Transcript Name of Presentation

European Investor Update
Background Material
June/July 2004
Safe Harbor Statement
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 such as “anticipate,”
“believe,” “expect,” “projected” and “goals” signify forward-looking statements. Forward-looking statements
are not guarantees of future results and conditions but rather are subject to various assumptions, risks and
uncertainties. This press release contains forward-looking statements about DTE Energy’s financial results
and estimates of future prospects, and actual results may differ materially. Factors that may impact forwardlooking statements include, but are not limited to, timing and extent of changes in interest rates; access to the
capital markets and capital market conditions and other financing efforts which can be affected by credit
agency ratings requirements; ability to utilize Section 29 tax credits or sell interest in facilities producing such
credits; the level of borrowings; the effects of weather and other natural phenomena on operations and actual
sales; economic climate and growth in the geographic areas in which DTE Energy does business; unplanned
outages; the cost of protecting assets against or damage due to terrorism; nuclear regulations and risks
associated with nuclear operations; the grant of rate relief by the MPSC for the utilities; changes in the cost of
fuel, purchased power and natural gas; the effects of competition; the implementation of electric and gas
customer choice programs; the implementation of electric and gas utility restructuring in Michigan;
environmental issues, including changes in the climate, and regulations, and the contributions to earnings by
non-regulated businesses. This press release should also be read in conjunction with the forward-looking
statements in DTE Energy’s, MichCon’s and Detroit Edison’s 2003 Form 10-K Item 1, and in conjunction with
other SEC reports filed by DTE Energy, MichCon and Detroit Edison.
2
DTE Energy Geography
Regional Area
of Focus
Synfuels
On-Site Energy Projects
Coke Batteries
Biomass
3
DTE Energy Overview
Utility Platform
Non-Regulated Platform
Power and Industrial Projects
•
•
•
•
Non-conventional Gas Production
• Michigan Gas Production
• Shale and Coalbed Methane
• Landfill Gas
Fuel Transportation and Marketing
• Coal Transportation and Marketing
• Gas Pipelines and Storage
• Energy Trading and Marketing
Generates and distributes electricity
throughout Southeastern Michigan
Produces, gathers, transmits, stores
and distributes natural gas throughout
Michigan
On-site Energy Projects
Steel-Related Projects
Power Generation with Services
Waste Coal Recovery
4
DTE Energy Business Segments
Regulated
Energy
Resources
Energy
Distribution
Energy
Gas
Detroit Edison
Power Generation
Detroit Edison
Power Distribution
MichCon
Gas Distribution
Energy
Services
Non
Regulated
Coal
Services
DTE Energy
Technologies
Non Reg
Energy Gas
Corporate
& Other
Energy Tech
Investments
Holding
Company
Biomass
Energy
Trading &
Co-Energy
Portfolio
5
Outline
• Regulated Business Overview
• Non-Regulated Business Overview
• Financial Information
• Topical Issues
– Environmental
– Michigan Economy
– Energy Technology
6
Profile of Detroit Edison and MichCon
Detroit Edison
• Ninth largest electric utility in
the U.S. with 2.1 million customers
• Over 11,000 MW of power
generation, primarily coal fired
• Fermi 2 nuclear plant is a top
industry performer
• 54,000 GWh in electric sales
• ~$3.7 billion in revenue
Detroit Edison
Distribution Services
MichCon
• Fifth largest natural gas utility in
the U.S. with1.2 million customers
