated in CMS Energy Corporation's Form
10-K for the year ended December 31, 1990,
File No 1-9513, as Exhibit (10)(y) and
Form 10-Q for the quarter ended September 30,
1991, File No 1-9513, as Exhibit (19)(d).)**
(10)(t) - Indemnity Agreement dated as of June 1, 1990
made by CMS Energy Corporation to Midland
Cogeneration Venture Limited Partnership.
(Designated in CMS Energy Corporation's
Form 10-K for the year ended December 31,
1990, File No 1-9513, as Exhibit (10)(z).)**
(10)(u) - Environmental Agreement dated as of June 1,
1990 made by CMS Energy Corporation to United
States Trust Company of New York, Meridian
Trust Company, each Subordinated Collateral
Trust Trustee and Holders from time to time of
Senior Bonds and Subordinated Bonds and
Participants from time to time in Senior Bonds
and Subordinated Bonds. (Designated in CMS
Energy Corporation's Form 10-K for the year
ended December 31, 1990, File No 1-9513, as
Exhibit (10)(aa).)**
(10)(v) - Amended and Restated Participation Agreement
dated as of June 1, 1990 among Midland
Cogeneration Venture Limited Partnership,
Owner Participant, The Connecticut National
Bank, United States Trust Company, Meridian
Trust Company, Midland Funding Corporation I,
Midland Funding Corporation II, MEC
Development Corporation and Institutional
Senior Bond Purchasers. (Designated in
Midland Cogeneration Venture Limited
Partnership's Form S-1 filed November 23,
1990, File No 33-37977, as Exhibit 4.13.)
Amendment No 1 dated as of July 1, 1991.
(Designated in Consumers Power Company's Form
10-K for the year ended December 31, 1991,
File No. 1-5611, as Exhibit (10)(w).)
(10)(w) - Power Purchase Agreement dated as of July 17,
1986 between Midland Cogeneration Venture
Limited Partnership and Consumers Power
Company. (Designated in Midland Cogeneration
Venture Limited Partnership's Form S-1 filed
November 23, 1990, File No 33-37977, as
Exhibit 10.4.)
Amendments thereto:
Amendment No 1 dated September 10, 1987.
(Designated in Midland Cogeneration Venture
Limited Partnership's Form S-1 filed November
23, 1990, File No 33-37977, as Exhibit 10.5.)
Amendment No 2 dated March 18, 1988.
(Designated in Midland Cogeneration Venture
Limited Partnership's Form S-1 filed November
23, 1990, File No 33-37977, as Exhibit 10.6.)
Amendment No 3 dated August 28, 1989.
(Designated in Midland Cogeneration Venture
Limited Partnership's Form S-1 filed November
23, 1990, File No 33-37977, as Exhibit 10.7.)
Amendment No 4A dated May 25, 1989.
(Designated in Midland Cogeneration Venture
Limited Partnership's Form S-1 filed November
23, 1990, File No 33-37977, as Exhibit 10.8.)
(10)(x) - Request for Approval of Settlement Proposal to
Resolve MCV Cost Recovery Issues and Court
Remand, filed with the Michigan Public Service
Commission on July 7, 1992, MPSC Case No. U-
10127. (Designated in CMS Energy
Corporation's and Consumers Power Company's
Forms 10-K for the year ended December 31,
1991 as amended by Form 8 dated July 15, 1992
as Exhibit (28).)
(10)(y) - Settlement Proposal Filed on July 7, 1992 as
Revised on September 8, 1992 by Filing with
the Michigan Public Service Commission.
(Designated in CMS Energy Corporation's and
Consumers Power Company's Forms 8-K dated
September 8, 1992 as Exhibit (28).)
(10)(z) - Michigan Public Service Commission Order Dated
March 31, 1993, Approving with Modifications
the Settlement Proposal Filed on July 7, 1992,
as Revised on September 8, 1992. (Designated
in CMS Energy Corporation's and Consumers
Power Company's Forms 10-K for the year ended
December 31, 1992 as Exhibit (10)(cc).
