Q2 2022 DTE Energy Co Earnings Call
Good morning, My name is Julian and I will be your conference operator today.
At this time I would like to welcome everyone to DTE Energy's Q2, 2022 earnings conference call.
All lines have been placed on mute to prevent any background noise.
After the Speakers' remarks, there will be a question and answer session.
You'd like to ask a question. During this time simply press star followed by the number one on your telephone keypad.
Barbara Tocqueville director of Investor Relations you May begin your conference.
Thank you and good morning, everyone before we get started I would like to remind you to read the safe Harbor statement on page two of the presentation, including the reference to forward looking statements.
Our presentation also includes references to operating earnings which is a non-GAAP financial measure.
Please refer to the reconciliation of GAAP earnings operating earnings provided in the appendix.
With us this morning are Jerry Norcia, Chairman, President and CEO , and Dave Ruud Senior Vice President and CFO .
And now I'll turn it over to Gerry to start the call. This morning.
Thanks, Barb and good morning, everyone and thanks for joining us.
Let me start by saying that halfway through 2022, we are on track for another very successful year.
We need to be well positioned for the future.
Morning, I will highlight some of the successes we have accomplished this year and Dave will provide a financial update and wrap things up before we take your questions.
Slide four lays off the topics I will talk about this morning.
And all are very positive.
As I said, we are on track for another successful year at DTE.
It always starts with our commitment to deliver for our team customers communities and investors.
We continue our journey of transitioning to a clean energy future.
Lighted by putting our new natural gas plant in service on time and on budget.
We have made great strides in strengthening our grid and particular to prepare for potential severe weather.
On the financial front, we are delivering another strong year for investors.
On our first quarter call. We told you we were ahead of plan and.
And we continue tracking that way through the second quarter.
We are confident that we will achieve our financial goals for the remainder of the year.
We are raising our 2022 operating EPS guidance midpoint from $5 90 per share of $6.
This is the second guidance increase for 2022 and provides over 8% growth from our 2021 original guidance midpoint.
So we're excited about delivering another successful year in 2022.
Let's move to slide five to discuss how we are delivering for all of our stakeholders.
You are probably very familiar with this slide by now this highlights to focus on our four key stakeholders.
We know that with our engaged and talented team we will continue to deliver for our customers communities and investors.
We are working hard on all of these fronts and I am pleased to highlight some of the recognition we have received.
We continue to focus on improving the health well being of our team.
Proud to say we were recently recognized for our efforts in this area by receiving the best Employers award from the business group on health for excellence of health and wellbeing with an additional notice for excellence in mental health.
The award was given to companies that focus on health equity and the employee experience and demonstrate the principles of diversity equity and inclusion.
DTE as one of only two utilities to receive this award which shows our commitment to improve the lives of our team and their families on the customer front.
We received the energy Star Excellence and energy efficiency award from the EPA and the department of energy recognizing energy programs that demonstrate organization wide energy savings and best practices.
We also continued our efforts to support our communities.
<unk> was recognized by points of light for the fifth consecutive year as one of the civic 50.
This award highlights <unk> is one of the top 50 community minded companies nationwide and corporate citizenship.
We will continue our efforts in helping to build stronger communities.
But the many programs we have in place I'm.
Im glad our team gets acknowledged for the great work they are doing.
Equally as important is our BP continues its journey to deliver for our customers and to be a force for good in our communities.
What does that all mean.
Well I've always said that having highly engaged employees customers who are satisfied with their service at.
The communities that are resilient and thriving enables us to deliver distinctive value for our investors.
As I mentioned, we are raising the midpoint of our 2022 operating EPS guidance given the strength, we have seen in the first half of the year and the opportunities we have in the second half.
Dave will provide the details on our guidance in a few minutes.
Let's turn to slide six.
Some of you have recently heard me say that right now is one of the most exciting times in our industry.
I recently told a group of new employees that they are joining our company and industry, but one of the most interesting times in our history.
There is so much opportunity in front of us and transforming the way we produce power shifting generation from coal to gas and renewables and modernizing our grid prepare for worsening weather patterns and preparing for increased demand from emerging technologies like vehicle electrification.
The level of investment in our company and our industry over the next five and 10 years will rival the original build outs of power generation and the electric grid.
We have made great strides in preparing for these opportunities in a number of key areas.
The Blue water Energy Center, our new natural gas plant went into service in June .
