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| file | filename |
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| EX-99.1 - EXHIBIT 99.1 - DTE ENERGY CO | exhibit991-12312016.htm |
| 8-K - 8-K - DTE ENERGY CO | a8-kearningsreleaseyearend.htm |
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1
EXHIBIT 99.2
Year End 2016
Earnings Conference Call
February 9, 2017
Safe Harbor Statement
Many factors impact forward-looking statements including, but not limited to, the following: impact of regulation by the EPA, the FERC, the
MPSC, the NRC, and for DTE Energy, the CFTC, as well as other applicable governmental proceedings and regulations, including any
associated impact on rate structures; the amount and timing of cost recovery allowed as a result of regulatory proceedings, related appeals, or
new legislation, including legislative amendments and retail access programs; economic conditions and population changes in our geographic
area resulting in changes in demand, customer conservation, and thefts of electricity and, for DTE Energy, natural gas; environmental issues,
laws, regulations, and the increasing costs of remediation and compliance, including actual and potential new federal and state requirements;
health, safety, financial, environmental, and regulatory risks associated with ownership and operation of nuclear facilities; changes in the cost
and availability of coal and other raw materials, purchased power, and natural gas; volatility in the short-term natural gas storage markets
impacting third-party storage revenues related to DTE Energy; impact of volatility of prices in the oil and gas markets on DTE Energy's gas
storage and pipelines operations; impact of volatility in prices in the international steel markets on DTE Energy's power and industrial projects
operations; volatility in commodity markets, deviations in weather, and related risks impacting the results of DTE Energy's energy trading
operations; changes in the financial condition of DTE Energy's significant customers and strategic partners; the potential for losses on
investments, including nuclear decommissioning and benefit plan assets and the related increases in future expense and contributions; access
to capital markets and the results of other financing efforts which can be affected by credit agency ratings; instability in capital markets which
could impact availability of short and long-term financing; the timing and extent of changes in interest rates; the level of borrowings; the potential
for increased costs or delays in completion of significant capital projects; changes in, and application of, federal, state, and local tax laws and
their interpretations, including the Internal Revenue Code, regulations, rulings, court proceedings, and audits; the effects of weather and other
natural phenomena on operations and sales to customers, and purchases from suppliers; unplanned outages; the cost of protecting assets
against, or damage due to, cyber crime and terrorism; employee relations and the impact of collective bargaining agreements; the risk of a major
safety incident at an electric distribution or generation facility and, for DTE Energy, a gas storage, transmission, or distribution facility; the
availability, cost, coverage, and terms of insurance and stability of insurance providers; cost reduction efforts and the maximization of plant and
distribution system performance; the effects of competition; changes in and application of accounting standards and financial reporting
regulations; changes in federal or state laws and their interpretation with respect to regulation, energy policy, and other business issues; contract
disputes, binding arbitration, litigation, and related appeals; implementation of new information systems; and the risks discussed in our public
filings with the Securities and Exchange Commission. New factors emerge from time to time. We cannot predict what factors may arise or how
such factors may cause results to differ materially from those contained in any forward-looking statement. Any forward-looking statements speak
only as of the date on which such statements are made. We undertake no obligation to update any forward-looking statement to reflect events or
circumstances after the date on which such statement is made or to reflect the occurrence of unanticipated events. This presentation should also
be read in conjunction with the Forward-Looking Statements section of the joint DTE Energy and DTE Electric 2016 Form 10-K (which section is
incorporated by reference herein), and in conjunction with other SEC reports filed by DTE Energy and DTE Electric.
