DTE Energy Company · NYSE:DTE
DTE Energy — FY2015 Earnings Presentation
46 slides from DTE Energy's earnings presentation, Feb 10, 2016
Slide 1: Year End 2015 Earnings Conference Call
Year End 2015 Earnings Conference Call February 10, 2016
Slide 2: Safe Harbor Statement
Safe Harbor Statement Many factors impact forward-looking statements including, but not limited to, the following: impact of regulation by the EPA, FERC, MPSC, NRC, and CFTC, as well as other applicable governmental proceedings and regulations, including any associated impact on rate structures; the
Slide 3: Participants
Participants • Gerry Anderson – Chairman and CEO • Peter Oleksiak – Senior Vice President and CFO • Jerry Norcia – President & COO, DTE Electric and Gas Storage & Pipelines • Anastasia Minor – Executive Director, Investor Relations 3
Slide 4: Agenda
• 2015 Accomplishments • Energy Policy Update • Long-Term Growth Update • Financial Update • Summary 4
Slide 5: Our system of priorities is fundamental to how we create value
Our system of priorities is fundamental to how we create value for our shareholders 5% - 6% Annual Attractive Strong EPS Growth Dividend Balance Sheet 5
Slide 6: We achieved top performance across our priorities in 2015
We achieved top performance across our priorities in 2015 Employee Continued focus on employee engagement Engagement • Earned third consecutive Gallup Great Workplace award • Ranked in the top 15% in Gallup’s* employee engagement survey • Achieved top-decile safety results; lowest OSHA rate in compa
Slide 7: We achieved top performance across our priorities in 2015 (continued)
We achieved top performance across our priorities in 2015 (continued) Political / Constructive political and regulatory environment Regulatory • Constructive outcome on electric rate case • Filed first gas rate case in four years • Entering final stages in Michigan energy policy • Michigan supplier
Slide 8: Agenda
• 2015 Accomplishments • Energy Policy Update • Long-Term Growth Update • Financial Update • Summary 8
Slide 9: Energy legislation continues to be a priority for the state
Energy legislation continues to be a priority for the state • Key elements focus on: Retail open access capacity and reliability requirements Integrated resource planning Renewable energy and energy efficiency • Moved package of bills out of House Energy Committee last year • Focus of activity
Slide 10: Policy will transform our generation mix, replacing coal with gas and renewables
Federal and state policy will lead to transformation of our generation mix by replacing coal with natural gas and renewables DTE Electric Capacity (GW) Nuclear / 15% 15% other 10% 15-30% Renewables 20% Gas 30-45% 55% Coal 25% 2015 2030 Scenario* * Ultimate timing and mix of generation impacted by MI
Slide 11: Agenda
• 2015 Accomplishments • Energy Policy Update • Long-Term Growth Update • Financial Update • Summary 11
Slide 12: We remain confident about delivering our 5%-6% operating EPS growth target
We remain confident about delivering our 5%-6% operating EPS* growth target (dollars per share) 2015 Operating EPS 2016 Operating EPS Total DTE Energy $4.82 Guidance Midpoint Growth segments $4.73 $4.93 Initial guidance $4.60 $4.93 $4.82 $4.73 Growth Operating EPS* $4.60 Initial guidance 6.5% CAGR 2
Slide 13: Infrastructure improvements drive capital investments through 2020
Distribution and generation infrastructure improvements drive capital investments through 2020 (billions) ~$13 $0.6-$0.9 P&I Cogeneration, on-site energy $2.0-$2.6 GSP Gathering investments, NEXUS, pipeline expansions ~$10 $1.6 Gas Base investments, infrastructure renewal, NEXUS related $8.2 Electri
Slide 14: Plan to invest ~$6.5 billion in distribution infrastructure over 10 years
Over the next 10 years we plan to invest ~$6.5 billion in distribution infrastructure (billions) DTE Electric Total Investment Base Case ~$18 ~$6.5 New generation Distribution infrastructure Maintenance and other Base projects Infrastructure redesign Infrastructure resilience Technology 2016-2025 14
Slide 15: Areas of greatest need for electric distribution improvements
We have identified areas of greatest need for electric distribution system improvements Infrastructure Resilience • Replace aging infrastructure • Focus on worst performing areas Infrastructure Redesign • Address overloaded substations • Reduce restoration time Technology Enhancements • Increase con
Slide 16: Managing customer affordability with requested rate increases
