Dte Energy Company · NYSE:DTE
Dte Energy — Investor Day (October 2009)
119 slides from Dte Energy's investor day presentation, Oct 19, 2009
Slide 1: Welcome & Overview of Agenda
Welcome & Overview of Agenda Tony Earley, Chairman & CEO DTE Energy Analyst Meeting October 19, 2009
Slide 2: Safe Harbor Statement
Safe Harbor Statement 2 The information contained herein is as of the date of this presentation. Many factors may impact forward-looking statements including, but not limited to, the following: the length and severity of ongoing economic decline; changes in the economic and financial viability of ou
Slide 3: Today's Agenda
Today's Agenda 3 October 19, 2009 Tony Earley, Chairman & CEO Welcome & Overview of Agenda David Cole, Chairman Center for Automotive Research Today's Turbulence: A Foundation for Future Success Tony Earley, Chairman & CEO DTE Energy Strategic Overview Gerry Anderson, President & COO Utility Value C
Slide 4: David Cole, Chairman, Center for Automotive Research
David Cole Chairman, Center for Automotive Research 4 David Cole is a not an employee of DTE Energy or its affiliates. His presentation reflects the views of the Center for Automotive Research and not those of DTE Energy
Slide 5: Strategic Overview
Strategic Overview Tony Earley, Chairman & CEO DTE Energy Analyst Meeting October 19, 2009
Slide 6: Strategic Outlook Discussion Outline
Strategic Outlook Discussion Outline Our accomplishments demonstrate our ability to get results Significant improvement to 2009 operating earnings guidance 2010 early outlook shows strong year-over-year earnings growth Our utility value creation model balances utility growth and customer affordabili
Slide 7: Our Accomplishments over the Last Three Years Demonstrate Our Ability to Get Results
Our Accomplishments over the Last Three Years Demonstrate Our Ability to Get Results Strengthened regulatory structure to benefit all stakeholders Significantly improved operational performance and reduced costs Streamlined non-utility business mix and sharpened focus Successfully navigating challen
Slide 8: Our Cost Reduction Efforts Have Helped Offset Lower Electric Load
Our Cost Reduction Efforts Have Helped Offset Lower Electric Load 8 Down 8% YTD Sept. 30th from 2008 Projecting 7% - 8% load loss in 2009 Continuous improvement and one- time cost reductions helped offset weak demand prior to self- implementation Detroit Edison Electric Load
Slide 9: Significant Improvement to 2009 Earnings Guidance
Significant Improvement to 2009 Earnings Guidance 9 $2.71 $0.89 Operating Earnings Per Share* Guidance Midpoint 2009 Original Guidance 2009 Revised Guidance * Reconciliation to GAAP reported earnings included in the appendix Maintaining utility guidance: able to offset further weakening in the econo
Slide 10: 2010 Early Outlook Shows Strong Year-Over-Year Growth
2010 Early Outlook Shows Strong Year-Over-Year Growth 10 $471 $523 - $558 $545 - $610 Operating Earnings* ($ millions) $2.90 $2.75 - $3.05 $3.20 - $3.40 Expect continued growth in 2010, even with conservative assumptions Utilities recover to full earnings power with anticipated rate increases Strong
Slide 11: Solid Plan for 5% to 6% Long-Term Earnings Growth Rate
Solid Plan for 5% to 6% Long-Term Earnings Growth Rate 11 Operating Earnings per Share* Abundant opportunities to invest capital Utility value creation model designed to translate capital into long-term earnings Non-utility investments complement utilities, diversify earnings, provide better than ut
Slide 12: Utility Value Creation Strategy Expected to Produce Consistent Results
Utility Value Creation Strategy Expected to Produce Consistent Results Predictable rate case outcomes enable investment and job creation Solid regulatory framework reduces regulatory lag Open communication builds strong relationships Positive customer feedback Manageable rate increases Competitive b
Slide 13: Our Non-Utility Value Creation Model Focuses on Lower Risk, Strong Return Investments
Our Non-Utility Value Creation Model Focuses on Lower Risk, Strong Return Investments 13 Focus on key, well-defined areas Disciplined Investment with strict risk/return criteria that produce better than utility returns Value Creation through continued earnings growth or monetizations with an objecti
Slide 14: Our Non-Utility Businesses Provide Geographic Diversity & Strong Returns
Our Non-Utility Businesses Provide Geographic Diversity & Strong Returns Leverages our strengths and skills History of generating substantial shareholder value Better than utility returns Enables participation in geographic markets beyond our regulated territories Diversifies earnings Rebalanced non
Slide 15: We Are Addressing Several Key Challenges
We Are Addressing Several Key Challenges Achieve consistently strong regulatory results 15 Continue to manage impact of economy Successfully navigate climate change legislation
Slide 16: Climate Change Legislation Moving in the Right Direction...