2
Participants
• Gerry Anderson – Chairman and CEO
• Jerry Norcia – President and COO
• Peter Oleksiak – Senior Vice President and CFO
• Barbara Tuckfield – Director, Investor Relations
3
• 2016 Accomplishments
• Long-Term Growth Update
• Financial Update
4
• Best employee safety rate in company history
• 4th consecutive Gallup Great Workplace award; only
utility to be recognized
Focus on our employees and customers has been
the foundation of our success
5
* J.D. Power 2016 Electric Utility Residential and 2016 Gas Utility Residential Customer Satisfaction Study(sm)(large providers). Visit jdpower.com
Employee Engagement
• Top quartile customer satisfaction for both electric and
gas residential customers in latest J.D. Power studies*
• Utility infrastructure reliability enhanced
Customer Satisfaction
• Constructive electric and gas rate orders
• Michigan energy legislation signed into law
Our growth plans for the utilities and non-utilities
are well supported for the long-term
6
Political & Regulatory Environment
• Combined cycle gas plant build announced
• Major acquisition at Gas Storage & Pipelines
• Significant progress on NEXUS pipeline
Growth / Value
Capacity requirements
10% ROA cap
10-month rate case cycle
15% renewables by 2021
Achieved operating EPS* of $5.28
Exceeded original guidance for
10th consecutive year
Increased operating EPS growth
target to 5% - 7% from 5% - 6%
Increased 2017 annualized
dividend by 7.1%; targeting ~7%
dividend increases in 2018 and
2019
Delivered total shareholder return
at top quartile of S&P 500 Utilities
for 3, 5, and 10 year periods
* Reconciliation to GAAP reported earnings included in the appendix 7
DTE achieved strong financial performance in 2016
(dollars per share)
* Reconciliation to GAAP reported earnings included in the appendix
** Growth segments midpoint (excludes Energy Trading)
2017
Guidance
$5.25
Growth
Segment
$4.93
**
$5.31
2016 Original
Guidance
2016
Actual
$3.08
$3.30
Operating EPS Annualized dividend per share
$5.28
$5.14
Growth
Segment
• 2016 Accomplishments
• Long-Term Growth Update
• Financial Update
8
2017 – 2021 Plan
2012 – 2016
$12 billion
$13.5 billion
2017 – 2021 Capital Plan
Electric............... $8.4 billion
Distribution infrastructure,
maintenance, new generation
Gas .................... $1.8 billion
Base investments, infrastructure
renewal, NEXUS related
GSP .......... $2.2 to $2.8 billion
Expansions, NEXUS
P&I ........... $0.6 to $1.0 billion
Cogeneration, on-site energy
+12.5%
9
Growth through 2021 fueled by investment in utility
infrastructure and generation along with midstream
opportunities
Infrastructure Redesign Infrastructure Resilience
Technology Enhancements
structure
Upgraded nearly 20% of circuits since 2013; impact
33% of circuits by the end of 2020, improving reliability
on impacted circuits by up to 70%
Major investments planned at 20-25 substations by 2021
to address load growth and aging infrastructure
Remote monitoring capability more than doubled from
2015 to 2016 with 100% capability planned by 2019
10
DTE Electric distribution investments continue to
drive reliability and increase customer satisfaction
Tree Trimming
Enhanced program has resulted in a 70% reliability
improvement on trimmed circuits
Main Replacement Pipeline Integrity
Meter Move Out
Systematically replaces poor performing
unprotected main - minimizing leaks and
improving customer satisfaction
Drives productivity - reducing manual meter
reading costs
Strengthens the system - decreasing the
potential for system failures
11
