Q1 2024 DTE Energy Co Earnings Call
Operator: At this time, I would like to welcome everyone to the DTE Energy Q1 2024 Earnings Conference call. All lines have been placed on mute to prevent any background noise.
At this time I would like to welcome everyone to the DTE Energy Q1, 2024 earnings Conference call.
All lines have been placed on mute to prevent any background noise.
Operator: After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keyboard. If you would like to withdraw your question, press star 1 again. Thank you. I would now like to turn the call over to Barbara Tuckfield, Director of Investor Relations.
After the Speakers' remarks, there'll be a question and answer session.
I'd like to ask a question. During this time simply press star followed by the number one on your telephone keypad.
To withdraw your question Press Star one again.
Speaker Change: Thank you.
Speaker Change: So now I'd like to turn the call over to Barbara Tuck field director of Investor Relations.
Barbara Tuckfield: Thank you, and good morning everyone. Before we get started, I would like to remind you to read the Safe Harbor Statement on page 2 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 Gap Earnings to Operating Earnings provided in the appendix. With us this morning are Jerry Norcia, Chairman and CEO. President and COO, and Dave Ruud, Executive Vice President and CFO. Now, I'll turn it over to Jerry to start the call this morning. Thank you.
Barbara Tuckfield: Please go ahead.
Barbara Tuckfield: 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.
Barbara Tuckfield: Our presentation also includes references to operating earnings which is a non-GAAP financial measure.
Barbara Tuckfield: Please refer to the reconciliation of GAAP earnings to operating earnings provided in the appendix.
Barbara Tuckfield: With us this morning are Jerry Norcia, Chairman and CEO.
Barbara Tuckfield: Joy Harris, President and CFO, and Dave Ruud Executive Vice President and CFO.
Gerardo Norcia: And now I'll turn it over to Gerry to start the call. This morning.
Gerardo Norcia: Thanks, Barb and good morning, everyone and thanks for joining us I hope everyone is having a healthy and safety are so far.
This morning, I will discuss the achievements we have made so far this year.
Gerry: As we continue to deliver for all of our key stakeholders and we continue to achieve successes.
Gerardo Norcia: Thanks, Barb, and good morning, everyone, and thanks for joining us. I hope everyone is having a healthy and safe year so far.
Gerry: Across all of our businesses.
Gerry: Given that joys in charge of operations. She will highlight our significant customer focused investment agenda to build the grid of the future maintain.
Gerry: Reliability and transition to cleaner generation, while continuing to focus on customer affordability.
Gerardo Norcia: This morning, I will discuss the achievements we have made so far this year, as we continue to deliver for all of our key stakeholders and we continue to achieve successes across all of our businesses. Given that Joi is in charge of operations, she will highlight our significant customer-focused investment agenda to build the grid of the future. Maintain reliability and transition to cleaner generation while continuing to focus on customer affordability, and Dave will provide a financial update and wrap things up before we take your questions. Let me start on slide four.
Speaker Change: And Dave will provide a financial update and wrap things up before we take your questions.
Speaker Change: Let me start on slide four we are off to a strong start in 2024 and well positioned to deliver on our targets this year.
Speaker Change: The success that BT has achieved continues to be the result of our focus and engaged team for our customers and communities.
Speaker Change: Our team continues to achieve improved health and wellbeing and cultivate deeper employee engagement, which results in being able to deliver service excellence for our customers and our communities.
Speaker Change: The engagement of our team at DTE was recognized with another Gallup Great Workplace Award.
Speaker Change: I am extremely proud of our team for receiving this award 12 years in a row.
Speaker Change: We continue to deliver for our customers in fact.
Speaker Change: At DTE gas.
Speaker Change: We have been delivering for our customers for nearly two centuries.
Speaker Change: Our gas company celebrates its 175th anniversary this year.
Speaker Change: We have been providing safe reliable and affordable natural gas to customers in Michigan since 18 49.
Gerardo Norcia: We are off to a strong start in 2024 and well positioned to deliver on our targets this year. The success that DTE has achieved continues to be the result of our focus and engaged team for our customers and communities. Our team continues to achieve improved health and well-being and cultivate deeper employee engagement, which results in being able to deliver service excellence for our customers and our communities. The engagement of our team at DTE was recognized with another Gallup Great Workplace Award. I am extremely proud of our team for receiving this award 12 years in a row.
Speaker Change: Three years before gas Light's, even appeared on Detroit City streets.
Speaker Change: We've come a long way over the years, but the focus on customers has never wavered.
Speaker Change: An important part of serving customers is to provide energy efficiency opportunities.
Speaker Change: <unk> was recently awarded the energy Star partner of the year award by the EPA.
Speaker Change: The award is the highest level of recognition of achieved from the EPA recognizing programs that demonstrate organization wide energy savings and best practices.
Speaker Change: We have demonstrated our commitment to help customers identify options to reduce their energy bills without sacrificing performance.
Speaker Change: This is the third consecutive year DTE has received this award.
Speaker Change: And again I am extremely proud of this recognition.
Speaker Change: We continued to invest in the communities, where we live and serve.
Speaker Change: <unk> invested $2 $7 billion with Michigan businesses in 2023, creating and sustaining more than 12000 jobs across the state.
Speaker Change: Last year <unk> also invested nearly $1 billion.
Speaker Change: Diverse suppliers and nearly $900 million with companies based in the city of Detroit.
Gerardo Norcia: We continue to deliver for our customers. In fact, at DTE Gas, we have been delivering for our customers for nearly two centuries. Our gas company celebrates its 175th anniversary this year. We have been providing safe, reliable, and affordable natural gas to customers in Michigan since 1849, two years before gaslights even appeared on Detroit city streets.
Speaker Change: We continue to be a leader in driving Michigan's Academy at all levels.
Speaker Change: As I said at the start of my remarks, we are having a strong start to the year and we are well positioned to deliver our 2024 targets.
Speaker Change: Our long term EPS growth rate remains at 6% to 8%.
Speaker Change: With 2023 original guidance as the basis for this growth.
Speaker Change: And our 2024 annualized dividend of $4.08 per share.
Speaker Change: Is consistent with our practice of growing dividends in line with operating EPS.
Speaker Change: Importantly, we will continue to have a strong balance sheet.
Speaker Change: And investment grade credit ratings to support this customer focused.
Gerardo Norcia: We have come a long way over the years, but our focus on customers has never wavered. An important part of serving customers is to provide energy efficiency opportunities. DTE was recently awarded the Energy Star Partner of the Year Award by the EPA. The award is the highest level of recognition achieved from the EPA, recognizing programs that demonstrate organization-wide energy savings and best practices. We have demonstrated our commitment to helping customers identify options to reduce their energy bills without sacrificing performance. This is the third consecutive year DTE has received this award. And again, I am extremely proud of this recognition.
Speaker Change: Capital investment plan.
Speaker Change: We remain committed to deliver premium shareholder returns that our investors have come to expect and that we will deliver.
Speaker Change: As DTE gas celebrates 175 year milestone DTE energy is also celebrating a milestone with 'twenty 'twenty four marking the 115th year.
Speaker Change: A continuous listing on the New York Stock Exchange in fact, Dte's tenure as the 16th largest of any company on the exchange.