This state of the art facility has an 1100 megawatt capacity and was constructed on time and on budget.
The in service of this plant was timed with the retirement of our St. Clair in Trenton power plants.
Today less than 40% of Ete's generation mix is attributable to coal.
And by 2028 after we cease coal use at our 1000 megawatt Belle River power plants.
Coal will represent less than 30% of our generation mix.
So we are ahead of our previous plan well on a path toward our net zero emissions goal.
Our voluntary renewables program migraine power continues to show substantial growth in fact, we have doubled the number of customers enrolled in the program for the third year in a row.
Recently, new contracts with the Anarbor school system, and Comcast rather to the program.
We have nearly 1100 megawatts subscribed large business customers and over 60000 residential customers. We are also finalizing agreements for over $1 billion of new my Green power investments with additional large customers.
We also continue our important main renewal work with the target of completing another 200 miles in 2022, ensuring we can continue providing safe and reliable service to our customers.
At DTE vantage, we have multiple onsite energy projects and very R&D projects coming online in the second half of the year.
Additionally, we have a strong pipeline of projects to support growth in this business, including potential additional landfills RMG conversions.
DTE electric rate case proceedings are going well and we're on track to file our integrated resource plan in October of this year.
We continue to evaluate the opportunity to exit coal use of the Monroe power plant earlier than 2040.
In this filing will begin to address our opportunities on that front.
As I mentioned on our first quarter call, we have been extremely focused.
Further hardening our grid.
And as you know we experienced extreme weather last year, we have an aging system.
We need to replace and upgrade Poles insulators in Transformers.
As a team we are committed to building a flawless grid for our customers.
And we need to invest to move towards that aspiration.
And with a level of investment and energy inside DT, we will get there.
We continue to make progress on further improving the reliability of our system with significant investments in tree trimming.
Around 70% of our outages are the result of trees, and we have a very aggressive tree trimming program.
We have gone from investing $60 million in 2013.
Well over $200 million this year pushed trees away from our wires and as we do this successfully and continue to replace and rebuilt our challenged circuits.
Our customers are experiencing the reliability that they expect.
So we are definitely making great progress across all of our businesses in 2022 and continue to be ahead of plan as I mentioned, we are increasing our 2022 operating EPS guidance midpoint of $6 per share providing over 8% growth from the original guidance.
Let's move to slide seven.
We are planning to invest over $40 billion.
Our utilities over the next 10 years.
At DTE electric.
We're investing over $35 billion over this time period.
Port reliability by building the grid of the future.
While adding renewable resources.
And as we plan for a cessation of coal use.
You'll need to invest in renewable resources.
Short and long duration storage demand response, and other dispatch low carbon free resources. We also see the increased pace of EV adoption that is driving grid investments support increased sales and a need for additional reliable generation.
At DTE gas, we are deploying significant capital over the next 10 years to upgrade or replace our aging infrastructure and to further reduce greenhouse gas emissions.
This large inventory of utility investment provides the opportunity to pull capital forward.
Future five year plans and positions us for sustainable long term growth.
We continue to evaluate our long term EPS growth target as we update our five year plan and worked through various milestones in our electric rate case, while actively engaging stakeholders as it relates to our integrated resource plan filing.
And our total return which continues to outpace the industry.
Is supported by a dividend that is growing in line with our operating EPS growth.
With that.
I will turn it over to Dave to provide a financial update Dave over to you.
Thanks, Gerry and good morning, everyone. Let me start on slide eight to review, our second quarter financial results.
Operating earnings for the quarter were $171 million this translates into 88 per share.
You can find a detailed breakdown of EPS by segment, including a reconciliation to GAAP reported earnings in the appendix.
I'll start the review at the top of the page with our utilities.
DTE electric earnings were $186 million for the quarter.
The primary drivers of the variance of the second quarter last year were higher rate based costs cooler weather O&M expense timing and the expected movement towards pre COVID-19 residential sales levels.
This was partially offset by the acceleration of the deferred tax amortization in 2022 that was implemented to delay the filing of a rate case to keep base rates flat during the pandemic.
The sales level change was consistent with our forecast and included in our full year guidance.
The higher O&M was driven in part by additional investment in the acceleration of our <unk> program and.
And some of the O&M was also driven by planned investment to ensure we continue to be well positioned for future years.
The O&M timing variance will reverse in the second half of the year.
