DTE Energy Company · NYSE:DTE
DTE Energy — FY2009 Earnings Presentation
39 slides from DTE Energy's earnings presentation, Feb 23, 2010
Slide 1: Business and Financial Update
Business and Financial Update February 23, 2010
Slide 2: Safe Harbor Statement
Safe Harbor Statement The information contained herein is as of the date of this presentation. Many factors may impact forward-looking statements including, but not limited to, the following: the length and severity of ongoing economic decline resulting in lower demand, customer conservation and inc
Slide 3: Participants
Participants • Gerry Anderson, President & COO • Dave Meador, Executive Vice President and CFO • Peter Oleksiak, Vice President, Controller & Investor Relations • Nick Khouri, Vice President and Treasurer • Lisa Muschong, Director of Investor Relations 3
Slide 4: 2009 Accomplishments, 2010 Priorities, 2010 Guidance
• 2009 Accomplishments • 2010 Priorities • 2010 Guidance 4
Slide 5: 2009 Priorities & Accomplishments
2009 Priorities & Accomplishments 2009 Priorities Accomplishments Regulatory Strategy • Successfully obtained authorization to implement renewable energy and energy optimization plans Successfully execute key regulatory proceedings to provide stability in 2009 • Received constructive rate case order
Slide 6: Further Strengthened Our Regulatory Structure in 2009 for Detroit Edison
Further Strengthened Our Regulatory Structure in 2009 for Detroit Edison 2009 Added Elements in 2010 • 11% ROE • Revenue decoupling – Removes disincentive for • Addresses revenue and • File & Use Rates* cost uncertainty / lag Energy Optimization – 6 month self-implementation – File & Use rate making
Slide 7: Build Upon Constructive Relationships in 2010
Build Upon Constructive Relationships in 2010 We will Continue to Build Constructive Relationships to Maintain our Solid Regulatory Environment and Ensure the Financial Health of our Utilities 2009 Ranking of State Utility Environments • Build upon constructive relationships to maintain the policy g
Slide 8: Solid 2009 Results Driven by Continuous Improvement Initiatives
Solid 2009 Results Driven by Continuous Improvement Initiatives Utility O&M* ($ millions) • Through continuous improvement (CI) and other initiatives DTE achieved $130 million in company-wide cost reductions in 2009 – Utility O&M was down $65 million vs. 2008 with cost reductions more than offsettin
Slide 9: Exiting 2009 with a Solid Foundation for Future Growth
Exiting 2009 with a Solid Foundation for Future Growth Operating Earnings Per Share* ($ millions) wth - 6 % Lo ng-Term Gro 5% $3.35 - $3.75 $3.30 • Achieved strong 2009 results during a $2.89 challenging year • Expect higher than targeted long-term operating EPS growth in 2010: – 11% CAGR from 2008
Slide 10: Our Solid Balance Sheet Provides Financial Flexibility to Fund Our Growth
Our Solid Balance Sheet Provides Financial Flexibility to Fund Our Growth Leverage* 53% 51% 50% • Key balance sheet metrics improved in 2009 compared to the prior year • Generated ~$700 million of free cash flow • S&P recently changed DTE’s outlook from negative to stable • We expect to maintain our
Slide 11: 2009 Accomplishments, 2010 Priorities, 2010 Guidance
• 2009 Accomplishments • 2010 Priorities • 2010 Guidance 11
Slide 12: 2010 Priorities
2010 Priorities EMPLOYEE ENGAGEMENT Manage employee engagement as a top priority in every part of DTE Energy. CUSTOMER SATISFACTION Take a sharp step up in customer satisfaction — close half the gap to first quartile in 2010. CONTINUOUS IMPROVEMENT Broaden and deepen our effort — target a Cl capabil
Slide 13: 2010 Growth & Value Creation and Financial Priorities
2010 Growth & Value Creation and Financial Priorities Capital Investment 2010 Growth & Value Creation ($ billions) $4.0 - $4.8 • Successfully execute our first major investments in Detroit Edison renewable assets $3.9 $0.6 - $0.9 • Tightly execute our Monroe Power Plant scrubber $0.7 $0.4 - $0.5 inv