Climate Change Legislation Moving in the Right Direction... Waxman-Markey impact on Detroit Edison: Provides nearly 30 million tons in free allocations in 2012, declining to zero in 2030 Allowance purchase of approximately $150 million would be required to meet gap between allocations and emissions
Slide 17: ....But We Still Need Improvements to Minimize Customer Impact
17 ....But We Still Need Improvements to Minimize Customer Impact A reasonable transition period allows time for technology development and deployment to reduce customer rate increases Keys to making the costs of climate change legislation reasonable: Free allocations: EEI/AGA/ACCCE and others will
Slide 18: DTE Energy's Key Strategic Objectives Will Deliver Value to Shareholders
DTE Energy's Key Strategic Objectives Will Deliver Value to Shareholders Achieve a level of operational excellence that is distinctive in our industry Utilize a utility model that balances growth and customer affordability Position the company to benefit from powerful trends in the energy sector Par
Slide 19: Today's Agenda
Today's Agenda 19 October 19, 2009 Tony Earley, Chairman & CEO Welcome & Overview of Agenda David Cole, Chairman Center for Automotive Research Today's Turbulence: A Foundation for Future Success Tony Earley, Chairman & CEO DTE Energy Strategic Overview Gerry Anderson, President & COO Utility Value
Slide 20: Utility Value Creation Strategy
Utility Value Creation Strategy Gerry Anderson, President & COO DTE Energy Analyst Meeting October 19, 2009
Slide 21: We Are Frequently Asked Three Questions by Our Investors
We Are Frequently Asked Three Questions by Our Investors 2 What is DTE's model for creating value in its utilities? The new regulatory framework is a big improvement... ....but given economic pressures, how will it be applied? When do you expect to see load growth again... ....and how can you grow u
Slide 22: Michigan's Regulatory Structure Has Improved Significantly Over the Past Year
Michigan's Regulatory Structure Has Improved Significantly Over the Past Year 3 7 States 10 States 15 States 10 States 6 States Lower Regulatory Quality Higher Regulatory Quality Michiga n Post-2008 Source: Barclays Capital, Regulatory Research Associates Michiga n Pre-2008 2009 Ranking of State Uti
Slide 23: Key Elements of a Strong Regulatory Model
What are the Key Elements of a Strong Regulatory Model in Current Environment? 4 Strong Regulatory Model
Slide 24: Detroit Edison / MichCon Regulatory Construct
11% ROE File & Use Rates 6 month self-implementation Forward-looking test year Tracking mechanisms for key costs Fuel & purchased power Electric Choice lost margin MichCon uncollectibles Storm restoration RPS/Energy Optimization (EO) with prefunding Certificate of Need for large capital projects Det
Slide 25: Detroit Edison Rate Case
Detroit Edison Rate Case 6 Completed constructive discussions with MPSC Staff on open revenue requirement issues and outstanding technical issues Key stakeholders recognize that our cost reductions have significantly reduced the need to increase rates Detroit Edison has significantly reduced costs,
Slide 26: We Are Frequently Asked Three Questions by Our Investors
We Are Frequently Asked Three Questions by Our Investors 7 What is DTE's model for creating value in its utilities? When do you expect to see load growth again... ....and how can you grow utility EPS if the economy isn't growing? Will Michigan's new regulatory framework be applied in a way that work
Slide 27: Detroit Edison Projected Capital Investment
Detroit Edison Has Capital Investment Opportunities Much Higher than Historical Average ($ billions) $3.0 - $3.4 $0.5 - $0.6 $0.4 - $0.5 $2.0 - $2.2 $2.5 $0.6 $1.9 $0.1 8 Detroit Edison Projected Capital Investment
Slide 28: Investments Will Lead to Significant Rate Base and Earnings Growth
9 These Investments Will Lead to Significant Rate Base and Earnings Growth Utility Growth Plan Supports DTE Energy's 5% - 6% Average Annual EPS Growth Rate $11.8 $13.5 - 13.9 ($ billions) 2.3 9.5 2.4 - 2.5 11.1 - 11.4 5% - 6% Annual Growth Utility Rate Base
Slide 29: Growth Is Both a Source and Enabler of Economic Development in Michigan
The Growth is Viewed as Both a Source and Enabler of Economic Development in Michigan 10 Environmental Projects at Monroe Power Plant Michigan Wind Farm Is a significant source of economic development Monroe Power Plant's environmental projects have been among the largest construction projects in Mi
