Dte Energy Company · NYSE:DTE
Dte Energy — FY2007 Earnings Presentation
51 slides from Dte Energy's earnings presentation, Feb 22, 2008
Slide 1: Business and Financial Update February 22, 2008
Business and Financial Update February 22, 2008
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: Participants
Participants 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: Business Update agenda
Business Update 2007 Earnings Results 2008 Guidance Cash Flow and Capital Expenditures Summary
Slide 5: DTE Energy Is an Attractive Investment
DTE Energy Is an Attractive Investment Strong utility growth outlook 5-6% annual long-term earnings growth Well-run utilities Increasingly constructive regulatory environment Growth upside from renewable generation ~ 5% dividend yield Proven track record of non-utility value creation 2008 catalysts
Slide 6: 2008 Catalysts
2008 Catalysts Updated Detroit Edison rate filing on Feb. 20; MPSC Staff testimony expected in second quarter Comprehensive energy legislation in Michigan Some pieces of legislation have been approved by the House Energy committee; awaiting action by the full House Complete significant utility capit
Slide 7: Detroit Edison Rate Case Updated to Include 2009 Capital Projects
Detroit Edison Rate Case Updated to Include 2009 Capital Projects Updated Detroit Edison's rate case this week to reflect 2009 as the projected test year for setting rates (versus 2008) Adding 2009 capital projects results in an incremental $85M rate request 2009 early operating earnings outlook of
Slide 8: Components of Detroit Edison's Rate Request
Components of Detroit Edison's Rate Request 2006 Normalized Capital O&M PEP Cost Savings Net Revenue / Fuel & Purchased Power Merger Control Premium Net Other (Incl. Benefits & Taxes) 2009 Request East -32 -32 254 265 208 208 271 284 West 254 129 118 57 63 13 North ($30) $130 $290 ($60) ($120) $60 $
Slide 9: Michigan Legislation Continues to Move Forward
Michigan Legislation Continues to Move Forward Legislation to establish a long-term energy plan for Michigan could have wide-ranging benefits for utilities and customers Key Legislation Introduced Legislative Timeline Electric Choice reform Renewable Portfolio Standard (10% by year end 2015) Energy
Slide 10: Detroit Edison Growth Investments on Track
Detroit Edison Growth Investments on Track Investing ~$1.0B on Clean Air Act compliance at 3,000 MW coal-fired Monroe plant from 2008-2012 Potential ~$300M Advanced Metering Infrastructure (AMI) program coordinated with MichCon; pilot program in 2008 License application for new nuclear power plant a
Slide 11: MichCon Growth Investments on Track
MichCon Growth Investments on Track Potential ~$60M AMI program coordinated with Detroit Edison; pilot program in 2008 ~$100M meter relocation program $90M distribution system expansion in Western Michigan $90M Utility storage (17 Bcf) $50M Panhandle Pipeline lateral Major 2008 Expansion Projects Gr
Slide 12: Successful Non-Utility Monetization Plan
Successful Non-Utility Monetization Plan Original Guidance Current Guidance At least $800M Antrim Power & Industrial Peakers Monetization After-Tax Cash Proceeds Closed Closed Core Barnett ~$1.7B Closed Closing delayed due to choppy debt markets Pursuing alternative financing options Expect addition
Slide 13: Development of Western Barnett Acreage Focused on Near-Term Value Creation
Development of Western Barnett Acreage Focused on Near-Term Value Creation Invest ~$100M Drill 30-40 wells Produce 5 Bcfe net Opportunistically increase strategic acreage holdings in current areas of operations 30% increase in proved reserves Drilled 50 wells 39 in west (2 awaiting completion) More
Slide 14: Western Barnett Reserves Valuation
Western Barnett Reserves Valuation Reserves (Bcfe) Value ($ per mcfe) Low Value ($ millions) High Value ($ millions) Proved 144 $1.50 - $2.00 $220 $290 Probable 192 $0.25 - $0.50 $50 $100 Total 336 $270 $390 Value of proved reserves in West is relatively transparent today Western Basin well economic
Slide 15: DTE Energy Gas Pipelines and Storage Assets Are Well-Positioned for Growth
DTE Energy Gas Pipelines and Storage Assets Are Well-Positioned for Growth 2007 Accomplishments Vector Pipeline Expansion Gas Storage Vector MichCon Millennium Michigan NY City Canadian & Arctic Gas Rockies Gas - REX Gulf (LNG) Gas DTE Storage We are well positioned to capitalize on the strong North
