Dte Energy Company · NYSE:DTE
Dte Energy — AGA Financial Forum 2008
53 slides from Dte Energy's conference presentation, May 5, 2008
Slide 1: DTE Energy Business Update: AGA Financial Forum
DTE Energy Business Update: AGA Financial Forum Gerry Anderson President and COO, DTE Energy Jerry Norcia President and COO, MichCon May 5, 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: DTE Energy: A Focused, Integrated Energy Strategy
Execute strong regulated growth plan DTE Energy: A Focused, Integrated Energy Strategy Execute value-focused non-utility plan Continue to pay an attractive dividend Realize projected utility earnings growth Near-term: 7 - 9% per year Long-term: 5 - 6% per year Upside potential from renewables Manage
Slide 4: DTE Energy is an Integrated Energy Company
Coal & Gas Midstream Power & Industrial Projects Unconventional Gas Production Detroit Edison MichCon DTE Energy is an Integrated Energy Company Complementary Non-Utility Businesses Strong, Stable and Growing Utilities Electric generation and distribution 2.2 million customers Fully regulated by Mic
Slide 5: Regulatory / Legislative Update; DTE Growth Profile; Regulated Growth Opportunities
Regulatory / Legislative Update DTE Growth Profile Regulated Growth Opportunities Summary
Slide 6: Detroit Edison General Rate Case: Estimated Revenue Requirements
Detroit Edison General Rate Case 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 $14 $284 Det
Slide 7: Energy Legislation Is Important to Michigan's Future
Energy Legislation Is Important to Michigan's Future Bills passed Michigan House on April 17 on a strong bi-partisan vote and now move to Senate Bills backed by a strong coalition including the Michigan Chamber of Commerce, Michigan Manufacturers Association, labor organization members, business lea
Slide 8: Michigan Legislation Continues to Move Forward
Michigan Legislation Continues to Move Forward House Bill 5524 Proposal Electric Choice reform Caps Choice at 10% of load Defines rules for customers returning to utility service Cost-of-service based electric rates (deskewing) Phases in cost-of-service based rates over a five year period for all cu
Slide 9: Michigan Legislation Continues to Move Forward (Cont.)
Michigan Legislation Continues to Move Forward (Cont.) Legislation Proposal Renewable Portfolio Standard (HB 5548/5549) 4% of energy from renewables by 2012 10% by 2015 Establishes cost caps and off-ramps to ensure costs are manageable Energy efficiency (HB 5525) Ramps up targets to annual increment
Slide 10: Regulatory / Legislative Update; DTE Growth Profile; Regulated Growth Opportunities
Regulatory / Legislative Update DTE Growth Profile Regulated Growth Opportunities Summary
Slide 11: Utility Growth Profile
Utility Growth Profile 2007 2009 Detroit Edison 8700 10700 11700 12400 10500 2000 1000 700 400 2300 2000 2007 Rate Base Projected 2012 Rate Base ~$8.7 ~$2.0 ~$2.3 ~$10.5 ~$1.0 ~$0.7 ~$0.4 Environ- mental Expansion & Infrastructure AMI Utility growth is heavily driven by environmental investments at
Slide 12: Utility Earnings Growth 2007 - 2009
Utility Earnings Growth 2007 - 2009 * Reconciliation to GAAP reported earnings included in the appendix Original 2007 Guidance rate red rate case Detroit Edison 340 360 400 82 88 93 2007A 2009 Early Outlook 2008 Guidance $422 $435 - 460 $480 - 505 $340 $82 $85 - 90 $350 - 370 $390 - 410 $90 - 95 Ope
Slide 13: Load Continues to Grow During Michigan's Economic Restructuring
Load Continues to Grow During Michigan's Economic Restructuring Annualized Sales (GWh) Detroit Edison Service Area: Electric Sales (GWh) Includes Electric Choice Hemlock Semiconductor Creating Jobs in Michigan Temperature Normalized Actual 0.7% compound annual growth temperature normalized
Slide 14: Non-Utility Growth Profile
2007A MichCon 236 GSPP Non-Utility Growth Profile 2008E Operating Earnings* Expect to invest $200-$300M annually Expand existing assets Vector Pipeline Shelby Storage New investments Millennium Pipeline Storage Optimize existing projects Disciplined approach to new industrial and renewable projects
Slide 15: DTE Energy 2008 Guidance & 2009 Early Outlook
