Dte Energy Company · NYSE:DTE
Dte Energy — EEI Financial Conference 2007
40 slides from Dte Energy's conference presentation, Nov 2, 2007
Slide 1: Business Update EEI Financial Conference November 5-6, 2007
Business Update EEI Financial Conference November 5 - 6, 2007
Slide 2: Safe Harbor Statement
Safe Harbor Statement The information contained herein is as of the date of this presentation. 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 such as "anti
Slide 3: DTE Energy Is Well Positioned for Growth
DTE Energy Is Well Positioned for Growth Solid plan for consistent, predictable utility growth Customer-focused investment program Excellence in operations and cost Sustained constructive regulatory environment Non-Utility businesses focused on creating value Successful 2007 monetization plan realiz
Slide 4: Winners in the Last Utility Build Cycle Shared Common Characteristics
Winners in the Last Utility Build Cycle (70's-80's) Shared Common Characteristics Cost efficiency and continuous improvement Manage capital projects - on time and on budget Robust processes and procedures Maintain good relationships with customers and regulators Avoid rate shock Keep reliability hig
Slide 5: MichCon Capital Investments Focus on Pipeline and Storage Optimization
2007 2008 2009 2010 2011 2012 Base 95 100 105 105 105 105 Projected MichCon Capital Investment (2007-2012) Growing rate base: $2.0B in 2007 to ~$2.3B by end of 2012 Expansion projects planned for completion by year end 2008: $70M pipeline in W. Michigan $75M utility storage $40M in Panhandle Pipelin
Slide 6: Detroit Edison Capital Is Driven by Investments in System Reliability and Environmental Compliance
2007 2008 2009 2010 2011 2012 Base 650 650 650 650 650 650 Environmental 235 260 200 200 200 200 AMI 20 45 45 45 45 Depreciation 485 510 535 560 585 615 Detroit Edison Capital Is Driven by Investments in System Reliability and Environmental Compliance Projected Detroit Edison Capital Investment (200
Slide 7: Environmental Requirements Will Continue to Drive Growth at Detroit Edison
Environmental Requirements Will Continue to Drive Growth at Detroit Edison Monroe Power Plant ~2012 Total environmental capital investment of $1.3B (2007 - 2012) $1B investment at Monroe power plant (SCRs and scrubbers) $300M investment at balance of plants Construction process proceeding well On ti
Slide 8: Significant Potential Investments Not Included in Base Plan
Significant Potential Investments Not Included in Base Plan Potential federal and state legislation on renewable energy and energy efficiency programs Possible investments in wind, biomass, energy efficiency and demand response programs Potential investment of $1B or more Long-term investment opport
Slide 9: Our Utility Operating Strategy Enables Increased Earnings Potential
Our Utility Operating Strategy Enables Increased Earnings Potential Well-run, customer-focused operations promote a constructive regulatory environment and strong financial performance Constructive Regulation Run the Business Well Collaborative Environment Creative Solutions Accelerated Capital Reco
Slide 10: Performance Excellence Process Reduces Fixed Cost Structure
Completed Projects Projects in Process Pending Projects Total Expected Program Benefits 190 270 Detroit Edison 190 80 50 320 PEP Benefits 2006 - 2008 O&M, Capital & Other $ millions, pre-tax Performance Excellence Process Reduces Fixed Cost Structure 2005 2006 Current 10300 9300 9075 Employees: Detr
Slide 11: Cost Efficiency Reduces the Need for Rate Increases
Cost Efficiency Reduces the Need for Rate Increases Illustrative customer rate impact from sustained cost savings and high capital investment Revenue Deficiency Revenue Sufficiency 2006 2007 2008 2009 2010 Increasing need for rate increase due to investments Decreasing need for rate increases due to
Slide 12: Constructive Regulatory Relationships Benefit Customers and Shareholders
Continue to address customer choice uncertainty Timely recovery of capital Rates that reflect cost of service (deskewing) Strengthen relationships with customers and regulators Constructive Regulatory Relationships Benefit Customers and Shareholders Chairman Orjiakor Isiogu Monica Martinez Steven Tr
Slide 13: Constructive Legislative Relationships Benefit Customers and Shareholders
Constructive Legislative Relationships Benefit Customers and Shareholders Senate Majority Leader Mike Bishop Andy Dillon Speaker of the House of Representatives Senate Energy Policy & Public Utilities Committee Chair Bruce Patterson House Energy & Technology Committee Chair Frank Accavitti Sources:
Slide 14: We Are Working with Many Others to Enact a Comprehensive Energy Plan for Michigan
We Are Working with Many Others to Enact a Comprehensive Energy Plan for Michigan Potential 10 - 15% Energy Portfolio Standard by 2015 - 2020 Ongoing detailed discussions on the best way to meet Michigan's future energy needs Consumer cost effectiveness Reliable and clean Provide economic developmen
Slide 15: We Have the Financial Resources to Fund Our Utility Growth Plan
We Have the Financial Resources to Fund Our Utility Growth Plan We have the flexibility to fund utility growth Non-utility monetization plan expected to produce at least $1.5 billion in after-tax proceeds in 2007 Synfuels expected to produce $900 million in total cash from 2007 through 2009 Balance
Slide 16: Our Utility Strategy Enables Consistent and Predictable Growth
Characteristics to succeed in the current high capital investment cycle Our Utility Strategy Enables Consistent and Predictable Growth Continuing to drive cost efficiency and continuous improvement initiatives Increasing focus on customer satisfaction Building collaborative relationships with regula
Slide 17: DTE Energy Is Well Positioned for Growth
DTE Energy Is Well Positioned for Growth Solid plan for consistent, predictable utility growth Customer-focused investment program Excellence in operations and cost Sustaining constructive regulatory environment Non-Utility businesses focused on creating value Successful 2007 monetization plan reali
Slide 18: Successful Non-Utility Monetization Plan Almost Completed
Successful Non-Utility Monetization Plan Almost Completed Original Guidance Upside Current Guidance At least $800 million $1.5 billion After-tax cash proceeds of at least $1.5 billion in 2007 $900 million common stock buyback by year end 2007 (~$725 million as of October 31) Power & Industrial monet
Slide 19: Monetizing Core & South, Focusing on Western Barnett
Monetizing Core & South, Focusing on Western Barnett Clay Zones of DTE Acreage Vertical Wells Horizontal Wells Dallas/ Ft Worth Metropolitan Area West 44,000 acres Core 11,000 acres Hood Johnson Erath Jack Somervell Hill Wise Tarrant Bosque Parker Denton Palo Pinto Moving to sell Core and Southern a
Slide 20: Power & Industrial Monetization Update
Power & Industrial Monetization Update Plan closing transaction by year end Expect total proceeds to DTE of ~$800 million (pre-tax) Monetization Update Execute existing strategy to provide value added products and services to large, energy-intensive customers Expect to selectively invest $50 - $100
Slide 21: Non-Utility Pipeline & Storage: Growing U.S. Northeast Market Dynamics
Non-Utility Pipeline & Storage: Growing U.S. Northeast Market Dynamics Source: EEA/DTE Gas Flow Model LNG (from Trinidad, Middle East and North Africa) LNG LNG LNG Traditional pipeline paths unable to expand economically Expected Flow of New Gas Supply, 2007 - 2020 Western Canada & Arctic / Alaskan
Slide 22: DTE Energy Midstream Pipeline and Storage Assets Are Positioned for Growth
DTE Energy Midstream Pipeline and Storage Assets Are Positioned for Growth Near-Term Gas Midstream Earnings Drivers 2007 2009 2010 Vector Expansion 4.5 Bcf Storage Expansion - - Millennium Pipeline in Service - - 6.7 Bcf Storage Expansion - - Vector Expansion - - 2 Bcf Storage Expansion - - 2 Bcf St
Slide 23: DTE Energy Is Well Positioned for Growth
DTE Energy Is Well Positioned for Growth Solid plan for consistent, predictable utility growth Customer-focused investment program Excellence in operations and cost Sustaining constructive regulatory environment Non-Utility businesses focused on creating value Successful 2007 monetization plan reali
Slide 24: 2007 Earnings Outlook
2007 Earnings Outlook Detroit Edison performance impacted by one time cost pressures Startup costs associated with 2007 SAP implementation Higher than normal storm expenditures MichCon remains on track to earn its 11% authorized ROE in 2007 Strong performance from our non-utility businesses All segm
Slide 25: Detroit Edison 2007 Operating Earnings Drivers
Detroit Edison 2007 Operating Earnings Drivers Detroit Edison 2007 Guidance Walk* Original 2007 Guidance SAP Startup Costs Economy Weather Revised 2007Guidance Detroit Edison 345 310 300 300 305 35 10 5 2007 Original Guidance 2007 Revised Guidance SAP Start Up Costs Net Weather Impacts Lower Territo
Slide 26: Revising 2007 Earnings Guidance