Slide 16: 2007 Earnings Results agenda
Business Update 2007 Earnings Results 2008 Guidance Cash Flow and Capital Expenditures Summary
Slide 17: 2007 Summary
2007 Summary Solid overall utility results Detroit Edison and MichCon overcame one-time computer system start-up challenges to earn near authorized returns on equity Strong results in all non-utility segments
Slide 18: 2007 Operating Earnings
2007 Operating Earnings Operating Earnings Per Share* Detroit Edison $2.00 Unconventional Gas Production $0.06 Non-Utility $0.83 Coal & Gas Midstream $0.31 Corporate & Other ($0.49) MichCon** $0.48 $2.82 Power and Industrial Projects $0.15 * Reconciliation to GAAP reported earnings included in the a
Slide 19: 2007 Operating Earnings Variance
2007 Operating Earnings Variance * Reconciliation to GAAP reported earnings included in the appendix 2005 excl synfuel DECO MichCOn coal UGP pip ET hold 515 488 488 504 511 513 502 477 27 16 5 5 31 42 25 477 Operating Earnings Variance* ($ millions) 2006 Operating Earnings Detroit Edison MichCon Pow
Slide 20: Detroit Edison Operating Earnings Variance
Detroit Edison Operating Earnings Variance Operating Earnings Variance* ($ millions) * Reconciliation to GAAP reported earnings included in the appendix 2006 Rate Red Pscr choice Econmy weather sap fermi other 2006 363 322 322 347 359 379 354 349 340 340 41 25 12 20 7 32 5 9 2006 Operating Earnings
Slide 21: MichCon Operating Earnings Variance
2005 Weather Volume EBS Interest other 2006 66 66 80 75 75 79 81 14 2 7 4 2 MichCon Operating Earnings Variance Operating Earnings Variance* ($ millions) $66 Base Gas / Other Weather $14 $4 $82 2006 Operating Earnings 2007 Operating Earnings * Reconciliation to GAAP reported earnings included in the
Slide 22: Non-Utility Segment Operating Earnings
Non-Utility Segment Operating Earnings Operating Earnings* ($ millions) * Reconciliation to GAAP reported earnings included in the appendix Earnings Drivers
Slide 23: 2008 Guidance agenda
Business Update 2007 Earnings Results 2008 Guidance Cash Flow and Capital Expenditures Summary
Slide 24: 2008 Earnings Guidance
Utilities targeted to earn their authorized 11% ROE in 2008 Power & Industrial guidance assumes 50% sale is complete 3/31/2008 Expect additional 2 cents in EPS per quarter until deal closes Coal & Gas Midstream: Increased gas storage and pipeline revenues drive earnings growth of ~$7M offset by impa
Slide 25: Detroit Edison 2008 Operating Earnings Drivers
Detroit Edison 2008 Operating Earnings Drivers Detroit Edison 2008 Guidance Walk* Original 2007 Guidance rate red choice Econmy sap Weather pscr other Revised 2007Guidance Detroit Edison 340 340 375 382 382 403 378 355 0 35 17 10 30 10 24 22 340 30 2007 Actual 2008 Guidance Rate Reduction Expiration
Slide 26: 2009 Early Outlook Shows Growth in All Segments
2009 Early Outlook Shows Growth in All Segments 2008 Guidance ($ millions) +6% 2009 Early Outlook +13% +6% +13% Potential Average Shares Outstanding** ~159M ~158M * Reconciliation to GAAP reported earnings included in the appendix ** Assumes $275 million in stock bought back on March 31, 2008 Operat
Slide 27: Cash Flow and Capital Expenditures agenda
Business Update 2007 Earnings Results 2008 Guidance Cash Flow and Capital Expenditures Summary
Slide 28: Positive Net Cash Flow Expected in 2008
Positive Net Cash Flow Expected in 2008 2007 Actual 2008 Guidance * includes cash accounted for as "investing activity" In 2007, the combination of internal resources and synfuel proceeds generated $1.5B in adjusted cash from operations Non-utility asset sales supported $725M of share repurchases an
Slide 29: DTE Energy Capital Expenditures
DTE Energy Capital Expenditures Utilities Account for 80% of Expected 2008 Capital Expenditures 2007 Actual 2008 Guidance Capital expenditures at Detroit Edison should reach $1B in 2008, substantially above the average of the past 5 years MichCon's capital is projected at $200M, about equal to 2007,
Slide 30: A Strong Balance Sheet Continues to Be a Priority
Leverage* * Excludes securitization debt and MichCon short-term borrowing **2008 assumes midpoint of applicable estimates Funds from Operations / Debt* A Strong Balance Sheet Continues to Be a Priority for DTE Energy 12/31/2006 12/31/2006 12/31/07E 0.534 0.515 0.52 12/31/2006 12/31/2006 12/31/07E 0.
