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Financial Instruments
 12 Months Ended
Dec. 31, 2012
Financial Instruments

7:FINANCIAL INSTRUMENTS

Presented in the following table are the carrying amounts and fair values, by level within the fair value hierarchy, of CMS Energy’s and Consumers’ financial instruments that are not recorded at fair value.  The table does not include information on cash, cash equivalents, short-term accounts and notes receivable, short-term investments, and current liabilities since the carrying amount of these items approximate their fair values because of their short-term nature.  For information about assets and liabilities recorded at fair value and for additional details regarding the fair value hierarchy, see Note 6, Fair Value Measurements.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

In Millions  

 

December 31, 2012

 

December 31, 2011

 

 

Carrying 

 

Fair Value

 

Carrying 

 

 

 

 

 

Amount 

 

Total 

Level 1 

Level 2 

Level 3 

 

Amount 

Fair Value 

 

CMS Energy, including Consumers

 

Securities held to

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

maturity

 

$
9 

 

 

$
10 

 

$

 -

 

$
10 

 

$

 -

 

 

$
7 

 

$
7 

 

Notes receivable1

 

 
544 

 

 

 
581 

 

 

 -

 

 

 -

 

 
581 

 

 

 
480 

 

 
504 

 

Long-term debt2

 

 
7,229 

 

 

 
8,347 

 

 

 -

 

 
7,321 

 

 
1,026 

 

 

 
7,073 

 

 
8,025 

 

Consumers

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Long-term debt3

 

$
4,338 

 

 

$
5,015 

 

$

 -

 

$
3,989 

 

$
1,026 

 

 

$
4,326 

 

$
4,882 

 

 

1

Includes current portion of notes receivable of $40 million at December 31, 2012 and $19 million at December 31, 2011.

2

Includes current portion of long-term debt of $519 million at December 31, 2012 and $1,033 million at December 31, 2011.

3

Includes current portion of long-term debt of $41 million at December 31, 2012 and $339 million at December 31, 2011.

Notes receivable consist of EnerBank’s fixed-rate installment loans.  EnerBank estimates the fair value of these loans using a discounted cash flows technique that incorporates market interest rates as well as assumptions about the remaining life of the loans and credit risk. 

CMS Energy and Consumers estimate the fair value of their long-term debt using quoted prices from market trades of the debt, if available.  In the absence of quoted prices, CMS Energy and Consumers calculate market yields and prices for the debt using a matrix method that incorporates market data for similarly rated debt.  Depending on the information available, other valuation techniques and models may be used that rely on assumptions that cannot be observed or confirmed through market transactions.  CMS Energy includes the value of the conversion features in estimating the fair value of its convertible debt, and incorporates, as appropriate, information on the market prices of CMS Energy common stock. 

The effects of third-party credit enhancements are excluded from the fair value measurements of long-term debt.  At December 31, 2012 and December 31, 2011, CMS Energy’s long-term debt included $103 million principal amount that was supported by third-party credit enhancements.  This entire principal amount was at Consumers. 

Presented in the following table are CMS Energy’s and Consumers’ investment securities classified as available for sale or held to maturity:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

In Millions  

 

December 31, 2012

 

December 31, 2011

 

 

 

Unrealized 

Unrealized 

Fair 

 

 

Unrealized 

Unrealized 

Fair 

 

 

Cost 

Gains 

Losses 

Value 

 

Cost 

Gains 

Losses 

Value 

 

CMS Energy, including Consumers

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Available for sale

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

DB SERP

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mutual funds

 

$
123 

 

$
3 

 

$

 -

 

$
126 

 

 

$
113 

 

$

 -

 

$

 -

 

$
113 

 

Held to maturity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Debt securities

 

 
9 

 

 
1 

 

 

 -

 

 
10 

 

 

 
7 

 

 

 -

 

 

 -

 

 
7 

 

Consumers

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Available for sale

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

DB SERP

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mutual funds

 

$
83 

 

$
2 

 

$

 -

 

$
85 

 

 

$
74 

 

$

 -

 

$

 -

 

$
74 

 

CMS Energy

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

common stock

 

 
6 

 

 
26 

 

 

 -

 

 
32 

 

 

 
7 

 

 
28 

 

 

 -

 

 
35 

 

The mutual funds classified as available for sale hold primarily fixed-income instruments of varying maturities.  During the year ended December 31, 2012, CMS Energy contributed $13 million to the DB SERP, which included a contribution of $9 million by Consumers.  The contributions were used to acquire additional shares in the mutual funds.  Debt securities classified as held to maturity consist primarily of mortgage-backed securities held by EnerBank.

Presented in the following table is a summary of the sales activity for CMS Energy’s and Consumers’ investment securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

In Millions  

Years Ended December 31
2012 
2011 
2010 

 

CMS Energy, including Consumers

 

 

 

 

 

 

 

 

 

 

Proceeds from sales of investment securities

 

$
3 

 

$
29 

 

$
1 

 

Consumers

 

 

 

 

 

 

 

 

 

 

Proceeds from sales of investment securities

 

$
2 

 

$
19 

 

$

 -

 

The sales proceeds for all periods represent sales of investments that were held within the DB SERP and classified as available for sale.  Realized gains and losses on the sales were not significant for either CMS Energy or Consumers during each period.  In 2011, CMS Energy and Consumers sold their DB SERP investments in state and municipal bonds, and reinvested the proceeds in a mutual fund that holds fixed-income instruments of varying maturities.

Consumers recognized gains of $5 million in 2012 and $4 million in 2011 from transferring shares of CMS Energy common stock to a related charitable foundation.  The gains reflected the excess of fair value over cost of the stock donated and were included in income.  Consumers did not transfer any shares of CMS Energy common stock in 2010.