Slide 30: Summary of Utility Rate Base Growth
11 Summary of Utility Rate Base Growth The quantity of investment opportunities is not the issue The affordability of these investments is the issue DTE's utility rate base will grow 5% - 6% over next 5 years Much of this growth is tied to environmental and renewable mandates How can DTE ensure that
Slide 31: We Are Frequently Asked Three Questions by Our Investors
We Are Frequently Asked Three Questions by Our Investors 12 What is DTE's model for creating value in its utilities? Will Michigan's new regulatory framework be applied in a way that works for DTE? How can Detroit Edison / MichCon grow if the underlying economy is struggling? How will the large cost
Slide 32: Cost Reductions Help Keep Rates Affordable
Cost Reductions Help Keep Rates Affordable Illustrative customer rate impact from sustained cost savings and high capital investment Revenue Deficiency Revenue Sufficiency 2008 2009 2010 2011 2012 Increasing need for rate increase due to investments Decreasing need for rate increases due to cost red
Slide 33: Since 2006 We Have Worked Hard to Reduce Costs
14 Since 2006 We Have Worked Hard to Reduce Costs to Improve Our Competitiveness and Affordability 2006 - 2008 Cost Reductions*... $300 ....Gave Way to Our Current Continuous Improvement Model Continuous Improvement Model Continuous Improvement Model ($ millions) * Includes expense and capital savin
Slide 34: In Late 2008 We Asked Employees to Accelerate CI Deployment
In Late 2008 We Asked Our Employees to Respond to the Economic Crisis by Accelerating Our CI Deployment 15 Committed to do everything in our power to preserve employment security In return, asked our employees to accelerate their use of continuous improvement to achieve: $150M in company-wide cost r
Slide 35: Employees' Response and Accelerated CI Explain Most of DTE's Positive Results
Our Employees' Response and the Accelerated CI Deployment Explain Most of DTE's Positive Results this Year 16 $150M improvement plan on track Utility earnings guidance maintained 2009 operating EPS* guidance midpoint increased from $2.90 to $3.30 Economic Results Best INPO index ever at Fermi 2 (app
Slide 36: Continuous Improvement Has Markedly Improved Our Performance
Continuous Improvement Has Markedly Improved Our Performance 2009 Projection Rigorous benchmarking shows our improvements Cost reductions have not compromised safety or reliability Our work is ongoing We still have opportunities for meaningful improvement 2008 Metric Metric 1st Quartile 2nd Quartile
Slide 37: We Have Gone About this CI Work Very Differently from Past Efforts
We Have Gone About this CI Work in a Manner Very Different from Past Efforts River Rouge Power Plant Warren Service Center 18 Michigan Avenue Service Center
Slide 38: It Is Difficult to Ask Employees to Turn On and Turn Off These Efforts
It Is Difficult to Ask Employees to "Turn On" and "Turn Off" These Efforts 19
Slide 39: Transparency Ultimately Trumps the Traditional Utility-Regulator Shell Game
We also Believe that Transparency Ultimately Trumps the Traditional Utility-Regulator "Shell Game" 20
Slide 40: We Are Frequently Asked Three Questions by Our Investors
We Are Frequently Asked Three Questions by Our Investors 21 What is DTE's model for creating value in its utilities? The new regulatory framework is a big improvement... ....but given economic pressures, how will it be applied? When do you expect to see load growth again... ....and how can you grow
Slide 41: Utility Value Creation Strategy
Utility Value Creation Strategy We believe our utility value creation strategy will produce consistent, low risk earnings growth Strong Regulatory Model Cost Reductions and Capital Efficiency Customer Satisfaction 22
Slide 42: Today's Agenda
Today's Agenda 23 October 19, 2009 Tony Earley, Chairman & CEO Welcome & Overview of Agenda David Cole, Chairman Center for Automotive Research Today's Turbulence: A Foundation for Future Success Tony Earley, Chairman & CEO DTE Energy Strategic Overview Gerry Anderson, President & COO Utility Value
Slide 43: Detroit Edison: Key Areas of Growth
Detroit Edison: Key Areas of Growth Steven E. Kurmas, President & COO, Detroit Edison DTE Energy Analyst Meeting October 19, 2009