I'd also like to remind you that in Q4 of 2021, we voluntarily implemented a onetime margin deferral of $90 million to be applied to the acceleration of <unk> expenses over the next few years to further our reliability improvements.
This is an expense that is nonrecurring for the second half of 'twenty two.
So with favorable weather and strong first half performance DTE electric is in a solid position to increase guidance for the full year.
Moving onto DTE gas operating.
Operating earnings were $6 million $1 million lower than the second quarter of 2021.
The earnings variance was due to higher rate base and O&M costs, partially offset by the implementation of base rates.
Given the solid position year to date at the gas company, we will be raising our full year guidance for this business.
Let's move to DTE vantage on the third row.
Operating earnings were $28 million in the second quarter of 2022.
This is a $6 million decrease from the second quarter last year due to the sunset of the RF business at the end of 2021, partially offset by higher earnings from the remainder of the portfolio.
On the next row, you can see energy trading earnings were $7 million for the quarter.
This is a decrease of $14 million from the second quarter of 2021, mainly due to the strong performance in the power portfolio that we had in 2021 offset by favorable performance and timing in our physical gas portfolio. This year.
Year to date energy trading is at $52 million of operating earnings which is favorable to our full year guidance.
As I mentioned on our first quarter call. Some of this favorability is driven by strong performance and some is timing related due to strategic long positions that support physical positions that will occur in future months.
While we do expect a reversal of the timing portion of this favorability as we deliver on these positions. We are confident in increasing our guidance in energy trading to reflect the strong performance in the first half of the year.
Finally, corporate and other was favorable $9 million quarter over quarter, which is primarily due to expenses, we incurred in 2021 to opportunistically retire higher price debt at the holding company.
In the second quarter. We also saw the reversal of the favorable tax timing from the first quarter.
Overall DTE earned <unk> 88 per share in the second quarter.
Let's turn to slide nine.
As Jerry mentioned, we are ahead of plan year to date, and we are increasing our 2022 operating EPS guidance at both DTE electric and DTE gas, primarily due to favorable weather.
And we are increasing guidance for energy trading due to the strong performance through the first half of the year.
Overall, we are increasing 2022 operating EPS guidance from a midpoint of $5 90 per share to $6 per share and we feel we are in great position to achieve this as well as continue to invest in our system to support performance in future years, Let me wrap up on slide 10, and then we will take your questions.
In summary, we feel great about our year to date financial results, we're having a strong operational and financial start to 2022 and are increasing our operating EPS guidance midpoint of $6 per share, which provides over 8% growth from our 2021 original guidance midpoint.
Our robust capital plan supports our strong long term operating EPS growth, while providing cleaner generation and increase reliability with a focus on customer affordability.
<unk> continues to be well positioned to deliver the premium total shareholder returns that our investors have come to expect with strong operating EPS growth of five 7% and a dividend growing in line with operating EPS.
With that I. Thank you for joining us today, and we can open the line for questions.
As a reminder, if you would like to ask a question. Please press star followed by the number one on your telephone keypad.
Our first question will come from Shar <unk> from Guggenheim Partners. Please go ahead. Your line is open.
Hey, good morning, guys.
Good morning Shar.
Sure.
So Jeremy let me just if it's OK start with the IRB is we're kind of getting closer to the date.
Do you have any sort of incremental thoughts on the overall approach beyond just the acceleration of coal and renewable investments and do you see opportunities for some immediate step ups like a purchase of an existing asset.
More gradual capital over time and any changes in financing in either scenario.
But what we see.
Early in our plan is certainly.
Incremental investments in renewables as well as batteries.
And also potential conversion of Belle River power plants to natural gas use so we see those types of investment sure coming into the plan and in the view in the first five years of the plan. So those are the major areas that.
Of opportunity that we see and of course longer term, we see significant investment and base load generation potentially incremental.
Global's as well so.
We're getting pretty excited about how this plan is shaping up and we're starting to get feedback from our stakeholders that is core.
Or somewhat supportive some stakeholders want us to go faster. So some of them want us to go slower, but we're feeling pretty good about how the plan is shaping up in order for it to be what I would say a resilient reliable plan for our customers as well as affordable.
And also <unk>.
Valuable to our investors.
And just to follow up on this slowing down.
Sure.
I really wanted to just maybe focus on the coal assets right because there seems to be a question and a few states to kind of maintain their viability longer.
