EX-99.3 4 c07417exv99w3.htm EXHIBIT 99.3 Exhibit 99.3

Exhibit 99.3

Third Quarter 2010 Earnings Conference Call October 29, 2010


 

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: economic conditions resulting in changes in demand, customer conservation and increased thefts of electricity and gas; changes in the economic and financial viability of our customers, suppliers, and trading counterparties, and the continued ability of such parties to perform their obligations to the Company; economic climate and population growth or decline in the geographic areas where we do business; high levels of uncollectible accounts receivable; access to capital markets and capital market conditions 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 losses on investments, including nuclear decommissioning and benefit plan assets and the related increases in future expense and contributions; the potential for increased costs or delays in completion of significant construction projects; the effects of weather and other natural phenomena on operations and sales to customers, and purchases from suppliers; environmental issues, laws, regulations, and the increasing costs of remediation and compliance, including actual and potential new federal and state requirements that include or could include carbon and more stringent mercury emission controls, a renewable portfolio standard, energy efficiency mandates, a carbon tax or cap and trade structure and ash landfill regulations; nuclear regulations and operations associated with nuclear facilities; impact of electric and gas utility restructuring in Michigan, including legislative amendments and Customer Choice programs; employee relations and the impact of collective bargaining agreements; unplanned outages; 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; cost reduction efforts and the maximization of plant and distribution system performance; the effects of competition; the uncertainties of successful exploration of gas shale resources and challenges in estimating gas reserves with certainty; impact of regulation by the FERC, MPSC, NRC and other applicable governmental proceedings and regulations, including any associated impact on rate structures; 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 amount and timing of cost recovery allowed as a result of regulatory proceedings, related appeals or new legislation; the cost of protecting assets against, or damage due to, terrorism or cyber attacks; the availability, cost, coverage and terms of insurance and stability of insurance providers; 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; and binding arbitration, litigation and related appeals. New factors emerge from time to time. We cannot predict what factors may arise or how such factors may cause our results to differ materially from those contained in any forward-looking statement. Any forward-looking statements refer 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 in each of DTE Energy's and Detroit Edison's 2009 Forms 10-K and 2010 Forms 10-Q (which sections are incorporated herein by reference), and in conjunction with other SEC reports filed by DTE Energy and Detroit Edison.Cautionary Note - The Securities and Exchange Commission permits oil and gas companies, in their filings with the SEC, to disclose only proved reserves that a company has demonstrated by actual production or conclusive formation tests to be economically and legally producible under existing economic and operating conditions. We use certain terms in this presentation such as "probable reserves" that the SEC's guidelines strictly prohibit us from including in filings with the SEC. You are urged to consider closely the disclosure in DTE Energy's 2009 Form 10-K and 2010 Forms 10-Q, File No. 1-11607, available from our offices or from our website at www.dteenergy.com. You can also obtain these Forms from the SEC by calling 1-800-SEC-0330. 2


 

3 Participants Dave Meador, Executive Vice President and CFOPeter Oleksiak, Vice President, Controller & Investor RelationsNick Khouri, Vice President and TreasurerMark Rolling, Director of Investor Relations


 

4 OverviewThird Quarter 2010 Earnings ResultsCash Flow and Capital ExpendituresSummary


 

Investment Thesis DTE Energy has a plan it believes will provide 5%-6% long-term operating EPS growth, an attractive dividend yield and a strong balance sheetUtility growth plan driven by mandated investmentsConstructive regulatory structure and continued cost savings enable utilities to earn their authorized returnsPlans in place to achieve operational excellence and customer satisfaction that are distinctive in our industry, with a focus on customer affordabilityMeaningful, low-risk growth opportunities in non- utility businesses continue to provide diversity in earnings and geography 5%-6% Average Annual EPS GrowthAttractive Dividend 5


 

Third Quarter 2010 Overview 6 * Reconciliation to GAAP reported earnings included in the appendix DTE Energy Q3 2010 operating earnings per share* of $0.96 vs. $0.91 in Q3 2009Solid results at our utilities and strong performance at Power & Industrial partially offset by a loss at Energy TradingRevised 2010 operating EPS guidance of $3.50 - $3.70 provides 9% growth at midpointVery strong performance at Power & Industrial and solid utility results offsetting lower contribution from Energy TradingBalance sheet remains strongGenerated $1.5 billion in cash from operations YTD 2010Raising cash flow guidance