Slide 44: Presentation Outline
Presentation Outline 2 Characteristics of Detroit Edison's Growth Plan Environmental Compliance Investments Renewable Portfolio Standard (RPS) Energy Optimization (EO) Summary and Business Imperatives
Slide 45: Detroit Edison Growth Comes from Required Investments
Detroit Edison's Near-Term Growth 3 Continue to rollout residential and commercial programs Ensure capital efficiency by aggressively managing project schedules and budgets Construction of utility owned renewable generation Execute third party PPA / REC purchase contracts Significant investments to
Slide 46: Detroit Edison Growth Profile
Detroit Edison Growth Profile 4 Detroit Edison's growth plan requires significant capital investment, which must be managed with intense rigor Detroit Edison Projected Capital Investment ($ billions) $3.0 - $3.4 $0.5 - $0.6 $0.4 - $0.5 $2.0 - $2.2 $2.5 $0.6 $1.9 $0.1
Slide 47: Presentation Outline
Presentation Outline 5 Characteristics of Detroit Edison's Growth Plan Environmental Compliance Investments Renewable Portfolio Standard (RPS) Energy Optimization (EO) Summary and Business Imperatives
Slide 48: Environmental Compliance
National Clean Air Act (CAA) New source review enforcement National Clean Water Act (CWA) Michigan Mercury Rule National carbon legislation Resource Conservation & Recovery Act 6 Existing Regulations Emerging Regulations Detroit Edison's environmental compliance strategies are driven by existing and
Slide 49: Past Environmental Investments and Emissions Reductions
SO2 reductions SCR 7 Reduced particulate emissions by nearly 90% since 1974, while increasing generation output by 56% NOx reductions Particulate reductions PCB phase- out Reduced SO2 emissions by over 60% from 1974 through beginning of 2009 through increased use of Western coal Installed and commen
Slide 50: Future Investments in Emissions Controls
Future Investments in Emissions Controls 8 Ash disposal CAIR, CAMR and Climate Change Develop and implement plans to meet EPA requirements Continued focus on efforts to influence the final outcome NOx reductions SO2 reductions Mercury reductions Install scrubbers Implement potential fuel blending pr
Slide 51: Presentation Outline
Presentation Outline 9 Characteristics of Detroit Edison's Growth Plan Environmental Compliance Investments Renewable Portfolio Standard (RPS) Energy Optimization (EO) Summary and Business Imperatives
Slide 52: Michigan RPS Legislation Overview
Michigan RPS Legislation Overview 10% of retail sales must come from Michigan-based renewable sources by 2015 Qualifying Technologies Ownership Constraints Up to 50% owned by DTE Energy At least 50% by 3rd party 10 Renewable energy sold by Detroit Edison at a "transfer price" determined by MPSC Non-
Slide 53: Wind Farm Opportunities
Wind Farm Opportunities 11 60 MW - John Deere Phase 2 of existing wind farm. Transmission studies complete. Earliest COD = 2010. 35 MW - BP Sale of land easements. Transmission studies complete. Earliest COD = 2011. 45 MW - Heritage Phase 2 of existing wind farm. Transmission studies complete. Earli
Slide 54: Renewable Portfolio Earnings & Capital Investment Profile
Renewable Portfolio Earnings & Capital Investment Profile Net Income ($ millions) Capital Investment ($ millions) 12 Longer-term, RPS investments will increase net income by an average of $40 - $45 million per year The one-time rate increase to support this was implemented in Sept. 2009 ~$100 $100-2
Slide 55: Presentation Outline
Presentation Outline 13 Characteristics of Detroit Edison's Growth Plan Environmental Compliance Investments Renewable Portfolio Standard (RPS) Energy Optimization (EO) Summary and Business Imperatives
Slide 56: Energy Optimization Program Design
Goals Energy Optimization Program Design Energy Optimization Education & Awareness Program Residential Programs Appliance Recycling Energy Star Residential & Small Commercial Program (e.g., high-efficiency lighting) HVAC Program Energy Audits and Weatherization Programs Low Income Program New Constr
Slide 57: Energy Optimization Capital Investment and Earnings Profile
Capital spend, $ millions 15 Net Income, $ millions Energy Optimization Capital Investment and Earnings Profile Longer-term, EO investments will have a positive impact on net income... ....while improving customer satisfaction and offsetting customer bill increases