MichCon
Distribution Services
Overlapping
Distribution Services
• 170 Bcf of gas sales
Detroit
• 12% of national gas storage
capacity with 124 Bcf of regulated
gas storage
• ~$1.5 billion in revenue
7
Profile of Detroit Edison and MichCon
• Detroit Edison has a balanced customer mix
• MichCon’s customers are largely stable residential users
• While important, the automobile sector accounts for only 14% of
electric load and 10% of revenue at Detroit Edison
Detroit Edison
2003 Total System Sales - 45,890 GWh
Detroit Edison
2003 Customer Volumes – 172 Bcf
Industrial 1%
Other 6%
Residential
33%
Commercial
24%
Industrial
26%
Residential
75%
Commercial
35%
8
Excludes End User Transportation
Detroit Edison Generation Fleet
• Detroit Edison has a diversified generation portfolio anchored by lower cost,
base load coal and nuclear generation
• With a focus on coal, Detroit Edison generally has limited exposure to more
volatile natural gas prices
Summer Net Rated Capacity
2003 Generation Fuel Mix
~11,000 MW Total
~46,000 GWh Gross Generation
Gas/Oil
1%
Pumped Storage 8%
Nuclear
18%
Peakers 10%
Gas/Oil
9%
Nuclear
10%
Coal
81%
Coal
63%
9
Detroit Edison Power Plant Portfolio
MW
%
Fossil-Fueled Steam-Electric
Belle River
Conners Creek
Greenwood
Harbor Beach
Marysville
Monroe
River Rouge
St. Clair
Trenton Channel
Nuclear - Fermi 2
Hydroelectric Pumped Storage
Oil or Gas-fueled Peaking Units
Total
1,026
215
785
103
84
3,045
510
1,415
730
9.3
1.9
7.1
0.9
0.8
27.6
4.6
12.8
6.6
1,111
10.1
917
8.3
9,941
90%
1,102
10.0
11,043
100%
10
Detroit Edison Plants are WellPositioned on the Regional Supply Curve
ECAR Dispatch Curve - Summer 2005
$80.00
$/MWh
$60.00
Summer
Peak
Demand
(104,000 MW)
$40.00
$20.00
Min Annual Demand
(44,000 MW)
$0.00
0
25,000
50,000
Avg. Annual Demand
(67,000 MW)
75,000
100,000
125,000
Cumulative MW
Hydro & Nuclear
Coal
Combined-Cycle & Steam (Gas)
Detroit Edison Power Plant
All costs include emissions ( NOx and SO2)
CT - Gas/Oil
11
Detroit Edison
Residential Electric Rates
1992 - 2003
Residential Electric Rates
¢/KWh
10
CPI
1992 = 100
CPI
1992–2003
Percent
Change
150
+31%
125
9.5
100
9
75
50
8.5
25
8
-11%
0
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003
12
Source: EEI Summer Typical Bill Survey
Detroit Edison
Commercial Electric Rates
1992-2003
Commercial Electric Rates
¢/KWh
11.781
CPI
1992 = 100
CPI
1992–2003
Percent
Change
150
125
+31%
100
9.8175
75
50
25
7.854
-12%
0
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003
13
Source: EEI Summer Typical Bill Survey
Detroit Edison
Industrial Electric Rates
1992-2003
Industrial Electric Rates
¢/KWh
CPI
1992 = 100
CPI
8.5
150
125
8
1992–2003
Percent
Change
+31%
100
7.5
75
7
50
6.5
25
6
-16%
0
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003
14
Source: EEI Summer Typical Bill Survey
Outline
• Regulated Business Overview
• Non-Regulated Business Overview
• Financial Information
• Topical Issues
– Environmental
– Michigan Economy
– Energy Technology
15
DTE Energy’s Approach to
Non-Regulated Businesses
• Build around unique
DTE Energy strengths
Non-Regulated Net Income
($ millions)
• Focus where competition is
manageable
$228
$205
• Focus on value added/profit
first, scale second
$162
• Pursue closely inter-linked
business lines
$84
$68
• Build outward from regional
base of strength
$42
• Build around broad portfolio,
not a single platform
1998
1999
2000
2001
2002
CAGR: ~40%
2003
16
Non-Regulated Business Segments
Energy Services
Develops and manages energy-related assets and
services, including coke production, synfuel
production, independent power plants, on-site
