Good morning, everyone and welcome to the CMS Energy 2008 Third Quarter Results and Outlook Call. This call is being recorded. Just a reminder, there will be a rebroadcast of this conference today beginning at 11 AM Eastern Time, running through November 12. This presentation is being webcast and is available on CMS Energy's website in the Investor Relations section. At this time, I would now like to turn the call over to Ms. Laura Mountcastle, Vice President and Treasurer. Please go ahead.

Thank you. Good morning and thank you for joining us for our third quarter earnings presentation. With me today are Dave Joos, President and Chief Executive Officer; and Tom Webb, Executive Vice President and Chief Financial Officer. Our earnings press release issued earlier today and the presentation used in this webcast are available on our website at cmsenergy.com. This presentation contains forward-looking statements. These statements are subject to risks and uncertainties and should be read in conjunction with our Form 10-K and 10-Q. The forward-looking statements and information and risk factors section discuss important factors that could cause results to differ materially from those anticipated in such statements. The presentation also includes non-GAAP measures when describing the company's results of operations and financial performance. A reconciliation of each of these measures to the most directly comparable GAAP measure is included in the appendix and posted in the Investor section of our website. We expect 2008 reported earnings to be about the same as adjusted earnings. Reported earnings could vary because of the effects of asset sales, unrealized losses on investment or other factors. We're not providing reported earnings guidance reconciliation because of the uncertainties associated with those factors. Now, I turn the call over to Dave.

Thanks, Laura and good morning everyone. Thanks for joining us today for our third quarter earnings call. As is our usual practice, I'll start the presentation with a brief update on the business and then I will turn the call over to Tom for a more detailed discussion on the financial results and the outlook and then we'll close with Q&A. It's been a tumultuous time in the financial markets until last call. Fortunately, our team was out front of the crisis with this year's planned financings and our liquidity position is strong, and Tom will give you a little more detail on that in a minute. The economy is shaky nationally and a little shakier here in Michigan. The autos in particular are struggling. That's not great for us, but also not as troubling as you might think. Our margin from the automotive sector is much smaller than it once was, now only about 3%. And we're seeing expansion in other industries that are offsetting the automotive sales decline like alternate energy manufacturing. Still we're seeing a sales decline and an uptick in uncollectibles. On a weather adjusted basis, both electric and gas deliveries are off about 2% for the first nine months of this year compared to last. While our uncollectibles are still well below the national average, they are trending upward. We've been able to offset these negatives with a combination of rate relief and spending cuts. So we're pleased to say that our adjusted earnings outlook remains unchanged, at $1.20 a share. One of the adjustments we've made however reflects the impact of the sharp market downturn on our pension fund. We don't see an earnings impact associated with the qualified plan, but there is one this year associated with the non-qualified plan. We booked a…

Thanks, Dave and thank you everyone for dialing in today. First for the quarter, despite software sales and rising uncollectible accounts, GAAP EPS at $0.34 was equal to last year. Adjusted non-GAAP EPS at $0.33 was up sharply from last year and stronger than First Call estimates. This excludes $0.03 associated with an unrealized loss on our non-qualified retirement plan investment that Dave referred to. Higher earnings reflect rate cases, benefits from the MCV regulatory out, lower interest expense and lower overhead cost. This more than offset unfavorable weather, sales, cost for launching our new SAP-based system, higher capital investment and lower interest income. Now, over the last several years, we've restructured the company and rebuilt our balance sheet, reducing our risk exposure substantially. More recently, as you can see on this slide, we exited our exposure to monoline insurance companies, added a 364-day revolver for $150 million at the utility and accelerated and increased the size of our planned first mortgage bonds at the utility. This bolstered our liquidity and further reduced our risk exposure. As with many companies, we were concerned that subprime loan problems would lead to rocky financial markets this fall. We did not expect the crisis and we were fortunate to complete our debt refinancing programs in advance of it. Events since 9/15 will be challenging, but we're in a much better position to deal with it. The financial, credit and economic dislocation will lead to lower sales, higher pension funding, higher uncollectible accounts, pressure on liquidity and a need to reshape our capital spending plans. Ignoring these changes wouldn't make any sense. Accordingly, early in October, we lowered our sales outlook and related assumptions for 2009 to reflect the recession and raised our estimate for pension obligations to reflect the sharp downturn in equity…

Thank you very much, Mr. Webb. [Operator Instructions]. Our first question comes from the line of John Kiani with Deutsche Bank. Please proceed.