 

7 2010 Operating Earnings* Guidance (millions) Prior Guidance * Reconciliation to GAAP reported earnings included in the appendix Raising utility guidance on strong performanceIncreasing lower end of Detroit Edison guidance rangeRaising and narrowing MichCon guidance rangePrimarily higher Steel Industry Fuels tax credit at Power & Industrial ProjectsUnfavorable performance at Energy TradingTax benefits at Corporate & Other Revised Guidance Drivers Original Guidance


 

8 OverviewThird Quarter 2010 Earnings ResultsCash Flow and Capital ExpenditureSummary


 

Third Quarter 2010 Operating Earnings Per Share* Detroit Edison$0.97 Unconventional Gas Production($0.02) Non-Utility$0.13 Gas Storage & Pipelines$0.07 Corporate & Other($0.10) MichCon**($0.04) $0.96 Power & Industrial Projects $0.15 * Reconciliation to GAAP reported earnings included in the appendix** Includes Citizens Gas Utility EnergyTrading($0.07) 9


 

10 Third Quarter 2010 Operating Earnings Variance Weather-normal sales in 2010 due to decoupling partially offset by 2009 property tax settlement * Reconciliation to GAAP reported earnings included in the appendix Detroit Edison MichCon June 2010 rate order Operating Earnings* (millions) 3Q 2010 3Q 2009 Change Non-Utility Power & Industrial primarily driven by higher coke sales and Steel Industry Fuels tax creditEnergy Trading driven by lower economic performanceCorporate & Other driven by one-time tax benefits in 2009 Drivers


 

(CHART) 11 Detroit Edison Variance Analysis * Reconciliation to GAAP reported earnings included in the appendix Q3 2009 Operating Earnings $24 $149 Q3 2010 Operating Earnings Margin $5 (millions) Detroit Edison Operating Earnings* Variance $165 Margin primarily driven by weather- normal sales in 2010 due to decoupling compared to colder than normal weather in Q3 2009O&M driven by continuous improvement, one-time cost reductions and lower uncollectible expenseHigher depreciation on increased asset base Other primarily driven by Q3 2009 property tax settlement O&M Depreciation ($3) Drivers ($10) Taxes and Other


 

12 MichCon Variance Analysis Margin driven by June 2010 rate order and lower lost gas expense partially offset by lower midstream revenues and conservationLower depreciation rates in 2010Other primarily driven by favorable interest (millions) MichCon Operating Earnings* Variance(CHART) ($23) * Reconciliation to GAAP reported earnings included in the appendix $12 Q3 2010 Operating Earnings Q3 2009 Operating Earnings ($6) $1 Margin Drivers Other $4 Depreciation


 

DTE Energy Trading Reconciliation of Operating Earnings to Economic Net Income *Reconciliation to GAAP reported earnings included in the appendix** See appendix for definitions (CHART) (millions) YTD Sept 2010Economic Net Income** Accounting Adjustments** YTD Sept 2010 Operating Earnings* $0 $23 $23 (CHART) $73 ($9) $64 YTD Sept 2009 Operating Earnings YTD Sept 2009Economic Net Income Accounting Adjustments 13 2010 has been a challenging year for the trading industry overall:Oversupplied gas marketSignificantly lower volatility and liquidityRegulatory changes and uncertainty associated with financial reform2010 accounting adjustments are driven by transactions where accounting income is recognized in future periods


 

14 OverviewThird Quarter 2010 Earnings ResultsCash Flow and Capital ExpendituresSummary


 

A strong balance sheet continues to be a key DTE Energy priorityLeverage and cash flow metrics within targeted rangesIn August, Detroit Edison priced a $300 million, 10 year bond offering at a coupon of 3.45%Successfully renewed $1.8 billion of bank credit lines in August 2010 15 Our Solid Balance Sheet Provides Financial Flexibility Leverage* Funds from Operations / Debt* (CHART) 53% 52% 50% - 52% (CHART) 22% 23% 22% - 24% *Debt excludes securitization, a portion of MichCon's short-term debt, and considers 50% of the trust preferreds as equity