energy projects and cogeneration services
Energy Marketing &
Trading
Physical power marketing and structured
transactions as well as enhancing returns from
DTE’s power plant, pipeline and storage assets
Coal Services &
Biomass
Coal marketing and transportation, waste coal
recovery and landfill gas recovery
Gas Production &
Storage, Pipelines and
Processing
Develops and produces natural gas in Northern
Michigan, transports and stores natural gas
17
Using This Approach, DTE Energy
Avoided Recent Industry Pitfalls
• Did not overpay for auctioned generation assets
• Avoided international investments
• Did not overemphasize trading business
• Predicted overbuild of merchant generation
• Did not pursue growth at the expense of the balance sheet
• Do not use overly complex and non-transparent
financial structures
• Do not promote unrealistic earnings growth expectations
18
Profile of DTE Energy Services
Synfuels
Power Generation
On-Site Energy Projects
Coke Batteries
NY
MI
PA
OH
IL
IN
WV
KY
NC
Business Profile
• Leverages DTE’s expertise with large
energy users, coal-based fuels and
power generation
• Business lines include
− Coal based fuels (coke batteries and
synfuels)
− On-site energy projects
− Power generation
AL
19
* Synfuel facility in Price, Utah not shown
Profile of DTE Energy Trading
Regions where 95% of
DTE’s trading activity
is concentrated
Business Profile
• Fundamental role of energy trading and
marketing at DTE:
– Add value to the company’s assets and
contractual positions, and to help manage
the risks tied to these assets and positions
– Provide products and services to
customers that lack required capabilities
e.g. munis, co-ops
• Commodities marketed and traded include
power, gas, coal and emissions credits
• 2003 combined net income for Energy
Trading and CoEnergy Portfolio was $29M
20
Profile of DTE Coal Services
Business Profile
• Leverages DTE’s scale as a coal user
and its expertise in coal transportation
and marketing
• Business lines include:
– Coal marketing
– Rail / water transportation
– Railcar maintenance
– Coal and emissions trading
– Coal tolling
– Waste coal recovery
• 2003 net income of $8M
Detroit Edison Plants
Utility Customers / Tolling Sites
Industrial or DTE Energy Services’ Sites
DTE Transportation Services Customer
DTE Dock
21
Profile of DTE Biomass Energy
Current Projects
Gas Sales
Power Sales
Steam Sales
Pipeline Quality Gas
Business Profile
• DTE Biomass is a leading
landfill gas to energy producer
– A niche business for DTE, with
modest competition, and
opportunities for high and
medium Btu production driven
by high natural gas prices
– Owns and operates 34 projects
in 13 states
– Extracts 28 Bcf of landfill gas
annually
– Helped reduce DTE Energy’s
overall CO2 emissions by 10%
• 2003 net income of $6M
22
Profile of Upstream and
Midstream Gas
Business Profile
Gas Production,
Gathering &
Processing
Gas Storage
Coalbed Methane
Focus Areas
Cherokee Basin
Arkoma Basin
• Upstream Gas
– Leverages DTE’s leading position in
Michigan gas production and our
strong technical expertise and
operating skills
– 25 Bcf of annual production from 1700
wells in northern Michigan
– DTE Gas Resources, which develops
coalbed methane projects
• Midstream Gas
– Value and returns enhanced by
marketing and trading opportunities,
economic expansion of assets, and
structuring/partnership opportunities
• 55 Bcf of unregulated gas
storage in Michigan
• 40% equity interest in Vector
pipeline
• 2003 net income of $29M
23
Historical Non-Regulated
Business Returns
Average 2001 - 2003
$ Millions
Energy Services
2003 Invested
Capital, $MM
Unlevered After-Tax
