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DTE Energy Management Discusses Q3 2010 Results – Earnings Call Transcript

DTE Energy Management Discusses Q3 2010 Results â¿¿ Earnings Call Transcript

DTE Energy Company (



Q3 2010 Earnings Conference Call

October 29, 2010 10 AM ET


David Meador – EVP and CFO

Peter Oleksiak – VP, Controller

Nick Khouri – Treasurer


Kevin Cole – Credit Suisse

Ashar Khan – Visium Asset Management


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Previous Statements by DTE
» DTE Energy Company Q2 2010 Earnings Call Transcript
» DTE Energy Company Q1 2010 Earnings Call Transcript
» DTE Energy Company Q4 2009 Earnings Call Transcript
» DTE Energy Company Q3 2009 Earnings Call Transcript

Welcome to the DTE Energy third quarter 2010 earnings conference call. Today’s conference is being recorded. At this time, I like to turn the conference over to Mr. David Meador, please go ahead, sir.

David Meador

Thank you, and good morning, and welcome to our third quarter conference call. Before we get started, I encourage you to read the Safe Harbor statement on page two, including the reference to forward-looking statements.

With me this morning are Peter Oleksiak, our Controller; Nick Khouri, our Treasurer; and Mark Rolling, our Director of Investor Relations. I also have with me members of the management team that I might call on during the Q&A session.

If you can turn to Slide 5, let me start with an overview. We’ve talked about our investment thesis on a number of occasions. This lays out our financial aspirations, and highlights what we, as a management team, are focused on. Our financial plan support our target of 5% to 6% long-term earnings per share growth, and attractive dividend, which we increased by nearly 6% last quarter, and a strong balance sheet.

We understand the needs and challenges of our customers and we continue to work closely with the MPSC. This gives us the confidence that we can grow the utilities in a manner that provides an attractive return to our shareholders, while at the same time being aware of the financial pressures of our customers. To do this, we need to manage significant capital on investment at Detroit Edison and MichCon. Much of the growth of the utilities is being driven by environmental mandates and renewable energy standards which are required by Federal and State Regulations.

At the same time, we face the significant capital investment requirements, we need to focus on the needs of our customers by ensuring the lowest possible rates and providing the highest level of customer service. To do this, we’re leveraging our continuous improvement capabilities to reduce both our O&M cost as well as our capital expenditures to ensure we minimize the overall rate impact on customers, and at the same time, improving our operational performance and customer service. When you combine the cost reduction efforts with constructive regulatory environment, we are confident that the two utilities will be able to earn their authorized return of 11% and grow 5% to 6% over time.

At the beginning of the third quarter, we filed for a $51 million rate increase in MichCon and later today, we will file a rate case for Detroit Edison. We’re not able to talk about the Detroit Edison rate case on this call before its filed but we will be preparing our standard investor summary document which will 8-K later on today. And of course, we’ll discuss this in more detail at EEI next week.

Our non-utility businesses continue to provide growth opportunities, as well as diversify our earnings. We’re prepared to go on a more detail on these businesses next week, also including both near and long term outlooks.

Now turning to page 6, our earnings for the third quarter came in at $0.96 per share, $0.05 above last year. The increase in earnings is primarily the result of solid results of the utilities in another robust quarter at the Power and Industrial group. Partially offsetting this is the third quarter loss of Energy Trading and higher cost at corporate and other.

Given the results through the third quarter and our forecast for the remainder of the year, we are tightening our 2010 guidance to $3.50 to $3.70 per share, which results in a year-over-year increase per share growth of 9% at midpoint. This is an improvement over the 7.6% growth we originally expected in our original guidance of $3.55 per share.

The local economy continues to improve. Year-to-date load is up to 2.3% on a temperature normal bases and industrial load is up almost 15% year-to-date. Then, we see other indicators of the economy recovering. Finally, our balance sheet metrics are strong and where we like them to be. Year-to-date, we have generated $1.5 billion in cash from operations and we’re increasing our full-year guidance for cash flow and Nick will take you through that in a few minutes.

On page 7 is an update of our 2010 guidance. As you know, the original guidance was $3.55 per share at midpoint and that’s the left hand column. After a strong first quarter at Detroit Edison, Power and Industrial and Energy Trading, we raised our guidance in April to a midpoint of $3.63 and that’s the middle column on this page. As we come into the final quarter where refine our guidance to reflect the continued strong performance of the utilities, Power and Industrial and the holding company, which is helping to offset the performance at Energy Trading. While there’s earnings mix change, holding the bottom line is something we take very seriously and we’re driving to deliver earnings pretty close to the revised guidance that we provided in the spring.

Let me walk down this page by going down the right hand column. With solid performance at our utilities, we’re raising the lower end of Detroit Edison’s guidance range by $10 million and we’re narrowing and raising the guidance range for MichCon to $105 million to $110 million. In an effort to stay out of rate case of Detroit Edison as long as possible, we captured a number of one-time cost savings opportunity which flowed through the bulk utilities.

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