Dte Energy Company · NYSE:DTE
Dte Energy — Q3 2020 Earnings Presentation
37 slides from Dte Energy's earnings presentation, Oct 27, 2020
Slide 1: DTE Spinning Off DTE Midstream to Create Significant Shareholder Value
DTE SPINNING OFF DTE MIDSTREAM TO CREATE SIGNIFICANT SHAREHOLDER VALUE 3Q 2020 EARNINGS CONFERENCE CALL OCTOBER 27, 2020
Slide 2: Safe harbor statement
Safe harbor statement The information contained herein is as of the date of this document. 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 “anticipa
Slide 3: Participants
Participants Jerry Norcia Robert Skaggs, Jr. President & CEO, DTE Energy Director, DTE Energy Dave Ruud David Slater SVP & CFO, DTE Energy President & COO, DTE Midstream 3
Slide 4: Creating significant investor value
Creating significant investor value Strategic spin-off of DTE Midstream business from DTE • Unlocking the full potential of our premier regulated utilities and premium natural gas midstream business − Aligning business mix with investor preferences and overall market trends leading to enhanced valua
Slide 5: Transaction overview
Transaction overview: delivering greater shareholder value by creating a predominantly pure-play utility and a strategically positioned high-quality midstream business DTE Energy: transforming into a best-in-class predominantly pure-play regulated utility Midstream: creating a uniquely positioned an
Slide 6: Delivering greater shareholder value by creating a predominantly regulated utility and midstream business
Delivering greater shareholder value by creating a predominantly regulated utility and a uniquely positioned high-quality midstream business • Positions DTE Energy as a high-growth, predominantly pure-play, best-in-class regulated Michigan-based utility • Establishes Midstream as an independent, nat
Slide 7: Transaction overview
Transaction overview • Spin-off of Midstream designed to be tax-free • Immediately after closing, DTE shareholders will: Structure − Retain current DTE shares − Receive pro-rata dividend of Midstream shares • Expected close mid-year 2021 • Multiple workstreams well underway Timing / • Subject to a F
Slide 8: Transaction overview
Transaction overview: delivering greater shareholder value by creating a predominantly pure-play utility and a strategically positioned high-quality midstream business DTE Energy: transforming into a best-in-class predominantly pure-play regulated utility Midstream: creating a uniquely positioned an
Slide 9: Numerous benefits for DTE Energy as a predominantly pure-play regulated utility
Numerous benefits for DTE Energy as a predominantly pure-play regulated utility Enhanced strategic ✓ Premier, predominantly pure-play regulated electric and natural Operating earnings transformation focus gas utility 70% 90% Investments in ✓ Substantially growing rate base with $17 billion of utilit
Slide 10: Two high-quality utilities operating in a constructive regulatory environment
Two high-quality utilities operating in a constructive regulatory environment DTE Electric ROE Operating in Michigan, one of the nation’s most constructive regulatory jurisdictions • 10-month rate cases supported by legislation • Recovery mechanisms for renewables and gas infrastructure 10.3% 10.3%
Slide 11: DTE Electric: increasing generation and distribution investments by $2 billion in 5-year plan
DTE Electric: increasing generation and distribution investments by $2 billion in 5-year plan to provide customers cleaner, more reliable energy (billions) Electric investment Cleaner energy $14 ✓ Net zero carbon emissions target by 2050 $2 ✓ 80% carbon emissions reduction target by 2040 $12 ~$1 Inf
Slide 12: DTE Gas: replacing aging infrastructure to reduce methane emissions
DTE Gas: replacing aging infrastructure to reduce methane emissions while improving performance, cost and productivity (billions) Gas investment Main renewal ✓ Targeting net zero greenhouse gas emissions by 2050 $3.5 ✓ Minimizing leaks to reduce costs and improve customer satisfaction $3.0 $0.5 Addi
Slide 13: Electric and gas utilities targeting net zero emissions by 2050
Electric and gas utilities targeting net zero emissions by 2050 DTE Electric delivering clean and reliable energy to customers DTE Electric carbon emissions reductions • 80% carbon emissions reduction by 2040; net zero by 2050 Percent carbon emission reduction • $3 billion invested in renewable ener