DTE Energy 2008 Guidance & 2009 Early Outlook Solid first quarter earnings Utilities remain on track to earn authorized ROE in 2008 Strong non-utility results at Energy Trading and Power & Industrial Projects Raised 2008 EPS guidance to $2.80 - 3.20 2009 early outlook on track 2008 Guidance 2009 Ear
Slide 16: Regulatory / Legislative Update; DTE Growth Profile; Regulated Growth Opportunities
Regulatory / Legislative Update DTE Growth Profile Regulated Growth Opportunities Summary
Slide 17: Factors For Successful Utility Growth
Factors For Successful Utility Growth
Slide 18: Detroit Edison Growth Profile
Detroit Edison Growth Profile Infrastructure Environmental Renewable Nuclear Detroit Edison Long-term Investment Profile Illustrative Investments in environmental controls, renewable energy and new base load generation create significant growth potential 2008
Slide 19: Attractive Market Dynamics in Gas Pipelines & Storage
Source: EEA/DTE Gas Flow Model LNG (from Trinidad, Middle East and North Africa) LNG LNG LNG Attractive Market Dynamics in Gas Pipelines & Storage Expected Flow of New Gas Supply, 2007 - 2020 Western Canada & Arctic / Alaskan supply Northeast market LNG Coal Bed Methane Tight Sands Gas Fayetteville
Slide 20: DTE Energy's Gas Asset Portfolio
DTE Energy's Gas Asset Portfolio DTE's gas asset portfolio is well positioned to take advantage of attractive market dynamics MichCon is the 11th largest US gas utility DTE Gas Midstream is among the top 10 North American storage providers Vector Millennium MichCon MichCon Service Area DTE Gas Stora
Slide 21: Significant Growth Investment Drives Future Growth
Significant Growth Investment Drives Future Growth 2007A MichCon 236 GSPP 37 2007A $37 $236 Expect to invest $250-$300M annually $273 $90M distribution system expansion $90M utility storage (17 Bcf) $50M Panhandle Pipeline lateral $100M meter relocation $60M AMI Millennium Pipeline - $65M Shelby 2 S
Slide 22: MichCon Has Retail Revenue Growth Opportunities
MichCon Has Retail Revenue Growth Opportunities 2007A 2008E 2009E 2010E 2011E 2012E Revenue 29 38 45 46 47 48 Net Income 0 0 -2 2 4 8 Home Protection Plus Revenue $29 Institutional Increasing power plant use New plants Other ($ millions) Opportunities for additional growth in end-user transportation
Slide 23: Investments in Our Gas Asset Portfolio Provide Significant Earnings Growth
2007A 2008E 2009E 2010E 2011E 2012E Michcon 82 87 95 105 112 116 GSPP 32 40 45 45 50 60 Investments in Our Gas Asset Portfolio Provide Significant Earnings Growth 7% - 8% Annual Growth Rate $82 $32 $85 - 90 $35 - 40 Gas Operating Earnings* ($millions) * Reconciliations to GAAP reported earnings incl
Slide 24: Regulatory / Legislative Update; DTE Growth Profile; Regulated Growth Opportunities
Regulatory / Legislative Update DTE Growth Profile Regulated Growth Opportunities Summary
Slide 25: DTE Energy: A Focused, Integrated Energy Strategy
Execute strong regulated growth plan DTE Energy: A Focused, Integrated Energy Strategy Execute value-focused non-utility plan Continue to pay an attractive dividend Realize projected utility earnings growth Near-term: 7 - 9% per year Long-term: 5 - 6% per year Upside potential from renewables Manage
Slide 26: For More Information
For More Information DTE Energy Investor Relations www.dteenergy.com/investors 313-235-8030
Slide 27: Appendix
Appendix DTE Energy s€
Slide 28: Q1 2008 Operating Earnings per Share
Q1 2008 Operating Earnings per Share* Detroit Edison $0.25 Unconventional Gas Production $0.01 Non-Utility $0.30 Coal & Gas Midstream $0.05 Corporate & Other ($0.14) MichCon** $0.37 $0.78 Power and Industrial Projects $0.06 * Reconciliation to GAAP reported earnings included in the appendix ** Inclu
Slide 29: Q1 2008 Operating Earnings Variance
Q1 2008 Operating Earnings Variance * Reconciliation to GAAP reported earnings included in the appendix 2006 DECO MichCOn coal UGP pip ET hold 112 106 103 100 100 100 106 129 6 3 3 0 6 28 5 129 ($ millions) 1Q 2007 Operating Earnings Detroit Edison MichCon Power & Industrial Projects Unconventional
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: 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 0.06 PNW 0.059 ED 0.056 TEG 0.055 DTE 0.052 NI 0.05 WR 0.05 CNP 0.047 TE 0.047 SCG 0.046 VVC 0.046 XEL 0.