We are managing customer affordability even with requested rate increases (dollars) Average Annual Residential Bill* Average Annual Residential Bill** DTE Electric DTE Gas $1,223 $1,225 Flat $910 $830 9% 2012 2013 2014 2015 2016E 2017E 2012 2013 2014 2015 2016E 2017E * Assumes average usage per year
Slide 17: DTE Electric industrial rates have declined 22% since 2013
DTE Electric industrial rates have declined 22% since 2013 and are below the national average 2015 Industrial Electric Rate* by State (¢ / kWh) 1st 2nd 3rd 4th quartile quartile quartile quartile DTE US and Great Lakes average 6.9¢ 2015* WA RI * August 2015 17
Slide 18: Gas Storage & Pipelines positioned around premium shale plays
Gas Storage & Pipelines is well positioned around premium shale plays in North America Michigan Gathering DTE Gas DTE Storage Bluestone Gathering System Bluestone Pipeline Utica Marcellus Shale Shale NEXUS Pipeline Headquarters Regional offices 18
Slide 19: Marcellus and Utica development will drive NEXUS and Millennium investment
The Marcellus and Utica Shale development will drive on-going investment in our NEXUS and Millennium pipelines NEXUS GAS TRANSMISSION • Utica and Marcellus shales have become the most economical geology in the country • NEXUS pipeline provides natural gas to utilities and markets in Ohio, Michigan,
Slide 20: Gas Storage & Pipelines focused on continued success in pipeline and gathering
Gas Storage & Pipelines is focused on continued success in pipeline and gathering Near-Term • Accelerated Marcellus development in 2015 delivered 30% year over Operating earnings* year earnings growth 2015 Actual $107 million • Earnings growth driven by both pipeline and gathering platforms 2016 Gui
Slide 21: Power & Industrial Projects serves customers from 66 sites in 17 states
Power & Industrial Projects serves its customers from 66 sites in 17 states Industrial Energy Services Renewable Energy Reduced Emissions Fuel 21
Slide 22: Power & Industrial Projects focused on replacing REF earnings
Power & Industrial Projects is focused on replacing REF earnings over the 5 year outlook Near-Term • 2016 earnings in line with Operating earnings* 2015 actuals 2015 Actual $95 million • Higher REF earnings offset by lower steel related 2016 Guidance earnings $90-100 million Long-Term • Grow cogener
Slide 23: Agenda
• 2015 Accomplishments • Energy Policy Update • Long-Term Growth Update • Financial Update • Summary 23
Slide 24: DTE Energy 2015 Operating Earnings Variance
DTE Energy 2015 Operating Earnings* Variance (millions, except EPS) Operating Earnings* Drivers DTE Electric 2014 2015 Change • Return to normal weather and rate DTE Electric $ 528 $ 562 $ 34 implementation DTE Gas 140 132 (8) DTE Gas Gas Storage & Pipelines 82 107 25 • Warmer weather in 2015 partia
Slide 25: DTE Electric Variance Analysis
DTE Electric Variance Analysis (millions) Operating Earnings* Variance Drivers • Warmer weather in 2015 Variance to normal weather $70 ($54) $17 ($6) ($8) - 2014: ($14) $15 $562 - 2015: $1 $528 • July 1st rate implementation supporting infrastructure improvements • Rate base growth (depreciation, pr
Slide 26: Confident we will achieve our 2016 operating EPS guidance
We are confident we will achieve our 2016 operating EPS* guidance (millions, except EPS) 2015 2016 Actuals Guidance Drivers DTE Electric $562 $584 - $600 Infrastructure improvements DTE Gas 132 135 - 141 Infrastructure improvements Gas Storage & Pipelines 107 105 - 115 Pipeline and gathering platfor
Slide 27: Bonus depreciation key driver of lower planned equity issuances
Extension of bonus depreciation is key driver of lower planned equity issuances (millions) Planned Equity Issuances 2016-2018 • Bonus depreciation provides a $800 total estimated cash benefit of $300 to $400 million over 5 year period • Lower planned equity compared $200 - $300 to previous forecast
Slide 28: A strong balance sheet remains a key priority to support growth
A strong balance sheet remains a key priority to support growth Leverage* • Completed 2015 equity issuances of ~$200 million Target 50% - 53% − Targeting $100 million equity issuances in 2016 51% 52% • Completed 2015 long-term debt issuances of ~$1 billion 2014 2015 2016-2018E • $1.5 billion of avai
Slide 29: Agenda
• 2015 Accomplishments • Energy Policy Update • Long-Term Growth Update • Financial Update • Summary 29
Slide 30: Summary
Summary • Exceeded our operating EPS* growth target with historical growth of 6.5% • Targeting 5% to 6% operating EPS* growth ‒ 2015 growth segments provided a 5.6% year over year increase ‒ Grow dividends in line with earnings • Meaningful investment opportunities drive continued development in the