Return on Capital
After-Tax
ROE
$810
21%
28%
Coal Services
$60
23%
>30%
Biomass Energy
$40
14%
16%
$440
7%
7%
$10
N/A
N/A
Gas Production & Midstream Gas
Energy Trading*
* Return on capital is not generally used as a metric for trading operations
24
Outline
• Regulated Business Overview
• Non-Regulated Business Overview
• Financial Information
• Topical Issues
– Environmental
– Michigan Economy
– Energy Technology
25
2003 Financial Summary
Operating Earnings per Share*
$2.84
Energy
Resources
Energy
$0.09
Distribution
Power
Generation
$1.50
Power
Distribution
Energy
Services
$1.18
DTE Energy
($0.09)
Technologies
Coal
Services
$0.05
Biomass
Energy
$0.03
Regulated
Non
Regulated
$3.09
Trading &
Co-Energy
Portfolio
Overheads
& Other
$0.18
Energy
Gas
$0.44
Gas
Distribution
$0.27
Non Reg
Energy Gas
$0.17
Corporate ($0.28)
& Other
Holding
Company
($0.23)
Energy Tech
Investments
($0.05)
$0.17
($0.09)
26
* Reconciliation to GAAP reported earnings included in the appendix
DTE Energy
2002 vs. 2003 Variance
($ millions)
Operating
Earnings*
2002
2003
$586
$521
Key Drivers:
• Weather demand
Regulated
Electric
$352
$282
• Electric Choice impact /
regulatory deferrals
• Storm restoration costs
Regulated
Gas
NonRegulated**
Holding
Company
Earnings Per
Share*
$66
$207
($39)
$3.55***
$46
• Benefit cost escalation
• Uncollectable expenses
$228
($35)
$3.09
• Non-regulated growth
* Reconciliation to GAAP reported earnings included
in the appendix
** Includes Energy Technology Investment
*** Excludes earnings from discontinued operations
(International Transmission Company)
27
Non-Regulated 2003 Review
Operating Earnings (after tax)*
($ millions)
Synfuels
Coke Batteries
On Site Energy Projects
Power Generation
Coal Services
Biomass Energy
Energy Trading & CoEnergy Portfolio
Energy Resources overheads & interest
Upstream & Midstream Gas
DTE Energy Technologies
Energy Technology Investments**
Other
Total
2002
2003
$ 136
52
9
(5)
13
7
25
(22)
26
(16)
(10)
(8)
$ 197
(7)
9
4
8
6
29
(23)
29
(15)
(9)
-
$ 207
$ 228
* Reconciliation to reported earnings included in the appendix
** Primarily Plug Power losses
• Higher year-over year
synfuel production, partially
offset by the absence in
2003 of coke battery
tax credits
• Power Generation gains
from contract restructuring
of $20M
• Gain on the sale of the
Portland pipeline of $10M
• Solid growth in realized
earnings at Energy Trading
• Discontinued equity
accounting at Plug Power in
November 2003
28
2004 Outlook
• Detroit Edison net income is highly dependent on:
– Timing and amount of rate relief
– Implementation of Power Supply Cost Recovery Factor
(PSCR)
– Resolution of customer choice
• MichCon net income is highly dependent on the timing and
amount of rate relief
• Non-regulated net income will be driven by:
– Timing and number of synfuel interests sold and synfuel
production levels
– Growth in coal bed methane, waste coal recovery and onsite energy projects
29
Non-Regulated 2004 Outlook
Operating Earnings (after tax)*
($ millions)
Synfuels
Coke Batteries
On Site Energy Projects
Power Generation
Coal Services
Biomass Energy
Energy Trading & CoEnergy Portfolio
Energy Resources overhead & interest
Upstream & Midstream Gas
DTE Energy Technologies
Energy Technology Investments & Other
Total
2003A
2004E
$ 197
(7)
9
4
8
6
29
(23)
29
(15)
(9)
$150-190
6-8
18-22
(16)
14-16
6
35-40
(33)
18-20
(4)
-
$ 228
$194-249
•
Timing of synfuel
sales
•
Restructured coke
battery contracts
•
Closing the utility
outsourcing deal
•
Continued weakness
in generation pricing
•
Drive to profitability
in Energy
Technologies
•
Discontinued equity
accounting at Plug