Slide 58: Presentation Outline
Presentation Outline 16 Characteristics of Detroit Edison's Growth Plan Environmental Compliance Investments Renewable Portfolio Standard (RPS) Energy Optimization (EO) Summary and Business Imperatives
Slide 59: Detroit Edison Earnings Growth
Detroit Edison Earnings Growth 17 Detroit Edison's Growth Plan Supports DTE Energy's 5% - 6% Average Annual EPS Growth Rate $9.5 $11.1 - $11.4 ($ billions) 5% - 6% Annual Growth Detroit Edison Rate Base Growth
Slide 60: Customer Affordability
Customer Affordability 18 Projected 2009 - 2012 Annual Residential Bill Increase ~2% 2.5% - 3% ~3% Overall customer bill increase is reduced due to cost reduction initiatives and energy efficiency efforts Strong focus on capital efficiency to keep customer rates manageable while still meeting mandat
Slide 61: Value Creation for Customers and Shareholders
Value Creation Customers and Shareholders 19 Detroit Edison's growth plan requires significant capital investment Our goal is to increase shareholder value creation and customer satisfaction Minimize equity needs by: Maximizing operating cash flows to fund capital investments Driving continuous impr
Slide 62: Business Imperatives
Supply and Demand Balance Regulatory & Legislative Management Capital Discipline O&M Cost Excellence Customer Satisfaction Focus Economy Regulatory Environment Political Environment 20 Customer Affordability To ensure that both shareholder and customer value is realized, a number of business imperat
Slide 63: Today's Agenda
Today's Agenda 21 October 19, 2009 Tony Earley, Chairman & CEO Welcome & Overview of Agenda David Cole, Chairman Center for Automotive Research Today's Turbulence: A Foundation for Future Success Tony Earley, Chairman & CEO DTE Energy Strategic Overview Gerry Anderson, President & COO Utility Value
Slide 64: MichCon Outlook & Midstream Growth
MichCon Outlook & Midstream Growth Jerry Norcia, President & COO, MichCon DTE Energy Analyst Meeting October 19, 2009
Slide 65: DTE Energy's Gas Asset Portfolio
DTE Energy's Gas Asset Portfolio MichCon is the 11th largest US gas utility* DTE Gas Midstream is a leading provider of North American gas storage and transportation Vector (40% owned) Millennium (26.25% owned) MichCon MichCon Service Area DTE Gas Storage Fields DTE's gas asset portfolio is well pos
Slide 66: MichCon Growth Opportunities
3 MichCon Growth Opportunities Gas Midstream History of Consistent Growth Future Growth Opportunities
Slide 67: MichCon Growth Opportunities
Strengthen and expand MichCon's distribution system Investment in additional pathways move gas outside of utility distribution system Expansion projects provide increased storage for 3rd party customers Distribution Other Retail MichCon Growth Opportunities Utility Storage & Transportation MichCon's
Slide 68: MichCon Earnings Growth
MichCon Earnings Growth 5 $70 $90 - $100 ($ millions) 9.0% ROE 10%-11% ROE MichCon Operating Earnings* Case requests first increase in delivery rates since 2005; rate freeze in effect since 2007 Incorporates multiple years of rate base growth Rate increase is offset by lower cost of gas and energy e
Slide 69: Gas Midstream Growth Opportunities
6 MichCon Growth Opportunities Gas Midstream History of Consistent Growth Future Growth Opportunities
Slide 70: Overview of DTE's Gas Midstream Assets
7 Joliet (Chicago) Dawn Corning Ramapo Overview of DTE's Gas Midstream Assets Washington 10 Washington 28 Shelby 2 Belle River Dawn DTE Gas Storage Fields Ownership Interest Capacity Gas Pipeline Vector Pipeline 40% 1.2 Bcf/d Millennium Pipeline 26.25% 0.5 Bcf/d Gas Storage Washington 10 & Shelby 2
Slide 71: History of Strong Net Income Growth
Shelby 2 Storage Project Millennium Pipeline Project History of Strong Net Income Growth 8 $11 $17 $25 $28 $34 $38 Pipelines Storage Washington 10 Phase I Storage Expansion Washington 10 Phase II Storage Expansion Washington 28 Storage Expansion Vector Pipeline Phase I Expansion In Service date: 200
Slide 72: Overview of Gas Supply / Demand Dynamics
9 2015 2.8 4.3 13.5 17.9 9.5 1.0 34.7 25.2 16.2 Unconventional Production - Tight Gas and Coal Bed Methane (~40% is Rockies production) Canadian Imports LNG Unconventional Production - Shale Conventional Production (Primarily On-Shore and Off- Shore Gulf) Source: Wood Mackenzie June 2009 2000 0.4 U.
