Dte Energy Company · NYSE:DTE
Dte Energy — Q1 2020 Earnings Presentation
35 slides from Dte Energy's earnings presentation, Apr 28, 2020
Slide 1: DTE 1Q 2020 Earnings Conference Call
c DTE 1Q 2020 EARNINGS CONFERENCE CALL APRIL 28, 2020 1
Slide 2: Safe harbor statement
Safe harbor statement Certain information presented herein includes “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 with respect to the financial condition, results of operations, and businesses of DTE Energy. Words such as “anticipate,” “belie
Slide 3: Participants
Participants Jerry Norcia – President and CEO Peter Oleksiak – Senior Vice President and CFO Dave Ruud – Senior Vice President, Corp. Strategy & Development Barbara Tuckfield – Director Investor Relations 3
Slide 4: Focusing on the well-being of our employees and communities
Focusing on the well-being of our employees and communities and positioned to deliver on our financial targets during COVID-19 pandemic Shareholders • Reaffirming 2020 operating EPS1 guidance Employees with Michigan starting to return to work • Ensuring the health and safety of our employees • Confi
Slide 5: Ensuring the health and safety of our employees
Ensuring the health and safety of our employees while delivering reliable energy • Successfully implemented work from home for over half of our employees • Strategically sequestered crews to ensure healthy back-up support and orderly shift transitions • Paused all non-essential field work for some o
Slide 6: Providing community support, especially to the most vulnerable
Providing community support, especially to the most vulnerable • Providing resources to serve families’ basic needs, such as food, shelter and access to core medical services • Assisting non-profit organizations and small businesses with emergency stabilization funds • Providing 2 million respirator
Slide 7: Positioned to deliver on our financial targets with cost reductions
Positioned to deliver on our financial targets with cost reductions and contingency planning Forecasted 2020 earnings pressure (~$60 million) Includes impact of: Earnings • COVID-19 sales reduction and incremental costs pressure • 1Q results below plan • Original contingency in plan used $6.47 – $6.
Slide 8: Potential 2020 operating earnings impact from electric sales scenarios
Potential 2020 operating earnings1 impact from electric sales scenarios is $30 – $50 million May start scenario • Return-to-work assumptions Residential sales impacts − Construction and outdoor industries: May • 3% – 4% annual sales increase − Industrial: May − $40 – $50 million operating earnings i
Slide 9: Updated planning process includes daily review of contingency plan
Updated planning process includes daily review of contingency plan and lean actions across all business lines Robust planning • Strong history of successfully Annually create detailed 5-year plan implementing earnings contingency plans including during the last recession Includes earnings contingenc
Slide 10: 1Q 2020 operating earnings variance
1Q 2020 operating earnings1 variance (millions, except EPS) 1Q 2019 1Q 2020 Variance Primary drivers Warmer weather, non-qualified benefit plan DTE Electric $ 147 $ 94 $ (53) investment losses and higher depreciation rates offset by rate implementation DTE Gas 151 121 (30) Warmer weather Blue Union
Slide 11: Positioned to achieve our 2020 operating EPS guidance
Positioned to achieve our 2020 operating EPS1 guidance (millions, except EPS) 2020 operating earnings guidance Assumptions underlying 2020 guidance • Electric sales assume Michigan’s shelter- DTE Electric $759 - $773 in-place order is lifted in May DTE Gas 185 - 193 − Recovery will be slow and conti
Slide 12: Additional measures taken to further strengthen our liquidity position
Additional measures taken to further strengthen our liquidity position Liquidity Financial strength and culture of cash control (billions) $0.4 $3.2 • Metrics within targeted ranges $0.4 • Strong liquidity position $0.8 − Issued $1.7 billion of long-term debt at DTE Electric at extremely favorable r
Slide 13: Maintaining strong cash flow, balance sheet and credit profile
Maintaining strong cash flow, balance sheet and credit profile (billions) • Maintaining strong investment-grade Planned equity issuances credit rating and FFO1/Debt2 target at 18% 2020 – 2022 • Targeting lower end of range for 2020 $1.3 equity issuances • Reiterating capital guidance Convertible equ
Slide 14: High-quality utilities progressing on $15 billion 5-year capital investment plan
High-quality utilities progressing on $15 billion 5-year capital investment plan with potential $2 billion upside DTE Electric DTE Energy investment Utility investment 2020 - 2024 2020 - 2024 • Received IRP order and filed updated renewable energy plan $19 billion Additional • Ahead of pace on volun
Slide 15: GSP is well positioned for value creation
GSP is well positioned for value creation Gas Storage & Pipelines Percentage of revenue from demand-based • Progressing on LEAP construction with an contracts or MVCs/flowing gas expected 3rd quarter in-service date • Business is producing strong adjusted EBITDA1 and is beating plan year-to-date 100
Slide 16: P&I operating earnings are underpinned by RNG and cogeneration growth
P&I operating earnings1 are underpinned by RNG and cogeneration growth Power & Industrial Projects • RNG and cogeneration projects drive long- term growth − Wisconsin RNG and Ford Motor projects fully operational − Originated over $50 million of earnings since 2017; continuing targeted origination p