Slide 14: Growth & Value Creation: Detroit Edison Investment Profile
Growth & Value Creation: Detroit Edison Investment Profile Renewable Energy Environmental • New generation to • Significant investment meet Renewable to meet environmental Portfolio Standard requirements (RPS) • $500 - $600 million • $300 - $400 million investment 2010-2012 investment 2010-2012 ($75
Slide 15: Growth & Value Creation: Gas Storage and Pipelines
Growth & Value Creation: Gas Storage and Pipelines History of Strong Net Income Growth ($ millions) Pipeline $49 Storage $38 $34 $25 $28 $17 $11 • 2010 operating earnings* guidance of $50 - $55 million Storage Operations: MPSC Regulated Storage Growth •Fully contracted (7.5 year average • Increases
Slide 16: Growth & Value Creation: Power & Industrial Projects
Growth & Value Creation: Power & Industrial Projects Industrial • Industrial sector demand - especially steel - • Utility services at strengthening industrial sites • Fuel supply and • Stronger coke demand results in 2010 operating transportation for earnings* guidance of $60 - $75 million industria
Slide 17: Unconventional Gas Overview
Unconventional Gas Overview Plan to Continue Development and Monetization of Unconventional Gas Assets for Premium Returns 2009 Results Barnett Shale Operating Metrics • Proved reserves increased 40% from YE 2008 Reserves (Bcfe) Gross Producing Wells • Drilled 11 new wells in 2009 489 • Production d
Slide 18: Conclusion
Conclusion • Successfully executed our 2009 plan in a challenging environment • Solid plan in place to achieve strong 2010 financial results • Constructive regulatory structure and continued focus on operational excellence and customer satisfaction enables meaningful growth at utilities • Continue t
Slide 19: 2009 Accomplishments, 2010 Priorities, 2010 Guidance
• 2009 Accomplishments • 2010 Priorities • 2010 Guidance 19
Slide 20: 2010 Operating Earnings Guidance
2010 Operating Earnings* Guidance 2009 2010 ($ millions) Actual Guidance 2010 Drivers Rate case finalized in Jan. 2010, revenue decoupling and Detroit Edison $380 $405 - 435 continued cost control Self-implementation/resolution of rate case, utility MichCon 80 95 - 105 capital placed into service an
Slide 21: Cautiously Optimistic on 2010 Economic Outlook
Cautiously Optimistic on 2010 Economic Outlook Detroit Edison Temperature Normal Sales • Overall, see economy stabilizing (Territory Sales) – Steel and vehicle production improving from last year – Companies are finding 2010E vs. opportunities to invest in Michigan 2009 Percentage Change vs. 2008 20
Slide 22: Detroit Edison 2010 Operating Earnings Guidance
Detroit Edison 2010 Operating Earnings* Guidance ($ millions) 2010 Drivers $40 ($10) ($10) ($15) $70 ($20- $50) $405 - $435 • Full-year rate increase vs. July self- implementation in 2009 $380 • Colder than normal weather in 2009; revenue decoupling mitigates potential weather impacts in 2010 • Incr
Slide 23: MichCon 2010 Operating Earnings Guidance
MichCon 2010 Operating Earnings* Guidance ($ millions) 2010 Drivers $95 - $105 • $170 million self-implementation in $80 January 2010; final order expected June 2010 • Lower margin driven by customer conservation, lower customer count and lower storage revenues • Continuous improvement initiatives p
Slide 24: 2010 Cash Flow Guidance
2010 Cash Flow Guidance Cash Flow Summary 2010 Drivers ($ billions) 2009 2010 Actual Guidance • 2010 cash from operations expected to be lower than 2009 driven by: Cash From Operations $1.8 $1.6 – Additional $100 million of federal tax Capital Spending (1.1) (1.4) payments in 2010 versus 2009 Free C
Slide 25: 2010 Capital Expenditure Guidance
2010 Capital Expenditure Guidance Capital Expenditures Summary 2010 Drivers ($ millions) Detroit Edison 2009 2010 Actual Guidance • Higher operational capital primarily due to scaling up Advanced Metering Infrastructure (AMI) and Detroit Edison nuclear fuel costs Operational $666 $750 • Lower enviro