Speaker Change: So I guess these milestones are just another way of saying we have been doing this successfully.
Speaker Change: For a very long time.
Speaker Change: I am very excited about the opportunities ahead of us for many years to come.
Speaker Change: Let's turn to slide five the highlight somebody achievements across our portfolio.
Speaker Change: We have made strong progress across the company in the early part of this year.
Speaker Change: Starting at DTE electric.
Speaker Change: We received approval to construct a 220 megawatt battery energy storage system at the site of the former Trenton channel power plant.
Speaker Change: This investment will be approximately a half a billion dollars. This project.
Gerardo Norcia: We continue to invest in the communities where we live and serve. DTE invested $2.7 billion with Michigan Businesses in 2023, creating and sustaining more than 12,000 jobs across the state. Last year, DTE also invested nearly $1 billion with diverse suppliers and nearly $900 million with companies based in the city of Detroit. We continue to be a leader in driving Michigan's economy at all levels. As I said at the start of my remarks, we are having a strong start to the year, and we are well-positioned to deliver our 2024 targets.
Speaker Change: As expected to be operational in 2026 and <unk>.
Speaker Change: We'll be the largest standalone battery energy storage project in the Great Lakes region.
Speaker Change: And it initiates an important investment area and our transition to cleaner generation.
Speaker Change: Last month, we filed an electric rate case that outlines the investments we need to build a smarter stronger more resilient electric grid of the future for our customers and further our transition to cleaner generation.
Speaker Change: Joy will go over the filing in more detail and how it underpins an important step in our long term investment in grid reliability and cleaner generation transformation, while remaining focused on customer affordability.
Speaker Change: At DTE gas, we are targeting over 200 miles of main renewal in 2024.
Speaker Change: As we continue to modernize the gas transmission system.
Speaker Change: Last year, we hit an important milestone, where we completed almost 50% of our main renewal program.
Speaker Change: In January we filed a rate case at DTE gas to support important investments necessary to continue to renew our gas infrastructure, which will minimize leaks and reduce cost.
Speaker Change: At DTE vantage, we continued to advance custom energy solutions projects.
Speaker Change: <unk> projects and carbon capture and sequestration projects.
Gerardo Norcia: Our long-term EPS growth rate remains at 6 to 8 percent, with 2023 original guidance as the basis for this growth, and our 2024 annualized dividend of $4.08 per share is consistent with our practice of growing dividends in line with operating EPS.
Speaker Change: One project to highlight is the Ford Motor Company Custom Energy solutions project that is scheduled to go into operation later this year and is underpinned by a long term.
Speaker Change: Fixed fee contract with no commodity risk.
Speaker Change: So to wrap up my comments I will just say I'm feeling extremely positive about our start in 2024, and how we are well positioned to continue to deliver now and into the future for our customers.
Speaker Change: Communities and investors.
Speaker Change: Now I'll turn it over to Joy to give some highlights on our investment agenda and reliability improvements joy over to you.
Gerardo Norcia: Importantly, we will continue to have a strong ballot sheet and investment grade credit ratings to support this customer-focused Capital Investment Plan. We remain committed to delivering premium shareholder returns that our investors have come to expect and that we will deliver. As DTE Gas celebrates the 175-year milestone, DTE Energy is also celebrating a milestone, with 2024 marking the 115th year of continuous listing on the New York Stock Exchange. In fact, DTE's tenure is the 16th longest of any company on the exchange.
Joy Harris: Thanks, Jerry and good morning, everyone.
Joy Harris: I'm happy to be here today with all of you I will provide more detail on our capital investment agenda, and our reliability plans to improve our customers' experience.
Joy Harris: Our investment plan is focused on building the greater the future improving reliability and transitioning to cleaner generation.
Joy Harris: We have a robust agenda of $25 billion over the next five years with about 95% of the investments at our utilities.
Joy Harris: Our five year utility investment plan was increased by $2 billion over the previous plan driven by investments in cleaner generation that is supported by the IOP.
Joy Harris: Energy legislation that passed last November and our voluntary renewables program.
Joy Harris: The distribution plan filed last year outlines a path to building this grid of the future and includes the transition to a smart grid with full automation within five years, resulting in less frequent and shorter outages for our customers.
Joy Harris: We are investing $9 billion in distribution infrastructure and targeting significant reliability improvements over the next five years.
Joy Harris: As Jerry mentioned, we filed an electric rate case last month that represents an important step in our customer focused investment agenda.
Gerardo Norcia: So I guess these milestones are just another way of saying we have been doing this successfully for a very long time, and I am very excited about the opportunities ahead of us for many years to come. Let's turn to slide 5 to highlight some of the achievements across our portfolio. We have made strong progress across the company in the early part of this year, starting at BT Electric. We received approval to construct a 220 megawatt battery energy storage system at the site of the former Trenton Channel Power Plant. This investment will be approximately half a billion dollars.
Joy Harris: This filing addresses our continued infrastructure investments designed to improve reliability and generation investments to bring cleaner energy faster to the state.
Joy Harris: We will continue to invest in our infrastructure and are focused on improving reliability for our customers, reducing power outages by 30% and cutting out its time in half in the next five years.
Joy Harris: We have already made significant progress on this front and we can see the work that we're doing is having tangible results.
Joy Harris: For example, an important part of our grid modernization plan is the replacement of our $4 eight kv system.
Joy Harris: We're making great strides on this front as the work is progressing across our service territory and then communities where DTE has completed the conversion work customers are experiencing a 90% improvement in reliability.
Joy Harris: We are also making great progress on our restoration initiatives we.
Joy Harris: We did experience a large storm in January and our team came together and achieved one of the fastest restorations for such a livestock.
Joy Harris: I'm extremely proud of the team given the our effort toward the goal of restoring all customers in 48 hours after a storm.
Gerardo Norcia: This project is expected to be operational in 2026 and will be the largest stand-alone battery energy storage project in the Great Lakes region, and it initiates an important investment area in our transition to cleaner generation. Last month, we filed an electric rate case that outlines the investments we need to build a smarter, stronger, more resilient electric grid of the future for our customers and further our transition to cleaner generations. Joi will go over the filing in more detail and how it underpins an important step in our long-term investment in grid reliability and cleaner generation transformation while remaining focused on customer affordability.
Joy Harris: So these investments are working and we have a healthy portfolio of opportunities to invest in our system to greatly improve the customer experience.
Joy Harris: We are committed to modernizing our electric infrastructure to be more reliable and resilient given increasingly severe weather, while also delivering cleaner energy to meet our aggressive carbon reduction goals and Michigan's clean energy legislation consistent with our most recent IRT.
Joy Harris: Let's move to slide seven.
Joy Harris: The electric rate case represents an important step in achieving our reliability commitment as we continue to build a more resilient and cleaner greater of the future.
Joy Harris: We are focused on reducing power outages by 30% and outage times by 50% over the next five years.
Joy Harris: We are planning to accelerate the deployment of technology and the transition to a smart grid upgrade existing infrastructure with equipment like stronger Poles, and fiberglass cross arms, which can better withstand extreme weather.
