CMS能源 (CMS) 2002 Q2 法說會逐字稿

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Good morning, everyone, and welcome to CMS Energy's 2002 earnings and financial outlook conference call.

Today's conference is being recorded.

Just a reminder, there will be a rebroadcast of this conference today, beginning at 2:30 p.m. Eastern time, and running through August 14th.

To listen, simply dial 719-457-0820 and reference pass code 765774.

Again, that's 719-457-0820, and pass code 765774.

At this time, for opening comments and introductions, I would like to turn the call over to the Vice President of Investor Relations and Treasurer, Ms. Laura Mount Castle. Please go ahead ma'am.

Thank you. Good morning and thank you for joining us today.

Before we start, I'll read the usual forward looking safe harbor statement.

This presentation contains forward-looking statements within the meaning of the safe harbor provisions of the Federal Securities laws, our actual results may differ materially from those anticipated in such statements, as a result of various factors discussed in our S.E.C. Filings.

And with that, I'll turn it over to Dave Joos, President and Chief Operating Officer.

Good morning.

I just want to make a couple of preliminary comments before I turn this over to Al Wright, who will be going through the second quarter earnings and financial outlook.

As you know, that--that today is Al Wright's swan song with CMS Energy after a 12-year career.

During that time, Al has seen some real highs and lows, and I know he's disappointed that his departure coincides with one of those lows.

I would say, however, that I've known Al since day one of his tenure with CMS, and he has always been very committed to the success of the company, and to the success of the employees.

As you know, he's been a colorful personalities as well, and a friend of mine, and he will be missed.

I want to offer Al my thanks for his service, and best of luck in his new adventure in Ann Arbor.

Also with us today is our new Executive Vice President and Chief Operating Officer, Tom Webb.

Tom has extensive experience in a similar role at Kellogg, and before that at Vistion.

And I'm pleased to welcome Tom to our team.

He'll be an observer today's conference call, having just showed up for work here on Monday, but you can expect to hear his voice on our next call.

So with that, let me turn it over to Al, and, of course, I'll be back to make a few comments as well and to help with answering any questions that you might have.

Al?

Well, Dave, thank you for the kind remarks.

Ladies and gentlemen, for the second quarter, we have reported a loss of 56 cents per share.

After excluding nonoperating charges and discontinued operations totaling $1 per share, operating earnings per share were 44 cents.

That represents an increase of 17 cents or 63% from last year.

The reconciling items for the quarter are: gains and asset sales, principally our electric transmission facility, the net loss from discontinued operations, now includes the expected loss from the announced sale of our oil and gas company and Vyron units, which although not closed, have been booked as a discontinued operation.

Restructuring costs, which are relatively minor, include severance costs related to the downsizing of our MST unit, and the extraordinary item cost relates to the early retirement of some $286 million of debt, repurchased by CMS and panhandled early in the quarter.

The second quarter operating earnings, reflect the benefits from a long-term supply contract marked to market at the MCV cogeneration plant.

Greatly reduced power supply costs, due to last year's refueling outage at our Palisades plant, which is not occurring this year.

Improved earnings from our IPP facilities, and the weather that was helpful, ironically, to both our gas and utility units as I'll describe in a second.

Year to date earnings on a reported or GAAP basis are $2.30, which is $1.05 above last year and, and as I said, that's principally due to our asset restructuring program.

Operating earnings per share, is 99 cents, which is 13% lower than last year, but yet ahead of our plan.

As a result, CMS is still currently positioned to achieve the annual targeted operating net income range of $1.50 to $1.55 per share that we quoted back in May.

And I want to remind you, this annual target includes, the ongoing negative impact of the Argentine devaluation and exappropriation issues.

With regard to our businesses, we will now discuss each unit's operating net income.

As a reminder, operating net income of the business units, does not include apparent interest expense allocation.

Also, we have adjusted 2001 to reflect a change in the method of allocating overheads to make the results comparable year to year.

Now, let's talk about the electric utility.

Their net operating -- operating net income was $54 million, which is some $25 million higher than last year.

The increase is due to higher deliveries from weather, an increase in Industrial sales, and lower supply costs, partially offset by increases in some operating expenses. Although average temperatures were cooler than last year for the quarter, it was kind of two different parts of the quarter.

The early part was quite cool, helping the gas unit and the latter part, as you probably know, was quite warm.

Cooling degree days, which is the driver of high margin air conditioning load, were 35% higher than last year's second quarter.

We estimate that would have benefited our 2002 operating net income by some $3 million.

Lower supply costs reflect the absence of last year's Palisades refueling outage, as well as the beginning of the six-month unscheduled outage which you may recall, began June 20th of last year.

With regard to the gas utility, the benefits of the cool spring and some interim rate relief received last December, offset the impact of slightly higher operating expenses.

As a result, operating net income is $4 million, up $4 million from last year, which was flat.

Higher deliveries for the quarter were principally due to heating degree days that totalled 1,024.

Ironically, in the same quarter that we had a higher air conditioning load.

This is an increase of 35% over last year and 12% colder than normal.

We estimate that this weather benefited our 2000 operating net income for the gas unit by $3 million.

On a weather-adjusted basis, deliveries were down, however, 3.8%.

For the panhandle companies, operating net income totalled $12 million or $2 million greater than last year.

Lower earnings at panhandle Lake Charles L&G processing facility, resulted primarily from fixed rates on the British gas contract, versus last year's higher spot rates.

These lower earnings were partially offset by lower fixed charges, substantially due to the retirement of some $235 million in debt from the L&G monitorization proceeds received last year. In addition, benefits were recognized from lower operating expenses, and from eliminating the amortization of goodwill as required by FAS, number 142.

Turning now to the rest of the natural gas transmission business, operating net income for the group excluding panhandled totals $1 million, or about $3 million less than last year.

Higher earnings at other pipeline operations and lower operating costs were more than offset by the Argentine exappropriation and devaluation issues, that for this unit alone totalled $5 million, and somewhat by the impact of lower commodity prices in our field services operations.

Marketing services and trading has a large variance, and posted an operating net loss of $18 million, a decrease of some $51 million from last year.

Quite frankly, credit constraints have severely limited the overall liquidity of the whole energy trading market, reducing MST's ability to actively manage and optimize its open positions as well as impacting the ability to execute new deals.

This has placed downward pressure on trading margins, for both wholesale power and natural gas, that includes for this quarter, an inner company loss from marked to market accounting, of transactions with related parties for whom they act as the head party.

As you will see later, this intercompany MTM loss is eliminated on the consolidated financial results.

Partially offsetting these lower margins, are lower net charges for mark-to-market and credit reserves, as well as lower opting expenses, which you'll continue to see reflected in the third and fourth quarter due to the downsizing of that operation.

On the independent power front, our operating net income was $48 million, an increase of some $30 million.

This increase can be attributed to the mark-to-market for the long-term supply contracts, gas contracts, at our MCD facility for $17 million, and improved plant performance overall of $6 million for the rest of the system.