Power
30
* Reconciliation to reported earnings included in the appendix
Financial Objectives
• Maintain strong balance sheet and solid investment grade rating
– 2003 year-end leverage declined to 49%*
• Generate strong cash flows
– Solid 2003 adjusted cash from operations of over $1 billion
– Synfuels turns from cash negative in 2003 to cash positive in 2004
– Capital expenditures declined $233M in 2003, mostly due to lower NOx
spending
• Conservative and sound financial policies
• Continue dividend of $2.06 per share, with a current yield of 5.2%
31
* Excludes securitization debt, MichCon short-term debt and quasi-equity instruments
DTE Energy Leverage
DTE Energy Leverage*
60%
55%
• Despite the problems that
have plagued the industry,
DTE Energy has been able
to maintain a strong balance
sheet
• This was achieved without
having to resort to a ‘backto-basics’ strategy
50%
45%
40%
1999
2000
2001
2002
2003
• Despite the current
challenges, DTE Energy’s
leverage has not been
negatively impacted
32
* Excludes securitization debt, MichCon short-term debt and quasi-equity instruments
DTE Energy
2004 Cash Flows
2004E
($ millions)
Cash from Operations
Synfuel Production Payment*
Adjusted Cash from Operations
Capital Expenditures
2003A
Low
High
$950
$800
$1,050
89
175
225
$1,039
$975
$1,275
(751)
(750)
(1,060)
Cash Improvement Initiative
100
100
669
40
40
Dividends
(346)
(353)
(353)
Cash Flow
$611
$12
$2
Asset Sales
• Cash flows in 2004, similar
to net income, are uncertain.
Final results depend on:
– Timing and amount of
rate relief
– Electric Choice
– Timing of synfuel sales
• The cash initiative
successfully implemented in
2003 will continue this year,
with a minimum goal of
internally funding
the dividend
• Leverage is expected to
remain at the low end of
our range
33
* Accounted for as ‘investing activity’
DTE Energy
Capital Expenditures
Capital Expenditures
(2004 Based on Rate Case Filings)
($ millions)
2003A
2004E
$516
$672
NOx
64
38
MichCon
98
139
73
211
Detroit Edison
Non Regulated &
Corporate*
Total
$751
$1,060
• Based on utility rate case
filings, 2004 capital
expenditures will be
approximately $1B
• These capital expenditures are
largely incurred at the two
regulated utilities
• We intend to match actual 2004
capital spending with available
cash flows. Until utility rate
cases are resolved, capital
spending will remain at
2003 levels
34
* 2004 includes $55M of corporate capital
DTE Energy
Current Credit Ratings
Current Ratings
DTE Energy
Detroit Edison
MichCon
Last action
S&P
Moody's
Fitch
BBB+A, B
Baa2 B
BBB
A- B
A3 B
A-
BBB+ B
A2 C
A
11/7/2003
1/28/2004
11/10/2003
A)
Corporate Credit Rating
B)
Negative Outlook
C)
Under review for possible downgrade
• Negative outlook from
Moody’s and S&P reflects
concerns over:
– Rate case outcomes
– Electric choice
program and need for
change
• Cash flow metrics should
start improving with impact
of rate cases and synfuel
monetization
35
DTE Energy’s Commitment
to the Dividend
Dividend Yield
6.5%
5.3%
4.8%
5.2%
4.9%
4.4%
• Management is committed to
maintaining dividend at
current level
$2.06
Dividend
1998
1999
2000
2001
2002
• Despite recent earnings
pressure to date the dividend
has remained stable at $2.06
per share
2003
• As cash flows improve DTE
intends, in the absence of
new investments that meet
our return requirements, to
return excess cash to
shareholders or pay down
debt
36
Outline
• Regulated Business Overview
• Non-Regulated Business Overview
• Financial Information
• Topical Issues
– Environmental
– Michigan Economy
– Energy Technology
37
Status of Multi-Emission
Legislation in the U.S.