Replacing aging infrastructure achieves a
fundamental shift in performance, cost and
productivity at DTE Gas
ri s ro cti it - re cin l t r
re in st
• FERC certificate of construction expected 1H17
• In-service 4Q17
• Ohio interconnect agreements provide 1.75 Bcf/d of
market access
• Mainline expandable up to 2.0 Bcf/d
NEXUS
• Initial shipper demand greater than anticipated
– Firming up near-term growth plans
• Strong tie with existing markets; new market access to
Gulf and Mid-Atlantic / LNG exports
• Expansion potential over 1.0 Bcf/d
Link Lateral & Gathering*
Pipeline and gathering platforms provide unique
opportunities and synergies for long-term growth
12
* Includes Appalachia Gathering System (AGS) and 55% of Stonewall Gas Gathering (SGG)
• 2016 Accomplishments
• Long-Term Growth Update
• Financial Update
13
2015 2016 Change
DTE Electric 562$ 622$ 60$
DTE Gas 132 138 6
Gas Storage & Pipelines 107 127 20
Power & Industrial Projects 95 95 -
Corporate & Other (48) (59) (11)
Growth segments** 848$ 923$ 75$
Growth segments operating EPS 4.73$ 5.14$ 0.41$
Energy Trading 15 25 10
DTE Energy 863$ 948$ 85$
Operating EPS 4.82$ 5.28$ 0.46$
Avg. Shares Outstanding 179.0 179.5
DTE Electric
• Weather and rate implementation
offset by 2015 RDM*** amortization
and O&M initiatives to enhance
customer reliability
DTE Gas
• Rate implementation and main
replacement surcharge offset by
warmer weather
Gas Storage & Pipelines
• Higher pipeline and storage platform
earnings
Corporate & Other
• State tax adjustment related to Link
acquisition and early debt redemption
fees
Energy Trading
• Higher realized power and gas results
(millions, except EPS)
Primary Drivers Operating Earnings
14
DTE Energy
2016 Operating Earnings* Variance
** Total DTE Energy excluding Energy Trading
*** Revenue decoupler mechanism
* Reconciliation to GAAP reported earnings included in the appendix
2017
Guidance
DTE Electric
DTE Gas
Gas Storage & Pipelines
Power & Industrial Projects
Corporate & Other
Growth segments**
Growth segments operating EPS
Energy Trading
DTE Energy
Operating EPS
Avg. Shares Outstanding
$610 - $624
143 - 151
140 - 150
90 - 100
(64) - (60)
$919 - $965
$5.12 - $5.38
$5 - $15
$924 - $980
179.5
$5.15 - $5.46
2016
Actuals
$622
138
127
95
(59)
$923
$5.14
$25
$948
179.5
$5.28
15
2017 operating EPS* guidance supports 5% - 7%
growth
(millions, except EPS)
* Reconciliation to GAAP reported earnings included in the appendix
** Total DTE Energy excluding Energy Trading
• 2017 operating EPS growth
segment guidance midpoint
growing 6.5% from 2016
original guidance of $4.93
• 2017 guidance assumes
return to normal weather
– 2016 included
significant weather
favorability at DTE
Electric
With tax reform, DTE is uniquely situated to
maximize customer and shareholder value
16
= Consolidated DTE Impact is Manageable
Customer savings allow for potential additional reliability investment
Increased earnings at non-utilities offset loss of interest deductions at holding company
Operating EPS growth target remains at 5%-7%
• Reduces customers
rates
• Allows acceleration
of customer centric
reliability projects
• Increases earnings
• Reduces cash flow
+ Utilities + Non-utilities - Holding Company Assumptions
• Increases earnings • Reduces earnings
• Corporate tax rate
reduction to 20%
• 100% capital
expensing
• Loss of interest
expense deductibility
on all debt
• Permanent loss of
value for customers
• Increases cash flow
• Deferred benefit
• Reduces earnings • Reduces earnings
• No impact • Deferred benefit
Engaged employees create a safe work environment and drive great operational