Slide 73: Gas Flows Along Vector & Millennium Expected to Increase
10 Expect Alliance and Northern Border continue to run full Expect volumes on northern pipelines (TCPL & GLGT) to decline Expect flows from the Rockies and Mid-Continent to increase TCPL GLGT Alliance / Northern Border Vector Chicago LNG Rockies Supply Western Canadian Supply Mid- Continent Supply G
Slide 74: Vector Pipeline Well Positioned to Capture Value
11 Vector Pipeline Well Positioned to Capture Value Surplus pipeline capacity into Chicago should keep Vector well supplied Decline in Canadian supplies on TCPL serving Ontario, Quebec and the U.S. Northeast expected to be offset by additional supplies moving from Chicago to Ontario via Vector This
Slide 75: Millennium Pipeline Well Positioned to Capitalize on Marcellus Shale
12 Millennium Pipeline Well Positioned to Capitalize on Boom in Marcellus Shale Production Most Marcellus drilling activity currently in "sweet spots", which have the thickest shale formations and are expected to produce the most gas Millennium's location on one of these "sweet spots" provides oppor
Slide 76: Changes in Gas Flow Dynamics Should Benefit Michigan Storage
Changes in Gas Flow Dynamics & Continuation of Two Historical Drivers Should Benefit Michigan Storage 13 Expect increased Rockies and Mid-Continent supplies to flow into Michigan and move further east into Ontario and the U.S. Northeast Expect an increase in gas flows from Chicago to Ontario via Mic
Slide 77: Gas Midstream Has Significant Investment Opportunities
14 Midwest Pipeline Opportunities $75 Potential Total Investment Gas Midstream Has Significant Investment Opportunities in the Next Five Years Potential DTE Investment In-Service Dates Potential Earnings $35 - $40 2010 - 2014 $5/yr Northeast Pipeline Opportunities Midwest Storage Opportunities $125
Slide 78: Summary
Summary 15 DTE's gas assets are well positioned to take advantage of opportunities Track record of success Changes in market dynamics provide opportunities: Pipeline and storage expansions Increased value of existing assets
Slide 79: Today's Agenda
Today's Agenda 16 October 19, 2009 Tony Earley, Chairman & CEO Welcome & Overview of Agenda David Cole, Chairman Center for Automotive Research Today's Turbulence: A Foundation for Future Success Tony Earley, Chairman & CEO DTE Energy Strategic Overview Gerry Anderson, President & COO Utility Value
Slide 80: Power & Industrial: Outlook & Growth
Power & Industrial: Outlook & Growth David Ruud, Executive VP, DTE Energy Resources DTE Energy Analyst Meeting October 19, 2009
Slide 81: Power & Industrial Is Focused on Two Business Areas
Ownership and operation of wood- fired power plants and landfill gas projects Power & Industrial Business Is Focused on Two Business Areas EES Coke Battery Woodland Biomass 2 Industrial Renewables Utility services at industrial sites Fuel supply and transportation for industrial customers 35 project
Slide 82: Power & Industrial Is Well-Positioned in Industrial and Renewable Areas
Power & Industrial Is Well-Positioned in Industrial and Renewable Areas 3 Extensive experience in efficient operations of large-scale industrial assets Strong project development and risk management skills to structure transactions to manage exposures Construction management skills to ensure project
Slide 83: Power & Industrial Follows Disciplined Investment Criteria
4 Power & Industrial Follows Disciplined Investment Criteria Consistent with Utility Investors' Risk Profile 13% 12 - 15% Asset-based, operationally intensive business allows for consistent returns Risk is limited through strict investment criteria applied to projects Modest scale investments Long-t
Slide 84: Steel Slowdown and Automotive Restructuring Decreased 2009 Earnings
5 Steel Industry Slowdown and Automotive Restructuring Have Decreased 2009 Earnings vs. 2008 $41 $30 - $35 2008A 2009 Original Guidance Power & Industrial Projects Operating Earnings* ($ millions) Steel industry slowdown impacted volumes to major customers Industrial sector now showing positive sign
Slide 85: 2010 and 2011 Earnings Should Increase
6 2010 and 2011 Earnings Should Increase with Potential for Additional Upside $30 - $35 2009E 2010E Power & Industrial Projects Operating Earnings* ($ millions) 2011E $40 - $50 $40 - $50 Upside Potential Base Business Base earnings growth driven by: Contracted increases in output at existing sites N
Slide 86: Renewables Trend Expected to Generate Growth Opportunities
7 Renewables Trend Expected to Generate Growth Opportunities Renewable Energy Trends Power & Industrial Growth Position State renewable and efficiency mandates Expanded federal government incentives Strong interest in renewables from corporations Focus in areas where we can apply operational experti