(10)(aa) - Unwind Agreement dated as of December 10, 1991
by and among CMS Energy Corporation, Midland
Group, Ltd., Consumers Power Company, CMS
Midland, Inc., MEC Development Corp. and CMS
Midland Holdings Company. (Designated in
Consumers Power Company's Form 10-K for the
year ended December 31, 1991, File No. 1-5611,
as Exhibit (10)(y).)
(10)(bb) - Stipulated AGE Release Amount Payment
Agreement dated as of June 1, 1990, among CMS
Energy Corporation, Consumers Power Company
and The Dow Chemical Company. (Designated in
Consumers Power Company's Form 10-K for the
year ended December 31, 1991, File No. 1-5611,
as Exhibit (10)(z).)
(10)(cc) - Parent Guaranty dated as of June 14, 1990 from
CMS Energy Corporation to MCV, each of the
Owner Trustees, the Indenture Trustees, the
Owner Participants and the Initial Purchasers
of Senior Bonds in the MCV Sale Leaseback
transaction, and MEC Development. (Designated
in Consumers Power Company's Form 10-K for the
year ended December 31, 1991, File No. 1-5611,
as Exhibit (10)(aa).)**
(11)-(12) - Not applicable.
(13) - Not Applicable.
(14)-(20) - Not applicable.
(21)(a) (CMS ONLY) - Subsidiaries of CMS Energy Corporation.
(21)(b) - Subsidiaries of Consumers Power Company.
(22) - Not applicable.
(23) - Consents of experts and counsel.
(24) - Powers of Attorney.
(25)-(28) - Not applicable.
*Five copies of this exhibit have been signed by, or on behalf of, each of
five Owner Participants. With regard to each of the agreements, each copy
is substantially identical in all material respects except as to the
parties thereto. Therefore, pursuant to Instruction 2, Item 601(a) of
Regulation S-K, CMS Energy Corporation and Consumers Power Company are
filing a copy of only one such document.
** Obligations of only CMS Holdings and CMS Midland, second tier
subsidiaries of Consumers, and of CMS Energy but not of Consumers.
Exhibits listed above which have heretofore been filed with the Securities
and Exchange Commission pursuant to various acts administered by the
Commission, and which were designated as noted above, are hereby
incorporated herein by reference and made a part hereof with the same
effect as if filed herewith.
<PAGE>
<PAGE>
EXHIBIT (24)
CMS ENERGY
February 25, 1994
Mr. Alan M. Wright and
Mr. Thomas A. McNish
Fairlane Plaza South, Suite 1100
330 Town Center Drive
Dearborn, MI 48126
CMS Energy Corporation is required to file an Annual Report on Form 10-K
for the year ended December 31, 1993 with the Securities and Exchange
Commission within 90 days after the end of the year.
We hereby make, constitute and appoint each of you our true and lawful
attorney for each of us and in each of our names, places and steads to
sign and cause to be filed with the Securities and Exchange Commission
said Annual Report with any necessary exhibits, and any amendments thereto
that may be required.
Very truly yours,
/s/ William T. McCormick, Jr. /s/ Percy A. Pierre
- ------------------------------------- ---------------------------
William T. McCormick, Jr. Percy A. Pierre
/s/ T. F. Russell
- ------------------------------------- ---------------------------
James J. Duderstadt Thomas F. Russell
/s/ Victor J. Fryling /s/ S. Kinnie Smith, Jr.
- ------------------------------------- ---------------------------
Victor J. Fryling S. Kinnie Smith, Jr.
/s/ Earl D. Holton
- ------------------------------------- ---------------------------
Earl D. Holton Robert D. Tuttle
/s/ Lois A. Lund /s/ Kenneth Whipple
- ------------------------------------- ---------------------------
Lois A. Lund Kenneth Whipple
/s/ Frank H. Merlotti /s/ John B. Yasinsky
- ------------------------------------- ---------------------------
Frank H. Merlotti John B. Yasinsky
/s/ W. U. Parfet
- -------------------------------------
William U. Parfet<PAGE>
<PAGE>
Extract from the minutes of a meeting of the Board of Directors of CMS
Energy Corporation (the "Corporation") held on February 25, 1994.