For reliability purposes et cetera, any sense, if your thoughts have changed and how to think about plants like Monroe, we're still looking to accelerate those retirement, just given what we've seen in several states.
Let's say share our thinking has not changed if you looked at how we've handled this thus far.
A significant amount of coal already.
<unk> St. Clair Rouge, Treadmills, and we basically replace those base load generation assets, one for one with natural gas assets that we purchased as well as the new power plant gas plant that we just built.
So we feel real good about our position in terms of having reliable and dispatch more generation and I think youll see that pattern continue where not only will we build out our renewable resources into our plan, but we will also have battery systems and will have baseball generation in our future that will help.
Achieve our resilience and reliability as we look to retire Monroe sooner than what we had expected.
Our our forecasted I should say, yes got it Okay and then just last one for me just around the visibility of the vantage.
And any kind of strategic updates I mean, obviously theres been some turbulence in R&D, which is one of the major drivers for that business, but at the same time competitors are starting to emerge more prominently focused on R&D.
Do you see that kind of complicated.
<unk> process, but more importantly, as we.
We're thinking about strategically does this present, even a better opportunity for you to recycle some or all of those assets.
Sure I'll start by saying that we're always looking for opportunities to maximize investor value in that business today.
Strong we have a strong line of sight to growth, especially in the landfill to R&D convergence, you've got a good inventory of those projects and those are still giving us mid teens type of Unlevered IRR.
So we feel really good about the growth, but then again cash that evaluation as to what's the best path forward for our investors.
Terrific. Thanks, guys congrats on the results.
Thank you Sir.
Our next question comes from Jeremy Tonet from Jpmorgan. Please go ahead. Your line is open.
Hi, good morning.
Good morning, Jeremy Jeremy.
Thanks, just wanted to dive into loan growth a little bit more if you could share any more thoughts on your expectations for residential going forward here at this point and kind of the drivers just thinking about how.
Post Covid World. If we are things are kind of evolving at this point relative to prior expectations.
Dave you want to take that.
Sure Hey, Jeremy Yes I.
I'd say.
Things are things are going as we had planned or as we had thought it would if you remember.
Our residential sales.
We're up about 7% to 8% over pre COVID-19 levels kind of at the heart of everybody working at home and we're seeing that trend down we saw that a little bit in this quarter with about a 2% lower residential sales this quarter.
And we think that's going to continue to trend down a little Morris as people come back to work and that's what we've contemplated in our rate case, and just assuming we get closer to those pre COVID-19 levels, and we have seen commercial and industrial come back and so were flat overall.
We are seeing is people tend to go back to work, we're seeing some of that.
Some of that expected.
The reduction in our in our residential sales.
Still it's still higher than pre Covid right now.
Got it.
Helpful.
Hot off the press and maybe too fresh but just wondering this recent report surrounding mentioned supporting.
Certain legislation out there.
Current package and just wondering if you had any preliminary thoughts there or how this might or might not impact your upcoming ERP.
Well Youre right its hot off the press it is interesting and it was good surprised last night, we were not counting on any of this right now in our plan.
We think that there is some some good benefits and some good impacts to clean energy going forward.
So we see the ptc's for solar actually PT for nuclear and the.
The increase value for carbon capture, albeit albeit positive to help with this transition and really help with some of the things that we'd want to do in the AARP. So we're going through and reviewing this we had gone through it a year ago or whenever it first came out and kind of go back through and see what the what the impacts could be too to our plan but.
So right now our plan didn't contemplate any of this but this can all be good positive stuff for us.
Got it that's helpful I'll leave it there thanks.
Our next question comes from <unk> Kim from Goldman Sachs. Please go ahead. Your line is open.
Hey, Thank you our first question going back to the ethylene <unk> ERP, a little bit and given the recent experience by CMS are consumers energy and getting their IRB approved and the different items, including still getting.
As the recovery of a return of the.
The value of their coal plant that they are retiring early.
I know, it's so we'll just have to wait for the filing at all.
Has that how is that.
Precision and the components are that impacted.
I guess you are planning a lot of as you think about your fleet.
Well first of all I will say that the results in our CMS case, where <unk>.
Constructive and very positive and supportive of the plan that we're looking to file.
I'll also say that in terms of assets. We're looking in the first five years of FERC conversion of an asset. So we will not retire any coal facilities at this point in time likely in the first three to four years, but it will start to fall into.
Likely the tail end of our five year plan and beyond where will we will pull forward future retirements.
