Zacks_Analysts' Blog : Consumers Energy, SmartSynch Tie Up - Analyst Blog

In an effort to make available the best metering solution to its customers, Consumers Energy Corporation (CMS) has chosen SmartSynch to provide advanced metering system. SmartSynch creates smart grids for the utility industry. As a smart grid infrastructure company, SmartSynch's IP-based solutions are capable of delivering grid intelligence to and from any device.

The advanced metering system will be the foundation for a grid and meter modernization program for 1.8 million electric customers of Consumers Energy in Michigan. After extensive research and testing of available industry solutions, the company decided to go for advanced metering system. Besides building and maintaining a private network, Consumers Energy will be able to utilize existing cellular networks for large-scale, high performance smart grid communications under this system.

Traditional meters only measure energy use and customers receive that information with their bills. However, SmartSynch's technology creates a two-way communications system that will provide customers with detailed information about their energy usage, allowing them to better manage their energy use and their bills.  Moreover, advanced metering will provide key customer value benefits including faster power outage identification and restoration.

The company expects meter installation to begin in Muskegon County in August 2012 with installation continuing through 2019 across the utility's service territory.

Through this contract, Consumers Energy will become the largest U.S. utility to choose a cellular-based communication system for the smart meter deployment phase of its grid modernization program. In addition to facilitating 1.8 million customers, the company also continues to evaluate the installation of communications modules on approximately 600,000 gas meters in areas where the utility serves customers with both electricity and natural gas.

CMS Energy’s regulated electric power operations in Michigan generate a relatively stable and growing earnings stream. Over the long term, the company presents a strong growth story, given its favorable regulatory policies in Michigan, higher rates, strong balance sheet, and incremental dividend.

But we also believe these positives are restrained by the unfavorable macro backdrop, lower demand for electricity and pending regulatory cases. The company presently retains a short-term Zacks #3 Rank (Hold) that corresponds with our long-term Neutral recommendation on the stock. In the near term, we would advise investors to accumulate its short-term Zacks #2 Rank (Buy rating) peer Xcel Energy Inc. (XEL).

Jackson, Michigan-based CMS Energy is the holding company of Consumers Energy Company (Consumers) and CMS Enterprises Company (Enterprises). Consumers is an electric and gas utility company that provides electricity and natural gas to Michigan’s residents, and serves customers in all 68 counties of Michigan’s Lower Peninsula. Enterprises, through its subsidiaries and equity investments, is engaged primarily in independent power production.