Joy Harris: We built significant portions of the grid and continued a trend trees as they account for 50% of the time customers are without power. Our goal is to improve the liability to surpass the peer average by 2029 and not only does this improve reliability enhance the customer experience. It has the potential to unlock significant.
Joy Harris: <unk> economic value for the state and customers.
Gerardo Norcia: At DTE Gas, we are targeting over 200 miles of main renewal in 2024, as we continue to modernize the gas transmission system. Last year, we hit an important milestone where we completed almost 50% of our main renewal program. In January, we filed a rate case at DTE Gas to support important investments necessary to continue to renew our gas infrastructure, which will minimize leaks and reduce costs. At DTE Vantage, we continue to advance custom energy solutions projects.
Joy Harris: While we are executing on our efforts to improve reliability, we remain focused on the important transition to cleaner energy, while keeping customer impact on Bill's love.
Joy Harris: Our current plan involves ceasing coal use at the Belle River power plant in 2026, and converting it to a 1300 megawatt natural gas, peaking resource.
Joy Harris: At our remaining Monro coal plant, we are ceasing coal use at two units in 2028 and the remaining two units in 2032.
Joy Harris: We are studying a range of possible replacement technologies for the two units of this plant.
Joy Harris: As Jerry mentioned, we received approval from the N PSC to repurpose the former Trenton channel power plant into a battery energy storage system project, which will come online in 2026.
Joy Harris: Battery storage will be an important investment area to support our clean energy transition consistent with the recent energy legislation and our integrated resource plan.
Gerardo Norcia: RG Projects, and Carbon Capture and Sequestration Projects. One project to highlight is the Ford Motor Company Custom Energy Solutions project that is scheduled to go into operation later this year and is underpinned by a long-term fixed-fee contract with no commodity risk. So to wrap up my comments, I'll just say I'm feeling extremely positive about our start in 2024 and how we are well positioned to continue to deliver now and into the future for our customers, communities, and investors. Now I'll turn it over to Joi to give some highlights on our investment agenda and reliability improvements. Joi, over to you.
Joy Harris: We have a great plan ahead of us here at DTE as we transition to cleaner energy resources and remain on track to cease the use of coal in 2032.
Joy Harris: At DTE, we are focused on continuous improvement and finding ways to improve efficiency in our processes to maintain customer affordability based on our recent rate case filing the forecasted average annual growth of our residential electric bill will likely be less than half the national average.
Joy Harris: I'm very excited about the opportunities we have in front of us and I am confident that we will execute on our plan to improve reliability, while we continue our clean energy transition and maintain customer affordability.
Joy Harris: Now I'll turn it over to Dave to give you a financial update.
David S. Ruud: Thanks, Joey and good morning, everyone.
David S. Ruud: Let me start on slide eight to review, our first quarter financial results.
David S. Ruud: Operating earnings for the quarter were $346 million.
David S. Ruud: This translates into $1 67 per share.
David S. Ruud: You can find a detailed breakdown of EPS by segment, including a reconciliation to GAAP reported earnings in the appendix.
Joi M. Harris: Thanks, Jerry, and good morning, everyone. I'm happy to be here today with all of you.
Speaker Change: I'll start the review at the top of the page with our utilities.
Speaker Change: DTE electric earnings were $194 million for the quarter.
Speaker Change: This was $93 million higher than the first quarter of 2023.
Joi M. Harris: I will provide more detail on our capital investment agenda and our reliability plans to improve our customers' experience. Our investment plan is focused on building the grid of the future, improving reliability, and transitioning to cleaner generations. We have a robust agenda of $25 billion over the next five years, with about 95% of the investments at our utilities. Our five-year utility investment plan was increased by $2 billion over the previous plan, driven by investments in cleaner generation that is supported by the IRP, the energy legislation that passed last November, and our voluntary renewables program.
David S. Ruud: The main drivers of the earnings variance were lower storm costs that rate implementation, partially offset by higher rate based costs and the onetime O&M cost reductions we implemented in 2023.
David S. Ruud: Moving onto DTE gas operating earnings were $160 million.
David S. Ruud: $11 million lower than the first quarter of 2023.
David S. Ruud: The earnings variance was driven by warmer winter weather higher rate based costs and the onetime O&M cost reductions we implemented in 2023.
David S. Ruud: Partially offset by higher <unk> revenue in 2024.
David S. Ruud: If you remember we had a very warm winter last year and this year was even a little warmer than last year and was our fourth warmest on record.
David S. Ruud: Let's move to DT vantage on the third row.
David S. Ruud: Operating earnings were $8 million for the first quarter of 2024. This is a $19 million decrease from 2023 due to an outage at one of our renewable plants in 2024 as well as the timing of R&D project earnings in steel related sales.
David S. Ruud: We continue to be confident in our full year guidance for vantage as the shape of earnings will be notably higher in the back half of the year driven by the timing of earnings for some key projects in our custom energy solutions and renewable portfolios.
David S. Ruud: On the next row, you can see energy trading finished the quarter with earnings of $5 million.
David S. Ruud: The favorability to 2023 is primarily driven by performance of the physical gas portfolio, which was higher in 2024.
Joi M. Harris: The distribution plan filed last year outlines our path to building this grid of the future and includes the transition to a smart grid with full automation within five years, resulting in less frequent and shorter outages for our customers. We are investing $9 billion in distribution infrastructure and targeting significant reliability improvements over the next five years. As Gerard mentioned, we filed an electric rate case last month that represents an important step in our customer-focused investment agenda.
David S. Ruud: As well as continued stronger margins in our physical power portfolio.
David S. Ruud: With these stronger contracted margins, we could experience some upside, though maybe not to the same magnitude as last year.
David S. Ruud: Finally, corporate and other was unfavorable by $22 million quarter over quarter due to the timing of taxes.
David S. Ruud: Overall DTE earned $1 67 per share in the first quarter of 2024.
David S. Ruud: While we have faced some unfavorable weather through the first quarter, we remain confident in achieving our annual operating EPS guidance range as we continue to plan conservatively.
David S. Ruud: And we are not facing the additional $200 million of incremental headwinds that we're facing from a less than optimal regulatory outcome in the large ice storm in the first quarter of 2023.
David S. Ruud: Our planning for warm weather coming into the year.
David S. Ruud: And our efforts to rebuild headroom after experiencing the warm weather this quarter leave us in a strong position to achieve our EPS goals for this year.
David S. Ruud: Let's move to slide nine to highlight our strong balance sheet and credit profile.
David S. Ruud: Going forward, we will continue to invest heavily into our utilities. This.
Joi M. Harris: This filing addresses our continued infrastructure investments designed to improve reliability and generation investments to bring cleaner energy faster to the state. We will continue to invest in our infrastructure and are focused on improving reliability for our customers, reducing power outages by 30% and cutting outage time in half in the next five years. We have already made significant progress on this front, and we can see that the work that we're doing is having tangible results.
David S. Ruud: This customer focused investment is supported by our robust cash from operations, which are shown on our cash and capital guidance slide in appendix.
David S. Ruud: Due to the strong cash flows dts minimal equity issuances and our plan targeting annual issuances of zero to $100 million through 2026.