• Lack of consensus from the industry and political challenges
prevented multi-emission legislation from being passed in 2003 –
Presidential politics in 2004 continue to block its consideration
• DTE Energy played a leadership role in attempting to create
consensus between companies taking a “just say no” position
and those with more aggressive positions (primarily Eastern and
nuclear utilities)
• Although legislation is stalled, the Administration has proposed
regulations to control sulfur dioxide (SO2), nitrogen oxides (NOx),
and mercury (Hg) with similar reductions and timeframes as
legislation DTE Energy supported
38
DTE Energy Estimated Cost of
Environmental Compliance
Total Estimated Capital: $2.4 Billion
($millions)
1,200
1,011
1,000
870
800
600
536
• DTE Energy will seek to gain
agreement with the Michigan
Public Service Commission on
the mechanism by which
these environmental
investments will be recovered:
– Another rate case that gives
clear path for recovery
400
– Securitization of
environmental capital
200
Previous
NOx
2005-2010
2011-2015
SO2
Mercury
– Environmental wires charge
(social benefit)
39
Air Issues Dominate DTE
Energy’s Focus
Changes in Detroit Edison Power Plant Emissions and Generation
(1974–2003)
39%
40%
20%
12%
16%
CO2
0%
PM
SO2
NOx
Hg
-12%
-20%
MWh
Fossil
MWh
System
-40%
-60%
-63%
-60%
-80%
-88%
-100%
40
Landfill Methane Recovery and Carbon Sequestration Projects offset much of the CO 2 increase
DTE Energy has Taken Significant
Action on Climate Change and will
Continue its Efforts
• DTE Energy’s carbon dioxide emissions continue below its 1990
level of 44.2 million tons. The company’s emissions for SO2, CO2
and NOx are 50-60% below the regional average
• DTE Biomass landfill gas projects eliminate substantial volumes of
greenhouse gas (equivalent to approximately 10% of DTE’s fossilfired carbon dioxide emissions)
• We have planted more than 20 million trees in Michigan since 1995.
These trees will absorb about 6.6 million tons of carbon dioxide and
produce 4.6 million tons of oxygen over a 50-year timeframe
• We continue to invest in high efficiency turbines at several of our
plants which will reduce emissions by approximately 2%
41
DTE Energy’s Environmental
Stewardship is Well-Recognized
DTE Energy’s relative environmental performance, as rated by Innovest Strategic Value Advisors,
an internationally recognized investment research and advisory firm specializing in
analyzing companies' performance on environmental, social, and strategic governance issues
42
DTE Energy is Actively Involved in
Waste Coal Recovery Efforts
Washed
Coal
Raw Coal
Mine
Prep Plant
Waste
Coal Fines
Coal Buyer
Refuse
Pond
• DTE Energy has sole rights to a proprietary waste coal recovery technology, “PepTec”
• The technology uses a chemical and mechanical process to separate clay from waste coal, thereby
increasing Btu content of the coal
• Builds upon DTE Energy’s strong knowledge of coal markets and relationships with coal companies
• The large market potential for the recovery technology makes it a significant opportunity for DTE
– Amount of coal in U.S. waste coal pond is estimated to be over 1 billion tons with 30 million tons added
each year
• Reclamation of coal fines from waste coal ponds also provides a significant environmental benefit
43
• Our first plant is operational and producing at a rate of ~250,000 tons per year
Outline
• Regulated Business Overview
• Non-Regulated Business Overview
• Financial Information
• Topical Issues
– Environmental
– Michigan Economy
– Energy Technology
44
Michigan’s Economy has Diversified
Michigan Gross State Product (GSP) by Sector
