A Reuters article pointed out that Friday set a record $2,000 per megawatt hour for electricity in the Midwest. Extreme heat and temperatures in the triple digits sent prices up. Utility companies like Consumers Energy (CMS), DTE Energy (DTE), and MidAmerican Energy, a component of Berkshire Hathaway (BRK.A), were expected to see a benefit from the higher usage.
Today's focus is on Consumers Energy. The company, owned by parent CMS Energy, is the leader in Michigan. Consumers provides electricity and natural gas to over 6.8 million residents in the lower peninsula of Michigan.
Consumers recently stated that demand was at its highest on Thursday and Friday. From 4pm-5pm on Friday, 8820 megawatts were used. This mark was just shy of an all time hourly high, coming in 1% lower than July 21st of last year (8930mw). Friday also marked the third highest day for total energy used by Consumers customers. Consumers, with a 125 year history, provides power to 1.8 million customers and has seen demand inside Michigan continue to rise. This summer is expected to be a brutally hot one. This bodes well for Consumers, who saw its demand decrease during a warm winter this past season. A hot summer followed by a normal or cold winter could make 2012 Consumers best year ever.
A huge benefit for Consumers has been increased usage of natural gas and electricity from its industrial customers. In fact, usage by industrial customers has risen each of the last three years. This is possibly a sign that Michigan is on its way to economic recovery.
Consumers is also entering the wind energy market with the construction of a wind farm. Lake Winds Energy Park will begin operating in 2012. The park will be able to generate 100 megawatts. A link to that project provides facts on wind energy from Consumers. Consumers has also increased involvement in its solar energy initiatives by investing in customer owned solar generators.
Along with owning Consumers Energy, parent company CMS Energy owns CMS Enterprises and EnerBank USA. CMS Enterprises has ownership stakes in power plants located in Michigan and North Carolina. EnerBank offers loans to homeowners for home improvements.
Since reinstating its dividend in 2007, after suspending it for five years, the company has been raising its quarterly payout. The new $0.24 quarterly dividend now represents a yield of over 4% on shares. Consumers has been raising its dividend each year since 2007, providing long term holders with increasing yield ratios.
Shares of Consumers are at ten year highs and appear to be headed higher. The recovery taking place in Michigan appears evident with higher usages. Consumers centralized focus on the "Mitten State" could be paying off significantly for shareholders over the next couple of years. Investors looking for a utility play or a dividend player should consider investing in Consumers.
Analysts on Yahoo Finance are expecting Consumers to report earnings per share of $0.31. The company, which reports on June 27th, reported earnings per share of $0.26 in the same quarter last year. Analysts expect Consumers to make a profit per share of $1.54 for fiscal 2012 and $1.64 the following year. The company has matched or beat earnings three quarters in a row. Consumers' own guidance for the year is $1.52 to $1.55.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