We have to address.
I appreciate it amounts to either conversion to different beneficial use or perhaps accelerated depreciation or take the option that CMS took so lots of options available to us that we need to finalize as we look to pull forward retirements, especially the Monroe retirements, which theres four units there and we'll do that in a likely in our staff.
<unk>.
In a staggered way.
Hopefully that answers your questions.
That's great additional color, Okay, and then secondly.
Impressive guidance raise and that's almost a 9% EPS growth year over year. After the original as we just think about.
The cost inflationary environment, right now and I think Youre doing your part every year to manage O&M or pull forward any extra.
The levers you have to get ready for the following year.
How are you set up I guess for 2023, just given I think this environment is a little bit more challenging than in normal years that you've been.
Experiencing.
I'll start and then I'll turn it over to Dave, but I would say, we're really well positioned for 2023 I would say that our 2022 raised guidance still has what I would call very adequate contingency in the plan to address the balance of the summer and the fall.
We're also looking at opportunities pull forward maintenance expenses that helped build contingency in the 2023.
Lots of work in that regards.
Of the inflationary pressures ill ask Dave to.
Comment on those and how we're handling those in the 2023 planning and beyond.
<unk>.
Yes.
We continue to.
We see it we see the impacts of inflation, where we continue to really work hard to manage it to make sure it doesn't impact our plan going forward.
We've had a really good success in the past.
Lowering our cost our costs are keeping our costs down compared to our peers.
One of the things that we see is 85% of our spend is services.
And we haven't seen as much inflation there so.
We're trying to manage that.
But we're doing really is looking at all of our long term contracts and watching the market closely extending some of those contracts doing some bundling in some other bidding to help mitigate any of the impacts we see there so.
We know we see the inflation, we feel it in with the wages, but within our planning process, we have we.
We don't see it impacting our capital plans or our O&M going forward as we continue to find offsets for it.
Okay.
Got it that's good color thanks, Jerry Thanks, Dave.
Our next question comes from Nicholas Campanella from Credit Suisse. Please go ahead. Your line is open.
Hey, good morning team thanks for taking the question.
Good morning, I wanted to ask and good morning, Good morning, I wanted to ask about the.
The new federal clean energy packages, just I imagine there's a lot of stuff in here that's similar.
The prior.
On the on the point of just nuclear tax credits.
Do you have any exposure at Permian.
Any color there would be great.
So youre asking how the nuclear PTC can play in for Us Nick.
Yes exactly exactly.
Yes, we're still looking through that we looked at it in the last plan to and thought that it could be an advantage for Steven our plants in a regulated environment.
Because of how it is still selling into the MISO market. So.
We're looking at that it does have a phase out when the market price is high but we think that it can be a nice backstop and really help with our customer affordability.
And.
As that comes in.
Got it alright, alright.
And then I guess just on the on the electric rate case.
You do have a history of.
Of constructive outcomes, there, but just.
How do you feel about ultimately being able to settle this case at this point.
Nicholas.
We're very interested in settling in and we're having those conversations now I would say that.
Whether we settle or it goes to a final order without settlement, we're feeling good about a constructive outcome.
This rate cases, primarily about capital investment and that capital investment is.
Well understood is not about increasing operating expenses thats really about deploying capital that if we feel that the commission the staff.
As well as the administration is very supportive of this infrastructure build out as it relates to the renewables.
Baseload generation as well as.
Significant investments in our electric grid, so I believe that that capital investment is very.
Very well understood and valued by.
By the interested stakeholders. So we expect a good constructive outcome, but would love to settle this certainly.
Got it thanks a lot.
Our next question comes from David Arcaro from Morgan Stanley . Please go ahead. Your line is open.
Hey, good morning, Thanks, so much for taking my question.
Good morning.
O&M pull forward side of things I was just wondering is there a certain level of O&M that you've been able to pull forward. So far into 2022 from 2023, just given the strength that you've had thus far in the first half.
Dave.
Yes, we have been able to do some of that some of it was.
Natural pull forward.
We accelerated some of our tree trimming expense and we were able to do that because we frankly had less storm. So we were able to work through some of our <unk> that we've been able to pull forward and then some of our outages are planned outages, we were able to do a little bit earlier as well. So there is there is some of that and that's what we're seeing play through in the second quarter.
Yes.
We do feel like it's putting us in a nice position for 2003, and the more and more of that we can do as well. So we try to vantage, though a few years at a time here.