Slide 87: Waste-Wood Conversion Project
8 Waste-Wood Conversion Project Is an Example of Power & Industrial Focus EJ Stoneman Power Plant Cassville, WI Converting 40 MW coal plant to wood- waste fired generation Conversion cost approximately 50% of new build cost Expected on-line in 2010 Builds upon our competencies Power plant operations
Slide 88: Power & Industrial Provides Solid Earnings Base and Growth Potential
9 Power & Industrial Business Provides a Solid Base of Earnings and Strong Growth Potential with Managed Risk Stable Base Earnings Primarily contracted base earnings Leverageable Competencies Proven operational, development and risk management expertise Growth Opportunities Attractive renewable oppo
Slide 89: Today's Agenda
Today's Agenda 10 October 19, 2009 Tony Earley, Chairman & CEO Welcome & Overview of Agenda David Cole, Chairman Center for Automotive Research Today's Turbulence: A Foundation for Future Success Tony Earley, Chairman & CEO DTE Energy Strategic Overview Gerry Anderson, President & COO Utility Value
Slide 90: Financial Overview
Financial Overview David E. Meador, Executive VP & CFO, DTE Energy DTE Energy Analyst Meeting October 19, 2009
Slide 91: Overview / 2009 Guidance / 2010 Outlook / Long Term Outlook
Overview 2009 Guidance 2010 Outlook Long Term Outlook 2
Slide 92: DTE's Financial Goals
DTE's Financial Goals 3 Total Shareholder Return (10%-12%) Maintain Strong Balance Sheet EPS growth of 5%-6% Attractive dividend yield Maximize free cash flow Strong investment grade credit rating Sufficient liquidity to support growth Earn allowed ROE Grow rate base in a disciplined manner Continuo
Slide 93: Overview
Increasing 2009 guidance Utilities have performed well in a difficult environment, although not earning full authorized return Non-utility performance ahead of plan and holding company one-time tax benefits help to deliver a strong year 2010 outlook shows continued growth Utilities return to full ea
Slide 94: Overview / 2009 Guidance / 2010 Outlook / Long Term Outlook
Overview 2009 Guidance 2010 Outlook Long Term Outlook 5
Slide 95: 2009 Overview
2009 Overview 6 Successfully implemented renewable energy and energy optimization plans Filed rate cases at both utilities Self-implemented rates at Detroit Edison in July Continuous improvement initiatives are on track to produce $100 million (~80% sustainable) in cost savings in 2009 Additional on
Slide 96: 2009 Operating Earnings Guidance
2009 Operating Earnings* Guidance 7 ($millions, except EPS) Revised Guidance Prior Guidance Detroit Edison: Continuous improvement and one-time cost reductions are offsetting lower demand and mild weather MichCon: Higher depreciation and customer conservation; in final year of a rate freeze Power &
Slide 97: 2009 Cash Flow Guidance
2009 Cash Flow Guidance 2009 Cash Flow Summary ($ billions) Plan to issue $60 - $80 million of equity in 2009 to fund Dividend Reinvestment and employee benefit programs 8 Our commitment entering this year was to improve the balance sheet and underlying cash flow 2009 is turning out to be a signific
Slide 98: Overview / 2009 Guidance / 2010 Outlook / Long Term Outlook
Overview 2009 Guidance 2010 Outlook Long Term Outlook 9
Slide 99: Key Assumptions for 2010 Early Outlook
Key Assumptions for 2010 Early Outlook 10 Utilities return to full earnings power, achieving 11% authorized ROE Utilities expected to return to authorized ROE through: (1) MPSC ordered rate increases (2) Self-implemented rate increases (3) Operation of MPSC approved trackers and decoupling (4) Cost
Slide 100: 2010 Early Outlook
2010 Early Outlook 11 Resolution of rate case, environmental projects placed into service, flat load and continued cost control Resolution of rate case, utility capital placed into service and continued cost control Return to normal after one-time tax benefits helped 2009 New projects coming on line
Slide 101: Overview / 2009 Guidance / 2010 Outlook / Long Term Outlook
Overview 2009 Guidance 2010 Outlook Long Term Outlook 12
Slide 102: Capital Discipline
Capital Discipline Implement capital-focused Continuous Improvement efforts Conduct value analysis and review engineering specifications Drive cost savings by leveraging procurement activities Continually challenge our prioritization strategies Explore partnership or other alternative ownership stru
Slide 103: DTE Energy Capital Investment Outlook
DTE Energy Capital Investment Outlook 14 Projected Capital Investment ($ billions) $0.8 $0.6 $0.6 - $0.9 $0.4 - $0.5 $3.0 - $3.4 Detroit Edison growth over the next three years driven by mandated environmental and renewable investment Renewables: $500 - $600M Environmental controls: $400 - $500M Non
