Slide 1: Third Quarter 2003 Financial Results
Third Quarter 2003 Financial Results November 7, 2003
Slide 2: Safe Harbor Statement
Safe Harbor Statement The information contained in this document is as of the date of this press release. DTE Energy expressly disclaims any current intention to update any forward-looking statements contained in this document as a result of new information or future events or developments. Words su
Slide 3: Participants
Participants Dave Meador Senior Vice President & Chief Financial Officer Mike Champley Senior Vice President - Regulatory Affairs Dan Brudzynski Vice President & Controller Nick Khouri Vice President & Treasurer Peter Pintar Director of Investor Relations
Slide 4: Outline
Outline Q3 Results 2003 Update Business Outlook
Slide 5: Summary
Summary The year continues to be challenging, with negative impacts from customer choice, weather, healthcare and benefits Although these are external factors, we will continue to drive cost reductions across the enterprise Recent successful resolution of the IRS/PLR issue The low end of our previou
Slide 6: Q3 2003 Operating Earnings per Diluted Share
Q3 2003 Operating Earnings per Diluted Share 168M avg shares outstanding Increasing margin loss due to customer choice Weather slightly above normal Lower purchased power costs Lost margin due to blackout Increased regulatory deferrals Increased pension and benefit costs and uncollectable expenses U
Slide 7: Q3 2003 Operating Performance Business Unit View
Regulated Non Regulated Power Generation Energy Services Coal Services Biomass Energy Energy Marketing & Trading Energy Resources Power Distribution DTE Energy Technologies Energy Distribution Gas Distribution Non Reg Energy Gas Energy Gas Holding Company Energy Tech Investments Corporate & Other Op
Slide 8: Q3 2003 vs. Q3 2002 Variance Analysis of Operating Results
Q3 2003 vs. Q3 2002 Variance Analysis of Operating Results
Slide 9: August Blackout Impact
August Blackout Impact $14 $25-30 $39- $44 Pre-Tax Impact (Millions) $0.06 $0.10 - $0.11 Lost Margin Direct Blackout Costs EPS Impact Not seeking recovery and this impact is reflected in Q3 operating earnings We recently filed an application at the MPSC to defer these costs We anticipate booking a r
Slide 10: Outline
Outline Q3 Results 2003 Update Business Outlook
Slide 11: 2003 Overview
2003 Overview We feel that the lower end of our operating earnings guidance range of $3.10 - $3.30 per share is still achievable, but will be challenging Our guidance assumes the following factors: Continued movement to electric choice (up to 13% of total load) Regulatory deferral of $40M for choice
Slide 12: Detroit Edison Year-to-Date Overview
Choice $268 $177 (34%) Detroit Edison Year-to-Date Overview Operating earnings are down 34% from comparable 2002 levels Key drivers include: very favorable weather in 2002 margin loss due to choice incremental territory growth increased regulatory deferrals due to choice, environmental and securitiz
Slide 13: Financial Impact of Electric Choice
Financial Impact of Electric Choice 2000 2001 2002 $0 $15 $50 $80-100 * Detroit Edison Pre-Tax Margin Loss (Millions) $140-200 * 2003E 2004E 2000 2001 2002 2003E 210 1,085 2,990 5,300 - 6,400 * Detroit Edison Customer Choice Penetration (GWh) 8,940 - 11,200 * 2004E * Low end of range is estimate con
Slide 14: MichCon Year-to-Date Overview
2002 YTD Operating Earnings* ($ millions) $31 MichCon Year-to-Date Overview 3 (24) 20 $22 Operating earnings are down 29% from comparable 2002 levels Key drivers include: Colder year over year weather Significant increases in pension and benefit cost more than offset the improvements in gross margin
Slide 15: Synfuel Results