Slide 31: Summary agenda
Business Update 2007 Earnings Results 2008 Guidance Cash Flow and Capital Expenditures Summary
Slide 32: DTE Energy Is an Attractive Investment
DTE Energy Is an Attractive Investment Strong utility growth outlook 5-6% annual long-term earnings growth Well-run utilities Increasingly constructive regulatory environment Growth upside from renewable generation ~ 5% dividend yield Proven track record of non-utility value creation 2008 catalysts
Slide 33: For More Information
For More Information DTE Energy Investor Relations www.dteenergy.com/investors 313-235-8030
Slide 34: Appendix
Appendix DTE Energy s€
Slide 35: Fourth Quarter 2007 Operating Earnings
Fourth Quarter 2007 Operating Earnings Operating Earnings Per Share* Detroit Edison $0.69 Unconventional Gas Production $0.01 Non-Utility $0.18 Coal & Gas Midstream $0.09 Corporate & Other ($0.13) MichCon** $0.27 $1.01 Power and Industrial Projects $0.08 * Reconciliation to GAAP reported earnings in
Slide 36: Fourth Quarter Operating Earnings Variance
Fourth Quarter Operating Earnings 2005 excl synfuel DECO MichCOn PIP UGP Coal & Gas ET Corp & Other 138 138 180 188 197 195 168 163 42 8 11 2 2 27 5 162 Operating Earnings Variance* ($ millions) Q4 2006 Operating Earnings Detroit Edison MichCon Power & Industrial Projects Corporate & Other Unconvent
Slide 37: Synthetic Fuel Reported Earnings Detail
Synthetic Fuel Reported Earnings Detail ($ millions, after-tax)
Slide 38: Sources and Uses of Monetization Proceeds and Synfuel Cash
Sources Uses East 1.4 0.7 West 0.95 1 0.2 0.7 Sources and Uses of Monetization Proceeds and Synfuel Cash Synfuel $900 (2007 - 2009) Monetization Proceeds ~$1,700 (2007 - 2008) Monetization Proceeds and Synfuel Cash Sources and Uses ~$2,600 ~$2,600 Debt Redemption $700 Share Repurchase* $1,000 Utilit
Slide 39: Performance Excellence Process Reduces Fixed Cost Structure
Completed Projects Projects in Process Total Expected Program Benefits 260 Detroit Edison 260 70 330 PEP Benefits 2006 - 2008 O&M, Capital & Other $ millions, pre-tax Performance Excellence Process Reduces Fixed Cost Structure 2005 2006 2007 10300 9300 9075 Employees at Year End: Detroit Edison, Mic
Slide 40: Growing Electric Load Despite Michigan Economy
Growing Electric Load Despite Michigan Economy Annualized Sales (GWH) Detroit Edison Service Area: Temperature-Normalized Electric Sales (Gwh) (including Electric Choice) Temperature-normalized electric sales grew more than 3% from 2002 to 2007
Slide 41: DTE Energy Trading Earnings Reconciliation
DTE Energy Trading Earnings Reconciliation Total EITF 51 51 55 4 ** 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 and storage. These
Slide 42: Detroit Edison Capital 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 Driven by Investments in System Reliability and Environmental Compliance Projected Detroit Edison Capital Investment (2007-2
Slide 43: 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 Existing Expansion projects : $90M pipeline in W. Michigan $90M utility storage $50M Panhandle Pipeline connection Longer term projects
Slide 44: Summary of Bills Introduced in Michigan Legislature
Summary of Bills Introduced in Michigan Legislature House Bill #5520: Gives the MPSC authority to approve generation asset sales over 200 MW HB 5521: Certificate of Need process for major capital investments in electric generation HB 5522: Cost-of-service based electric rates (deskewing) HB 5523: Fi
Slide 45: 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 46: 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 47: Reconciliation of Q4 2007 Reported to Operating Earnings
Reconciliation of Q4 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 me
Slide 48: Reconciliation of Q4 2007 Reported to Operating Earnings per Share
Reconciliation of Q4 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 perf
Slide 49: Reconciliation of 2006 Reported to Operating Earnings
Reconciliation of 2006 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 50: Reconciliation of Q4 2006 Reported to Operating Earnings
Reconciliation of Q4 2006 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 51: Reconciliation of 2008 and 2009 Reported to Operating Earnings
Reconciliation of 2008 and 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 performa