Lower steam costs at our Dearborn Industrial Generation facility are also a factor.

As you may recall, last year this facility was experiencing construction delays, and had to purchase the steam to meet our obligations, rather than benefiting from its own steam by-product, which it currently is.

We also had higher earnings from our other investments, primarily higher generation at Tacarade, and the commercial operation of our facilities in UAE, which began in late 2001.

These benefits were partially offset by the Argentine exappropriation and devaluation issues for this unit, that totalled $8 million for the quarter.

With regard to parent expense and other issues, the other includes the elimination of a debt, $21 million intercompany loss which was recorded at MS&T.

It does include lower parent company interest expense, principally due to our asset restructuring program.

For those interested, CMS consolidated overall average borrowings are down an average $355 million for the quarter, and had an average cost of 6.87%, which is 94 basis points lower than last year.

These benefits were partially offset by some losses related to nonstrategic Latin American investments, for example, the Foundlic Fund.

And now, as a wrap-up, for the quarter, second quarter, operating net income for CMS is $59 million,or 44 cents per share, up some $24 million or 17 cents from last year.

Now, let's talk about our very, very important asset sale program.

We still plan to realize close to $2.9 billion of cash from asset sales over these two years, but some of this may now occur in 2003.

With the sale of the oil and gas company, however, we stand at $2.6 billion total, which represents more than 88% of our $2.9 billion goal.

Additionally, we are working on and have targeted eight other assets to be sold this year, that should generate between $75 to $275 million of additional proceeds this year.

In addition, we are evaluating other assets for sale to generate yet another $200 million in fiscal 2003 beginning in January.

We do think that if we were successful on these eight projects, it would total $275 million, which would put us at the high end of the range of $2.8 billion.

We thought because of the liquidity events of July, that we'd present our source and use of cash here at this -- at the parent company level.

At the beginning of the quarter -- excuse me, at the end of June 30, we had $70 million on hand.

Our bank borrowings netted us $186 million from the new facilities that closed on July 12th.

We'll have $232 million of asset sales from those deals already announced, principally at oil and gas.

The dividends you see here both from consumers and enterprises for the balance of the year, and some other sources like tax payments or tax refund, I should say, for $42 million, total $680 million.

On the outflow side, we expect to pay down some $286 million, which includes the retirement of $54 million of our parent company general turn notes as per schedule, capital investments totaling $160 million, parent interest charges of $130 million, dividends, both deferred and common, at the lower level on common, $75 million, for a subtotal 651, thus, on a very conservative basis, we would end with $99 million.

This statement assumes only the sale of oil and gas already announced, and consumers return to capital markets in the fall as we planned.

Our plan is to execute greater debt paydown, and have higher cash balances that are shown in this bare bones forecast.

If we're successful in closing on other targeted asset sales as I just mentioned, and/or we have access to the capital markets at CMS for the issuance of equity linked securities as planned, both of these assumptions would increase our debt paydown and our projected year-end cash balances, and would affect the projected year-end capital structure as I'm about to describe.

It's important to note that either paying down an additional $214 million of debt, or issuing as planned some $250 million of equity-linked securities, would satisfy the credit agreement terms that allow us to continue to pay the dividend as we planned in the first quarter of next year.

With regard to capital structure, as you can see, our total debt to capital ratio at the end of the quarter, is some 69%, disappointingly higher than we had hoped, and it's lower than the end of last year, but up from 66% at the end of the first quarter.

This reflects the previously announced change in the functional currency for Argentine investments, which hurt equity by approximately $400 million, which we booked in April, and prebooking the loss related to the announced sale of oil and gas unit, consistent with FAS-144, discontinued operations.

Our forecast for the end of the year is now 66%, shortly higher than our previous guidance of 60% to 62%.

Although this is a disappointing result, it is primarily due to charges to equity, and not to increased debt.

In fact, total debt is estimated to be between $6.6 and $6.7 billion at year end, down to at least $1.2 billion from the previous year end.

In addition, the forecast reflects the suspension of equity issues that we had planned on, and reflects maintaining higher cash balances at the -- at the company, at CMS and at panhandle, which hurt the total equity -- or total debt ratio by about 3%.

Now, other items that could further impact these ratios are, the panhandled goodwill impairment, that I'll discuss in just a minute, and a potential charge to comprehensive income for pension liability resulting from poor market performance in recent years. and this year specifically, which will not be common or unique to this company and common to many.

Longer term, we will continue to work on approving this ratio through our asset sale program, equity issues, and operating performance for the ultimate goal of achieving approximately a 60% debt ratio.

With regard to net income guidance, there hasn't been a lot of fluctuation, as you can see from this chart.

MST is down and our interest expense is expected to be lower, and they are offsetting, which results in the same operating net income. So we are reaffirming our 150 to 150 per share guidance for this year's operating net income.

This annual target includes the negative impact, or the deduction due to Argentine devaluation and exappropriation, that we currently estimate the total 35 cents.

In other words, the number would otherwise have been 35 cents higher.

A couple of the key assumptions is that a gas utility final rate order is entered in the third quarter, and that weather is somewhat normal for the remainder of this year.

I mentioned the goodwill impairment potential.

Under FAS-142, goodwill amounts are now required to be tested annually for impairment under this [INAUDIBLE]

If the total enterprise fair value of an acquired entity, does not equal or exceed the book basis, then you can have and would have an indication that the goodwill accounts may be impaired.

It is a two-step process.

Our initial test for panhandle indicated a potential impairment.

A second phase of testing fair values by individual asset and liability, is now required.

Generally with the help of an outside appraiser, more than one appraiser, to determine if an actual impairment exists.

This actual impairment determination, which is under way, must be completed under this guidance -- or under this rule, no later than year-end this year.

With the transition rules requiring that any such impairment be treated as a change in accounting, and reported as such, including recognition retroactively in the beginning of the year.

On another issue, as we notified the market, is that as a result of the recent downgrades of panhandle and CMS, certain rights were triggered in some surety agreements and pipeline financings, that involved MST's panhandle or enterprises and third parties.

We are working with these parties to find mutually satisfactory arrangements that -- where there can be no assurance that such arrangements will be completed, or that litigation may not result.

These agreements can be as large as $180 million at the pipeline company for project financings.

We think it's more likely that that will be closer to a figure of 110, and they could aggregate to some $300 million approximately of additional security required for the surety agreements.

Finally, with respect to new hot topic, which are the CEO and CFO certifications, we will not be able to give the certification of the 2001 form 10K, as required by the S.E.C.'s June order, or the certification of the June 30, 10Q required by the [INAUDIBLE] act.

As we have previously and repeatedly disclosed, we are restating CMS Energy's 2000 and 2001 financial statements, to adjust for the effects of roundtrip trades.

Some of these historic numbers impact the comparative periods included in both the 10K and the 10Q.

In light of this intended restatement, and the related board's special committee investigation, Arthur Andersen, our former accountant, changed its historic CMS audit opinion, back in June.

