Slide 1: First Quarter 2003 Financial Results
First Quarter 2003 Financial Results May 2, 2003
Slide 2: Safe Harbor Statement
Safe Harbor Statement The information contained in this document is as of the date of this press release. 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 su
Slide 3: Participants
Participants Dave Meador Senior Vice President & Chief Financial Officer Dan Brudzynski Vice President & Controller Nick Khouri Vice President & Treasurer Peter Pintar Director of Investor Relations
Slide 4: Conference Call Objectives
Conference Call Objectives Explain first quarter results Be transparent by clearly explaining non-recurring transactions and FASB accounting changes Provide visibility on projected 2003 earnings outlook Regulated vs. non-regulated earnings Challenges and opportunities All other items will be covered
Slide 5: Financial Highlights
Financial Highlights Normalized operating results adjusted for non-recurring transactions and accounting changes, were reasonable, when compared to the prior year period These one-time transactions and FASB accounting changes affected reported (GAAP basis) Q1 results Strong non-regulated performance
Slide 6: Several One-Time Transactions and Accounting Changes Affected Q1 Reported Earnings
Several One-Time Transactions and Accounting Changes Affected Q1 Reported Earnings Changes in accounting principle Divested unprofitable steam heating business Divested transmission business Used portion of proceeds from ITC divestiture to pre-fund the DTE Energy Foundation Quarterly adjustment to n
Slide 7: Q1 2003 Reported vs. Operating Earnings Results
Q1 2003 Reported vs. Operating Earnings Results Q1 2003 Reported Earnings - GAAP Basis $0.92 Non-Recurring Items Thermal divestiture ( sale was NPV positive ) (0.08) O&M DTE Foundation contribution (0.06) O&M Reserve for potential GCR disallowance (0.10) MichCon Margins Energy Trading Activities (EI
Slide 8: Q1 2003 Operating Earnings per Diluted Share
Q1 2003 Operating Earnings per Diluted Share 168 million average shares outstanding (fully diluted) Favorable winter heating season for gas and electric sales Higher pension and health care costs within regulated utilities Higher operating expenses due to customer service improvements and timing of
Slide 9: First Quarter 2003 Operating Performance Business Unit View
Regulated Non Regulated Power Generation Energy Services Coal Services Biomass Energy Energy Trading & Marketing Energy Resources Power Distribution DTE Energy Technologies Energy Distribution Gas Distribution Non Reg Energy Gas Energy Gas Holding Company Energy Tech Investments Corporate & Other Ea
Slide 10: Q1 2003 vs. Q1 2002 Variance Analysis of Operating Results
Q1 2003 vs. Q1 2002 Variance Analysis of Operating Results Q1 2002 Reported Earnings per Share $1.24 Adjust for Q1 2002 Quarterly Effective Tax Rate Adjustment (0.07) Adjust for discontinued operations - ITC earnings in Q1 2002 (0.05) Q1 2002 Operating Earnings per Share $1.12 Regulated Electric Gro
Slide 11: Cash Flows
Cash Flows Q1 2003 Q1 2002 Cash from Operations $127 $8 Capital Expenditures (218) (230) Dividends (86) (84) Asset Sales 631 7 Free Cash Flow $454 ($299) ($ millions) Cash Flow Strong first quarter cash performance Capital expenditures down Successful closing of the ITC sale For the full year, cash
Slide 12: 2003 Earnings Outlook
2003 Earnings Outlook We are maintaining 2003 guidance on a comparable basis and reflecting ITC's status as a discontinued operation The mix of operating earnings in 2003 will likely change 2003 remains a challenging year, with many earnings drivers yet to play out
Slide 13: Adjusted 2003 Earnings Guidance to Reflect Discontinued Operations
Adjusted 2003 Earnings Guidance to Reflect Discontinued Operations $3.90 - $4.10 ($0.03) ($0.24) $0.05 $0.07 $3.75 - $3.95 2003 Guidance from Feb 12th 2 months ITC Net Income 10 months 2003 ITC Net Income Interest Savings Pension Expense Reduction Updated 2003 Guidance
Slide 14: 2003 Operating Earnings Guidance vs. Reported Earnings
2003 Operating Earnings Guidance vs. Reported Earnings Operating Earnings Guidance Impact of ITC Sale DTE Foundation Contribution $3.75- $3.95 $0.44 ($0.06) GCR Reserve Thermal Divestiture FAS 143 GAAP Reported Earnings Other Non- Strategic Asset Sales ($0.10) ($0.08) $0.07 ($0.07) $3.95- $4.15
Slide 15: Operating Earnings Guidance - Updated Mix
Operating Earnings Guidance - Updated Mix Net Income ($ millions) Based on Q1 results and our updated projections, 2003 guidance is re-mixed for: Increased non-regulated earnings Capture higher contribution from synfuel and energy trading businesses Increased regulated gas earnings Weather upside as
Slide 16: Key Assumptions and Sensitivities for 2003
Key Assumptions and Sensitivities for 2003 Assumption Update Currently in line with expectations Continued economic growth in our service territory (GDP of 3%) Continued movement to electric choice (10-13% of total load) Regulatory recovery of electric choice impact Normal weather Continued synfuel
Slide 17: Many Earnings Drivers Have Yet To Play Out
Many Earnings Drivers Have Yet To Play Out Summer cooling season and plant performance Additional storms, after April catastrophic ice/snow storm Cost pressures and offsetting cost reduction efforts Pace and timing of economic recovery
Slide 18: Financial Objectives
Financial Objectives Maintain solid investment grade rating Stable outlook with BBB+ rating Targeted year end leverage of 51-53%, ended Q1 at 51% Generate strong cash flows from the core business Solid Q1 cash from operations Reduced Q1 capital expenditures Conservative and sound financial policies
Slide 19: Summary
Summary First quarter included successful divestiture of ITC and Thermal operations in addition to accounting changes. Reported earnings must be adjusted to assess operating earnings The quarter compared reasonably to 2002 results on a comparable basis 2003 was always going to be a challenging year.
Slide 20: Appendix
DTE Energy = Appendix
Slide 21: Reconciliation of Legal Entity Operating Earnings Guidance to Reported Guidance
Non-regulated Businesses Operating Earnings Guidance FAS 143 asset retirement obligations Reported Earnings Guidance 250 - 260 (3) 247 - 257 Regulated Gas Operating Earnings Guidance Reserve for disallowance of gas costs FAS 143 asset retirement obligations Reported Earnings Guidance 75 - 80 (17) (1