Slide 14: Transaction overview
Transaction overview: delivering greater shareholder value by creating a predominantly pure-play utility and a strategically positioned high-quality midstream business DTE Energy: transforming into a best-in-class predominantly pure-play regulated utility Midstream: creating a uniquely positioned an
Slide 15: Midstream will be well-positioned with experienced leadership and unique, high-quality assets
Midstream will be well-positioned with experienced leadership and unique, high-quality assets Enhanced ✓ Positioned to be a premier, publicly traded natural gas midstream company with high-quality assets strategic focus strategically located in premium basins connected to major demand markets Experi
Slide 16: Energy industry leader with the assets, resources and capabilities to stand on its own
Energy industry leader with the assets, resources and capabilities to stand on its own Key markets Pipelines • 900 miles of FERC regulated gas transmission lines providing Ontario Northeast connectivity to high-quality markets Storage • 91 Bcf of FERC regulated storage capacity • Capitalizing on str
Slide 17: Highly focused, independent gas pipeline, storage and gathering company with proven track record
Highly focused, independent gas pipeline, storage and gathering company with proven track record (millions) Midstream operating earnings 18% CAGR $288 - $294 Consistently delivering strong financial results • 18% CAGR for operating earnings1 since 2008 $38 • Over $3.0 billion of cash generation sinc
Slide 18: Diversified, long-term contracts and well-capitalized balance sheet bolster cash flow quality
Diversified, long-term contracts and well-capitalized balance sheet bolster cash flow quality and growth potential Unique midstream investment opportunity Percentage of revenue from demand-based • Only independent, mid-cap, gas-focused midstream company with contracts or MVCs / flowing gas exposure
Slide 19: Transaction overview
Transaction overview: delivering greater shareholder value by creating a predominantly pure-play utility and a strategically positioned high-quality midstream business DTE Energy: transforming into a best-in-class predominantly pure-play regulated utility Midstream: creating a uniquely positioned an
Slide 20: Strong YTD results provide confidence to increase 2020 operating earnings guidance
Strong YTD results provide confidence to increase 2020 operating earnings 1 guidance; positioned for a successful 2021 Continuing strong 2020 performance Positioned for success in 2021 • 3Q operating earnings of $2.61 per share • Providing 2021 early outlook3 operating EPS range of $6.88 - $7.26 • I
Slide 21: 3Q 2020 operating earnings variance
3Q 2020 operating earnings1 variance (millions, except EPS) 3Q 2019 3Q 2020 Variance Primary drivers Higher residential sales, rate implementation and DTE Electric $307 $398 $91 warmer weather offset by rate base growth costs Infrastructure recovery mechanism and lower O&M DTE Gas (38) (20) 18 costs
Slide 22: Increasing 2020 operating EPS guidance midpoint
Increasing 2020 operating EPS1 guidance midpoint 6% (millions, except EPS) Original guidance Revised guidance Significant year-over-year growth DTE Electric $759 - $773 $799 - $813 • Revised guidance provides 14% growth from 2019 original guidance DTE Gas 185 - 193 185 - 193 Gas Storage & Pipelines
Slide 23: 2021 early outlook provides 7% operating EPS growth over 2020 original guidance
2021 early outlook provides 7% operating EPS1 growth over 2020 original guidance (millions, except EPS) 2021 early outlook Primary drivers DTE Electric $826 - $840 Distribution and cleaner generation investments DTE Gas 202 - 212 Continued main renewal and other infrastructure improvements Gas Stora
Slide 24: Strategic separation to create two premier energy companies positioned for further growth
Strategic separation to create two premier energy companies positioned for further growth Positioning DTE Energy as a predominantly pure-play utility ✓ ~90% operating earnings1 from and investment into utility operations ✓ Delivering clean, safe, reliable and affordable energy in top-tier regulatory
Slide 25: Visit us: DTE Investor Relations, 2020 ESG Report