Under these circumstances, we feel imprudent to certify the form 10K or 10Q at this time.

And now, Dave would like to discuss a number of future issues that are ongoing.

I would just like to bring you up to speed on a couple of things.

With regard to investigations, it's well -- been well publicized that there are investigations ongoing by the S.E.C., the CFTC, the FRDC and the Department of Justice, related to roundtrip trading in the company's financial statements, accounting practices and controls.

The company continues to answer daily requests and subpoenas for information, really no new developments in that regard here recently.

Obviously, it's not possible at this time to predict the outcome of these investigations.

With regard to the special committee, the board of directors, their work is ongoing.

You'll recall that it was initially expected that that activity would take some 60 to 90 days to complete.

The board committee recently discussed this issue with the Board of Directors, in total it is making good progress and continues to expect that it will be able to complete its work by the end of September.

In that regard, the Ernst & young audit is also ongoing with regard to reauditing 2000 and 2001 in preparation for allowing the certification of financial statements.

Ernst & Young has previously stated its intent to wait until the completion of the Board of Directors special committee work to complete that certification.

Their work is ongoing though, and they to have targeted to complete that work shortly after the board committee's work, so that -- so that if everything continues according to schedule, they would complete that work in October.

Finally, we want to talk about the potential sale of our pipeline assets, the company announced this morning that we are exploring the sale of our pipeline and fuel services businesses.

These are our domestic assets, including the Panhandle and Trunk Line Interstate Natural Gas Pipelines, the lake Charles L&G terminal, Centennial Liquid Products pipeline, and our Guardian Natural Gas Pipeline, as well as our field services gathering and processes businesses.

This was discussed with the Board of Directors last week, and the Board agreed with moving forward with the exploration of this potential sale.

We are in the process of assessing the market's interest, and we do know there's significant interest.

We have been contacted by a number of companies interested in those assets, and we are currently exploring the various financial, legal, and regulatory issues associated with those sales.

Now, once that's completed, we'll make a final decision on whether to move forward with the sale.

If we do move forward, we expect, depending on the buyer and the associated regulatory approvals, that that sale could be closed as early as late in 2002 or early 2003.

We expect that the sale of these businesses would accelerate our primary efforts, strengthening the balance sheet, improving credit ratings and enhancing financial flexibility.

Obviously, the sale of these businesses would represent a change to our North American base.

However, given the current volatility, domestic energy markets, and the significant improvement we would expect in terms of accelerating financial health and financial flexibility, the company's giving it a serious consideration.

So that's -- that's the announcement we made this morning, and we're working expeditiously on the investigations that we talked about with regard to that.

That completes our planned presentation for this morning, and at this time we'd like to -- I'm sorry, Al Wright would make a comment, but a-- as soon as he's completed with his comment, then we'd like to open up the floor for questions.

Al?

My thoughts are that we have some 200-plus people on the phone.

Most of which I've dealt with over the last 20 years, my 33 years in the energy business, and I want to take this moment, while we have everybody together to thank you for your support, thank you for investing in some $22 billion worth of securities over 22 years -- or 20 years, and that I will miss talking to you, but I am looking forward to a new career in the life science business.

So, thanks very much for all of your help over the years.

Now we'd like to open the floor for questions.

Thank you.

Our question and answer session will be conducted electronically.

Anyone wishing to ask a question may do so by simply pressing the star key followed by the digit 1 on your touch tone telephone.

We'll take your questions in the order that you signal us.

And we'll take as many questions as time permits.

Once again, if you would like to ask a question, you may do so by pressing star 1 now.

And first, we'll go to Kerry Stevins with Morgan Stanley.

Hi, good morning.

Good morning, kerry.

A few questions.

First, I just wanted to know, when you were considering the sale of the pipeline, was it also potentially considered to sell off the remaining international assets, specifically the IPP, and that was decided against?

Or has that been contemplated at all?

Well, we haven't announced any change to the sale of our international assets at this point in time.

We continue to hold the international IPP assets in Morocco, in Ghana, and in the Middle East.

So that has not changed.

Okay.

And was it contemplated, or just the focus was on the pipeline?

Well, I prefer not to get into the details of our discussions in that regard, but at this point in time, we aren't announcing a change to the sale of those assets.

Yeah.

As we've said historically, those assets are good-performing assets with contracts in place, and they're contributing earnings and cash flow, and at this point in time, we decided to hold those assets.

Okay.

Do you have kind of an updated forecast for potential -- for your expectations for the pipeline's EBITDA for this year?

Well, I don't think I should go into a lot of detail in that regard.

I would just say broadly, and I'm not going to talk specifically about specifics here, but broadly the pipeline assets that we're talking about in the field services assets generate between $250 to $300 million of EBITDA.

Okay.

And two more quick follow-ups.

Al was mentioning the part about having to issue to convert to continue to pay the dividend, and, also, something about a $214 million dollar debt payment.

I'm just confused.

Do both of those criteria need to be met to continue to pay the dividend, or just the issuance of the convert?

Well, actually, it's either, kerry.

Either?

Either.

If we're able to affect an additional, other than what's in the chart of the $200 million figure.

Okay.

That will extinguish the two series of bank loans that have the requirement of the equity issue.

Or, even if that's not done, but we do do the equity issue, then that will also qualify us to continue as planned.

So it's kind of a two-path -- two ways to go.

Okay, wait.

So I had that you were paying down $286 million of debt. Is that right?

That's correct.

In this bare-bones plan, if we're able to do an additional --

14?

-- correct.

Okay.

Then that would be enough to erase the two series of bank loans that have --

Okay.

Okay.

Okay, I got that.

And then, on these, um I guess, triggers, the $180 million and the #300 million in surety bonds, do you have, like, specific time frames, like to quell those, like 15 or 30 days, and, you know, in your bare-bones analysis, this wasn't included, so I'm confused, obviously, are these things going to be more of a priority than, you know, the convert or the additional debt paydown?

How does this rank?

Well, it's something we have to deal with, Kerry, and they're not necessarily cash requirements in the form of the sureties.

They're looking for additional security to back up their surety bond as is required in their respective contracts.

With regard to the project financing backup agreements, this is for Guardian and Centennial.

Mm-hmm.

We think there are other ways to deal with that, other than just pure guess.

Okay.

So that you could satisfy it with security, I guess?

Yes.

And that all relates to the pipeline?

Yes.

Okay, great.

Thanks, guys.

Congratulations, Al.

Thank you.

Next, we'll go to Winfred Fruhov with National Bank Financial.

Thank you.

Assuming you are devesting yourselves of your pipeline and field service and possibly other businesses, would that be correct that you'll be essentially more or less a combination gas and electric utility?

Well, it's clearer, Winfred, the utility's always been a big piece of our business, and we'll continue to do that.

Obviously with this move, if we go forward with it, it will become a higher percentage of our asset base and our earnings, but it's not the only thing that we would own.

Of course, we still have a number of international assets, most of which we're in the process of selling, all of that will take some time.