Understood and then.
Thinking on the rate case.
Okay.
Line of sight as to how long you might be able to stay out from.
From rate cases again after the conclusion of this one.
And would strategically your your preference be to have it be several years between rate cases going forward.
So that's something we'll have to assess once we get the final results. Obviously, our desire is always to stay out as long as possible but.
Once we once we finalize we'll have a better better view on that.
We are looking at in future rate cases potential mechanisms.
For example, trackers on.
Capital, but I would say is very transparent and very well understood.
There seems to be renewed interest in that thought so that's something that we may pursue in our next rate case.
Got you thanks.
And then last quick one I was just wondering is there any commentary you can provide on how the trading environment is looking thus far in <unk> just in terms of the market volatility.
Are there prospects for continued strength in that business.
Well I'd say, yes, you've seen there still is a lot of volatility in that area.
We continue to manage things really tightly and have strict controls in there but.
But we are we're generally long in our physical positions we've had.
Frankly, we had a really good year there as we mentioned we are.
$52 million year to date in the business, but some of that is timing that we know will play out over the second half, but even with the with the volatility there should be.
Should be some additional opportunity there as well.
Great that makes sense. Thanks, so much.
Our next question comes from Andrew Weisel from Scotia Bank. Please go ahead. Your line is open.
Hey, good morning, everyone.
A lot of my questions have been asked and answered I just wanted to ask two on the gas side can you give us any update on the clean burning natural gas program. The voluntary clean gas program, where does that stand.
Andrew.
We're getting subscriptions weekly.
I'd say that were roughly around 5000 to 6000 customers that have signed up so it's following a similar track as when we offer the migraine power program on the electric side. So good interest we're evolving.
Product, if you will to try to attract commercial customers and industrial customers that are programs. So that'll be the next evolution of that program and when we do that.
We expect larger volumes right now are getting small volumes from residential customers and it's primarily a residential program, which is the way we started migraine power. So we're.
Can it continue to evolve that product as we've seen interest from some of our institutional customers and corporate customers I would like to enroll so more to come on that.
Do you think that business could be as big as the electric one related to the proportionally.
It's too early to tell Andrew, but we're certainly seeing an interest in the product.
If you recall the product is really.
Biopsy frustration products, which are <unk> III products that we use as carbon offsets as well as a small component of RMG.
So we will have to look to.
Be acquiring more assets to support what I would say larger volumes right at this point in time, we acquired assets in Michigan.
Through third parties that are in the forestry business that offer us those carbon offsets.
But well supplied and we're looking to see what the opportunities are for larger institutional and corporate clients that would like to have this product.
So more to come it's hard to say if it will be as big as the electric business, but I guess three years or four years.
To get that voluntary program on the electric side really start coming in.
It gets significant interest and commitment.
Okay. That's helpful. The other one is just on the gas rate case, and any sense of when the next filing might come.
We're looking either fourth quarter or first quarter fourth quarter of this year or first quarter of next year.
Okay that would have rates in place for not this upcoming heating season, but the following one right.
That's correct.
Okay. Thank you very much.
Thank you Andrew.
Our next question comes from Ryan Levine from Citi. Please go ahead. Your line is open.
Good morning.
It looks like morning, Brian .
Good morning, it looks like about 40% of.
The EPS increase guidance was from energy trading would you be able to talk about how much of the year to date performance is expected to be reversed and then given the volatility of the last few weeks does this guidance seems conservative from your perspective, when you look for the remaining question again.
Yeah.
Right. That's a good question you're right. We had a had another good quarter in trading and had a really good start to the year. So like I mentioned, we're at $52 million year to date in that business and.
And that's why we're confident raising the guidance from like you said, 15% to 25 up to 20% to 35.
The timing impact is probably about half of that and the performance is another half so we're seeing.
Half of it that's really come out performance.
The timing play out in two ways either with.
If we see if we see prices come back or some of it just plays out as we deliver on the physical position. So if pricing doesn't come down as much then there could be some some favorability in that timing piece for the second half of the year too.
But we're confident in the guidance right now.
How is that guidance then given.
Given the comment you just made.
What are the bookends of the range that was provided.
The cancer.
If.
Well, we set it based on what we what we know we can achieve what we think we can achieve and so we see the performance part is right within the middle of that guidance and then if some of the timing.
What are the or the pricing doesn't play out in the.