- - - - - - -
SEC Form 10-K Filing
Draft copies of the Form 10-K for 1993 will be given to the Directors
and officers of the Corporation for review and comments. Pursuant to
regulations of the Securities and Exchange Commission, the Annual Report
on Form 10-K must contain the signatures of the principal executive
officer, the principal financial officer and the Controller or the
principal accounting officer. Each officer of the Corporation will be
asked to review the Form 10-K and acknowledge approval of the contents as
applied to his/her area of responsibility.
Upon motion duly made and seconded, the following resolution was
thereupon unanimously adopted:
RESOLVED: That the officers of the Corporation, and
each of them, are authorized to execute the Annual Report on
Form 10-K for the year ended December 31, 1993, for and on
behalf of the Corporation, and any amendments thereto, and to
file or cause to be filed such Annual Report, and any
amendments thereto, with the Securities and Exchange Commission
and The New York Stock Exchange, including any exhibits or
other documents that may be required, with any changes thereto
as they may deem appropriate and as counsel may advise.
- - - - - - -
(SEAL) /s/ Thomas A. McNish
----------------------------
Thomas A. McNish
Secretary <PAGE>
<PAGE>
EXHIBIT (24)
CONSUMERS POWER
February 25, 1994
Mr. Alan M. Wright and
Mr. Thomas A. McNish
212 West Michigan Avenue
Jackson, MI 49201
Consumers Power Company is required to file an Annual Report on Form 10-K
for the year ended December 31, 1993 with the Securities and Exchange
Commission within 90 days after the end of the year.
We hereby make, constitute and appoint each of you our true and lawful
attorney for each of us and in each of our names, places and steads to
sign and cause to be filed with the Securities and Exchange Commission
said Annual Report with any necessary exhibits, and any amendments thereto
that may be required.
Very truly yours,
/s/ William T. McCormick, Jr. /s/ Percy A. Pierre
- ---------------------------------- ---------------------------
William T. McCormick, Jr. Percy A. Pierre
/s/ T. F. Russell
- ---------------------------------- ---------------------------
James J. Duderstadt Thomas F. Russell
/s/ Victor J. Fryling /s/ S. Kinnie Smith, Jr.
- ---------------------------------- ---------------------------
Victor J. Fryling S. Kinnie Smith, Jr.
/s/ Earl D. Holton
- ---------------------------------- ---------------------------
Earl D. Holton Robert D. Tuttle
/s/ Lois A. Lund /s/ Kenneth Whipple
- ---------------------------------- ---------------------------
Lois A. Lund Kenneth Whipple
/s/ Frank H. Merlotti /s/ John B. Yasinsky
- ---------------------------------- ---------------------------
Frank H. Merlotti John B. Yasinsky
/s/ W. U. Parfet
- ----------------------------------
William U. Parfet<PAGE>
<PAGE>
Extract from the minutes of a meeting of the Board of Directors of
Consumers Power Company (the "Company") held on February 25, 1994.
- - - - - - -
SEC Form 10-K Filing
Draft copies of the Form 10-K for 1993 will be given to the Directors
and officers of the Company for review and comments. Pursuant to
regulations of the Securities and Exchange Commission, the Annual Report
on Form 10-K must contain the signatures of the principal executive
officer, the principal financial officer and the Controller or the
principal accounting officer. Each officer of the Company will be asked
to review the Form 10-K and acknowledge approval of the contents as
applied to his/her area of responsibility.
Upon motion duly made and seconded, the following resolution was
thereupon unanimously adopted:
RESOLVED: That the officers of the Company, and each of
them, are authorized to execute the Annual Report on Form 10-K
for the year ended December 31, 1993, for and on behalf of the
Company, and any amendments thereto, and to file or cause to be
filed such Annual Report, and any amendments thereto, with the
Securities and Exchange Commission and The New York Stock
Exchange, including any exhibits or other documents that may be
required, with any changes thereto as they may deem appropriate
and as counsel may advise.
- - - - - - -
(SEAL) /s/ Thomas A. McNish
-------------------------------
Thomas A. McNish
Secretary
<PAGE>