Other 2%
Services
44%
Other 1%
Industrial
54%
1980
Source: U.S. Department of Commerce, Bureau of Economic Analysis, “Regional Economic Accounts”
Services
53%
Industrial
46%
2001
45
Diversification Assures a Steady Base,
Countering the Cycles of Michigan's
Manufacturing Industry
Traditional Industries
High-Tech Industries
• Automotive, plastics, engineering
and R&D, wood products,
agribusiness and tourism
2001 Michigan Industries
Agriculture,
forest., fish
1%
Manufacturing
23%
Finance /
Insurance /
Real Estate
16%
Retail trade
10%
• Pharmaceuticals
• Medical devices, instrumentation
and diagnostics
• Research and ancillary services
Construction
5%
Services
21%
Transportation
& utilities
6%
Wholesale
trade
7%
• Life sciences
– Nearly $2 billion industry
– Main sectors:
Government
11%
– Over 540 firms including Pfizer,
Lumigen and Pharmacia
• Information Technology
– Home to major technologyfocused companies including
Compuware, Dow Chemical, and
EDS
• Alternative energy
• Advanced automotive technology 46
Source: U.S. Dept. of Commerce, Michigan Economic Development Corporation
Michigan Is Emerging As a Hotbed of
Technology-focused Industry
•
Michigan ranked fifth in the 2003 annual national ranking of
corporate expansions and locations
•
Michigan ranks fourth nationally for total employment in high
tech industries
– Employment in high tech industries accounts for 5.3% of
Michigan’s total workforce, exceeding the national average of
4.4%
•
The University of Michigan is #1 in the nation for life sciences
research, with $591 million in research expenditures in 2001
•
Venture capital investment up in Michigan
– More than $2.4 billion is under management by Michigan
venture capital firms
– Software, Industrial, and Biotechnology firms continued to attract
the most investment capital
Source: Michigan Economic Development Corporation
47
Michigan’s Unemployment
Tracks National Rate
Historical Comparison of Unemployment
Michigan v. United States
18.0
• Michigan’s economy
and unemployment was
once thought to be
more severely impacted
than the nation as a
whole by downturns in
the economy.
16.0
12.0
10.0
8.0
6.0
4.0
Jan-2004
Jan-2003
Jan-2002
Jan-2001
Jan-2000
Jan-1999
Jan-1998
Jan-1997
Jan-1996
Jan-1995
Jan-1994
Jan-1993
Jan-1992
Jan-1991
Jan-1990
Jan-1989
Jan-1988
Jan-1986
Michigan
Jan-1985
Jan-1984
Jan-1983
Jan-1982
Jan-1981
Jan-1980
-
U.S.
Jan-1987
2.0
Jan-1979
Unemployment Rate (%)
14.0
• While once true, the
correlation no longer
exists as Michigan’s
unemployment now
tracks with the national
rate
48
Source: U.S. Bureau of Labor Statistics
Michigan’s Automobile Industry
•
The automobile sector accounts
for 14% of Detroit Edison’s sales
and 10% of revenue
•
Within Detroit Edison’s service
territory, the Big 3 automakers
generally produce more popular
and higher margin vehicles
•
Over the past 15 years, area auto
production volume has remained
relatively constant while Detroit
Edison’s electric load has
increased by ~25%
•
In the next five years, Big 3 auto
production in Detroit Edison’s
service territory is expected to
remain relatively stable
Detroit Area Light Vehicle Production
1.2
1
0.8
0.6
0.4
0.2
0
2003
2004
2005
2006
General Motors
DaimlerChrysler
Ford
2007
2008
49
Light Vehicle Production Forecast
2003 to 2008:
Detroit Area versus Rest of U.S.
• DaimlerChrysler’s forecasted Detroit
area light vehicle production should
match overall US production levels
40%
35%
• While General Motors is forecasting
a decrease in US production, Detroitarea production will remain flat
30%
25%
20%
15%
10%
5%
6% 6%
-5% 0%
0%
-3% 34%
-5%
General
Motors
-10% DaimlerChrysler
U.S.
