Slide 1: Business and Financial Update
Business and Financial Update February 24, 2009
Slide 2: Safe Harbor Statement
2 Safe Harbor Statement 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 effects of weather and other natural phenomena on operations and sales to customers, and purchases fro
Slide 3: Participants
3 Participants Gerry Anderson, President and COO Dave Meador, Executive Vice President and CFO Peter Oleksiak, VP and Controller Nick Khouri, VP and Treasurer Lisa Muschong, Director of Investor Relations
Slide 4: Overview
4 Overview 2008 Results / 2009 Guidance Future Growth Opportunities
Slide 5: 2008 Overview
5 2008 Overview Achieved 2008 operating EPS growth of 3% year over year despite the emergence of a challenging economic environment* Maintained strong cash flow and balance sheet metrics Energy legislation enacted that improves the regulatory structure and the climate for investment in Michigan Also
Slide 6: Legislation Strengthened Michigan's Regulatory Framework
Legislation Strengthened Michigan's Regulatory Framework Cap Electric Choice at 10% Deskewing of customer rates reduces Choice incentives File and use rate-making Self-implement rates after 6 months 12 month deadline for rate cases Forward test year Renewable Portfolio Standard & Energy Efficiency S
Slide 7: Constructive Regulatory Environment
7 Constructive Regulatory Environment Strengthen relationships with customers and regulators Continuous improvement Focus on strong customer satisfaction Timely recovery of capital Regular rate filings Detroit Edison filed Jan. 26, 2009 MichCon to file mid-2009 Self-implement rate increases Pursue a
Slide 8: Using Continuous Improvement to Lower Costs and Improve Efficiencies
Using Continuous Improvement to Lower Costs and Improve Efficiencies Utility Operational O&M* The focus on cost reductions and efficiency improvements continued in 2008 Since 2005, costs savings have more than offset inflation and new incremental costs Strong employee engagement supports our ability
Slide 9: 2009 Overview
9 2009 Overview 2009 guidance based on realistic assumptions around the economy and electric demand Built flexibility into plan to address economic uncertainties Addressing the weak economic climate in several ways: Significant, sustainable company-wide cost reductions Mid-year Detroit Edison revenu
Slide 10: 2009 Focus
10 Execute realistic, flexible operating plan Deliver stable earnings Maintain strong balance sheet Preserve/strengthen financial metrics to support future growth Continue to deliver cost savings to mitigate economic conditions and minimize rate increases Maintain or improve safety and reliability m
Slide 11: 2008 Results / 2009 Guidance
11 Overview 2008 Results / 2009 Guidance Future Growth Opportunities
Slide 12: 2008 Results
2008 Results 12 * Reconciliation to GAAP reported earnings included in the appendix DTE Energy 2008 operating earnings* of $2.90 vs. $2.82 in 2007 Proactive cost reductions enabled solid earnings results at Detroit Edison and MichCon Non-Utility businesses delivered $130 million in operating earning
Slide 13: 2008 Operating Earnings Variance
13 2008 Operating Earnings Variance Lower sales and higher uncollectible expense partially offset by O&M improvements and the expiration of the temporary rate reduction from the show cause settlement in April 2008 Drivers * Reconciliation to GAAP reported earnings included in the appendix Detroit Ed
Slide 14: 2009 Operating Earnings Guidance
14 2009 Operating Earnings Guidance * Reconciliation to GAAP reported earnings included in the appendix 2009 Operating Earnings Guidance* (millions) 14 2009 Guidance Goal for 2009 is to preserve our financial strength and earnings level 2009 plan includes a 6% electric sales reduction (~3,000 GWh) v
Slide 15: Electric Load Analysis
Electric Load Analysis Car and Truck Production (Million Units) 15 Rest of US Service Area Source: DTE Energy forecasts 1974 1980 2009F Residential -1.7 1.2 -1.4 Commercial -3.1 0.1 -4.7 Industrial -9.5 -18.4 -13.7 Total -5.1 -7.2 -5.7 Annual Load Loss 1974 1980 2009F 40% 34% 25% Industrial % of Tot
Slide 16: Responding to Changes in Electric Load
Responding to Changes in Electric Load Guidance assumes 10-11 million unit auto sales Assumes additional plant shutdowns Automotive is only 5-6% of margin Chrysler is only 2.5% of load and 1% of margin Our customer mix has changed Industrial load down from 40% in 1974 to 25% today Guidance assumes 6
Slide 17: Detroit Edison 2009 Operating Earnings
Detroit Edison 2009 Operating Earnings* * Reconciliation to GAAP reported earnings included in the appendix Assumptions ($ millions) 2008 Operating Earnings ($30) ($90) $331 2009 Guidance $355-385 Economy Mid-Year Rate Increase, O&M & Other $89-119 Dec 2008 Rate Increase Employee Benefits Sales redu
Slide 18: MichCon 2009 Assumptions
18 MichCon 2009 Assumptions To offset declining margins and expand working storage capacity: MichCon's first base gas settlement allowed for us to sell gas over 2007-2009 This required a moratorium on base rate increases until January 1, 2010 Pending approval from the MPSC, a second base gas settlem
Slide 19: MichCon 2009 Operating Earnings
19 Assumptions ($ millions) MichCon 2009 Operating Earnings* 2008 Operating Earnings Depreciation & Interest Base Gas Sale Revenue Employee Benefits O&M & Other $7-17 ($11) ($7) $89 $70 - 80 ($8) Constructive base gas settlement offsets declining margins Increased pension expense due to reduced fund
Slide 20: 2009 Capital & Cash Flow Guidance
20 2009 Capital & Cash Flow Guidance Capital Summary ($ millions) * Reconciliation to GAAP reported cash flow included in the appendix Cash Flow Summary ($ billions) Plan to issue $60 - $80 million of equity in 2009 to fund Dividend Reinvestment and employee benefit programs *