Consumers Energy Company [Member]
  
Financial Instruments

7:FINANCIAL INSTRUMENTS

Presented in the following table are the carrying amounts and fair values, by level within the fair value hierarchy, of CMS Energy’s and Consumers’ financial instruments that are not recorded at fair value.  The table does not include information on cash, cash equivalents, short-term accounts and notes receivable, short-term investments, and current liabilities since the carrying amount of these items approximate their fair values because of their short-term nature.  For information about assets and liabilities recorded at fair value and for additional details regarding the fair value hierarchy, see Note 6, Fair Value Measurements.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

In Millions  

 

December 31, 2012

 

December 31, 2011

 

 

Carrying 

 

Fair Value

 

Carrying 

 

 

 

 

 

Amount 

 

Total 

Level 1 

Level 2 

Level 3 

 

Amount 

Fair Value 

 

CMS Energy, including Consumers

 

Securities held to

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

maturity

 

$
9 

 

 

$
10 

 

$

 -

 

$
10 

 

$

 -

 

 

$
7 

 

$
7 

 

Notes receivable1

 

 
544 

 

 

 
581 

 

 

 -

 

 

 -

 

 
581 

 

 

 
480 

 

 
504 

 

Long-term debt2

 

 
7,229 

 

 

 
8,347 

 

 

 -

 

 
7,321 

 

 
1,026 

 

 

 
7,073 

 

 
8,025 

 

Consumers

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Long-term debt3

 

$
4,338 

 

 

$
5,015 

 

$

 -

 

$
3,989 

 

$
1,026 

 

 

$
4,326 

 

$
4,882 

 

 

1

Includes current portion of notes receivable of $40 million at December 31, 2012 and $19 million at December 31, 2011.

2

Includes current portion of long-term debt of $519 million at December 31, 2012 and $1,033 million at December 31, 2011.

3

Includes current portion of long-term debt of $41 million at December 31, 2012 and $339 million at December 31, 2011.

Notes receivable consist of EnerBank’s fixed-rate installment loans.  EnerBank estimates the fair value of these loans using a discounted cash flows technique that incorporates market interest rates as well as assumptions about the remaining life of the loans and credit risk. 

CMS Energy and Consumers estimate the fair value of their long-term debt using quoted prices from market trades of the debt, if available.  In the absence of quoted prices, CMS Energy and Consumers calculate market yields and prices for the debt using a matrix method that incorporates market data for similarly rated debt.  Depending on the information available, other valuation techniques and models may be used that rely on assumptions that cannot be observed or confirmed through market transactions.  CMS Energy includes the value of the conversion features in estimating the fair value of its convertible debt, and incorporates, as appropriate, information on the market prices of CMS Energy common stock. 

The effects of third-party credit enhancements are excluded from the fair value measurements of long-term debt.  At December 31, 2012 and December 31, 2011, CMS Energy’s long-term debt included $103 million principal amount that was supported by third-party credit enhancements.  This entire principal amount was at Consumers. 

Presented in the following table are CMS Energy’s and Consumers’ investment securities classified as available for sale or held to maturity:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

In Millions  

 

December 31, 2012

 

December 31, 2011

 

 

 

Unrealized 

Unrealized 

Fair 

 

 

Unrealized 

Unrealized 

Fair 

 

 

Cost 

Gains 

Losses 

Value 

 

Cost 

Gains 

Losses 

Value 

 

CMS Energy, including Consumers

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Available for sale

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

DB SERP

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mutual funds

 

$
123 

 

$
3 

 

$

 -

 

$
126 

 

 

$
113 

 

$

 -

 

$

 -

 

$
113 

 

Held to maturity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Debt securities

 

 
9 

 

 
1 

 

 

 -

 

 
10 

 

 

 
7 

 

 

 -

 

 

 -

 

 
7 

 

Consumers

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Available for sale

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

DB SERP

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mutual funds

 

$
83 

 

$
2 

 

$

 -

 

$
85 

 

 

$
74 

 

$

 -

 

$

 -

 

$
74 

 

CMS Energy

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

common stock

 

 
6 

 

 
26 

 

 

 -

 

 
32 

 

 

 
7 

 

 
28 

 

 

 -

 

 
35 

 

The mutual funds classified as available for sale hold primarily fixed-income instruments of varying maturities.  During the year ended December 31, 2012, CMS Energy contributed $13 million to the DB SERP, which included a contribution of $9 million by Consumers.  The contributions were used to acquire additional shares in the mutual funds.  Debt securities classified as held to maturity consist primarily of mortgage-backed securities held by EnerBank.

Presented in the following table is a summary of the sales activity for CMS Energy’s and Consumers’ investment securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

In Millions  

Years Ended December 31
2012 
2011 
2010 

 

CMS Energy, including Consumers

 

 

 

 

 

 

 

 

 

 

Proceeds from sales of investment securities

 

$
3 

 

$
29 

 

$
1 

 

Consumers

 

 

 

 

 

 

 

 

 

 

Proceeds from sales of investment securities

 

$
2 

 

$
19 

 

$

 -

 

The sales proceeds for all periods represent sales of investments that were held within the DB SERP and classified as available for sale.  Realized gains and losses on the sales were not significant for either CMS Energy or Consumers during each period.  In 2011, CMS Energy and Consumers sold their DB SERP investments in state and municipal bonds, and reinvested the proceeds in a mutual fund that holds fixed-income instruments of varying maturities.

Consumers recognized gains of $5 million in 2012 and $4 million in 2011 from transferring shares of CMS Energy common stock to a related charitable foundation.  The gains reflected the excess of fair value over cost of the stock donated and were included in income.  Consumers did not transfer any shares of CMS Energy common stock in 2010.