Detroit
Ford
• Ford Motor Company’s latest
forecast indicates a sharp increase
in production at Detroit-area plants,
driven by :
– new product offerings in the
sport utility and pick-up truck
lines
– production of the Ford Focus
(best selling car in the world)
will move from Mexico to
Wayne, Michigan
50
Outline
• Regulated Business Overview
• Non-Regulated Business Overview
• Financial Information
• Topical Issues
– Environmental
– Michigan Economy
– Energy Technology
51
Alternative Energy Technologies Will
Play a Role As the Energy System
Evolves
• Increasing
Demand
• Need for
Economic
Growth
• Environmental Pressure
• Energy Security Needs
Current
Energy System
• Supply and
Infrastructure
Constraints
• The current energy
system is under
pressure
• Incumbent fuels and
technologies(oil, gas,
coal, internal
combustion engines)
will likely still
dominate
• Alternative technologies
(renewables, fuel cells,
distributed power,
hydrogen) will become
increasingly important
as performance
improves
52
DTE Energy Has Taken a
Pragmatic Approach to New
Energy Technologies
Basic Philosophy
• New energy technologies and
approaches will play an
increasing role in our energy
system
• Need to be active in these
markets to build expertise
Business Approach
• Invest limited capital
• Leverage existing skills and
customer relationships
• Look for profitable market
segments to build new
businesses or expand
existing businesses
• Exit when business
opportunities don’t develop
53
DTE Energy Has a Long History of
Technology Innovation in
Conventional and Alternative
Technologies
Electrostatic
Precipitators
(1970s)
Plug Power
(1997)
DTE Biomass
Energy (1989)
Low Sulfur
Coal
(1970s)
Solar Currents
(1996)
DTE Energy
Technologies
(1998)
High Temperature
Superconductors
(1998)
Peptec Waste
Coal Technology
(2002)
DTE Solar of
California
(1999)
Hydrogen
PowerPark
(2003)
54
Today, DTE Energy Is a Leader in
Alternative and Clean Energy
Technologies
DTE Biomass Energy
DTE Energy Ventures
DTE Hydrogen Project
DTE Energy Technologies
DTE Solar Projects
55
Appendix
56
Reconciliation of Operating
Earnings to Reported Earnings
Operating Earnings to Reported Earnings Reconciliation
Earnings Per
Share
Full Year 2003
DTE Energy
Consolidated
DTE Energy
Consolidated
3.09
521
282
(0.10)
0.10
(0.08)
(0.10)
(0.06)
0.03
0.37
(0.07)
(16)
16
(14)
(17)
(10)
5
63
(11)
(16)
(0.09)
(16)
3.09
521
Operating
Blackout Costs
Adjustment of EITF 98-10 accounting change (Flowback)
Loss on sale of steam heating business
Disallowance of gas costs
Contribution to DTE Energy Foundation
Adjustment for discontinued operations of ITC
Gain on sale of ITC
Asset retirement obligations (SFAS 143)
Adjustment of EITF 98-10 accounting change
(cumulative effect)
Reported
Net Income ($ millions)
Regulated
Electric
Regulated
Gas
46
NonRegulated
228
Holding
Company
(35)
16
(14)
(17)
(10)
5
63
(6)
(1)
(4)
(16)
314
28
224
(45)
57
Reconciliation of Operating
Earnings to Reported Earnings
Operating Earnings to Reported Earnings Reconciliation
Earnings Per
Share
Full Year 2002
Operating
DTE Energy
Consolidated
3.55
Adjustment for discontinued operations of ITC
Intercompany Gain
0.28
Reported
3.83
Q4 2003
Operating
Net Income ($ millions)
Net Income
($ millions)
586
46
Regulated
Electric
352
-
Regulated
Gas
66
NonRegulated
207
Holding
Company
(39)
-
-
-
66
207
(39)
4
632
Earnings Per
Share
Net Income
DTE Energy
Consolidated
DTE Energy
Consolidated
0.94
159
Tax credit driven normalization
0.42
70
Reported
1.36
229
356
58