David S. Ruud: Our long term financial plan incorporates debt refinancing and new issuances to fund our capital investment plan and is consistent with our 6% to 8% operating EPS growth target.
David S. Ruud: As we came into the year, we had parent company debt financing in our plan to date, we have hedged or issued about 80% of the debt financing and we did it all in rates below what we had in our plan, making us confident that our full year 2020 for debt financing plan will be.
David S. Ruud: Be completed within our conservative planning assumptions.
David S. Ruud: We continue to manage future issuances through an active hedging program and other opportunities that mitigate interest rate variability consistent with our five year plan.
Joi M. Harris: For example, an important part of our grid modernization plan is the replacement of our 4.8 kV system. We're making great strides on this front as the work is progressing across our service territory. And in communities where DTE has completed the conversion work, customers are experiencing a 90% improvement in reliability. We are also making great progress on our restoration initiative. We did experience a large storm in January, and our team came together and achieved one of the fastest restorations for such a large storm.
David S. Ruud: We continue to focus on maintaining our strong investment grade credit rating and solid balance sheet metrics.
David S. Ruud: We target an <unk> to debt ratio of 15% to 16%.
David S. Ruud: Let me wrap up on Slide 10, and then we will open the line for questions.
David S. Ruud: Our team continues our commitment to deliver for all of our stakeholders.
David S. Ruud: Our robust capital plan supports our customers as we execute on the critical investments that we need to make to improve reliability and transition to cleaner generation, while focusing on customer affordability.
David S. Ruud: The 2020 for operating EPS guidance midpoint provides 7% growth over the 2023 original guidance midpoint.
David S. Ruud: And we continue to target long term operating EPS growth of six 8%.
David S. Ruud: <unk> continues to be well positioned to deliver the premium total shareholder returns that our investors have come to expect with a strong balance sheet that supports our future capital investment plan.
Speaker Change: With that I. Thank you for joining us today and.
Speaker Change: And we can open the line for questions.
Speaker Change: At this time I would like to remind everyone in order to task. A question Star then the number one on your telephone keypad.
Speaker Change: Your first question comes from the line of.
Joi M. Harris: I'm extremely proud of the team given their effort toward the goal of restoring all customers in 48 hours after a storm. So these investments are working, and we have a healthy portfolio of opportunities to invest in our system to greatly improve the customer experience. We are committed to modernizing our electric infrastructure to be more reliable and resilient, given increasingly severe weather, while also delivering cleaner energy to meet our aggressive carbon reduction goals and Michigan's clean energy legislation, consistent with our most recent IRP.
Shar: Shar <unk> with Guggenheim partners.
Shar: Please go ahead.
Shar: Hey, guys good morning.
Shar: Good morning, sure Michel Good morning, Jerry Good morning, guys.
Speaker Change: I guess first off.
Speaker Change: I guess, how are you sort of thinking about the cadence maybe capex updates in light of that kind of the new legislation could we see some adjustments to generation plant capex kind of in the near term to align closer to the new cost structure or is this kind of further out and as <unk>, maybe kind of the right cadence for any uptick.
Speaker Change: So as we're thinking about this new construct.
Speaker Change: So I'll start and maybe Dave can add to it sure, but we did update our capital plan that reflected.
Speaker Change: The RFP settlement from last summer.
Speaker Change: And also the.
Speaker Change: Legislation that passed in the fall so when we updated our five year plan much of that capital is included and that created a $2 billion increase that we rolled out.
Speaker Change: Now I will say that.
Speaker Change: As we get to the.
Speaker Change: Last part of that plan and we roll things up for the next five year period, we do anticipate.
Speaker Change: The DRP and legislation will create incremental investment opportunity.
Joi M. Harris: The electric rig case represents an important step in achieving our reliability commitment as we continue to build a more resilient and cleaner grid of the future. We are focused on reducing power outages by 30% and outage times by 50% over the next five years. We're planning to accelerate the deployment of technology and the transition to a smart grid, upgrade existing infrastructure with equipment like stronger poles and fiberglass cross arms, which can better withstand extreme weather, rebuild significant portions of the grid, and continue to trim trees as they account for 50% of the time customers are without power.
Speaker Change: Dave do you want to add to that.
David S. Ruud: Actually I think that's that's exactly right.
David S. Ruud: Our five year plan was consistent with the IOP the legislation the IOP were really close to each other.
David S. Ruud: And in this five year period, but there will give us some additional opportunities when we look beyond that.
David S. Ruud: Yes, and that was actually more referencing the <unk>.
David S. Ruud: Roll forward rate.
Speaker Change: Okay, and then just on I guess on.
Speaker Change: Just funding that incremental capex as we're thinking about rolling forward do you have that up to $100 million figure through 'twenty six.
Speaker Change: I guess, how do we how do we think about the incremental.
Speaker Change: Equity on every dollar that you could increase should we be assuming kind of that 50 50 cap structure or is there still some avenues to monetize assets like maybe DTE vantage projects R&D or is that kind of off the table at this point. Thanks.
Speaker Change: Well I'll say that our strong cash flow generation and our strong balance sheet allow us to do it as capital investment with that minimal equity and we've said that zero to 100 kind of fits throughout our five year plan that you are at a 100 on an equity.
Speaker Change: And a lot of that was because of the IRA.
Speaker Change: A lot of cash coming in from the from the IRS and the tax credits from the IRR. So we're confident in the capital we have in the plan that we're going to be able to stay within the and the equity that we've talked about as well as <unk>.
Speaker Change: Keep our <unk> to debt at that 15% to 16%.
Sharon: Okay Sharon.
Speaker Change: Im sorry, Im sorry go ahead.
Speaker Change: Jerry sorry about that.
Gerardo Norcia: I was going to say in terms of advantage certainly, we we like that business, but if the opportunity.
Sharon: Presented itself, where we.
Sharon: We can deploy some recycling of capital and create incremental shareholder value. Then we're always looking for those opportunities sure. So.
Joi M. Harris: Our goal is to improve reliability to surpass the peer average by 2029, and not only does this improve reliability and enhance the customer experience, but it has the potential to unlock significant economic value for the state and customers. While we are executing our efforts to improve reliability, we remain focused on the important transition to cleaner energy while keeping customer impact on bills low. Our current plan involves ceasing coal use at the Bell River Power Plant in 2026 and converting it to a 1,300 megawatt natural gas peaking resource.
Sharon: Equity needs were to change that may make it more.
Sharon: More impactful if you will.
Sharon: But we don't we don't see that right now.
Speaker Change: Okay perfect Gerry.
Gerry: Sure Matt. Thank you so much guys I appreciate it thank.
Speaker Change: Thank you Sir.
Speaker Change: Yeah.
Gerry: Your next question comes from the line of Nick <unk>.
Nick: Hello with Barclays.
Nick: Please go ahead.
Nick: Okay.
Nick: Hey, good morning, everyone. Thanks for taking my question.
Speaker Change: Hey, Nick good morning.
Speaker Change: So I guess.
Nick: You are kind of back to your normal course business planning now that we've moved past 'twenty three.
Nick: I know you have some.
Nick: Some execution items out there on the on the rate case side, but just how do you kind of feel about being able to kind of derisk 'twenty five and beyond here with with O&M and otherwise.