Good morning, Dave, Tom.

Good morning, John.

Good morning.

Laura. Couple of questions. Dave, I know you briefly touched on the energy legislation in your comments and you also made some comments about sales volume. But can you articulate a little bit more on how file and implement affects your ability to readjust rates or file to readjust rates based on potential further degradation of sales volume and how that could protect the margins that the company realizes?

Sure. Well, on both the electric and gas side, the law allows us to make a filing and then self implement up to the amount of that filing, six months after we make the filing. Now, it does have to be within the test year associated with the filing. Of course, we have a gas case in process right now. And that case is far enough along with that feature of the loss, not likely to file although it could, because frankly any pending case also falls under that six-month limit. We're going to be filing an electric rate case shortly. So assuming the commission deems the filing to be complete and there is a 30-day period for the commission to determine whether it's complete or not. That six-month period would start when we file the case. So it does allow us to self implement rates early in... sometime in the second quarter of next year, assuming when we make the filing, the commission deems it to be complete.

That's helpful, thank you. And then on another subject, can you remind us Tom, what the most recent NOL balance is at the parent company, ballpark?

Happy to. We'll just take them out right now. Keep in mind as I give you those, we have AMT credits that are worth about $0.25 billion and NOLs, and our most recent status we'll give you here in just a second. John, I think those after-taxes are going to also be about $0.5 billion, so add those back in to with AMT credits and in just a minute we will give the exact number.

Great.

Did you have... do you have another question?

I do actually. And so I guess, in conjunction with this NOL figure, and I think earlier in your comments, you reiterated and said you're still comfortable with your 6 to 8% long-term earnings growth rate. Can we confirm that you don't need equity capital to fund that growth rate outside of obviously the special situation with the potential to build a new coal plant at Michigan, outside of that project I guess in combination with this NOL and reasonable debt financing, is it safe to continue to assume that you achieve that growth rate without the need for an external equity capital funding?

Yeah, that's been our plan all along. And it didn't make sense for us to invest in a multibillion dollar coal plant without shoring up our balance sheet with an equity assurance. But our plan all long has been that that would be the only situation in which we feel we're going to need new equity.

Right. So looking at the rate base growth outside of that, you're covered with the NOL?

Right.

And so it looks like we're about 250 for the AMT and you said $500 million after-tax for the NOL, Tom?

Yeah, I'll give you that exact number in just a minute.

Okay. Thank you.

Don't worry we'll sneak it there, John.

Great.

Thanks.

Your next question comes from the line of Paul Ridzon with KeyBanc. Please proceed.

What Tom, just regarding the SAP implementation costs, are these recurring costs or was this just kind of limited to this quarter to kind of get the system up and running?

This is really just the expense after we launched and therefore we stopped capitalizing the work, so as we were bringing things up to run, not everything runs as perfectly as you'd like to and all the changes and improvements that we made, we need to do expense. Those are just a little bit bigger than what we had planned for. And I don't think any thing extraordinary from what you see and a good SAP launch because so far we are very proud of what we've done.

I mean Paul, to be clear, long-term of course we expect the SAP to reduce our cost. But in the near-term, some of these implementation charges that we're no longer able to capitalize affected our earnings.

Do we see some fourth quarter trickle through of the higher costs?

