CMS Energy plans to divest non-utility renewable energy operations at its NorthStar Clean Energy Services subsidiary, according to a company announcement Tuesday. The Jackson, Michigan-based firm expects the sale to bring in roughly $500 million and allow it to derive nearly all earnings from regulated utilities after 2027. NorthStar currently operates approximately 1.8 GW of generation capacity across Michigan, Ohio, Texas, and additional states, but the company said it will keep critical Michigan assets including a 770-MW waste- and gas-fired cogeneration facility near Detroit, two gas-fired peaker plants in south-central Michigan, and four solar installations totaling about 500 MW.
The strategic shift comes as CMS Energy's second-quarter adjusted earnings dropped 48% to 37 cents per share, down from 71 cents per share in the same period last year. The utility blamed a combination of mild winter and spring weather and storm-related infrastructure damage for weaker performance at its regulated operations, which serve 1.8 million electric customers and 1.7 million gas customers across central and western Lower Michigan under the Consumers Energy brand. The company's prospective large-load customer pipeline remains around 9 GW, similar to recent quarters, with about 135 MW energized this year and 1 GW to 2 GW in final contracting stages. Meanwhile, costs to keep the J.H. Campbell coal plant running under federal emergency orders reached $259 million through June 30, up substantially from $138 million three months earlier.
"We're reallocating capital away from NorthStar so more of the upside and more of the growth will come from the utility," Srikanth Maddipati, CMS Energy's newly appointed chief financial officer, said on Tuesday's earnings call. The company filed an electric rate case last month seeking $456 million in additional revenue and a 10.25% return on equity, following a March order that authorized a $276 million revenue increase and 9.9% return on equity. President and CEO Garrick Rochow disclosed that Consumers had requested a two-year investment recovery mechanism to cover grid-hardening costs, building on a one-year, $226 million extension the Michigan Public Service Commission approved in March.
The company's data center ambitions face uncertainty after a township tabled Microsoft's rezoning request in April for a planned facility near Grand Rapids that would use up to 1 GW of power under a 20-year tariff agreement. Rochow acknowledged the rezoning struggles but noted the customer was exploring multiple locations within Consumers' territory. Stock analysts say the delay puts Consumers behind rival DTE Energy, whose electric utility is advancing an Oracle data center project in southeastern Michigan that broke ground in early June with the governor attending. CMS Energy also continues wrestling with costs from the U.S. Department of Energy's campaign to delay retirement of the 1,407-MW J.H. Campbell coal plant, originally scheduled to close in May 2025, with five consecutive emergency stay-open orders issued under Section 202(c) of the Federal Power Act. The Federal Energy Regulatory Commission is still reviewing the company's request to recover the $42 million net cost of the initial 90-day order, and Consumers intends to file cost-recovery petitions for the four subsequent orders despite ongoing legal challenges from environmental groups, consumer advocates, and other states.