Speaker Change: Maybe I'll start again and my team can add to it but.
Speaker Change: We have started at a much stronger position this year with the absence of $200 million of headwinds the incremental headwinds that we experienced last year.
Speaker Change: And we are deep into planning for 2025, and what we're looking to do is really.
Speaker Change: Try to create opportunities to improve the levels of.
Speaker Change: Headroom for 2025 I mean this is our typical planning process. When we start to feel really good about the current year. We go deep into the prompt year and I can tell you we're deep into it and we're starting to feel real good about 25.
Speaker Change: And putting that together as far as.
Speaker Change: Key milestones both the gas rate case electric rate case that late this year and early next year.
Joi M. Harris: At our remaining Monroe coal plant, we are ceasing coal use at two units in 2028 and the remaining two units in 2032. We are studying a range of possible replacement technologies for the two units of this plan. As Jerry mentioned, we received approval from the NPSC to repurpose the former Trenton Channel power plant into a battery energy storage system project, which will come online in 2026. Battery storage will be an important investment area to support our clean energy transition consistent with recent energy legislation and our integrated resource plan.
Speaker Change: These rate cases are pretty straightforward in the sense that they are all about capital capital deployment, and really continuing to rebuild and enhance both the gas infrastructure.
Speaker Change: Our electric infrastructure to be more reliable and cleaner so much of what we are.
Speaker Change: Requesting from our customers is to support those investments and we've seen support for that in the past. So we feel pretty confident about our 2025 year plan coming together nicely.
Speaker Change: I appreciate that.
Speaker Change: And then I guess.
Speaker Change: I know vantage you cannot have this $15 million a year growth cadence.
Speaker Change: In the plan, but it does seem that there are some tailwind to that business from some tax credits than just stronger cash returns in general can you just any way to isolate how large that strength is relative to that that assumption that you had in there.
Speaker Change: How would you kind of describe where it puts you.
Speaker Change: Overall in the business at the midpoint of that six to eight range can you be above that range.
Speaker Change: Years, and how should we kind of think about that.
Speaker Change: Yes, Nick.
Nick: As he said there are some some good tailwind and our vantage business that we're seeing from tax credits related both R&D and to our customer energy solutions business and also we have some good growth in that area as well.
Nick: When we get to the end of the year, we'll talk more about 25 and beyond and how.
Nick: Some of those tax credits will come into our plan.
Nick: What we do see is that it does give us some more flexibility.
Nick: Some some additional confidence in the six to eight as we go through these years in.
Joi M. Harris: We have a great plan ahead of us here at DTE as we transition to cleaner energy resources and remain on track to cease the use of coal in 2032. At DTE, we are focused on continuous improvement and finding ways to improve efficiency in our processes to maintain customer affordability. Based on our recent rate case filing, the forecasted average annual growth of our residential electric bill will likely be less than half the national average.
Nick: As we get beyond some still some really good confidence in the long term, 6% to 8%.
Speaker Change: Alright, I appreciate it have a great day, thanks, Nick Thanks, Nick.
Speaker Change: Your next question comes from the line of Jeremy Tonet.
Jeremy Bryan Tonet: With JP Morgan.
Jeremy Bryan Tonet: Please go ahead.
Jeremy Bryan Tonet: Hi, good morning.
Jeremy Bryan Tonet: Hey, Jeremy.
Jeremy Bryan Tonet: Just wanted to come back to the comments as you laid out with regards to vantage in the R&D assets and the potential for.
Speaker Change: Portfolio rotation, there should the opportunity presented itself and just curious I guess the driver to these comments have others approached you on these assets or I was just trying to get a sense for what you see or how that the market is for those type of assets right now.
Joi M. Harris: I'm very excited about the opportunities we have in front of us, and I'm confident that we will execute on our plan to improve reliability while we continue our clean energy transition and maintain customer affordability. Now, I'll turn it over to Dave to give you a financial update.
Speaker Change: Sure. So Jeremy I'll, just start by saying look we like those assets. They have created extraordinary returns for us.
Speaker Change: Great cash flows and we still see a strong pipeline of growth and as we were in the market all the time talking about value.
Jeremy Bryan Tonet: And I can tell you that.
Jeremy Bryan Tonet: At this point in time based on our long term plan.
Jeremy Bryan Tonet: For value creation.
Jeremy Bryan Tonet: We don't see the opportunity to create incremental value above.
David S. Ruud: Thanks, Joi. Good morning, everyone.
Jeremy Bryan Tonet: What we could expect now the assets are extremely accretive.
David S. Ruud: Let me start on slide 8 to review our first quarter financial results. Operating earnings for the quarter were $346 million, which translates into $1.67 per share. You can find a detailed breakdown of EPS by segment, including our reconciliation to GAAP-reported earnings in the appendix. I'll start the review at the top of the page with our utilities.
Jeremy Bryan Tonet: But we always look to create incremental value over our long term plan and we.
Jeremy Bryan Tonet: We don't see that opportunity just yet, but if it presents itself, we will exercise that opportunity I assure you.
Jeremy Bryan Tonet: And again, we're in conversations all the time with the market, there's obviously lots of dialogue that happens.
Jeremy Bryan Tonet: In this type of marketplace.
Speaker Change: Got it that's very helpful. Thank you and then.
Jeremy Bryan Tonet: Just wanted to come back and kind of.
Jeremy Bryan Tonet: On the back of some of your earlier comments here talking about the renewable energy plan. Just wondering if you might be able to peel back a little bit more of the details here, what we should be expecting what you're focused on for the upcoming renewable energy plan.
David S. Ruud: DTE Electric earnings were $194 million for the quarter. This is $93 million higher than the first quarter of 2023. The main drivers of the earnings variance were lower storm costs at rate implementation, partially offset by higher rate-based costs and the one-time O&M cost reductions we implemented in 2023. Moving on to DT Gas, operating earnings were $160 million. $11 million lower than the first quarter of 2023. The earnings variance was driven by warmer winter weather, higher rate-based costs, and the one-time O&M cost reductions we implemented in 2023, partially offset by higher IRM revenue in 2024.
Speaker Change: Well, what I would say that as our voluntary plan continues.
Speaker Change: The replay of this that we have one of the largest voluntary renewable development plans in the country.
Speaker Change: Based on the size of our company.
Speaker Change: And.
Speaker Change: That continues to exceed our expectations. We currently have about 2400 megawatt size.
Speaker Change: 2500 megawatt goals for the next five years. So you can see that.
Speaker Change: We're getting very close to having that plan. So I would say that's one update that we will provide as we roll forward. The next five year plan. In addition to that the IRB becomes more aggressive.
Speaker Change: As we move forward beyond the current five year plan.
Speaker Change: So I think we will see some tailwind from that in the plan as well as we rollout together.
Speaker Change: So those are the new opportunities that we see longer term and near term in the.
Speaker Change: Renewable energy development plan.
Speaker Change: Got it thank you for that I'll leave it there.
Speaker Change: Thank you.
Speaker Change: Your next question comes from the line of David Arcaro with Morgan Stanley. Please go ahead.