results
Value driven utility investments provide an excellent customer experience while
ensuring affordable rates
Constructive regulatory environment and continued cost savings enable utilities to
earn authorized returns
Strategic and transparent growth opportunities in non-utility businesses offer
diversity in earnings and geography
Strong EPS and dividend growth that deliver premium total shareholder returns
17
Summary
DTE Energy Investor Relations
www.dteenergy.com/investors
(313) 235-8030
Contact Us
18
Appendix
• Warmer weather
Variance to normal weather
– 2015: $1
– 2016: $59
• Rates supporting infrastructure
improvements to enhance
customer reliability
• Rate base growth (depreciation,
property tax and interest)
• Other is primarily reliability
related spend
$562
$622 $58
$101
($38)
($27)
($34)
Primary Drivers Operating Earnings* Variance
20
DTE Electric Variance Analysis
(millions)
2015
Operating
Earnings
2016
Operating
Earnings
Weather Rate Case
Impact
RDM Rate Base
Growth
Other
* Reconciliation to GAAP reported earnings included in the appendix
YTD 2015 YTD 2016 % change 4Q 2015 4Q 2016 % change
Actuals 836 1,123 34% Actuals 1,719 2,010 17%
Normal 803 803 0% Normal 2,238 2,185 (2%)
Deviation from normal 4% 40% Deviation from normal (23%) (8%)
YTD 2015 YTD 2016 % change
Actuals 6,283 5,812 (7%)
Normal 6,376 6,405 0%
4Q YTD Deviation from normal (1%) (9%)
($11) $1
$0 $59
4Q YTD
($0.06) $0.01 4Q YTD
$0.00 $0.33 ($20) ($3)
($4) ($16)
(Includes Electric Choice) (GWh) 4Q YTD
YTD 2015 YTD 2016 % change ($0.11) ($0.02)
Residential 15,055 15,182 1% ($0.02) ($0.09)
Commercial 20,033 20,219 1%
Industrial* 11,940 11,886 0%
Other 291 264 (9%)
TOTAL SALES** 47,319 47,551 0.5%
DTE Electric service territory DTE Gas service territory
Variance from normal weather
($ millions, after-tax)
2015
2016
Variance from normal weather
($ per share)
2015 ($ millions, after-tax)
2016 2015
2016
($ per share)
2015
2016
Cooling degree days
21
Weather and DTE Electric Weather Normal Sales
* 2015 includes sales adjusted for steel resolution
** Includes choice of 4,870 YTD 2015 and 4,892 YTD 2016
Heating degree days
Earnings impact of weather – DTE Electric
Earnings impact of weather – DTE Gas
Weather Normal Electric Sales – DTE Electric Service Area
21%
2016 2017-2019E
51%
2016 2017-2019E
Leverage*
Funds from Operations** / Debt*
Target
50% - 53%
Target
20% +
• Cash flow and balance sheet strength
are a key priority
• No equity issuances in 2016
‒ Acquisition related equity of $675
million in late 2019 (through
convertible equity units)
‒ No additional equity planned
through 2019
• Issued $2.7 billion of long-term debt
to fund growth
• $1.5 billion of available liquidity at
December 31, 2016
22
Strong balance sheet supports growth
* Debt excludes a portion of DTE Gas’ short-term debt and considers 50% of the junior subordinated notes and 100% of the convertible equity units as equity
** Funds from Operations (FFO) is calculated using operating earnings
2015
Actual
2016
Actual
Cash From Operations* $1.9 $2.1
Capital Expenditures (2.3) (3.4)
Free Cash Flow ($0.4) ($1.3)
Asset Sales & Other 0.1 -
Dividends (0.5) (0.5)
Net Cash ($0.8) ($1.8)
Debt Financing:
Issuances $1.1 $2.7
Redemptions (0.3) (0.9)
Change in Debt $0.8 $1.8
Cash Flow
23
DTE Energy
2016 Cash Flow and Capital Expenditures Actuals
(billions)
Capital Expenditures
2015
Actual
2016
Actual
DTE Electric
Distribution Infrastructure $579 $567
New Generation 316 131
Maintenance & Other 892 805
$1,787 $1,503
DTE Gas