It's too early to tell, I think but... they're certainly aren't an ongoing cost, but this I couldn't say that they aren't going to show a little bit in the fourth quarter as well.

Tom, what do you envision being as the delta in the discount rate to alleviate any earnings impact?

In terms of where we were last year, you can see that our discount rate was 6.4%. And conservatively speaking, we expect the year to end up at around 7% and that's what's in the numbers that I'm factoring in. But as you know, we look not only at the asset value, but on what's really happening in the market on discount rates at the end of the year. I think we've been a little conservative. Discount rates really are running a little bit higher than that for the portfolio mix that we have.

And it's great to hear you reiterated the growth rate. Should we expect maybe it's not as straight as we may have thought it was earlier, but more kind of... got some coverage into it?

Well, we've never tried to imply that it would be a straight line all the way out, obviously it gets a little bit lumpy on occasion depending on when your rate cases occur and when your investments take place. We're still comfortable with that range. As we said, we moved some capital spending out of 2009 of simply be conservative on liquidity. And... but we're still comfortable with that long-term range in fact over the five-year period.

And your electric case that you are planning on filing, will ask for decoupling?

I don't think we have decoupling in our electric rate case. The law actually specifically provides for gas decoupling. That doesn't preclude electric decoupling, but right now we don't have plans to file that in the current electric rate case.

And what do the... what uncollectibles protections are built into your current regulatory construct?

Well on the uncollectible side, we already have built in $25 million. So what we'll need to do is look at where we're running today and we're running at $38 million. We'll pickup the electric part of that in this rate case and then the gas part of that in the next gas rate case.

And then lastly, there's been some talk about steering some federal funds towards the auto industry. What are you hearing on that front?

We're not hearing anything more than you are. Lot of discussion about that as you know, Michigan delegation is certainly been pushing hard for that. But it's not clear what's going to actually happen.

Okay. Thank you very much, and congratulations on a strong quarter.

Thank you.

Thanks and thank you. And for John and everyone else, the specific AMT credit number was $267 million and the net number from NOL, the tax impact side of that is $350 million. There you can see, there is well over $600 million of tax benefit available to us. And thanks for the question John, sorry to be slow with the answer.

Your next question comes from the line of Jonathan Arnold with Merrill Lynch. Please proceed.

Good morning.

Good morning, Jonathan

Just one detailed question; on page three of the earnings release, we noticed the number of dividends and other distributions to parent of 1.3 billion, which we suspected may be to the one that shouldn't be there, just wanted to verify that.

No, these are all just... those are all just the normal payments in dividends that were paid including tax sharing benefits, which were pretty substantial. And remember, this was all during the course of last year.

Okay. But there you have 250 million at the end of December and then 1.3 billion as of now, so?

So, don't think of that as just the utility, which is what you may have in mind. Remember all the assets we sold, which make up the bulk of that.

Right, okay.

Dividended from enterprises.

Okay. So that includes things that come out of... the money that came out of enterprises?

Well, absolutely right.

Okay. I understand. And then Tom, you mentioned I think a number of 75% as your way you projected to be in terms of funding on the pension. Is that on the PBO basis or the ABO basis?

It's all was the new pension act calculations, so you need to be careful it's not pure as to one or the other and which you can see on chart on page 11. We are trying to get to the 75% level because that's threshold that you need to reach within those calculations so that you don't have either enact risk program or any benefit considerations.

Just to be... so the discount rate you are using there, or is that the sort of smooth discount rate that is used for funding or is it more the higher discount rate that you can use on the expense side?

It is smooth, but remember not as much any more as you may have remembered in the past under the new pension act. And it's just... the best thing to think of it, it's close to the ABO as you can be without being the ABO.

Okay. And then just one follow-up on... you talked about having your plan to address the cash flow implications of sales. Should we think about this kind of new lower sales forecast as being also addressing the earnings implications of the kind of forecast you are talking about. Then if we get to this contingency level of even lower sales that you also mentioned that that's what would throw you off may be in this short-term your earnings target?