David Keith Arcaro: Good morning, David Hey, good morning, Thanks, so much David.
David Keith Arcaro: One more vintage question here I was curious or data centers, our customer class that you go after and I'm thinking with custom energy solutions, just wondering if theres any emerging growth opportunities there.
Speaker Change: So the short answer is yes, but maybe I'll describe this in.
David S. Ruud: If you remember, we had a very warm winter last year, and this year was even a little warmer than last year and was the fourth warmest on record. Now, let's move to DT Vantage on the third row.
David Keith Arcaro: Global's perspective for DTE.
David Keith Arcaro: I would say, both our utility electric utility and vantage.
David Keith Arcaro: Well positioned to pursue these opportunities with data centers here just right here in our backyard and also with vantage beyond our backyard, but in Michigan, Let me focus on Michigan for a minute.
David S. Ruud: Operating earnings were $8 million for the first quarter of 2024. This is a $19 million decrease from 2023 due to an outage of one of our renewable plants in 2024, as well as the timing of R&G project earnings and steel-related sales. We continue to be confident in our full-year guidance for Vantage, as the shape of earnings will be notably higher in the back half of the year, driven by the timing of earnings for some key projects in our custom energy solutions and renewable portfolios. On the next row, you can see Energy Trading finished the quarter with earnings of $5 million.
David Keith Arcaro: We have great access to water favorable climate conditions and power plant sites with large land positions in grid access that I think will be very.
David Keith Arcaro: <unk> is very attractive to the suitors that we are having conversations with what we're seeing.
David Keith Arcaro: <unk> interest and we're engaged in discussions, but I will say this much hinges on the legislation that exemption sales and use tax.
David Keith Arcaro: You may recall at the house here in Michigan approved the bills, a bipartisan way they are awaiting approval by the Senate.
David Keith Arcaro: The Governor has indicated a great willingness to sign those bills if they come that her desk.
David Keith Arcaro: So I.
David Keith Arcaro: I believe that we're well positioned in Michigan with both the electric utility and vantage that can provide the.
David Keith Arcaro: Onsite energy services. So we're.
David Keith Arcaro: We're having those conversations they're early but the opportunity is sizable.
Speaker Change: Great. Thanks, that's helpful color.
David Keith Arcaro: And then I was wondering if let's say pivoting to the rate case the.
David Keith Arcaro: The electric rate case I was wondering if you could maybe help contextualize some of the attorney General's comments that were out there on the on the size of the request and maybe any early indications early thoughts on whether you think a settlement could be something that you go after and could be.
David S. Ruud: The favorability to 2023 is primarily driven by performance of the physical gas portfolio, which was higher in 2024, as well as continued stronger margins in our physical power portfolio. With these stronger contracted margins, we could experience some upside, though maybe not to the same magnitude as last year. Finally, Corporate Another was unfavorable by $22 million, quarter over quarter, due to the timing of tax.
David Keith Arcaro: <unk>.
David Keith Arcaro: Acceptable in this rate case.
Speaker Change: Yes, I think that the attorney general and good morning, and Attorney General.
Speaker Change: Pretty much things that we expected.
David Keith Arcaro: This rate case as it now.
David Keith Arcaro: Is really all about our capital and the capital we're deploying is targeting the distribution infrastructure and we're looking to improve reliability and certainly continue our journey.
David Keith Arcaro: Our transition to cleaner energy sources faster for the state and with respect to the distribution infrastructure.
David Keith Arcaro: Looking to reduce power outages by 30% and cut in half over the next five years. So the case is going as we planned we just filed that we do now have a pre hearing schedule for tomorrow, and we will start to notice and understand the schedule and then start to get feedback.
David Keith Arcaro: Brad.
David Keith Arcaro: Staff.
Speaker Change: So I guess, what's in the case in general.
David Keith Arcaro: Just on the investments that we have in their infrastructure. There's also a storm tracker storm tracker is about $65 million.
David S. Ruud: Overall, DTE earned $1.67 per share in the first quarter of 2024. While we have faced some unfavorable weather through the first quarter, we remain confident in achieving our annual operating EPS guidance range as we continue to plan conservatively, and we are not facing the additional $200 million of incremental headwinds that we were facing from a less-than-optimal regulatory outcome in the large ice storm in the first quarter of 2023, are planning for warm weather coming into the year, and our efforts to rebuild Headroom after experiencing the warm weather this quarter leave us in a strong position to achieve our EPS goals for this year.
Brad: Based on the five year average so almost the two way tracker with the 50 50 sharing available above and the low rates.
Brad: So that's really what former case investment that we have in our infrastructure to drive reliability improvements and certainly cleaner generation.
David Keith Arcaro: Now that the revenue requirement is about $466 million and we're targeting an IRA.
David Keith Arcaro: And then the 5% with a 50 50 cap structure.
Speaker Change: In terms of prospects for settlement, David We've got a lot of Interveners in this case and we will do all we can to settle.
Speaker Change: But again as Joey said.
Speaker Change: Since this case it was really primarily about capital deployment.
David Keith Arcaro: Well understood and well known agenda for capital deployment.
Speaker Change: We're confident that even if it goes to its full course in terms of litigation that we will get a supportive outcome.
Speaker Change: The Commission has a strong track record in that.
Speaker Change: Way and also the administration supports these investments and knows that they are extremely important for the state.
Speaker Change: To pursue economic development and also provide more value to our customers and our citizens here in the state of Michigan.
Speaker Change: We're feeling pretty good about how it's progressing.
Speaker Change: <unk>.
Speaker Change: Okay, great I appreciate that thanks, so much.
Speaker Change: Thank you.
Speaker Change: Your next question comes from the line of Doug, Yes, guests Chilcote with Evercore ISI. Please go ahead.
David S. Ruud: Let's move to slide 9 to highlight our Strong Balance Sheet and Credit Profile. Going forward, we will continue to invest heavily in our utilities. This customer-focused investment is supported by our robust cash from operations, which is shown on our cash and capital guidance slide in the appendix. Due to these strong cash flows, DTE has minimal equity issuances in its plan, targeting annual issuances of $0 to $100 million through 2026. Our long-term financial plan incorporates debt refinancing and new issuances to fund our capital investment plan and is consistent with our 6-8% operating EPS growth target.
Doug Chilcote: Hey, good morning team. Thanks for taking my questions Hey, Good morning, Chris.
Doug: Good morning, Gerry Gerry enjoyed the.
Doug: The discussion on the electric rate case settlement.
Doug Chilcote: You guys had discussed or in the past you've talked about potentially a partial <unk>.
Doug Chilcote: Settlement, but with some parties and not unanimously is that something that you could pursue with this electric rate case.
Geis: Could the geis and certainly we will.
Doug Chilcote: Again, I don't want to hedge too many helps on a settlement we will do all we can to settle.
Doug Chilcote: But as we saw it in our last rate case, we weren't able to bring all the parties together for various reasons and sometimes that happens, but our opening position and our desire is to settle.
Doug Chilcote: But we're also confident that we will get the support of outcomes in the event that there is not a settlement.
Speaker Change: Understood. Thanks for that and then maybe just one question.