 

16 YTD September 2010 Cash Flow DTE Energy Cash Flow* (billions) Drivers Strong year-to-date cash from operations; above average cash from operations in 2009Capital spending in 2010 primarily driven by higher non-utility spend and timing of utility projects$1.8 billion of available liquidity at September 30, 2010 * Includes securitization


 

17 2010 Capital Expenditures & Cash Flow Guidance Capital Expenditures (millions) Cash Flow Summary* (billions) * Includes securitization


 

18 OverviewThird Quarter 2010 Earnings ResultsCash Flow and Capital ExpendituresSummary


 

Summary 19 * Reconciliation to GAAP reported earnings included in the appendix Q3 operating EPS* of $0.96 driven by strong performance at our utilities and Power & Industrial ProjectsRevised 2010 operating EPS guidance provides 9% growth at midpointSolid performance at our utilities driven by constructive regulatory environment and intense focus on continuous improvementDiversity of non-utility segments helps support DTE's earnings growth Balance sheet and cash flow metrics remain strongYTD cash from operations of $1.5 billion supports improved 2010 cash flow guidanceEEI conference presentation is November 2 at 8:15AM PDT with Gerry Anderson - President and CEO


 

20 Contact Us DTE Energy Investor Relationswww.dteenergy.com/investors313-235-8030


 

Appendix


 

(CHART) DTE Energy Trading Reconciliation of Operating Earnings* to Economic Net Income ** Consists of 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 MTM, instead are recognized for accounting purposes on an accrual basis. (millions) YTD Sept 2010Economic Net Income Accounting Adjustments** YTD Sept 2010 Operating Earnings* $0 $23 $23 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. * Reconciliation to GAAP reported earnings included in the appendix *** Economic gross margin is the change in net fair value of realized and unrealized purchase and sale contracts including certain non-derivative contract costs Energy Trading Operating Earnings* RealizedUnrealizedO&M / Other YTD 2009 YTD 2010 $61 $30 11 56 (44) (41) (millions, after-tax) $73 $ 0 (CHART) $73 ($9) $64 YTD Sept 2009 Operating Earnings* YTD Sept 2009Economic Net Income Accounting Adjustments** 22


 

(CHART) (CHART) (CHART) Net Production (Bcfe) Gross Producing Wells 186 Reserves (Bcfe) Acreage Position (000's Acres) Net Undeveloped Acres Net Developed Acres Barnett Shale Operating Metrics 16 Q3 2010 53 69 15 48 YE2009 63 Q3 2010 YE2009 169 5 2009A 5 23 (CHART) YE2009 YE2008 Probable(Unaudited) Proven 255 234 489 265 167 432 Continue to prudently manage and develop Barnett assets Invest $25 millionDrill 10 - 15 wells Produce 5 Bcfe netFocus on cost reduction & production optimization Drilled 11 wellsNet Production of 3.6 BcfeIncreased crude oil production Capital Expenditures $20 million 2010 YTD Results 2010 Goals 2010 Est.


 

24 YTD September 2010 Capital Expenditures DTE Energy Capital Expenditures (millions) Drivers MichCon capital lower due to completion of a pipeline expansion project in 2009Gas Storage & Pipelines primarily driven by Millennium equity contributionPower & Industrial primarily driven by higher spend on Reduced Emission Fuel and wood-waste conversion projects


 

25 Reconciliation of Full Year 2010 and Q3 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 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 2010 guidance for operating earnings. It is likely that certain items that impact the company's 2010 reported results will be excluded from operating results. A reconciliation to the comparable 2010 reported earnings/net income guidance 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.There were no reported to operating adjustments in Q3 2010


 

26 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. Reconciliation of YTD September 30, 2010 Reported to Operating Earnings * Deferral of previously expensed cost to achieve as allowed for in June 3, 2010 MPSC order (case - U-15985)


 

27 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. Reconciliation of Q3 2009 Reported to Operating Earnings


 

28 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. Reconciliation of YTD September 30, 2009 Reported to Operating Earnings