Revising 2007 Earnings Guidance * Reconciliation to GAAP reported earnings included in the appendix Note: EPS based on expected 170.5M average shares outstanding Operating Earnings* $ millions 2007 Previous Guidance 2007 Revised Guidance 2007 operating EPS $2.50 - $2.65 Detroit Edison expected to ea
Slide 27: 2007 Net Cash Has Improved Since Our Original Guidance
2007 Net Cash Has Improved Since Our Original Guidance 2007 Revised Guidance ($ millions) DTE Energy Net Cash Flow ** Accounted for as 'investing activity' on statement of cash flows * Includes approximately $220M of accelerated tax credits *** Reconciliation to GAAP reported cash flow included in t
Slide 28: 2008 Utility Outlook Remains Strong
2008 Utility Outlook Remains Strong 2008 Earnings Drivers Utilities on track to earn their authorized ROE of 11% in 2008 Detroit Edison SAP startup costs behind us Expiration of rate reduction in April 2008 Resolution of electric rate case in Q3 2008 MichCon Innovative restructuring settlement posit
Slide 29: DTE Energy 2008 Earnings Profile
Regulated Electric Regulated Gas Regulated Gas Pipelines and Storage Non-Regulated East 380 90 33 55 DTE Energy 2008 Earnings Profile Detroit Edison: Target 11% ROE MichCon: Target 11% ROE Non-Utility: Post-monetization earnings lower, offset by reduced share count and interest expense 2008 guidance
Slide 30: Our Sustainable Dividend is Very Competitive
Our Sustainable Dividend is Very Competitive As utility earnings increase, our payout ratio will improve, providing flexibility to consider further dividend increases Industry Dividend Yield PGN 0.052 ED 0.05 AEE 0.048 NI 0.046 SO 0.045 DTE 0.043 CNP 0.04 AEP 0.034 PCG 0.032 D 0.031 FE 0.029 ETR 0.0
Slide 31: DTE Energy's Investment Thesis
DTE Energy's Investment Thesis DTE Energy expects to create significant value for shareholders over the next five years and beyond 5-6% long-term utility earnings growth Well-run utilities engaged in a customer-focused investment program, operating in a constructive regulatory environment Potential
Slide 32: Appendix
Appendix DTE Energy *
Slide 33: We Expect the Commission to Continue to Support Michigan's Energy Plan
We Expect the Commission to Continue to Support Michigan's 21st Century Energy Plan Orjiakor Isiogu Chairman Appointed: 9-9-2007 Term Ends: 7-2-2013 (Democrat) Served as the Director of the Telecommunications Division of the MPSC since 2003 where he advised the Commission on all issues relating to t
Slide 34: Barnett Shale Operating Metrics
16 Net Production Rate (mmcf/day) 25 16 Gross Producing Wells 65 170 9/30/07 12/31/05 Reserves (Bcfe) Probable Reserves Proven Reserves 120 59 179 12/31/05 12/31/04 Acreage Position (thousands) Net Undeveloped Acres Net Developed Acres 62 76 64 16 85 12/31/06 12/31/05 123 12/31/06 9/30/07 12/31/05 1
Slide 35: Gas Midstream Business Existing Expansion Projects
Gas Midstream Business Existing Expansion Projects 65.6 Bcf 13.5 Bcf Phase in service Q2 2008 Phase 1 - 4.9Bcf (8.1Bcf total) Millennium Pipeline (DTE owns 26.25%) Under construction - majority of activity to occur in summer of 2008. In-service projected for 4th Q of 2008 Initial capacity: 0.5 Bcf/d
Slide 36: Sources and Uses of Monetization Proceeds and Synfuel Cash
Sources Long-Term Uses East 1.4 0.75 West 0.95 0.75 0.25 0.65 Sources and Uses of Monetization Proceeds and Synfuel Cash Synfuel $900 - 1,000 (2007 - 2009) Monetization Proceeds ~$1,500 (2007) Monetization Proceeds and Synfuel Cash Sources and Uses $2,400 - 2,500 $2,400 - 2,500 Debt Redemption ~$700
Slide 37: Non-Utility Monetization Summary
Non-Utility Monetization Summary Our strategy of developing and monetizing non-utility businesses has created significant value for shareholders Antrim Sale Peaker Sale Power and Industrial Monetization Potential Sale of Barnett Reserves Comments Expected/Realized After-Tax Proceeds ($ million) Sale
Slide 38: Synfuels Expected to Produce $900 Million in Cash in 2007-2009
Synfuels Expected to Produce $900 Million in Cash in 2007-2009 2007 2008 2009 Total 675 675 850 175 50 900 2007E 2008E 2009E Total Expected Synfuel Cash Flow* ~$675 ~$175 ~$50 ~$900 Gains from non-utility monetizations enable DTE to use more of its banked tax credits in 2007 Pulls ahead cash into 20
Slide 39: DTE Energy 2007 Revised Capital Expenditure Guidance
DTE Energy 2007 Revised Capital Expenditure Guidance 2007 Original Guidance 2007 Revised Guidance DTE Energy Capital Expenditures $ millions
Slide 40: Reconciliations of 2007 Reported to Operating Earnings
Reconciliations 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 meas