Speaker Change: On 2024, obviously, you expressed a lot of confidence here on any numbers, maybe can you just frame for us.
Speaker Change: What level of contingency if any you might have used I know you go into the year with a healthy level of contingency, but you had milder weather in <unk>. So maybe just frame for us how much of that contingency bucket is still left.
Speaker Change: Hey, Jay this is Dave how are you.
David S. Ruud: So as we as we came into the year, we did have some some contingency.
David S. Ruud: For weather and then we did see weather in the first quarter as you can see.
David S. Ruud: But as we see that whether we work right away to rebuild what we can to make sure. We're in a good position for the summer.
David S. Ruud: So we've done that and then we also have our lean and invest where we saw last year. We can go we can go deeper if we need to and doing things that way.
David S. Ruud: We will need to do to to make it so we're in a.
David S. Ruud: We're defined position going into this into the summer and that's when the real whether it will happen for us.
Speaker Change: Excellent I appreciate it high confidence in doing fine. Thank you.
Speaker Change: Yes.
David S. Ruud: As we came into the year, we had parent company debt financing in our plan. To date, we have hedged or issued about 80% of the debt financing, and we did it at all-in rates below what we had in our plan, making us confident that our full-year 2024 debt financing plan will be completed within our conservative planning assumptions. We continue to manage future issuances through an active hedging program and other opportunities that mitigate interest rate variability consistent with our five-year plan.
David S. Ruud: Your next question comes from the line of Andrew Weisel with Scotiabank. Please go ahead.
Andrew Marc Weisel: Thank you good morning, everybody.
David S. Ruud: Morning.
David S. Ruud: Chris.
Andrew Marc Weisel: The first asset O&M question, a little bit differently.
Andrew Marc Weisel: We're pretty aggressive last year as soon as the year started given the rate case and the mild winter weather and obviously some of that is partly reversed in the first quarter I guess the way I would where it is would you say you are back to normal O&M levels or are you still sort of catching up from last year or again, there's last question asked or you would lean mode already.
Andrew Marc Weisel: Given the mild winter 2024.
Speaker Change: Andrew I'll start by saying this year feels a lot different than last year, we had.
Andrew Marc Weisel: We had weather last year or two but we also had the storm in the first quarter in the rate case. So we were in a very different position this year.
Andrew Marc Weisel: And we did a lot across the company to achieve what we needed to do last year.
Andrew Marc Weisel: Some of those reductions continue naturally into this year, but for the most part those were all one time savings from last year. So we're back into what I would say is our normal efforts on productivity and efficiency improvement.
Andrew Marc Weisel: Putting in place are lean and invest as needed as we continue to manage affordability and ensure we're going to deliver for our customers. So.
Operator: At this time, I would like to remind everyone, in order to ask a question, press star then the number one on your telephone keypad.
Andrew Marc Weisel: I'd say, it's more into the normal.
Andrew Marc Weisel: T motive.
Andrew Marc Weisel: Productivity and efficiency improvements.
Speaker Change: Okay, great good to hear.
Andrew Marc Weisel: One very small one.
Andrew Marc Weisel: Negative earnings at corporate and other and you have a note that there is it related to the timing of taxes was that in line with your expectations. When you gave the full year guidance and should that fully offset as the year goes on or is that trending a little differently than you had budgeted.
Gerardo Norcia: So I'll start, and maybe Dave can add to it, Shahriar, but we did update our capital plan that reflected, you know, our IRP settlement from last summer and also the
Andrew Marc Weisel: That is all consistent with what we budgeted and it will all reverse by the end of the year too.
Speaker Change: Great to hear thank you very much.
Speaker Change: Okay.
Speaker Change: Your next question comes from the line of Michael Sullivan with Wolfe Research. Please go ahead.
Gerardo Norcia: A lot of that was because of the IRA. And, you know, we have a lot of cash coming in from the IRA and the tax credits from the IRA. So we're confident in the capital we have in the plan that we're going to be able to stay within the equity that we've talked about, as well as keep our FFO to debt at that 50.
Michael P. Sullivan: Hey, good morning.
Michael P. Sullivan: Morning, Michael.
Andrew Marc Weisel: Hey.
Michael P. Sullivan: I wanted to maybe dive a little deeper on the rate case, and some of the kind of non traditional aspects of it I guess on the storm costs.
Michael P. Sullivan: Tracker, what do you think chances are that that goes through or does this need to iterate through.
Michael P. Sullivan: A couple of more cases.
Michael P. Sullivan: If you had that in place last year, what would that have been enough to.
Michael P. Sullivan: Put you in a position to have to have hit the original guide and then and then on the IRS.
Michael P. Sullivan: How much is that ramping up from the last case and do you think.
Shahriar Pourreza: I'm sorry, Shahriar, go ahead.
Michael P. Sullivan: That can help space out cases in the future sorry that was a bunch there, but any color would help.
Shahriar Pourreza: Maybe I'll start again.
David S. Ruud: Headroom for 2025. I mean, this is our typical planning process. When we start to feel really good about the current year, we go deep into the following year. And I can tell you, we're deep into it.
Speaker Change: Yes so.
Michael P. Sullivan: First question around the storm tracker the $65 million.
Michael P. Sullivan: If that were in place last year, yes that would have been helpful. Certainly.
Michael P. Sullivan: Given the costs that we experienced in the first quarter and then throughout the balance of the year.
Michael P. Sullivan: Do I think that we will get some support for it I think there is there's a lot of conversation that happened early on there is a good chance that we will get the support I think we're aligned with.
David S. Ruud: We're starting to feel really good about 2025 and putting that together. As far as key milestones, both the gas rate case and the electric rate case that come late this year and early next year, these rate cases are pretty straightforward in the sense that they're all about capital, capital deployment, and really continuing to rebuild and enhance both the gas infrastructure and our electric infrastructure to be more reliable and cleaner. So much of what we're requesting from our customers is to support those investments, and we've seen support for that in the past. So we feel pretty confident about our 2025 year plan coming together nicely.
Michael P. Sullivan: With consumers and pursuing this type of tracker.
Michael P. Sullivan: And.
Michael P. Sullivan: More will come in by way of testimony will know here shortly what the schedule is set and you'll start to see the intervenor and staff testimony how much support we actually get.
Michael P. Sullivan: In terms of the IRS whats in the Iran.
Michael P. Sullivan: Our 2020, the IRR and includes $530 million worth of capital and then for 2027 and $720 million worth of capital pre.
Michael P. Sullivan: Previously, we had filed for $62 million or 2024 and $290 million in 2025.
Michael P. Sullivan: And we are well positioned to execute on our 24 plants and we certainly have plans for 26 and 27.
Michael P. Sullivan: Do I think that it will keep us out of future rate cases, I think it will have to continue to grow.
Michael P. Sullivan: In order for us to achieve.
Michael P. Sullivan: I think a delay in the rate case cadence that we have right now and that will take us several years, So Ryan I think that ramp.
Michael P. Sullivan: Yes.
Ryan: Okay, Great. Yes, you hit all of them. Thank you for that and then just one quick one.
Michael P. Sullivan: <unk>.
Speaker Change: Renewable plant outage and vantage in Q1 was that.