Slide 104: Detroit Edison Growth
Detroit Edison Growth 15 Detroit Edison 2009 - 2012 Projected Rate Base Growth ($ billions) $9.5 $11.1 - $11.4 Mandatory Renewable Energy and Environmental Investments Drive Rate Base and Earnings Growth at Detroit Edison 0.5 - 0.6 0.4 - 0.5 0.7 - 0.8
Slide 105: Energy Trading Outlook
16 Energy Trading Outlook ($ millions) * Reconciliation to GAAP reported earnings included in the appendix Energy Trading has historically provided a solid cash flow stream which helps support DTE's investments Expect $45-$55 million in annual operating earnings, cash flow from Energy Trading Strate
Slide 106: Unconventional Gas Overview
Unconventional Gas Overview DTE's unconventional gas business has been very successful Sold Michigan Antrim properties for $1.3 billion Sold a portion of Barnett properties for $260 million (100%+ IRR) Near-term capital spend of $20-30 million Develop existing properties to create maximum value Mone
Slide 107: Barnett Valuation
Barnett Valuation 18 Reserves (Bcfe) Value ($ per mcfe) Low Value ($ millions) High Value ($ millions) Proved 167 $1.50 - $2.00 $250 $334 Probable 265 $0.50 - $1.00 $133 $265 Total 432 $383 $599 Average cost per well has decreased ~20%; Operating expenses are down 50% Average well productivity impro
Slide 108: Strong Balance Sheet Supports Growth
Strong Balance Sheet Supports Growth 19 2010 - 2012E Cash Flow Summary* Combination of internal cash and external financing will support the growth in capital spending Equity will support utility capital spend and improve the balance sheet * Excludes securitization
Slide 109: Targeted Financial Metrics
Targeted Financial Metrics Our objectives are to continue to: Strengthen our balance sheet Maintain focus on rating agency financial metric targets Maintain required capital structure in regulated businesses Given commitment to maintaining investment grade rating, targeting high end of our range for
Slide 110: Our Dividend Is Well Supported
Our Dividend Is Well Supported 21 Our dividend of $2.12 per share is well supported Our current dividend yield at 6.0% is above our utility peer group average of 5.3% Our payout ratio is manageable, roughly in line with our 60% - 70% target Potential to grow dividend as we grow our business Dividend
Slide 111: Investment Thesis
5%-6% Average Annual EPS Growth Attractive Dividend Investment Thesis 22 Strong regulated growth plan Regulatory framework now very constructive Dedicated funding and earnings mechanisms for renewables and energy optimization Non-utility businesses provide diversification of geography and earnings T
Slide 112: Contact Us
Contact Us DTE Energy Investor Relations www.dteenergy.com/investors 313-235-8030 23
Slide 113: DTE Energy
DTE Energy
Slide 114: 2009 Capital Expenditures Guidance
25 2009 Capital Expenditures Guidance Capital Expenditures ($ millions)
Slide 115: Reconciliation of 2008 Reported to Operating Earnings
26 Reconciliation of 2008 Reported to Operating Earnings Use of Operating Earnings Information - DTE Energy management believes that operating earnings provide a more meaningful representation of the company's earnings from ongoing operations and uses operating earnings as the primary performance me
Slide 116: Reconciliation of 2008 Reported to Operating Earnings per Share
27 Use of Operating Earnings Information - DTE Energy management believes that operating earnings provide a more meaningful representation of the company's earnings from ongoing operations and uses operating earnings as the primary performance measurement for external communications with analysts an
Slide 117: Reconciliation of 2007 Reported to Operating Earnings
Reconciliation of 2007 Reported to Operating Earnings Use of Operating Earnings Information - DTE Energy management believes that operating earnings provide a more meaningful representation of the company's earnings from ongoing operations and uses operating earnings as the primary performance measu
Slide 118: Reconciliation of 2009 and 2010 Reported to Operating Earnings
Reconciliation of 2009 and 2010 Reported to Operating Earnings Use of Operating Earnings Information - DTE Energy management believes that operating earnings provide a more meaningful representation of the company's earnings from ongoing operations and uses operating earnings as the primary performa
Slide 119: Reconciliation of Cash from Operations to Adjusted Cash from Operations
30 Reconciliation of Cash from Operations to Adjusted Cash from Operations * accounted for in the investing activities section of the statement of cash flows Adjusted Cash From Operations Use of Adjusted Cash From Operations - DTE Energy management believes that adjusted cash from operations provide