Well. It certainly creates more challenge for us recall though as I said earlier will be filing an electric rate case reflecting lower sales and should be able to self implement those in the second quarter per plan and what we may have to make some other spending adjustments, and we were reviewing our budgets to reflect the impacts earlier in the year.

Right.

So even though on slide nine, we have shown you under the sales trend information, the cash flow implications because I know that's very important to everybody. There is a set of earnings implications that go right down the page with that two and we're focused on trying to address both of those in a balanced way.

Okay. And finally, when would you... when do you anticipate giving your 2009 earnings outlook?

We've had practice of giving that in our year end call, typically around the 1st of February, so that's...

End of February.

Yeah, towards the end of February.

And that would be the plan for '09. Okay, thank you very much.

Thank you.

Your next question comes from the line of Mark Siegel with Canaccord Adams.

Good morning. In the past, you guys have spoken about plans to pursue advance metering in your service territory. Just wondering if you could provide an update on where things stand and what you think the timing of your plans might be going forward? Thanks.

Yeah. We were still very interested in that, we think it's a great project and it's part of what enables the energy efficiency targets in the new legislation to be met. We've been working closely with the commission staff and getting aligned with them on the requirements. Frankly right now, we're on the front end of that project, working on software, building our plans for pilots and we'll be running pilots in 2009-2010. The real deployment of the metering would then happen 2011 and beyond. And right now, we expect that's going to be about a three to four-year period to deploy those meters, but all of that's pretty much on track.

Okay, thanks so much.

You're welcome.

[Operator Instructions]. Your next question comes from the line of Robert Gephardt [ph] with Neuberger Investment Management. Please proceed.

Good morning, everyone.

Good morning.

Just regards to your comments that you are planning to come to market to term out your mortgage bonds in kind of the middle 2009. Is there an interest rate that what you would just use your available liquidity to just pick on your balance sheet and then determine when kind of the markets improve?

The best way to answer that is we're going to watch the markets very carefully. Again remember, we were fortunate to be out in front and accelerated $350 million of our consumers' first mortgage bonds before September 15 when things fell apart and also our revolver. So we'll watch what happens. We don't have to do anything now. We probably get in to the first quarter or so and read the market. We will finance ourselves appropriately, but it's hard to believe our consumers were not going to be able to get something that's reasonable and we wouldn't want to dip into our revolver. On the other hand, let's take it to another side, is that for the parent, we don't have anything that's due until deep into 2010. But we have told you that we have adequate revolver capacity there and for some reason that market stayed difficult for that long, we could back that up. So when we say that that's just to provide you with some comfort on what we can do, but our desire will be to get into the proper financing markets.

Okay. Great, thanks guys.

Your next question comes from the lines of Brian Russo with Ladenburg Thalmann. Please proceed.

Hi, good morning.

Good morning.

Most of my questions have been asked and answered. But I am just curious on that 77 million of the PA 141 balance that remains? How is that to be collected?

It's not dictated in the law exactly how it's to be done, but maybe to put up little history to it, the 2000 law provided for stranded cost recovery, there are number of stranded cost cases, and the majority of that 77 million is stranded cost. And when the commission, the prior commission established the surcharge to allow us to collect that, they established that at a low enough level, but the balance is actually going up and not down. And so we were concerned to make sure that under this new law, we could actually collect that cash. The law says it has to be done over no more than five years, it's not much more clear than that. So we'll be making a filing with the commission and working out a process to collect that cash, but it does provide certainty that we'll get that cash.

And it's positive to cash flow?

Yes.

Great. And just from the dividend policy, does the weighing of the 180 million of CapEx, does it at all change your dividend payout strategy?

Are you talking about common dividend of CMS?

Yeah.