Slide 17: Our strategies and operating model create extraordinary value
Our strategies and operating model create extraordinary value for our people, customers, communities and shareholders Providing support during the COVID-19 pandemic Strong track record of operating EPS 1 growth • Ensuring the health and safety of our employees 7.3% CAGR • Delivering safe and reliabl
Slide 18: Contact Us
CONTACT US DTE Investor Relations www.dteenergy.com/investors 313.235.8030 18
Slide 19: Appendix
Appendix DTE
Slide 20: Clear line of sight for growth supported by investment in utility infrastructure
Clear line of sight for growth supported by investment in utility infrastructure and disciplined non-utility opportunities 2020 – 2024 DTE Energy investment $19 billion $15 Electric: Distribution infrastructure, $12 cleaner generation, maintenance Gas: Base infrastructure, main $3 80% renewal accele
Slide 21: Contributing to local economy
Contributing to local economy; invested $11.4 billion in Michigan businesses since 2010 (billions) Investing in Michigan businesses $2.1 • Driving economic growth in Michigan • Invested over $11.4 billion since 2010 − Creating 34,000 jobs • $2.1 billion in 2019 − With over 2,300 businesses − In 78 c
Slide 22: DTE Electric variance analysis
DTE Electric variance analysis (millions) Operating earnings1 variance $147 ($24) • Warmer weather in 2020 - variance to normal weather ($35) − 1Q 2019: $6 $17 ($11) − 1Q 2020: ($18) $94 • Non-qualified benefit plan investment losses from trust used to fund deferred compensation and retirement benef
Slide 23: Cash flow and capital expenditures guidance
Cash flow and capital expenditures guidance Cash flow Capital expenditures (billions) (millions) 2020 2020 guidance guidance Cash from operations1 $3.0 DTE Electric Capital expenditures (4.5) Base infrastructure $680 Free cash flow ($1.5) New generation 1,050 Distribution infrastructure 850 Dividend
Slide 24: Cash flow and capital expenditures actuals
Cash flow and capital expenditures actuals Cash flow Capital expenditures (billions) (millions) 1Q 2019 1Q 2020 1Q 2019 1Q 2020 Cash from operations1 $0.8 $1.0 DTE Electric Capital expenditures (0.7) (1.3) Base infrastructure $178 $270 Free cash flow $0.1 ($0.3) New generation 142 415 Distribution i
Slide 25: Weather impact on sales
Weather impact on sales Cooling degree days – DTE Electric service area Heating degree days – DTE Gas service area 1Q 2019 1Q 2020 % Change 1Q 2019 1Q 2020 % Change Actuals - - 0% Actuals 3,420 2,890 (15%) Normal - - 0% Normal 3,245 3,288 1% Deviation from normal 0% 0% Deviation from normal 5% (12%)
Slide 26: DTE Electric and DTE Gas regulatory update
DTE Electric and DTE Gas regulatory update DTE Electric DTE Gas • General rate case – filed July 2019 • General rate case – filed November 2019 (U-20561) (U-20642) − Effective: May 2020 − Effective: October 2020 − Rate recovery: $351 million − Rate recovery: $204 million − ROE: 10.5% − ROE: 10.5% −
Slide 27: Longer-term demand increases will require continued production growth through new drilling
Longer-term demand increases will require continued production growth through new drilling U.S. natural gas demand forecast (Bcf/d) • Longer-term natural gas supply/demand fundamentals remain attractive; shorter-term gas prices 130 +2% CAGR remain challenged 120 110 • Gas demand is forecasted to gro
Slide 28: It is necessary to drill 19 Bcf/d of new natural gas supply
It is necessary to drill 19 Bcf/d of new natural gas supply on an annual basis to hold production flat Annual decline of U.S. natural gas supply • Given decline profiles of flowing wells, new from currently-flowing wells (Bcf/d) production is needed to just keep supply flat 92 − Wood Mackenzie forec
Slide 29: Our assets are well-positioned in low cost resource basins
Our assets are well-positioned in low cost resource basins • The quality of the resource underlying our assets will ensure that gas will continue to flow on our 2021 – 2023 drilling supply curve (Bcf/d) systems − Additionally, our assets are well- positioned in supply basins that ~19 Bcf/d of new su
Slide 30: 2020 Energy Trading reconciliation of operating earnings to economic net income
2020 Energy Trading reconciliation of operating earnings 1 to economic net income (millions) Energy Trading reconciliation • Economic net income equals economic gross margin3 minus O&M expenses and taxes 1Q 2019 1Q 2020 • DTE Energy management uses economic net Operating earnings $5 $14 income as on
Slide 31: 2019 – 2020 reconciliation of reported to operating earnings
2019 – 2020 reconciliation of reported to operating earnings (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 operating earnings as the primary
Slide 32: 2019 – 2020 reconciliation of reported to operating EPS
2019 – 2020 reconciliation of reported to 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 operating earnings as the primary perf
Slide 33: 2008 reconciliation of reported to operating EPS
2008 reconciliation of reported to 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 operating earnings as the primary performance
Slide 34: 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
Slide 35: Adjusted EBITDA is a non-GAAP measure
Adjusted EBITDA is a non-GAAP measure Adjusted EBITDA is calculated using net income, the most comparable GAAP measure and adding back expenses for interest, taxes, depreciation and amortization. Adjusted EBITDA also includes an adjustment for DTE’s proportional share of joint venture net income, ex