And domestically, our Generation business has domestic generation.

It's not a large portfolio, but it is a significant one, including our Dearborn Industrial generating facility.

And the remainder of the business activity at marketing services and trading, which we continue to believe has a future.

We have announced, as you said, as we've indicated before, our withdrawal from speculative trading activity, but we continue to be optimistic about the growth of origination of contracts for municipal and wholesale cooperative customers.

I'd like to commend you on that decision, because I certainly believe that there is a -- there is a place for trading, marketing and risk management out there.

But even though you didn't sort of confirm what I was suggesting, that you would essentially become a utility, if you did, would you be considering, at all, growing beyond the boundaries of Michigan, or would you just be content to remain in Michigan?

Well, I think it's appropriate for us at this point in time to focus on the fundamentals of improving our balance sheet, and improving our financial flexibility, and we'll leave decisions as to that sort of thing for the future.

I certainly wouldn't rule it out in the long term, but in the near term, it's not something we're pursuing.

Well, I don't want to be unpolite, but it seems to me, it sounds like curing the symptoms, rather than sort of the underlying causes, and if pipelines look like a sensible and solid investment when you made the decision to buy the pipelines, I'm asking you, what has gone fundamentally wrong with the business plan, and the underlying business principles of here your pipelines?

Well, I wouldn't say anything is fundamentally wrong with the underlying principles associated with the pipeline.

We've taken a look at the overall corporation, however, and believe that because of the constraints on capital, and the debt levels that we have, and the last of balance sheet and financial flexibility that we have at this point in time, that we're unable to fully take advantage of, in the way of additional capital investments, into the pipelines that's available, and maybe of more value at this point in time, to others who have more financial flexibility.

That's not to say we it's a bad business, or a business that we would never enter again, but at this point in time, we think it makes sense to pursue this as a strategic alternative, accelerate our financial [INAUDIBLE]

One more quick one for Al.

If FASB-142 had not happened, what would have been the EPS impact of goodwill amortization in the second quarter?

I'm scrambling from memory, but about $21 million pretax for the year.

That, I think was the question for the year.

$21 million for the year.

Okay, thanks very much.

All the best to you, Al.

Thanks very much Winfred.

Thanks.

We'll go next to Devon Gihagan with Lumina Management.

Hi.

I just wanted to clarify some of the operations of the pipeline.

If you have $300 million in EBITDA from the pipeline, assuming that the multiples that have gotten done with Buffett and whatnot, the seven times is probably rational floor, which gets you to about $2.1 billion on a purchase price, less than $950 million in pipeline debt, now, do all those proceeds need to be applied to the bank lines, or can you apply those to outstanding debt at the parent level?

Well, the debt outstanding is at the parent level, primarily, and it would depend on the timing.

That is to say, if, from our other asset sales we've already extinguished the required traunchs at the parent, then the proceeds could be applied to debt elsewhere, as is likely, I think, given the timing of the sale.

On the other hand, if it were to be accelerated and done this year, we might be able to use most of the proceeds to retire the required parent company debt, so we have some flexibility there, depending on how far down the parent debt is paid from other transactions prior to the sale of the pipe.

I guess it seems to me you got about a billion-two left of bank line, assuming you haven't prepaid any of the ones due in December, and it seems to me you're losing about $300 million of EBITDA, or approximate for cash flow if you sell these pipelines.

I guess I'm just trying to figure out where the deterioration of the cash flow, if you go ahead and do this, how do you further deliver the company, and, you know, actually, what's left?

We'll be looking at more detail, and obviously we don't want to speculate at this point in time of what the ultimate sale price will be, and I would -- I would clarify that it's not just the pipeline, but also includes our field services business in that regard.

The EBITDA -- the net cash flow net of capital investment at those units combine significantly less than that on a net cash flow basis, probably only about $100 million, or thereabouts.

And so, when we look at this, and again we'll be doing more detailed analysis, and it will to some extent depend on the ultimate proceeds, but we believe that this will improve our overall debt ratio, and have some beneficial effects on overall coverages, all of that may not be huge.

Okay.

Just a couple more questions.

Does it seem rational that the set of operations probably contribute around 55 cents a share for 2002?

Let's see, if we took that forecast slide, I have the natural gas transmission providing $70 million of net operating income.

That's after tax, and after interest at that unit, but before parent company interest, so that's the number, $70 million at tax and after interest at the unit, for the entire natural gas business.

I don't have panhandle by itself.

Okay.

One last question around the pension expense.

You mentioned that there would be higher pension expenses but I didn't hear the number.

Can you just clarify that?

Well, we don't know what the number is going to be.

It's a matter of conjecture depending on how the market performs through the balance of the year.

In fact, as you know, the market's showing some signs of life here recently, but, all we're saying is, just like everyone else, because of prior market performance, we're going to have to measure the liability versus the fund balance, and perhaps have a charge by the end of the year.

Okay, thank you very much.

And next we'll go to Tim Shayler with Timco Investment Management.

Hi, guys.

Regarding the assets sales of the assets at Panhandle, if there's an asset sale without selling the entire company, how would the cash flow flow?

Would it stay at Panhandle, and then dividend it up, or are you only envisioning the sale of the entire company?

Yeah, just for clarity, our intent would be to sell the stock of the entire company.

It wouldn't be an asset sale, but a business sale.

Okay, good.

Thank you.

And next, we'll take a question from Jay Dobson with Deutsche Bank.

Hey Al, hey Dave, how are you? Couple of questions if I can.

Dave, on the Panhandle sale, I think you said a final decision would occur at some point, and then you'd hope if you were successful selling a late '02 or early '03 closing, and, you know, being August 6th or 7th today, I'm just wondering, when do you think a final decision on sale is made such that, a process to sell the pipe occurs, or do you envision, you know, taking bids while you're sort of deciding?

I'm just trying to think of sort of how this goes out late '02.

It sounds like a really fast deadline.

Well, we're in the process of evaluating the schedule, and I wouldn't want to commit at this point in time to a specific final decision date.

I think it's -- it's clear that there's a market for these kinds of assets.

It's also clear when we look at our own situation, it's not something we have to sell.

I mean, we want to make sure the market is reasonable, and that it makes sense for us to go forward before we make that final decision, but I would say that it's something that we expect to be relatively expeditious.

The regulatory approvals associated with the sale of the entire business are not all that onerous, but they do depend on, you know, the situation associated with the buyer, and we also don't want to restrict ourselfs to a smaller buying community than we might have to, to accelerate that sale, and that's why there's some uncertainty associated with the process.

But it's -- it's a business that's fairly understandable.

A lot of folks have done a lot of work recently in evaluating these kinds of businesses, so we think it is certainly feasible to move forward, reasonably quickly, but it's a little bit difficult to put specific dates on it at this point in time.

Okay, but given your response to one of the previous questions.

Would it be fair to say that, really price is what's going to decide whether to go forward with the sale or not?