Synfuel Results Q1 Q2 Q3 Q4* 2002 1.4 1.3 2 4.1 2003 4.3 4.4 1.7 2 Synfuels Produced (millions of tons) Net Income Q1 Q2 Q3 Q4* 2002 22 18 28 68 2003 56 62 27 32 Synfuels Net Income ($millions) * Q4 2003 - forecasted production and net income Total Synfuel Production 2002: 8.8M tons 2003: 12.4M tons
Slide 16: 2003 Operating Earnings Outlook
2003 Operating Earnings Outlook EPS $3.10 ($ millions) Regulated Electric Regulated Gas Non- Regulated Cost Reductions Corporate $255 $55 $225 $15 ($28) $522 $3.10 per share, the low end of our guidance, still appears to be achievable but is dependent on a number of key drivers: Note: A reconciliati
Slide 17: DTE Energy Cash Flows
DTE Energy Cash Flows 2002A 2003P Cash from Operations $974 $950 Capital Expenditures (984) (840) Dividends (338) (350) Asset Sales 41 700 Cash Flow ($307) ($ millions) Cash from Operations is expected to reach $950M this year, below our original estimate. The lower forecast reflects: weak utility e
Slide 18: DTE Energy Balance Sheet
DTE Energy Balance Sheet DTE Energy's leverage End of Q3 2003: 51.6%* Projected year-end 2003: 51-52%* Recently completed renewal of $1.3B revolver: Oversubscribed by $360 million 9 banks increased their commitments 4 new banks participated Liquidity of $1.3B plus $200M Detroit Edison receivable fac
Slide 19: Outline
Outline Q3 Results 2003 Update Business Outlook
Slide 20: 2004 Outlook
2004 Outlook Detroit Edison net income is highly dependent on: Timing and amount of rate relief Implementation of PSCR Resolution of customer choice MichCon net income is highly dependent on the timing and amount of rate relief Non-regulated net income will be driven by: Timing and number of synfuel
Slide 21: Regulatory Update
Regulatory Update Issue Latest News PSCR Reinstatement Briefs were filed on 10/17, and reply briefs filed on 10/31. Anticipate MPSC order before year end Blackout Cost Recovery Filed application on 10/24 for authority to defer costs for a future rate proceeding Elimination of Choice Transition Credi
Slide 22: Energy Bill Update
Energy Bill Update Certain provisions in the proposed Energy Bill, if enacted, could benefit DTE Energy: Potential extension of tax credits for fuel produced from non- conventional sources, including coke, coal bed methane, Antrim shale and landfill gas Proposed tax credits for production of refined
Slide 23: Summary
Summary The low end of our operating earnings guidance of $3.10 - $3.30 per share remains achievable, but challenging Continued negative financial impacts at the utilities stress the need for speedy resolution of the rate cases and the restructuring of Michigan's flawed Electric Choice program Non-r
Slide 24: Appendix
Appendix
Slide 25: Reconciliation of Legal Entity Operating Earnings Guidance to Reported Earnings Guidance
Reconciliation of Legal Entity Operating Earnings Guidance to Reported Earnings Guidance Non-regulated Businesses Operating Earnings Guidance FAS 143 asset retirement obligations Reported Earnings Guidance $225 (3) $222 Regulated Gas Operating Earnings Guidance Reserve for disallowance of gas costs
Slide 26: Reconciliation Year-to-Date Operating Earnings to Reported Earnings
Reconciliation Year-to-Date Operating Earnings to Year-to-Date Reported Earnings ($ millions) MichCon YTD Operating Earnings Detroit Edison YTD Operating Earnings Reported Earnings Guidance $27 $177 Loss on Thermal divestiture FAS 143 asset retirement obligations August 2003 blackout costs $141 16 6
Slide 27: Quarterly Effective Tax Rate Adjustment
Quarterly Effective Tax Rate Adjustment Each quarter an accounting adjustment is made to reconcile back to DTE's overall effective rate for the year The effective tax rate adjustments net to zero for the total year This adjustment is recognized in reported earnings but is removed from operating earn