VISIT US: DTE INVESTOR RELATIONS 2020 ESG REPORT 2019 - 2020 CORPORATE CITIZENSHIP HIGHLIGHTS
Slide 26: Transaction overview
Transaction overview: delivering greater shareholder value by creating a predominantly pure-play utility and a strategically positioned high-quality midstream business DTE Energy: transforming into a best-in-class predominantly pure-play regulated utility Midstream: creating a uniquely positioned an
Slide 27: DTE Electric and DTE Gas regulatory update
DTE Electric and DTE Gas regulatory update DTE Electric DTE Gas • General rate case final order (U-20561) • General rate case settlement approved August 2020 (U-20642) − Effective: May 15, 2020 − Effective: October 1, 2020 − Rate recovery: $188 million − Rate recovery: $110 million along with $20 mi
Slide 28: Maintaining strong cash flow, balance sheet and credit profile
Maintaining strong cash flow, balance sheet and credit profile (billions) • $166 million equity issued through 3Q with internal mechanisms Planned equity issuances 2020 - 2022 • Maintaining strong investment-grade credit rating and FFO1 / Debt2 target at 18% $1.3 • $3.5 billion of available liquidit
Slide 29: Updating 2020 cash flow and capital expenditures guidance
Updating 2020 cash flow and capital expenditures guidance Cash flow Capital expenditures (billions) (millions) Original Revised Original Revised guidance guidance guidance guidance DTE Electric Cash from operations1 $3.0 $3.5 Base infrastructure $680 $800 Capital expenditures (4.5) (4.5) New generat
Slide 30: Cash flow and capital expenditures actuals
Cash flow and capital expenditures actuals Cash flow Capital expenditures (billions) (millions) YTD 2019 YTD 2020 YTD 2019 YTD 2020 Cash from operations1 $1.9 $2.8 DTE Electric Base infrastructure $524 $676 Capital expenditures (2.8) (3.5) Free cash flow ($0.9) ($0.7) New generation 384 631 Distribu
Slide 31: Weather impact on sales
Weather impact on sales DTE Electric DTE Gas Cooling degree days Heating degree days % YTD YTD % % YTD YTD % 3Q 2019 3Q 2020 3Q 2019 3Q 2020 Change 2019 2020 Change Change 2019 2020 Change Actuals 702 697 (1%) 852 956 12% Actuals 57 135 137% 4,336 3,982 (8%) Normal 580 580 0% 795 795 0% Normal 121 1
Slide 32: 3Q and YTD Energy Trading reconciliation of operating earnings to economic net income
3Q and YTD Energy Trading reconciliation of operating earnings 1 to economic net income (millions) Energy Trading reconciliation 3Q 2019 3Q 2020 Operating earnings $18 $15 • Economic net income equals economic gross margin3 minus O&M expenses and taxes Accounting adjustments2 (8) (9) • DTE Energy ma
Slide 33: Visibility into highly accretive Midstream growth projects
Visibility into highly accretive Midstream growth projects Platforms Regulation Phase Growth opportunities Blue Union Early Gathering build-outs Gathering build-outs / compression / LEAP System Early market connections NEXUS Pipeline FERC Early Compression / market connections Generation Pipeline PU
Slide 34: Midstream leadership biographies
Midstream leadership biographies David Slater Robert Skaggs, Jr. President & CEO Elect, Midstream Executive Chairman Elect, Midstream Slater has over 30 years of experience in the energy industry, where he has Skaggs has over 35 years of experience in the energy industry, including leading worked in
Slide 35: 2019 - 2020 reconciliation of reported to operating earnings and operating EPS
2019 - 2020 reconciliation of reported to operating earnings (non-GAAP) and operating EPS (non-GAAP) 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 oper
Slide 36: 2008 reconciliation of GSP reported Adjusted EBITDA to operating earnings
2008 reconciliation of GSP reported Adjusted EBITDA is a non-GAAP to operating earnings (non-GAAP) measure (millions) (millions) Use of Operating Earnings Information – DTE Energy management believes that operating Adjusted EBITDA is calculated using net income, the most comparable GAAP measure and
Slide 37: Reconciliation of reported to operating earnings
Reconciliation of reported to operating earnings (non-GAAP) Use of Operating Earnings Information – Operating earnings exclude non-recurring items, certain mark-to-market adjustments and discontinued operations. DTE Energy management believes that operating earnings provide a more meaningful represe