Consumers Energy – the principal subsidiary of CMS Energy Corp. (CMS) – has entered into an agreement with General Electric Company (GE). Per the contract, GE will supply 62 turbine units for CMS Energy’s Cross Winds Energy Park. Each turbine unit has a generation capacity of 1.7 megawatts (MW) which calls for an installed generation capacity of 105.4 MW.
Construction of the Cross Winds Energy Park in Tuscola County is expected to begin later this year and come on line late in 2014. During its construction period, the project is expected to create 155 jobs.
This project will help the company in meeting Michigan's 2008 energy law. Currently, this law calls for the company to generate 10% of the electricity from renewable sources by 2015. However, the project is subject to approval from the Michigan Public Service Commission and has yet to receive a special use permit from Columbia and Akron townships in Tuscola County.
Also, the company requires to enter into an interconnect agreement with the Mid-continent Independent System Operator, Inc. and International Transmission Company, a subsidiary of ITC Holdings Corp. (ITC).
Wind generation is a vital part of Consumers Energy's Balanced Energy Initiative. This 20-year plan targets to meet the needs of its 1.8 million electric customers with energy efficiency, demand management, expanded use of renewable energy, and development of new power plants.
The extension of tax credits for wind projects for which construction begins prior to Dec 31, 2013 will curtail the cost of meeting the renewable requirements of the 2008 Energy Law.
CMS Energy plans to spend approximately $6.5 billion to $7.0 billion in the next five years (2013 – 2017) on upgrading its distribution system and generation assets through projects such as advanced metering infrastructure and renewable investments. With its robust pipeline of regulated investment opportunities and favorable regulatory treatment, the company remains on track to achieve its long-term EPS growth target of 5% to 7% and annual rate base growth of 6% to 7%.
In order to meet its renewable capacity requirements, the company expects to add more than 500 MW of owned or contracted renewable capacity. Through Mar 2013, the company had contracted the purchase of 299 MW of renewable energy and owned 100 MW of capacity at its recently constructed Lake Winds Energy Park.
However, we remain concerned about the present unfavorable macro backdrop, lower demand for electricity, the dismal economy in Michigan and pending regulatory cases. The company presently retains a short-term Zacks Rank #3 (Hold).
In the near term, we would advise investors to accumulate its short-term Zacks Rank #1 (Strong Buy) peer Companhia Paranaense de Energia (ELP).
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