It sounds like you have a pretty good defense for selling the panhandle pipeline assets right now.

Well, let me just say that we're going to feel the market out a little bit and make sure we're comfortable with the level of interest.

Our pipeline assets and field services are a little bit different than others have been sold.

Obviously, there's the premiere LNG facility involved in this with an awful lot of interest in that.

So we'll have to do a little work in that regard.

That would be a--a key consideration.

We also have to look at the various legal and regulatory issues surrounding it, but at this point in time, we don't anticipate there's anything daunting in that regard.

Okay.

Al? Al, I was wondering if could you go through the asset sales that you are considering now?

I think you threw out another $200 or $250 million dollars' worth, and then one other question for maybe both you and Dave is, I guess Al, in your comments, you suggested that MS&T was being hurt by some of the, you know, liquidity issues and credit constraints.

I'm just wondering, you know, sort of how the business is dealing with that, and sort of what the issues are going forward?

Well, first, let's talk about the candidates on the horizon.

They include the Saudi and India, [INAUDIBLE] third quarter timing, Viron which we recently announced, also moving along possible third quarter, we'll be selling some logistical assets for about $5 to $10 million.

Centennial could yield, by itself, we're planning on selling Centennial, that could yield $60 million.

We've got some land for sale that could yield $20 million.

CPEE, we're pushing hard to get that done, that's the white well operated distribution company in Brazil, that could get done in the fourth quarter, and finally, our utilities, small utility on the island of Margarita, and Venezuela, it's for sale, and that could get done this year, and if you add up reasonable proceeds for each of those, you can get into that $275 range.

Jay, let me take the second half of your question with regard to MST.

We did mention earlier, is that of course, MST's business has been severely constrained this year by credit issues.

As have another a number of parties in this business. We continue to believe that the wholesale marketing to the [INAUDIBLE] co-ops make as lot of sense, but obviously there's concerns on the customers' side about credit support in that regard.

We have not issued any kind of a press release, but I will tell you, we have entered into an agreement with a limited partnership by the name of Current Capital. Current Capitals limited partnership between Harvard Management, Corporated Capstone Global Energy, and it basically is a credit support agreement that would enable us to permit MST to move forward with new long-term gas or electric sales, using credit support from this entity, which would provide a rated credit.

So we think this is a positive development.

We haven't announced any detail.

We don't intend to.

Get into any more detail until such time as we actually are able to announce some new deals, but we're optimistic we can move forward in that regard.

Would that credit support agreement be finite in the amount of credit support it would provide, or is there some scalability to it?

Well, right now, it is an enabling agreement.

I think it's significantly scalable, because of the financial capability of the backers.

Having said that, it's going to be, you know, on a case-by-case basis as we start this, this business up, and I think there's some real potential.

Care to characterize it as a 50/50 joint venture?

No, it's not a joint venture at this point in time and it's not what 50/50 deal.

As I said, it's an enabling agreement at this point and time, that would allow for us to bring deals to them and quickly evaluate them, depending on the term of the deal and the associated risks and whatnot, would make a determination as to what kind of margin sharing would be involved and what kind of fees might be involved.

Great.

Fair enough.

Thanks a lot.

Thank, Al.

You're welcome.

We'll take our next question from Kathleen Louly with JK Utility Advisory.

Yeah, hi, it's John Colettey.

I wanted to explore a little bit further your flexibility in having to issue the $250 million of equity or converts before the end of the year.

If there's an early repayment of debt prior to the end of the year, that would absolve you from having to issue the equity.

I guess I wondered, is that correct?

It is, John.

You'll recall from the conference on the 15th, there are kind of three levels of bank loans.

There's the 150 at Enterprise that has a December maturity, then there's an approximately $300 million level at CMS Energy that has kind of a March maturity.

If those two facilities are paid down, those are the ones that have the $250 million requirement, and then the third facility that doesn't mature until June of '03 does not have that requirement, so thusly, if the first two were paid off, that would obviate the need to do the equity, although the balance sheet could use the equity.

So it's $250 million that would have to be repaid early, or $350?

No, it's $300 plus $150, a total of $450 --

Okay.

And we've already, of course, got $230 coming in the door, well, not already, but scheduled to come in the door from the oil and gas transaction.

Okay.

And then a--just a clarification on the EBITDA, the properties that may be sold or put up for sale from pipeline or field services.

Earlier caller was talking about $300 million EBITDA number.

Do you agree with that as sort of the correct EBITDA number for, you know, those assets that are being reviewed for possible sale?

Again, as I answered earlier, without getting into specifics, and without getting into talking about which years apply and that sort of thing, it's in the range of $250 to $300 million EBITDA for the combined businesses.

Okay.

And then, lastly, is it feasible, if there's an agreement on the sale of the company or those assets, but it doesn't close by the end of the year, that you could borrow against that, in terms of realizing proceeds to make those early debt repayments?

Yeah, John -- John, I think that's quite feasible.

Mm-hmm.

I think something like that took place, you'd know more than I, in recent other pipeline transactions.

Yeah.

Okay.

Ok.That's it.

Congratulation, Al.

Good luck in the future.

Thank you, John.

It's been a pleasure dealing with you.

Thanks.

And we'll take our next question from Mitchell Stigle with Credit Suites First Boston.

Just a couple of quick questions.

Can you update what the cash levels are at the subsidiariaries today?

As of last night's report, the Enterprise's subsidiariaries had a balance of about $200 million, and consumers had a balance of about $166 in cash.

Okay.

Is there -- with regard to the pension liability, that would be a noncash expense that would run through?

That's correct.

And the triggers you highlighted, the 180 and the 300, those relate exclusively to the pipeline assets, is that right?

No.

Of the two, the 180, which is more likely going to be in the area of 110, relates to project's financings that are being undertaken by the gas transmission company, both Panhandle and the gas transition company, in the form of the Centennial pipeline and in the form of the Guardian pipeline.

That has all to do with that.

The surety requirements, which would aggregate as high as $300 million, have to do with the long-term gas prepay deals that were done a couple years ago.

In fact, part of that requirement is not triggers by our situation, as much as it is by a downgrade by the insurance companies.

So we're going to work through that, but it's segregated.

Part of it's pipeline and part of it MST and Enterprises.

You said earlier you don't expect to need cash to remedy those situations?

Why is that?

Because, for two reasons, one, we need the cash for other purposes, and secondly, we think we can provide other structures that will be satisfactory to our third parties.

And our next question will come from Neil Winer with Triage Capital Management.

Yes, can you just further go into those types of structures that would be satisfactory?

No, I -- I think it would be premature to get into the technicalities of what those might be, and some are fairly complex, involving security we have in the form of letters of credit that are due on margin, that kind of thing.

And what is -- what is the likelihood that these other structures could be used?

I mean, what would you place the odds?

I don't think it would be prudent for me to do odds making right now.

Okay, thank you.

Radula Murdy with SAC Capital has our next question.

Good morning.

Good morning.