Base Infrastructure $184 $177
NEXUS Related 2 94
Main Replacement** 87 124
$273 $395
Non-Utility*** $299 $1,533
Total $2,359 $3,431
** Includes Main Renewal / Meter Move-out / Pipeline Integrity
* Includes ~$0.2b and $0 equity issued for employee benefit programs in 2015 and 2016, respectively
*** Non-utility capital is higher driven by Gas Storage & Pipelines acquisition
(millions)
2016
Actual
2017
Guidance
DTE Electric
Distribution Infrastructure $567 $690
New Generation 131 45
Maintenance & Other 805 725
$1,503 $1,460
DTE Gas
Base Infrastructure $177 $200
NEXUS Related 94 90
Main Replacement* 124 145
$395 $435
Non-Utility $1,533 $900 - $1,100
Total $3,431 $2,795 - $2,995
2016
Actual
2017
Guidance
Cash From Operations $2.1 $1.9
Capital Expenditures (3.4) (3.0)
Free Cash Flow ($1.3) ($1.1)
Asset Sales & Other - -
Dividends (0.5) (0.6)
Net Cash ($1.8) ($1.7)
Debt Financing:
Issuances $2.7 $1.7
Redemptions (0.9) -
Change in Debt $1.8 $1.7
Capital Expenditures Cash Flow
24
DTE Energy
2017 Cash Flow and Capital Expenditures Guidance
(billions) (millions)
* Includes Main Renewal / Meter Move-out / Pipeline Integrity
• Self implemented general
rates 3Q
DTE Gas DTE Electric
2017
2016
2018+
• Final rate order and IRM
ruling 4Q
– $122 million rate order
– 10.1% ROE
• Final rate order 1Q
– $184 million rate order
– 10.1% ROE
• File rate case 2Q
• Annual rate cases • Expect rate case filing
2018/2019
25
Regulatory Update – Electric and Gas
$15
$54
• Economic net income
equals economic gross
margin*** minus O&M
expenses and taxes
• DTE Energy management
uses economic net income
as one of the performance
measures for external
communications with
analysts and investors
• Internally, DTE Energy
uses economic net income
as one of the measures to
review performance
against financial targets
and budget
Operating Earnings*
Realized
Unrealized
O&M / Other
2015 2016
$34 $61
23 28
(47) (59)
(millions, after-tax)
$15 $25
$39
$25
$15 $40
*** Economic gross margin is the change in net fair value of realized and unrealized purchase and sale contracts including certain non-derivative contract costs
** Consists of 1) the income statement effect of not recognizing changes in the fair market value of certain non-derivative contracts including physical inventory and capacity contracts
for transportation, transmission and storage. These contracts are not marked-to-market, instead are recognized for accounting purposes on an accrual basis; 2) operating
adjustments for unrealized marked-to-market changes of certain derivative contracts; and 3) DTE Energy Foundation contributions
* Reconciliation to GAAP reported earnings included in the appendix
2016 Economic
Net Income
Adjustments**
2016 Operating
Earnings*
2015 Operating
Earnings*
2015 Economic
Net Income
Adjustments**
26
DTE Energy Trading Reconciliation of Operating
Earnings* to Economic Net Income
(millions)
Use of Operating Earnings Information – DTE Energy management believes that operating earnings provide a more meaningful representation of the company’s earnings from ongoing
operations and uses operating earnings as the primary performance measurement for external communications with analysts and investors. Internally, DTE Energy uses operating
earnings to measure performance against budget and to report to the Board of Directors. Operating earnings are presented both with and without Energy Trading. The term “Growth
Segments” refers to DTE Energy without Energy Trading and represents the business segments that management expects to generate earnings growth going forward.