Slide 32: We Expect the Commission to Continue to Support Michigan's 21st Century 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 33: 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 34: 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 35: Detroit Edison Growth Investments
2007A 2008E 2009E 2010E 2011E 2012E Base 600 675 650 650 650 650 Environmental 210 260 200 200 200 200 AMI 20 45 45 45 45 Depreciation 485 510 535 560 585 615 Detroit Edison Growth Investments Detroit Edison Capital Investment (2007-2012) Growing equity base: ~$3.2B in 2007 to ~$4.4B by end of 2012
Slide 36: Detroit Edison Rate Base Growth
Detroit Edison Rate Base Growth Detroit Edison 2007-2009 Net Plant Growth 2007 2009 Detroit Edison 8700 8700 9500 9500 1900 1100 $ billions ~$8.7 ~$9.5 YE 2007 Capital Investments YE 2009 Depreciation ~$1.9 ~($1.1) Average Equity Base $3.2 $3.7 Growth is primarily driven by ~$500M environmental (Cle
Slide 37: Regulatory Agenda Provides For Strong Future Earnings at Detroit Edison
Original 2007 Guidance Revised 2007Guidance Detroit Edison 340 0 0 350 390 20 20 2007 Actual 2008 Guidance 2009 Early Outlook $340 $350-370 $390-410 Detroit Edison Operating Earnings Outlook* Regulatory Agenda Provides For Strong Future Earnings at Detroit Edison Expiration of the $79M (pre-tax) sho
Slide 38: MichCon Growth Investments
MichCon Growth Investments 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 (planned completion in 2009) Major 2008 E
Slide 39: Gas Pipeline and Storage Growth Projects
Gas Pipeline and Storage Growth 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 quarter of 2008 Initial capacity: 0.5 Bcf/d Tot
Slide 40: 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 41: 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 to buy b
Slide 42: Development of Western Barnett Acreage Focused on Near-Term Value Creation
Development of Western Barnett Acreage Focused on Near-Term Value Creation Invest ~$100M Drill at least 30 wells Produce 5 Bcfe net Opportunistically increase strategic acreage holdings in current areas of operations 30% increase in proved reserves Drilled 50 wells 39 in West (2 awaiting completion)
Slide 43: Barnett Shale Operating Metrics
Net Production Rate (Mmcfe/day) Gross Producing Wells 132 Reserves (Bcfe) Probable Proven Acreage Position (000's Acres) Net Undeveloped Acres Net Developed Acres YE2007 192 144 336 Barnett Shale Operating Metrics (Excludes Sold or Held for Sale Properties) 111 180 YE2006 291 11 3/31/08 41 52 10 38
Slide 44: Western Barnett Reserves Valuation
Western Barnett Reserves Valuation Reserves (Bcfe) Value ($ 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 45: Western Barnett Has Different Characteristics than the Core
Western Barnett Has Different Characteristics than the Core Western Core Cost per horizontal well ~$1.5M ~$3M Reserves per well (Bcf) 1 - 1.5 2 - 4 Peak rate per well (Mcf/day) 500 - 1,000 800 - 3,000 Well spacing (acres)* 90-120 40-120 Western Barnett development is economically attractive Generall
Slide 46: Barnett Shale Map
Barnett Shale Map Clay Zones of DTE Acreage Vertical Wells Horizontal Wells Dallas/ Ft Worth Metropolitan Area West 52,000 acres Hood Johnson Erath Jack Somervell Hill Wise Tarrant Bosque Parker Denton Palo Pinto South
Slide 47: 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 48: 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 49: Reconciliation of Q1 2008 Reported to Operating Earnings
Reconciliation of Q1 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 50: Reconciliation of Q1 2008 Reported to Operating Earnings per Share
Reconciliation of Q1 2008 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 51: 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 52: 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 53: 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