Kind of in a downward way than we can reach the high end of that guidance.
Okay.
And then as in the release you looks like you reaffirmed your longer term EPS growth guidance should we view that to be off of a rebase 22 number that reflects.
The higher turning to guidance.
That's off the original 'twenty two guidance since where we go.
Okay I appreciate that.
Thank you.
Our next question comes from Steve Fleishman from Wolfe Research. Please go ahead. Your line is open.
Hi, good morning.
Good morning, Steve.
Hey, Jerry.
I'm, just curious going back to a question before on the.
The R&D business. There was this recent transaction for Vanguard renewables.
I'd be curious just any.
Any thought on on.
The pricing evaluation of that and how it impacts how you are thinking about the value of vantage.
Okay.
Yes, we saw that as well Steve It was there.
There are different business than us and that they don't have as many.
Operating projects, but it did look like a really good opportunity and shows great interest still in great confidence in the LNG market going forward and the opportunity for additional development projects. So.
It's hard to do a direct comparison of pricing but.
Was viewed as a positive in the market.
There was still some strong and are still a lot of strong interest in R&D.
Okay.
And then and I apologize. This is also kind of breaking news questions, but just.
In the past when.
I think late last year, when <unk> was first likely.
You talked about interest and you've talked about interest in carbon capture and storage and opportunities. There long term could you maybe just.
Talk a little bit about.
How youre thinking about that business opportunity.
Sure Steve we certainly we're encouraged by that.
The tax benefits that the current plan could offer we need to understand it more clearly, but we've got a handful of projects that we're looking at early feasibility stage.
And in our service territory as well as outside of our service territory.
These can be quite interesting with enhanced tax credits, especially the 45 to that we believe is being proposed to change in that so.
More to come on that but could be quite interesting in terms of evolving.
Potential investment opportunity.
Okay. My last unfair question.
Is it.
Just I guess to Dave just in terms of thinking about this 15% minimum tax.
Could you just.
Give a sense of whether that would be an issue for you at all.
Okay.
Yes, Steve.
We looked at this before and we've got to revisit it again just to go through how it could all work when we spend time with a year ago.
We understood that we could we could we think it could work on earnings basis, we can find ways to offset the earnings that may have a little bit of a cash hit but it wasn't wasn't that strong.
Also want to look at how that plays into some of the renewable development projects.
The accelerated depreciation there is the other piece of that but.
We were able to as we were doing some of our analysis mitigate most of the impacts of what that seems like it could do.
Yes.
Okay, great. Thank you I appreciate it.
Thank you Steve.
Our last question will come from Anthony <unk> from Mizuho. Please go ahead. Your line is open.
Good morning, Gary Good morning Gabe.
Anthony Hey, Anthony.
Hopefully.
Two quick ones.
Two I am just looking at slide 16 on the convertible equity units.
When I think of the dilution you get hit with.
<unk> said this I am thinking about the electric rate case.
Maybe more earnings from vantage are there any other <unk>.
<unk> that may be you could potentially offset the.
Diversion.
I would say.
Anthony the the entire capital plan at both utilities as a fundamental tailwind that will move us through <unk>.
2023 and.
We're pretty confident we're going to achieve our growth targets in 2023, because of the primarily driven by the capital plan at the two utilities.
Youll see that our.
And that's what we'll move through.
And also vantage of course will make its contribution.
And its growth, we're adding $15 million a year. There. So all three entities are really going to drive us through 2023 and that dilution that youre talking about.
I actually don't forget to answer this but would you be able to give us.
And we'd be willing to give us guidance on net income and right now we have I think 5% and EPS growth.
I mean, I'm thinking for net income from 'twenty to 'twenty three.
Or <unk>, it's mark.
Much higher above the five to seven is that something that company would provide.
Well, that's something we can we can look to provide anything show the growth that our underlying utilities maybe.
Something we've shown in the past so that's something that we can we can look at also.
Great. Thanks, so much for taking my questions.
Thanks, Anthony Thank you Anthony.
We have no further questions I'd like to turn the call back over to Jerry Norcia for any closing remarks.
Well, thank you everyone for joining us today.
Just close by saying that DTE had a very successful second quarter and will and were feeling great about the remainder of 2022 and also our long term plan.
Hope everyone has a great morning, and stays healthy and safe. Thank you.
Ladies and gentlemen, this concludes today's conference call. Thank you for your participation you may now disconnect.
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