In terms of the various assets that you indicated this morning that you would putting up for sale, including the pipelines, Lake Charles, the field services, et cetera, can you tell us right now in aggregate how much debt is on the books, say, with those assets, and what the equity investment is currently on the books, associated with those assets are?

I can tell you that the debt on Panhandle's in the 935 to 950 area right now.

As to the others, there aren't any debt on the book for those other entities that I'm aware of, Radula.

And the equity?

Yeah, that number I don't have in the back of my mind.

It's in the range of $1.4 billion.

Yeah, that sounds right.

Collectively.

Okay.

And I'm wondering, can you go a little bit further, I was a little confused with respect to this credit support agreement you have for MST with Harvard Management, and I missed the name of the other party, and under what conditions that was -- so many parties in this industry have been trying to find, you know, highly creditworthy partners or backstops, or however you want to describe it.

Well, I don't want to going into a lot of detail right now, like I said, I prefer to leave the detail to when we announce a deal here.

But it's a limited liability --a limited partnership called Current Capital, which is a limited partnership between Harvard Management, Inc. And Capstone Global Energy.

And I would describe the agreement we have as enabling agreement, that would allow us to bring deals to them that meet certain criteria, and the details of the financial arrangements associated with those would be announced at a future date.

So it would basically be on a transaction-by-transaction basis and they could kind of say, "yeah, we like this one and we'll provide backstop," or they'll say, "this doesn't meet our criteria, so forget it."

Well, I think that's--I thinks that's safe that they're not committed to do that, and the deals individually would be different enough that it probably wouldn't make sense to try to get that specific at this point in time.

Having said that, obviously, they put the time and effort into the agreement, as have we, and we're optimistic that it will come to some fruition.

Do you have a timing on when you'll be able to discuss this in more detail?

Well, again, I think we'll discuss it in more detail in conjunction with announcing additional deal origination, and it's a little hard to predict at this point in time when that may occur, although, as we've said before, that we're very optimistic, there's a lot of potential out e in that marketplace, and to some extent, the troubles in our industry as a whole, have reduced the competition somewhat, so we continue to believe that there's opportunity there, but we'll wait and hold off on additional detail.

And with respect to the equity linked issue, I understand that you can, you know, by paying down the $214 million dollars of debt, you don't have to necessarily issue the equity in order to continue being able to pay the dividend, but Al indicated, that, you know, the balance sheet could certainly use it.

What is your intention with respect to issuing equity for the balance sheet irrespective of the dividend?

With respect to -- well, our plan is to issue a equity-linked, probably convert preferred by year end.

That is plan A.

And that might be in the amount of $250 to $300 millionaire .

I would say, Radula, that obviously, that the-- the issues associated with the sale, potential sale of the pipeline, might affect our equity plans in that regard as well.

Good point.

Okay.

And I assume that plan A, even if you have the cash to pay down the debt, without a sale of the pipeline, that plan A is still anticipated, so we should still continue to expect a issuance by the end of the year, even if you have the cash to pay down debt otherwise?

Yeah, I think that's fair, depending on the price of the equity that's underlying the convert, market conditions, et cetera, et cetera.

Okay.

And, Al, best of luck in the future.

Thank you.

And next, we'll take a question from Jeff Gildersleeve with Argus Research.

Good morning.

Most of my questions have been asked and answered.

However, I just wanted to touch, if you could comment on the debt to total cap level, and I know one of the bank's facilities had a 65% ratio.

How does that work out, and can you just comment on facilities in general?

Yeah, we are -- that particular ratio was not on a consolidated basis.

Here we go.

Get some information here.

Here we go.

The required ratios are consolidated debt to EBITDA of 4. -- excuse me, 5.75.

Cash dividend income to interest expense coverage ratio of 1.25.

With regard to consumers, that's where you picked up the 65% --

Right.

Okay.

And we'll be well under that.

We're running now in the lower 50s.

And with regard to consumers' consolidated EBITDA, to consolidated interest expense, is not greater than -- not less than, excuse me, two times.

Okay, very good.

Not above that.

I'm sorry?

We're well above that.

Okay, thank you.

And just as far as the investigations, you just made general comment about trading and, is there any sense from the company of when FERC will supposedly come out with its interim report here?

I don't think we can predict that.

I mean they said early August, I guess you haven't heard anything different?

We don't have any reason to know anything different.

Okay.

Very good.

Thank you.

And we'll go next to Paul Rison with McDonald Investments.

Just firstly, I just wanted a clarification, the assets that have recently been contemplated for sale have a book of billion-four, and secondly, Al, I think you said you have a target of a 66% debt ratio by year end.

What are the assumptions there with regard to Panhandle impairment, pension, surety [INAUDIBLE], and asset sales, a little unsure on what the assumptions were there.

Ok, on the 66%, it does assume a preferred issuance of the kind I talked about.

It does assume some modest impairment at panhandle.

Let me correct that.

Excuse me.

It does not assume any impairment of panhandle, but we indicated that obviously any impairment of panhandle would make that worse.

However, it also doesn't assume any of the proceeds for the potential sale of the assets, that the businesses we've talked about.

The pipeline.

Right.

It does assume some success on the regular asset sales.

But it has no assumption of what you announced today?

No.

Okay.

And the surety calls?

It did not impact that statistic.

Okay.

Thank you very much.

Oh, I guess the equity on the new assets, was it a billion-four?

It's in that ballpark, yeah.

Okay, thank you.

Good luck, Al.

Thank you.

We'll take our next question from Steve Bushman from Merrill Lynch.

Hi, guys.

Hi.

A couple questions.

The a--Dave, is it possible to give any flavor on the EBITDA from this group of assets you're selling, how much is pipeline versus other stuff?

Yeah, about 80% of that, the pipeline, and L&G, about 20% of that for field services, yeah, and those are just ballpark kind of numbers.

Okay.

Secondly, are you, Dave, concerned at all -- there was this recent FERC order put out regarding financial structures of pipelines, and the like, and including in that, maintaining investment grade, and I believe panhandle's below investment grade at some agencies.

Could you just comment on your concern, and whether that order might be relevant to you guys?

It could be relevant.

Steve, this is Al.

We do run a system-wide -- what's called money pool or cash management organization for the nonconsumers additives, and that's why it's currently running a balance of over $200 million, and depending on how that rule making finally comes out, if CMS Enterprises were to continue to not be investment grade, then we'd have to restructure that pooling arrangement.

Obviously, all that would become important if we chose to move forward with the sale of the pipeline assets, and, as Al said, that we don't use cash pooling with the utility.

But you do with the pipeline?

We do --

Yes, we do.

-- currently.

So it potentially would affect the pipeline if we still help the pipeline.

Okay.

And then last question is, with respect to MST, what is in your guidance for the year, what are you assuming for second-half results at MST?

I think back at your conference, you thought you would see some positive results, new contracts.

Are you still assuming that?

We--let me put it to you this way, and then Dave can jump in, for 2002, current guidance on that slide, we're not assuming any operating net income from MST.