Yeah, I don't see that that would have an impact on that. Of course we haven't been real clear on what our strategy is in that regard, but what we said before and I think still holds true is we would intend to move the dividend up but at a slower pace than we have in the past and as long as we're in a strong capital investment cycle we certainly wouldn't expect to get it as high as the industry norm for while.

Okay. Thank you.

Your next question comes from the line of Hart Horsky with State Street Global [ph]. Please proceed.

Hi, thanks. Tom, could you just circle back on the 160 million incremental plan related to pension and just reiterate what exactly that figure represents?

Yep. The total contribution that we would expect to make in September of next year would be $210 million. We had 50 already baked into our plans, so it was in our cash flows that we talked to you about. But we've to add $160 million to address the drop in asset values and make sure we could be at our 75% funding target. So if some market drops further and our assets drop further, we'll need to increase that contribution and of course if it goes the other way, it would be smaller.

Okay. So that takes you to the 70% or 75%?

75.

Okay. Thanks. And what did you projected or what balance of assets you are using?

We're using the balance as of September 30. So at this point, if you looked at October 31, of course it would be worst than that.

Okay. Okay, thank you.

You bet.

Your next question comes from the line of Edward Heine [ph] with Catapult Capital Management. Please proceed.

Good morning.

Good morning.

Just had a quick question on one of the slides that didn't show up in the presentation this time was the rainbow rate base slide. I know that the punch line of that slide is that you think that the 6 to 8% EPS growth rate is okay and you've obviously reaffirmed that this morning. But just is there any color on why you guys chose not to give that, is that potentially going to be changing a little bit, as you work through some of these economic impacts?

Yeah. We'll probably present that at the EEI conference coming up here next week. There really wasn't any reason that we took that out other than to shorten the presentation. That hasn't changed substantially at all. As I indicated, we have slipped some capital out of 2009. But we've incorporated it later in the five-year period, so we will update it for at the EEI conference if you are going to be there.

Okay.

But it's not a material change

Fair enough. Great, thanks a lot. Congratulations on the good quarter.

Thank you.

Your next question comes from the line of Raymond Leung [ph] with Goldman Sachs. Please proceed.

Thank you. Hey guys. Just a quick question, can you address Tom, what strategy is on the accounts receivable facility. I think you indicated there is something you may need to do on that next year. And also a follow on question about CapEx. I think more guidance you can provide on what kind of flexibility you may have on the future CapEx budget, if you do comment and if we do continue with the more challenging economic/last financing environment?

Yeah. Our accounts receivable program is an annual program. So we renew that once in a year and will be doing that again in February. Candidly, we don't see any signs why we're not going to be able to successfully renew that prospects, although it might be a little smaller than what we've done in the past, but candidly our needs haven't been as big. So, it's just an annual event. And then on capital spending, we told you that we've taken 180 million and again reshaped it, and deferred it. And I want to emphasize something that part of that was to help us on cash flow. But part of that made some sense to us anyhow to execute our programs in a more orderly basis. So, it really isn't deleting anything, it's deferring. We've already put together another plan if we needed it, to do a like amount, another additional amount of capital spending deferrals. And again not deletion so we'll look at that if we need it. We feel pretty good about where we are now and keep in mind some of the deferrals that we talk about are things like new business. When new business is down, we don't have to spend as much and our outrages can be adjusted. There is just a variety of things that we're able to time differently and that's all that we're doing at this point.

Okay. Great, thanks. Oh, and just quickly, what's the current rate on the AR facility?

Little over 3%.

Great.

It's probably... it's a little inside of where our revolvers are, so it's attractive to us but keep in mind, when we renew at in this market, we'll have to do little negotiating.

Okay, fair enough. Thank you.

At this time, there are no further questions.

All right. Well, thank you for joining us this morning. We've continued to I think perform well in a challenging time. We've made some prudent adjustments we think to our plan, but are comfortable with our long-term outlook and we look forward to seeing you all at the EEI Conference. Thank you.

This concludes today's conference. We thank everyone for your participation. .