by Roger Conrad, editor Utility Forecaster
Nine years ago CMS Energy Corp.
) stood on the brink of bankruptcy. The longtime CEO had lost the confidence of regulators, shareholders and the utility's Michigan customers.
After a scandal involving phony energy trades broke, he was forced to step down. That's when current Chairman David Joos set the company on the road to recovery.
Joos focused on slashing debt, dumping unprofitable non-utility operations and repairing long-frayed relations with regulators.
There was plenty of pain along the way, including a four-year stretch during which the company paid no dividends.
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Today CMS is an invest-to-grow story. The company again boasts an investment-grade credit rating and is reliably growing earnings and dividends.
CMS announced this month it will build a $750 million, 700-megawatt natural gas-fired power plant to enter service in 2017. That adds to five-year utility system capital spending plans of $6.5 billion to $7.3 billion already in the works.
Meanwhile, once-contentious Michigan has evolved into a model regulatory climate as a consequence of the state's 2008 energy law.
The manufacturing boom in CMS' territory has further helped relations, with industrial sales surging nearly 6 percent the past 12 months.
Return on equity is a solid 10.3 percent, and the company has structured its investment to minimize rate increases.
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CMS raised its dividend by more than 14 percent in 2012.
Expected 5 percent to 7 percent annual underlying earnings growth and a low payout ratio should ensure another 8 percent to 10 percent boost this month.
Coupled with sharply reduced financial and operating risk, CMS earns a move to the Growth Portfolio Core Holdings. Buy up to my raised target of 25.