You're assuming -- okay, but is that you assume you make positive in the second half, because you had this loss?

Yeah, it assumes a modest earnings for the remainder of this year. I don't recall, it's somewhere in the range of $10 million or thereabouts, not a big number.

Obviously, we've pared back some of our business activity, and it would assume some modest success with regard to contract origination.

It assumes some recovery, Steve, from the position as of YTTJune.

We think it's pretty reasonable.

Okay.

And then just, just the one last clarification, the $1.4 billion for these assets being sold, that's an equity book value?

Yes.

Okay, thank you.

We'll go next to John Olson with Sanders Morris Harris

Gentlemen, good morning.

Good morning, John.

First of all, Al, you fought the good fight and kept the faith, and congratulations to you.

Thank you, John.

Secondly, I'd like to go back to Argentina if I may.

Yes.

These people down there have basically blown away their sovereign debt, they've obligated all their contracts and the like, and it's costing you guys 30, 35 cents a share.

Isn't it time to consider, invoke force[INAUDIBLE] over those service contracts down there, or something to vote with your feet?

And what about OPEC insurance as well?

Let me go through that.

Right now, the projects continue to remain liquid, although not earning.

We have arbitration pending.

We are the first to have arbitration pending.

International arbitration has provided for -- with respect to the TGM pipeline, and their early arbergation of the CPI rate increase, so we're ahead of the pack with regard to arbitration, and we've added our claims with regard to this January 7th order, and everything happened thereafter, to that arbitration.

That said, John, that's probably going to take a year or more to resolve through international arbitration.

We only have $80 some odd million left remaining on the books, in Argentina as a result of our currency translation adjustment, and we are covered with political risk insurance with respect to those investments up to 50%.

So we think it's reasonable in a kind of '04 time period, that we'll recover at least what's left remaining on the books.

Okay, thank you very much.

Next, we'll go to James Spaliker with Socas.

Yeah, good morning.

Good morning.

Just one clarification, Dave, you had mentioned that this will be a sale of the Enterprise with panhandle and trunk line and the other assets?

Right.

You're selling the common stock of it?

Right.

Well, not the common stock but the stock.

The stock of it.

As you guys go from a tax perspective, any sort of loss on that would be a capital loss, correct?

Meaning that you'd have to have capital gains basically to offset it from a tax perspective?

That's probably right.

And we did take a big capital gain, as you recall, when we sold EG

Ok, so that would be the basic offset there?

Yes.

Okay, thank you very much.

Next, we'll take a question from Joe Luminowa with Prudential Investments.

Thanks, my question's been answered.

Thank you.

If you found that your question has been answered, you may remove yourself from the queue by pressing the pound sign.

We'll go next to Ted Olishonski with Bank of New York.

Yes, good morning.

I had a couple of questions.

First, as a point of clarification.

The level of debt associated with these additional asset sales in the pipeline area, is there any project debt in addition to the panhandle debt?

Well, only the ones that I just mentioned that had to do with the support arrangements for Guardian and with respect to Centennial, that could require a call that I've gone through, but that's it.

Right.

And what was -- what was that number again, the total number?

Well, there's 950 on the Panhandle itself.

We could be required to do about $110 million to support those project financings, and in addition, Panhandle has the LNG facility on a project financing, that depending on accounting treatment and other issues, might come on balance sheet as well, and that's sort of something that's under review right now.

Right.

And what's that number?

Well, it depends on how the accounting works.

It could be something like $40 million, or if the entire thing were consolidated, it would be --

There's about $235 million of debt at the LNG -- you know, behind the LNG contract monitization.

Right.

Okay.

So it could be anywhere from 40 to 235?

Yeah.

And that would be, if it were fully consolidated.

By the way, it would not necessarily have be repaid on the event of a sales of stock at Panhandle.

Right.

Right.

As far as the other 110, would that have to be repaid upon the sale of those assets?

I don't know the answer to that off the top of my head.

Okay.

So the panhandle plus other pipeline assets, when those are sold, it could be -- you could be looking at debt versus debt of 950 at Panhandle plus 110, plus some other number at the LNG?

The LNG -- go ahead, Dave.

I was going to say, the 110, missing something here.

We would assume an assumption of debt at those various projects when they're sold, so it wouldn't be additional debt.

Right, no, I understand.

Okay.

Could you give us an update on the gas case, and where -- you know, when you expect an order to be issued there?

We can never predict exactly when the public service commission will act.

The replies to exceptions, the Administrative Law Judge, were due back in, I think, the 9th of July, so the case is now ripe for decision before the commission.

Their next meeting is the 20th of August.

That would probably be the earliest that they might act on it, although it's not unusual for them to take a major case, and have a special meeting, and whether they'll act on the 20th of August or not, we don't know.

It is ripe, and I would expect that the commission will act on it reasonably promptly, but we can't predict it.

Right, okay.

Okay, that's it.

And lastly, just a point of clarification, regarding the investigation undertaken by the board and the audits, the reaudit by Ernst & Young, is there anything --is there- are both of these parties looking at virtually the same -- the same details?

Well, we can't speak to the details of what the special committee is looking at.

Their charter is oriented toward looking to issues surrounding the roundtrip trading, and it's fairly specific and narrow in that regard.

The reaudit for 2002 -- 2000 and 2001 a full-blown audit of the company to satisfy E&Y's ability to provide certification of financial statements in that regard.

So there's some potential overlap that E&Y will get involved in audit work at MS&T, but they're certainly not 100% advantaged by any stretch.

Right.

Okay.

Our next question comes from Beth Barnsworth with KDP Investment Advisers.

Good morning.

In regard to the asset sales, I know you've gone over this a lot.

I think you mentioned another $200 million or so in asset sales that might occur in January.

Is that correct?

I think I said next year.

Yeah.

I said January but --

Yeah, let me kind of clarify one thing.

We did -- we did say for the remainder of this year we're forecasting between $75 and $275 million dollars worth of asset sales.

Right.

In fact.

We have about eight assets that are on the market that collectively, we think are worth about $275 million in today's environment.

The range of 75 to 275 isn't based on how much we would get for those assets.

It's based on our assumption as to when they might actually get done.

And so, 200 of that 275 may very well slip into the first quarter of 2003.

Oh.

We also, in addition to that, do have some additional assets scheduled for 2003, and it's difficult to predict how much, and what will get done.

I will just give you an example, though, the [INAUDIBLE]plant, we've talked about over time, and obviously a significant asset, and at one time we expected we would have that done this year, conditions have changed such, that it's not likely to get done, and it's not in our forecast, but could very well get done next year, for example.

Okay.

So that actually isn't included in the 275?

That's correct.

Or obviously the pipeline assets?

That's correct.

And another caller referred to possible value of your pipeline assets, quoting something in the neighborhood of $2.1 billion, so it's reasonable to expect that taking off the debt associated with that sale, you would have the excess available for other debt reduction?

Well, basically, we don't have that much debt.