Slide 31: DTE Energy Investor Relations
Detroit is in the midst of a revitalization DTEEnergy DTE EnergyInvestor InvestorRelations Relations www.dteenergy.com/investors www.dteenergy.com/investors (313)235-8030 (313) 235-8030 31
Slide 32: Appendix
se DTE Energy: Appendix
Slide 33: Sally Talberg appointed chair of the Michigan Public Service Commission
Sally Talberg appointed chair of the Michigan Public Service Commission (MPSC) • In January 2016, Governor Snyder appointed Sally Talberg as chair of the MPSC, replacing John Quackenbush • Mr. Quackenbush will continue as a commissioner until March 31, 2016 to facilitate a smooth transition prior to
Slide 34: DTE rate case highlights
DTE rate case highlights DTE Electric Rate DTE Gas Rate DTE Electric Rate Case 2014 Case 2015 Case 2016 Approved by MPSC on Filed December 18, 2015 Filed February 1, 2016 December 11, 2015 • Rate recovery: $243 million • Requested rate recovery: • Requested rate recovery: • Test year: July 1, 2015 t
Slide 35: NEXUS project is on track; FERC filing completed in November
NEXUS project is on track; FERC filing completed in November • 50% ownership with Spectra Energy • 1.5 Bcf/d pipeline • ~250 miles of pipe • DTE expected investment of $1 billion EPCM* Contracted OEB In-service executed for pipe preapproval 4Q17 Commercial Right of way, field work, design, planning
Slide 36: Bluestone volumes significantly better than original forecast
Bluestone volumes have been significantly better than original forecast Bluestone Average Daily Volume (MMcf/day) 1,000 800 Actuals 600 400 Original Forecast 200 0 36
Slide 37: Power & Industrial Projects operates within three distinct business lines
Power & Industrial Projects operates within three distinct business lines Industrial Energy Reduced Emissions Renewable Energy Services Fuel • On-site utility services • Wood-fired power • Projects reduce for industrial and plants emissions from coal- commercial customers fired plants • Landfill gas
Slide 38: DTE Energy 2015 Cash Flow Actuals
DTE Energy 2015 Cash Flow Actuals (billions) Cash Flow Summary Drivers 2014 2015 Actual Actual • Cash from operations improved primarily Cash From Operations* $1.8 $1.9 due to stronger operating results across the Capital Spending (2.1) (2.3) growth segments, partially offset by lower Free Cash Flow
Slide 39: DTE Energy 2015 Capital Expenditure Actuals
DTE Energy 2015 Capital Expenditure Actuals (millions) Capital Expenditures Summary Drivers 2014 2015 Actual Actual DTE Electric • DTE Electric capital is higher due to the Operational $1,187 $1,335 purchase of new generation assets and Environmental 169 136 infrastructure improvements Renewables /
Slide 40: DTE Energy 2016 Cash Flow and Capital Guidance
DTE Energy 2016 Cash Flow and Capital Guidance (billions) (millions) Cash Flow Summary Capital Expenditures Summary 2015 2016 2015 2016 Actual Guidance Actual Guidance Cash From Operations* $1.9 $1.8 DTE Electric Capital Spending (2.3) (2.7) Distribution Infrastructure $579 $610 New Generation 316 1
Slide 41: Weather and DTE Electric Weather Normal Sales
Weather and DTE Electric Weather Normal Sales Cooling degree days Heating degree days DTE Electric service territory DTE Gas service territory YTD 2014 YTD 2015 % change YTD 2014 YTD 2015 % change Actuals 648 836 29% Actuals 7,242 6,283 -13% Normal 803 803 Normal 6,297 6,376 1% Deviation from normal
Slide 42: DTE Energy Trading Reconciliation of Operating Earnings to Economic Net Income
DTE Energy Trading Reconciliation of Operating Earnings* to Economic Net Income (millions) $39 $54 • Economic net income equals economic gross Operating Earnings* margin*** minus O&M (millions, after-tax) expenses and taxes $15 • DTE Energy management uses economic net income 2014 2015 as one of the
Slide 43: 2015 Reconciliation of Reported to Operating Earnings
2015 Reconciliation of 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 44: 2014 Reconciliation of Reported to Operating Earnings
2014 Reconciliation of 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 45: 2011 – 2015 Full Year Reconciliation of Reported to Operating Earnings
2011 – 2015 Full Year Reconciliation of 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
Slide 46: Reconciliation of Other Reported to Operating Earnings
Reconciliation of Other 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 meas