Dte Energy Company · NYSE:DTE
Dte Energy — Merrill Lynch Global Power & Gas Leaders Conference 2006
33 slides from Dte Energy's conference presentation, Sep 26, 2006
Slide 1: Merrill Lynch Global Power & Gas Leaders Conference
Merrill Lynch Global Power & Gas Leaders Conference Steve Ewing Vice Chairman September 26, 2006
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's Investment Thesis
DTE Energy's Investment Thesis 5-6% utility growth customer focused investment program 10-20% non-utility growth1 strong pipeline of opportunities stable balance sheet financial flexibility +5% dividend yield competitive and sustainable 9-10% overall earnings growth1 1 excluding synfuels
Slide 4: Stable Balance Sheet Metrics Provide Flexibility
Stable Balance Sheet Metrics Provide Flexibility DTE Energy Funds from Operations/Debt 2004A 2005A 2006E 2007E 2008E 19 22 23 23 23 2 2 19% 22% 21-23% 23-25% DTE Energy Leverage* 2004A 2005A 2006E 2007E 2008E 23-25% 2004A 2005A 2006E 2007E 2008E 51 52 52 50 50 2 3 3 51% 52% 52-54% 50-53% 2004A 2005A
Slide 5: Our Sustainable Dividend is Very Competitive
Our Sustainable Dividend is Very Competitive Industry Dividend Yield September 2006 PGN 0.054 ED 0.05 DTE 0.05 AEE 0.047 KSE 0.045 SO 0.045 NI 0.043 CNP 0.041 SCG 0.04 AEP 0.04 D 0.035 FPL 0.034 PEG 0.033 PCG 0.032 FE 0.032 PPL 0.031 ETR 0.028 EXC 0.026 TXU 0.025 EIX 0.025 CEG 0.025 SRE 0.024 CMS 0
Slide 6: DTE Energy - Our Businesses
Detroit Edison (Electric Utility) Customers: 2.2M Revenue: $4.5M Equity Base: ~$3.0B 11% Allowed ROE 11,000 MW owned generation DTE Energy - Our Businesses Fuel Transportation & Marketing Gas Pipelines and Storage Coal Transportation Trading & Marketing MichCon (Gas Utility) Customers: 1.3M Revenue:
Slide 7: Recent Settlement of Show Cause Case Benefits Detroit Edison
Recent Settlement of Show Cause Case Benefits Detroit Edison Strategic Benefits Financial Benefits Well-positioned to earn authorized 11% ROE in 2006 and 2007 Gained mechanism to reduce Electric Choice exposure Granted deferral and amortization of $200-250M in costs to achieve savings from ongoing r
Slide 8: Performance Excellence Process Focused on Improving Service while Reducing Cost
Performance Excellence Process Focused on Improving Service while Reducing Cost Increased Productivity and Reduced Costs Improved Customer Satisfaction We are on target to achieve our performance and savings goals Expect total savings of $50-100M for shareholders and customers in 2006, increasing to
Slide 9: Detroit Edison Investment Program Includes $1B for Clean Air Act Compliance
Detroit Edison Investment Program Includes $1B for Clean Air Act Compliance Potential Cost 2006-2010 Potential In Service Date Unit 3 SCR ~$150M 2007 Unit 4 Scrubber and common infrastructure ~$300M 2008 Unit 3 Scrubber ~$200M 2010 Units 1 and 2 Scrubbers ~$400M Post-2010 Compliance with the Clean A
Slide 10: MichCon's Regulated Investments and Regulatory Progress
MichCon's Regulated Investments and Regulatory Progress Distribution system expansion New infrastructure to meet demand growth in W. Michigan ~ $75M capex Regulated gas storage expansion Pipeline Safety Act compliance Increase summer storage capacity by 17 Bcf ~ $75M capex Inspect 400 miles of high
Slide 11: Investment in Utilities Grows Potential Net Income by over $100M
Investment in Utilities Grows Potential Net Income by over $100M 2005 2006 2007 2008 2009 2010 250 460 460 230 215 190 225 185 280 265 260 * Assumes 11% authorized return on equity, reconciliation to GAAP reported earnings included in the appendix Utility Rate Base Investments Capital in Excess of D
Slide 12: Non-Utility Investment Focused on Three Key Areas
Non-Utility Investment Focused on Three Key Areas Shale gas production in the Antrim and Barnett Unconventional Gas Production Own and operate energy-related assets for large energy-intensive customers Store, transport and trade gas, electricity and coal Power & Industrial Projects Fuel Transportati
Slide 13: Synfuels Expected to Produce ~$1B in Cash by Year End 2009
2006 2007 2008 2009 Total AMT 400 400 600 970 580 Hedge 200 370 30 260 Production 160 Synfuels Expected to Produce ~$1B in Cash by Year End 2009 Even with No Future Production Expected Synfuel Cash Flow Assuming No Future Production 2006-2009 ($ millions) ~$400 2006E 2007E 2008E 2009E ~$200 ~$370 ~$
Slide 14: Gas Pipelines & Storage
Washington Storage Field Expansion 14 BCF Addition In service Apr 2006 DTE Investment $46M Gas Pipelines & Storage Expansion in service November 2007 DTE Investment of $27M Vector Pipeline Millennium Gas Storage 186 mile pipeline to New York City In Service November 2007 DTE Investment $176M
Slide 15: Power & Industrial Projects
Power & Industrial Projects Landfill Gas On Site Projects Coke Batteries
Slide 16: Unconventional Gas Production
Unconventional Gas Production
Slide 17: The Road to Fort Worth
The Road to Fort Worth * Largest and lowest cost operator in Michigan 1960's 1970's 1990's 2000 2002 Development of Michigan storage assets Move into gathering and processing Development of Antrim Production* Investment in Coal Bed Methane Initial investment in Barnett Shale 2000 wells 100+ drilled
Slide 18: Michigan Geology Stratigraphic Column
Michigan Geology Stratigraphic Column Glacial Drift Coldwater Shale Bedford Shale ANTRIM SHALE (1940- present) Traverse Lime Detroit River Bass Islands Salina "F" Salt Salina "B" Salt Salina "A-2 Carb Niagaran Reef (1965-1990) Clinton Shale Prarie Du Chien (1990-1995) SURFACE SEA LEVEL -1000' -2000'
Slide 19: Unconventional Gas has a Lower Risk Profile
Unconventional Gas has a Lower Risk Profile Conventional Exploration and Production (E&P) risk includes the exploration risk of finding the reservoir The location of unconventional formations are typically well known and can exist over a large area, reducing the exploration risk Unconventional forma
Slide 20: Unconventional Resources Are Present Throughout The U.S.