2016 Actual
DTE
Electric DTE Gas
Gas Storage
and Pipelines
Power and
Industrial
Projects
Corporate
and Other
Growth
Segments
Energy
Trading DTE Energy
R d rnings 622$ 138$ 119$ 95$ (61)$ 913$ (45)$ 868$
Pl t cl sure - - - - - - - -
Link - - 8 - 2 10 - 10
Certain mark-to-market transactions - - - - - - 70 70
Operating Earnings 622$ 138$ 127$ 95$ (59)$ 923$ 25$ 948$
Net Income (millions)
2016 A u l
DTE
Electric DTE Gas
Gas Storage
and Pipelines
Power and
Industrial
Projects
Corporate
and Other
Growth
Segments
Energy
Trading DTE Energy
Repor ed Earnings 3.47$ 0.77$ 0.66$ 0. 3$ 0.35)$ 5.08$ (0.25)$ 4.83$
Plant closure - - - - - - - -
Link 0.05 0.01 0.06 0.06
Certain mark-to-market transactions - - - - - - 0.39 0.39
Operating Earnings 3.47$ 0.77$ 0.71$ 0.53$ (0.34)$ 5.14$ 0.14$ 5.28$
EPS
After-tax items:
After-tax items:
*
**
NI Tax impact of adjustments
[80÷ (1-39%)] – 80 = $51.15
EPS Tax impact of adjustments
Results from above ÷ shares outstanding
$51.15 ÷ 179 = $0.29
27
2016 Reconciliation of Reported to Operating
Earnings
* Total tax impact of adjustments to reported earnings: $51m
** Total tax impact of adjustments to reported EPS: $0.29
2015 Actual
DTE
Electric DTE Gas
Gas Storage
and Pipelines
Power and
Industrial
Projects
Corporate
and Other
Growth
Segments
Energy
Trading DTE Energy
Reported Earnings 542$ 132$ 107$ 16$ (48)$ 749$ (22)$ 727$
PSCR disallowances 12 - - - - 12 - 12
Tree trimming disallowance 8 - - - - 8 8
Plant closure - - - 69 - 69 69
Contract termination - - - 10 - 10 - 10
Natural gas pipeline refund - - - - - - (10) (10)
Certain mark-to-market transactions - - - - - - 47 47
Operating Earnings 562$ 132$ 107$ 95$ (48)$ 848$ 15$ 863$
Net Income (millions)
2015 Actual
DTE
Electric DTE Gas
Gas Storage
and Pipelines
Power and
Industrial
Projects
Corporate
and Other
Growth
Segments
Energy
Trading DTE Energy
Reported Ea nings 3.02$ 0.73$ 0.60$ 0.09$ (0.27)$ 4. 7$ (0.12)$ 4.05$
PSCR disallowances 0.07 0.07 - 0.07
Tr e trimming disallowance 0.05 0.05 - 0.05-
Plant closure - - - 0.39 - 0.39 - 0.39 -
Contract termination - - - 0.05 - 0.05 - 0.05
Natural gas pipeline refund - - - - - - (0.05) (0.05)
Certain mark-to-market transactions - - - - - - 0.26 0.26
Operating Earnings 3.14$ 0.73$ 0.60$ 0.53$ (0.27)$ 4.73$ 0.09$ 4.82$
EPS
After-tax items:
After-tax items:
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 measurement for external communications with analysts and investors. Internally, DTE Energy uses operating
earnings to measure performance against budget and to report to the Board of Directors. Operating earnings are presented both with and without Energy Trading. The term “Growth
Segments” refers to DTE Energy without Energy Trading and represents the business segments that management expects to generate earnings growth going forward.
*
**
NI Tax impact of adjustments
[20 ÷ (1-40%)] – 20 = $13.33
[79 ÷ (1-39%)] – 79 = $50.51
[37 ÷ (1-39%)] – 37 = $23.66
$87.50
EPS Tax impact of adjustments
Results from above ÷ shares outstanding
$87.50 ÷ 179 = $0.49
28
2015 Reconciliation of Reported to Operating
Earnings
* Total tax impact of adjustments to reported earnings: $88m
** Total tax impact of adjustments to reported EPS: $0.49
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 representation of the company’s earnings from ongoing operations
and uses operating earnings as the primary performance measurement for external communications with
analysts and investors. Internally, DTE Energy uses operating earnings to measure performance against
budget and to report to the Board of Directors.
In this presentation, DTE Energy provides guidance for future period operating earnings. It is likely that
certain items that impact the company’s future period reported results will be excluded from operating
results. A reconciliation to the comparable future period reported earnings is not provided because it is not
possible to provide a reliable forecast of specific line items. These items may fluctuate significantly from
period to period and may have a significant impact on reported earnings.
29
Reconciliation of Other Reported to Operating
Earnings