Fitch: After-Tax Impairment Unlikely to Affect Ratings for CMS.

CHICAGO -- Fitch Ratings anticipates no change in CMS Energy Corp.'s (CMS) ratings based on the recent announcement that CMS has recorded an approximate $385 million after-tax impairment charge related to the company's ownership interest in Midland Cogeneration Venture (MCV) in the third quarter of 2005.

Fitch rates CMS as follows:

--Senior secured bank loan 'BB';

--Senior unsecured debt 'B+';

--Preferred stock and QUIPs 'B';

--Rating Outlook Positive.

The impairment charge relates to CMS' 49% interest in the MCV Partnership (rated 'BB' by Fitch), which owns the MCV Plant, a 1,500 MW gas-fired combined-cycle cogeneration qualifying facility. MCV supplies electric energy and capacity to Consumers Energy Cop. (senior unsecured rated 'BB', Stable), and electric energy and steam to Dow Chemical. While the contracts with Dow and Consumers are paid based on the price of coal, the cost to MCV is tied to natural gas. As a result of sustained high natural gas prices, MCV is expected to incur losses as its power supply contract does not provide for the full recovery of its natural gas fuel costs at current and forecast prices. While MCV has hedged positions for its natural gas volumes, this position declines over time, and continued higher natural gas prices would further erode the plant's cash reserves.

Fitch does not expect the impairment charge to have an adverse effect on CMS' near-term liquidity position. Importantly, the charge will not result in the breach of any financial covenants under CMS' existing bank credit facilities. CMS faces elevated liquidity needs over the near-term as a result of increased working capital requirements due to high natural gas prices and increased capital expenditures. The Positive Outlook on CMS was assigned in December 2004 and incorporated Fitch's expectation that the company has a strategy in place to reduce debt and improve credit metrics. If the CMS' ability to reduce debt were to be inhibited, negative rating action may occur.

The impairment will affect the financing and equity calculation for Consumers. The utility will be limited in the amount of first mortgage debt it will be able to issue to $298 million over the next twelve months due to a net earnings certificate requirement in Consumers' current bond indenture. However, Fitch expects Consumers to be able to address any liquidity needs with either second mortgage bonds, springing lien bonds or even unsecured debt. A credit concern facing the utility relates to Consumers' electric rate case pending before the Michigan Public Service Commission (MPSC). With the impairment charge, there is a potential risk that the MPSC will factor in the adjusted capital structure in its rate making decisions.

CMS is a utility holding company, whose primary subsidiary is Consumers. CMS also has operations in natural gas pipelines and independent power generation.

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.