Slide 26: 2010 Equity Plan
2010 Equity Plan • Cash flow requirements will be funded with ($ millions) both debt and equity to maintain balance $200 sheet targets Pension • We will continue prior year practice of Contribution issuing new shares to fund DRIP and $100 employee benefit plans $82 • In 2010, expect to issue ~$100 m
Slide 27: Investment Thesis
Investment Thesis • Track record of strong performance in a challenging environment • DTE Energy has a robust plan for 5%-6% long-term EPS growth combined with an attractive dividend yield • Constructive regulatory structure and continued cost savings will enable our utilities to earn their 5%-6% Av
Slide 28: Contact Us
Contact Us DTE DTE Energy Energy Investor Investor Relations Relations www.dteenergy.com/investors www.dteenergy.com/investors 313-235-8030 313-235-8030 28
Slide 29: Appendix
DTE Energy: Appendix
Slide 30: 2009 Operating Earnings Per Share
2009 Operating Earnings Per Share* $3.30 Detroit Edison MichCon** Non-Utility Corporate & Other $2.30 $0.49 $0.93 ($0.42) Gas Storage and Unconventional Power and Energy Trading Pipelines Gas Production Industrial Projects $0.46 $0.30 ($0.05) $0.22 * Reconciliation to GAAP reported earnings included
Slide 31: 2009 Operating Earnings Variance
2009 Operating Earnings Variance Operating Earnings* Drivers ($ millions, except EPS) Detroit Edison 2008 2009 Change • Rate increases and O&M cost reductions; partially Detroit Edison $ 331 $ 380 $ 49 offset by lower volumes due to weaker economy, cooler weather and higher benefit expenses MichCon
Slide 32: Detroit Edison Variance Analysis
Detroit Edison Variance Analysis Detroit Edison Operating Earnings* Variance Drivers ($ millions) $28 ($19) • Temperature-normal sales down 7% $179 $5 $380 $331 ($144) • Cooler weather in 2009 • December 2008 rate order and July 2009 self-implementation • O&M driven by continuous improvement initiat
Slide 33: MichCon Variance Analysis
MichCon Variance Analysis MichCon Operating Earnings* Variance Drivers ($ millions) • Lost gas / theft increased by 1.8 Bcf $89 ($9) ($9) $6 $80 • Lower gain on base gas sale driven ($6) $9 by lower prices and volumes • Sales volume decreased 3% primarily due to increased customer conservation, warm
Slide 34: DTE Energy Trading Reconciliation of Operating Earnings to Economic Net Income
DTE Energy Trading Reconciliation of Operating Earnings* to Economic Net Income ($ millions) Energy Trading Operating $75 $(13) Earnings* $62 • Economic net income ($ millions, after-tax) equals economic gross margin*** minus O&M 2009 2008 expenses and taxes. • DTE Energy management Realized $104 $6
Slide 35: 2009 Capital Expenditures and Cash Flow
2009 Capital Expenditures and Cash Flow DTE Energy Capital Expenditures DTE Energy Cash Flow ($ millions) ($ billions) 2008 2009 Detroit Edison 2008 2009 Operational $675 $666 Environmental 269 116 Cash From Renewables / EO - 11 Operations $1.3 * $1.8 $944 $793 Capital Spending (1.5) (1.1) MichCon F
Slide 36: Reconciliation of 2009 Reported to Operating Earnings
Reconciliation of 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 performance measu
Slide 37: Reconciliation of 2008 Reported to Operating Earnings
Reconciliation of 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 measu
Slide 38: Reconciliation of 2010 Reported to Operating Earnings
Reconciliation of 2010 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 39: Reconciliation of 2008 Cash from Operations to Adjusted Cash from Operations
Reconciliation of 2008 Cash from Operations to Adjusted Cash from Operations Use of Adjusted Cash From Operations - DTE Energy management believes that adjusted cash from operations provide a more meaningful representation of the company's cash from ongoing operations and uses adjusted cash from ope