I mean, we have a billion dollars or --

Right.

-- theres about in debt, maybe less than that.

The assets are worth quite a bit more than that, and obviously it would be available for debt reduction.

One of the reasons we're looking at the potential for sale of these assets, is that it would cause us to make significant debt reduction and improvement in the balance sheet.

Okay.

And just one last thing, can you also go over the $214 million dollar discussion, and what that is?

Well, it's -- it's fairly simple, actually, if you kind of back it out.

Two of the vehicles that we entered into in July in terms of the bank debt, totaling about $450 million.

Right.

Have covenants associated with them, that basically would preclude us from paying a dividend in the first quarter of next year, unless we were able to access the public markets, and sell some $250 million worth of additional equity-linked securities.

Mm-hmm.

Now, as Al indicated there's really two ways you avoid that problem.

One is to take out that $2450 million of debt, and basically eliminate those covenants as a result of that, or alternatively, have access to the public markets and sell that $250 million worth of equity-linked secures.

Either way solves that problem.

Those $450 million instruments also require that 100% of asset sale proceeds go to the payment -- repayment of those facilities, and one of the asset sales that we've announced and expected to close around the first of September, plus or minus, would generate $232 million worth of proceeds, that's the oil and gas business, and it's the balance of that from the approximately 450 -- actually, 446 that generates the net 214 that you would still have to come up with to avoid having to have access to the capital markets.

So I guess in a nut shell, when you look at our cash flow situation, asset sales alone could, in fact, allow us to take those vehicles out.

We obviously also have a cash balance that we show.

It's not -- not necessarily -- it doesn't necessarily require us to have access to the capital markets in the fourth quarter at CMS to get this done, but obviously, that access would provide a cushion as would potential circumstances surrounding the potential sale of the pipeline.

Okay.

And are you still looking to do a mortgage?

You talked to something about doing some kind of a mortgage note at the end of the year, too.

Is that still accepted?

Consumers.

Consumers.

Consumers was still require access to the markets in the sort of October time frame to raise additional debt as consumers for our capital construction program associated with the clean air principal.

Okay.

And in terms of maintaining the dividend, that would -- the assumption that that dividend would be maintained at the current lower level is appropriate at this time?

That's what our plan suggests.

Okay, great, thank you.

Next,we'll go to Kathie Lee with Coast Advisory.

Hi, just wondering if I could get an update on the amount of trading obligations that are guaranteed at the CMS Energy level?

I do not have that number.

Not many are guaranteed at the energy level.

Most are guaranteed at the enterprise level.

Ok, at the enterprise's level.

Yes.

You don't have that number?

No.

We'll search for it and we can take a -- I say we can take another question and try to answer that when we get the answer.

Okay, thank you.

We'll next go to Peter Hark with Callen Capital

First, thanks to you, Al, for all your help over the years.

You're welcome.

My question is how much is goodwill associated with either the pipelines or the fuel services assets, and what is the possible accounting treatment in the event of a sale?

About $700 million of goodwill would be involved.

Okay.

So then, on that sale, would there be a charge roughly 400 --

No, not necessarily t would depend on the proceeds.

If the proceeds were in excess of the amount including goodwill, there would be no charge.

Perfect.

Thanks.

Our next question will come from Chris Berry with Sanfield Capital Partners.

Yes, on the certification, you combine the statements with CMS Energy and consumers.

Will you be producing a certification of consumers on a stand-alone basis, or is that involved with the audit, also?

I'm sorry, say again.

You combine, when you put out your 10ks and 10qs, you combine all of your panhandle, consumers and CMS.

When you say you will not be certifying the CMS Energy's financials.

Will you be able to certify the consumers and the panhandle, are they involved, also, in the reaudit?

They are involved in the special committee, work, and some of the reaudit, so we will not.

There is reaudit work going on at those businesses, and we'll provide a qualified certificate.

Will that interfere with your first mortgage bonds and dentures without having to audit the financials?

Well, we're going to have to have a comfort letter to consumers to issue the first mortgage bond and indentures, and we think that can be done relatively quickly after the completion of the special committee work.

We don't expect, by the way, any real overlap between the special committee work and consumers, but as a means of caution, I think we'll wait until after that's completed before doing the comfort letter.

Were there bonds issued, first mortgage bonds issued to collateralize the July restatement -- or new facilities that were done?

At consumers, yes.

At consumers? So those were issued and that is not a problem?

That is correct.

Ok. Great.

Thank you very much.

And we have a follow-up from Devon Gihagan With Luminas Management.

Hi, just wanted to clarify a couple of things.

One, in the presentation, it shows you had $70 million at the parent corp. level as of June 30th, and then I heard the numbers thrown out, $200 million at enterprises and 166 to consumers.

I thought I had heard a different number, of maybe, 264, so I just wanted to reconfirm those cash numbers and where the cash is located.

The enterprise combined companies are 204, and consumers is 166.

Okay.

And then --

That's of the evening of 8/6.

Okay.

And then, the $1.4 billion dollars that's being talked about with the asset sales, does that include the panhandle or the enterprises system, so that's the entire -- is that your inside basis or outside tax basis of the book equity?

The $1.4 billion is our book basis not our tax basis.

Okay.

Equity approximately, again, I'll say approximate, the equity in the field services and panhandle-related businesses.

Okay.

One last question to follow up on that, in the press release, including minority interest, you have a book equity of $1.8 billion.

If I'm trying to look at a pro forma of the enterprises sale, should I assume that that $1.4 gets subtracted from the 1.8?

No, not necessarily.

The equity of the parent is not the sum of the equity of the subs.

That is shown as a definite and associated companies on the balance sheet.

So, no, that would not be an appropriate calculation to make.

Okay.

The calculation to make, would be to, deduct from the consolidated equity any gain or loss you might expect from the transaction.

Okay.

And then, is a gain or loss associated -- if you take the $2.1 billion, let's just say as an assumption, and you got a $1.4 book value, plus -- then how do I get to a gain or loss on that?

If you assume 2.1 on the book is 1.4 with, you know, 950 plus 235 of debt, what kind of numbers am I looking at?

I think the 950 plus 235 of debt is erroneous, with regard to that.

Ok.

The 950 of debt is accurate, and obviously it's the total proceeds, less the amount of debt that it tells you what we have to contribute to equity, and we compare that to the 1.4 where we determine whether there's a book loss or book gain associated with that.

Okay, thank you very much.

I would say, operator, it's about three minutes to noon, we scheduled from about 10:30 til noon, so we will take a couple more questions and then wrap it up.

And I'll respond to an earlier one that the credit support rendered primarily by CMS Enterprises, it's come down from $928 million in March to about 560 as of June.

And we have no further questions in our queue.

Thank you, operator.

I didn't mean to cut off the communications quite that quickly.

Thank you, operator.

And again, thank you all for putting up with me, and we'll be talking sometime in the future maybe.

All right, thank you, all.

Thank you.

That concludes today's conference.

We thank you all for joining us.

Have a great day.