Unconventional Resources Are Present Throughout The U.S. Coal Bed Methane Tight Sand Shale DTE presently operates in the Antrim Shale and the Barnett Shale Currently, resource plays are a strong destination for onshore capital DTE has deep historical experience (15+ years) with unconventional gas DT
Slide 21: Unconventional Gas Has a Clear Focus on Shale Production
Unconventional Gas Has a Clear Focus on Shale Production 291,000 acres 2,010 gross producing wells 338 Bcf proved reserves 35 Bcf probable reserves ~$320M invested capital 91,000 acres 95 gross producing wells 59 Bcf proved reserves 120 Bcf probable reserves ~$200M invested capital
Slide 22: Unconventional Gas: 2006 Antrim Shale Progress
Area of detail Antrim Shale DTE Acreage DTE CO2 Plants Goal Progress Drill 130 Wells Drilled 104 to date and expect to meet or exceed target Produce 22 Bcfe net On forecast to meet 100% reserve replacement On forecast to meet or exceed Drill 10 horizontal wells Drilled 7 horizontal wells to date Unc
Slide 23: Antrim Shale Operating Metrics
Net Production Rate (mmcf/day) 59 Gross Producing Wells 2,010 1/1/05 Reserves (Bcfe) Probable Reserves Proven Reserves 335 35 338 373 12/31/2005 1/1/2005 Acreage Position (thousands) Net Undeveloped Acres Net Developed Acres 79 214 12/31/05 1/1/05 Antrim Shale Operating Metrics 1,878 12/31/05 1/1/05
Slide 24: Unconventional Gas: 2006 Barnett Shale Progress
Unconventional Gas: 2006 Barnett Shale Progress Goal Progress Drill 55 Wells Drilled 40 to date 6 rigs operating Produce 4.1 Bcfe net (~500% increase over 2005) On forecast to meet or exceed Increase proved reserves to 100 Bcfe by year end On forecast to meet or exceed Drill 4 additional test wells
Slide 25: Barnett Shale Operating Metrics
Net Production Rate (mmcf/day) 0 13 Gross Producing Wells 5 95 8/31/06 1/1/05 Reserves (Bcfe) Probable Reserves Proven Reserves 8 16 120 59 179 8 12/31/2005 1/1/2005 Acreage Position (thousands) Net Undeveloped Acres Net Developed Acres 49 49 73 18 91 12/31/05 1/1/05 Barnett Shale Operating Metrics
Slide 26: Why Unconventional Gas Production Makes Sense for DTE Energy
Why Unconventional Gas Production Makes Sense for DTE Energy Extension of a core business skill Deep historical experience (15+ years) with unconventional gas Expertise acquired through the MCN Energy merger Premium Returns Targeted ROIC of 15-20% for new investment Manageable risk Active in lower r
Slide 27: Equity Monetization or Financing Structures
Debt & Equity Equity Monetization Or Financing Structures May Provide Benefits For Managing The Growth Of The Unconventional Gas Business Monetization and financial structures may provide benefits to DTE: Provide capital to reinvest in the business Manage the size of the E&P assets within DTE Altern
Slide 28: DTE Energy's Investment Thesis
DTE Energy's Investment Thesis DTE Energy plans to create significant value for shareholders over the next five years The utilities are positioned to grow earnings 5-6% per year while driving a customer focused investment program Our three non-utility businesses have opportunities to grow earnings a
Slide 29: For More Information
For More Information DTE Energy Investor Relations www.dteenergy.com/investors 313-235-8030
Slide 30: Appendix
Appendix DTE Energy Fs
Slide 31: Unconventional Gas Production Valuation
Unconventional Gas Production Valuation Antrim Reserve Valuation Less: Allocated debt 0.50-1.00 2.50-3.00 35 338 Probable Proved Valuation Comparable ($/mcf) Reserves (Bcfe) Component ~$420-620 Current Valuation ($ millions) Less: Cost of Legacy Hedges Based on $5 market to hedge price differential
Slide 32: Reconciliation of 2005 Reported Earnings to Operating Earnings
Reconciliation of 2005 Reported Earnings 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
Slide 33: Reconciliations
Reconciliations In this release, DTE Energy discusses 2006 operating earnings guidance. It is likely that certain items that impact the company's 2006 reported results will be excluded from operating results. A reconciliation to the comparable 2006 reported earnings guidance is not provided because
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