Slide 21: DTE Energy - Liquidity Summary
DTE Energy - Liquidity Summary Over $1 billion of liquidity available at end of 2008 Expect to pay down drawn credit lines by the end of February 2009 Only one significant debt maturity of $200 million in 2009 Approximately half ($975 million) of our credit facilities expire in October 2009; expect
Slide 22: Future Growth Opportunities
22 Overview 2008 Results / 2009 Guidance Future Growth Opportunities
Slide 23: Future Growth Opportunities
23 Future Growth Opportunities Utility growth heavily driven by mandated environmental and renewable investment New and existing state and federal regulations drive environmental investments State legislation calls for significant investment in renewable power and energy optimization More substantia
Slide 24: Environmental Investment Outlook
Environmental Investment Outlook Mandatory Environmental Capital Spend to Comply with New and Existing Legislation Will Be Significant 24 1st Qtr FGD 700 SCR 250 ACI 240 Cooling 100 Active Carbon Injection (ACI) and Fabric Filters Flue Gas Desulfurization (scrubbers) Selective Catalytic Reduction (S
Slide 25: Potential Renewable Profile
25 Potential Renewable Profile (MW) 160 210 290 375 500 710 775 Potential Detroit Edison Renewable Capex Levelized customer surcharge beginning fall 2009 Transparent cost to customers Fixed monthly payment (~$3/month per residential customer) for 20 years Revenues in early years higher than under tr
Slide 26: Non-Utility Growth Opportunities
26 Non-Utility Growth Opportunities Power & Industrial Projects Gas Midstream Unconventional Gas Production Transport and Store Natural Gas Own and Operate Energy-Related Assets Western Barnett Shale Gas Production in Texas Industrial /Utility Solid Fuels On-Site Energy Services Renewable Energy Fut
Slide 27: DTE Energy: A Focused, Integrated Energy Strategy
DTE Energy: A Focused, Integrated Energy Strategy Achieve strong results in a challenging economic environment Michigan legislation provides key new tools to enable DTE to address weak economy Two new utility growth platforms - RPS and EO - have dedicated funding mechanisms 2009 plans are based on r
Slide 28: Contact Us
28 Contact Us DTE Energy Investor Relations www.dteenergy.com/investors 313-235-8030
Slide 29: Appendix
DTE Energy’ Appendix
Slide 30: Detroit Edison Variance Analysis
30 Detroit Edison Variance Analysis * Reconciliation to GAAP reported earnings included in the appendix 2007 Operating Earnings ($26) ($65) $340 2008 Operating Earnings $20 Sales $27 ($ millions) Detroit Edison Operating Earnings Variance* Drivers Information System Costs O&M/Other $331 Temperature-
Slide 31: Detroit Edison Sales Volumes
Detroit Edison Sales Volumes 31
Slide 32: MichCon Variance Analysis
32 MichCon Variance Analysis Colder weather in 2008 Lower temperature normalized sales Lower storage rates Elimination of information system startup costs in 2008 Base gas sale of 2.9 Bcf in 2008 compared with 0.7 Bcf sale in 2007 Higher uncollectible expense net of tracking mechanism ($ millions) M
Slide 33: DTE Energy Trading Reconciliation of 2008 Operating Earnings to Economic Net Income
DTE Energy Trading Reconciliation of 2008 Operating Earnings* to Economic Net Income ** Consists of the income statement effect of not recognizing changes in the fair market value of certain non-derivative contracts including physical inventory and capacity contracts for transportation, transmission
Slide 34: Detroit Edison Rate Case Filing
34 Detroit Edison Rate Case Filing Detroit Edison's Estimated Revenue Deficiency Key Elements Anticipate self implementing some portion of rate request on or after July 26, 2009 Rate request primarily driven by economic pressures impacting sales, uncollectible expense and pension costs Includes prop
Slide 35: Key Provisions of the Michigan RPS Legislation
35 Requires up to 10% of retail sales to come from renewable sources by 2015, with interim targets in prior years designed to "close the gap" New capacity requirements of 300 MWs by 2012; 600 MWs by 2015 Qualified technologies include: wind, solar, biomass, hydro, some co-generation applications Mus
Slide 36: Key Provisions for EO Legislation in Michigan
36 Key Provisions for EO Legislation in Michigan Compliance Options Targets Funding Includes energy efficiency, conservation, and demand response (electric) Providers (utilities) can operate compliance programs or fund a state program Legislation limits annual spending via a customer surcharge Funds
Slide 37: Past Success at Developing and Selling Unconventional Gas Assets
Past Success at Developing and Selling Unconventional Gas Assets for Premium Returns 2007 2008 change Reserves (Bcfe) 336 432 +29% Proved 144 167 +16% Probable 192 265 +38% Gross Producing Wells 120 156 +30% Net Production Rate (Mmcfe/day) 10 16 +60% Future DTE's unconventional gas business has been
Slide 38: Reconciliation of 2008 Reported to Operating Earnings
38 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 39: Reconciliation of 2008 Reported to Operating Earnings per Share
39 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 40: 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 41: Reconciliation of 2007 Reported to Operating Earnings per Share
Reconciliation of 2007 Reported to Operating Earnings per Share 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 perform
Slide 42: Reconciliation of 2009 Reported to Operating Earnings
42 Reconciliation of 2009 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 43: Reconciliation of Cash from Operations to Adjusted Cash from Operations
43 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