Michael P. Sullivan: Planned or unplanned and does it if it was unplanned is it.
Michael P. Sullivan: Resolved.
Michael P. Sullivan: It was unplanned it actually started last year and it is resolved so it's coming back on line for the rest of the year.
Speaker Change: Great. Thanks, Thanks, Dave I appreciate it.
Michael P. Sullivan: Yes.
Michael P. Sullivan: Your next question comes from the line of Sophie Karp with Keybanc. Please go ahead.
Shahriar Pourreza: All right. I appreciate it. Have a great day.
Sophie Ksenia Karp: Hi, Good morning, Thank you for taking my morning shortly.
Jeremy Bryan Tonet: Your next question comes from the line of Jeremy Tonet with JPMorgan. Please go ahead.
Sophie Ksenia Karp: Uh huh.
Sophie Ksenia Karp: Just wondering if you could maybe talk a little bit big picture right without a pretty pretty.
Sophie Ksenia Karp: Pretty impressive investment plan that you have over the next few years right and I'm sure there's going to be a more rate cases common to kind of account for that.
Gerardo Norcia: Sure. So, Jeremy, I'll just start by saying, look, you know, we like those assets. They've created, you know, extraordinary returns for us and great cash flows. And we still see a strong pipeline of growth. And, you know, we were in the market all the time talking about value. And I can tell you that at this point in time, based on our long-term plan for value creation, we don't see the opportunity to create incremental value above what we could expect.
Sophie Ksenia Karp: Longer term, what do you see as an offsetting factor I guess to a customer bill increases here.
Sophie Ksenia Karp: Inc.
Sophie Ksenia Karp: Is that maybe industrial load, that's cowen and including data centers or some of the.
Sophie Ksenia Karp: Automation, you're partnering with Qatar on Opex like if you could give us some sense of kind of like the picture how would you.
Sophie Ksenia Karp: I guess offset customer bill pressures with that.
Sophie Ksenia Karp: Well I would say Sophie thanks for the question.
Sophie Ksenia Karp: I mean, we are undertaking a historic transformation.
Speaker Change: Here at DTE as we think about the way, we deliver energy our wires business.
Speaker Change: The way, we're transforming the way we produce power over the next five years and as you can see in our capital plan, we have $25 billion and our five year capital plan.
Gerardo Norcia: Now, the assets are extremely accretive, but we always look to create incremental value over our long-term plan. And we don't see that opportunity just yet, but if it presents itself, we will exercise that opportunity, I assure you. And again, we're in conversations all the time with the market. There's obviously lots of dialogue that happens in this type of marketplace.
Speaker Change: With 90 more than 90% of a directed at our two utilities and we also continue to transform the way, we deliver natural gas and that's well underway now in terms of affordability perspective, you can see we're extremely well positioned with there are bills to our residential customers being well below the national average our goal is to maintain.
Speaker Change: Their position.
Speaker Change: And the way we maintain that position is as you described a lot of these investments are pointed at.
Speaker Change: Assets that will reduce costs for example, as we continue to improve reliability and the electric wires business.
Speaker Change: To see our trouble costs and storm costs fundamentally we will start to decline.
Jeremy Bryan Tonet: Got it. Thank you for that. I'll leave it there.
Speaker Change: And that will help to finance this as well.
Jeremy Bryan Tonet: One more Vantage question here. I was curious, are data centers a customer class that you go after? I'm thinking about custom energy solutions. Just wondering if there are any emerging growth opportunities.
Speaker Change: And that's just one example, even the transition from coal to natural gas and renewables, that's creating significant cost reductions operating cost reduction so a lot of our capex.
Speaker Change: Will yield a lower operating costs, which will obviously.
Speaker Change: Be transferred to the benefit of our customers in terms of revenue growth, we see several other opportunities.
Gerardo Norcia: So I believe that we're well positioned in Michigan with both the electric utility and Vantage to provide onsite energy services. So we're having those conversations. They're early, but the opportunity is sizable.
Speaker Change: As we look forward in a lot of discussion in the industry about data centers, certainly that will help as we start to windows and we needed enabling legislation to get that done.
Speaker Change: We also.
Speaker Change: See evs, even though they've slowed down a bit we're still conducting.
Speaker Change: Evs, a month or more.
Speaker Change: It is encouraging and we see that growing and we see the big three here working.
David S. Ruud: In terms of prospects for settlement, David, we've got a lot of interveners in this case, and we will do all we can to settle, but again, as Joi said, since this case is really primarily about capital deployment.
Speaker Change: Heavily to bringing new models.
Speaker Change: To bear and as a matter of fact just quickly heroes.
Speaker Change: <unk> was the president of General Motors and abuse testing of new EV under under a drag here in Milford.
Speaker Change: So lots of development activity is still on Uavs.
Speaker Change: And bringing those to market. So I think we'll see that help finance some of these investments. So I would say two things just to summarize.
Jeremy Bryan Tonet: Okay, great. I appreciate that. Thanks so much.
Speaker Change: Significant capital agenda $25 billion over the next five years 50 billion over the next 10 years. So if you're an investor of DTE you should be really excited about our long term investment opportunity and the fact that a lot of this investment will help moderate bills over time.
Durgesh Chopra: Your next question comes from the line of Durgesh Chopra with Evercore ISI. Please go ahead.
Durgesh Chopra: Okay, great. Good to hear. And then there is one very small one.
Speaker Change: Thank you that's very helpful. I also wanted to ask you a quick question on vantage right. So.
Michael P. Sullivan: The negative earnings of corporate and other, and you have a note that it's related to the timing of taxes, was that in line with your expectations when you gave the full-year guidance, and should that fully offset as the year goes on, or is that trending a little differently than you had budgeted?
Speaker Change: I guess to the extent you're keeping this business how should we think about the size of the trial at this too.
Speaker Change: The utility businesses that you have.
Speaker Change: Is there a certain kind of like a contribution to earnings that you wanted to keep it on their part.
Speaker Change: Like what's what is your thinking there.
Speaker Change: Yeah, our investment thesis there is that we want to pursue high quality investments.
Speaker Change: Low risk and high returns and we've been doing that and that's working out quite well, but we want to keep it at less than 10% at 10% or less of earnings contribution as we look forward and our utilities are growing so quickly that it does give us the opportunity to continue to grow vantage as well.
Speaker Change: Alright. Thank you so much it's all for me thanks.
Speaker Change: Thank you.
Speaker Change: Your next question comes from the line of Angie <unk> zinc zinc Keith with Seaport. Please go ahead.
Michael P. Sullivan: Michael. Hey, I wanted to maybe dive a little deeper into the rate case and some of the kind of non-traditional aspects of it. I guess on the storm cost tracker, what do you think the chances are that that goes through, or does this need to iterate through, you know, a couple more cases? If you had that in place last year, would that have been enough to put you in a position to have to have hit their original guide, and then and then on the IRM, you know, how much is that ramping up from the last case? And what do you think?
Angie: Good morning.
Angie: Good morning, Angie Angie.
Angie: Good morning.
Angie: Just wondering you know in the past I remember there was always this discussion about.
Angie: Our approach to.
Angie: Coal plant retirements.
Angie: The lion's integrated versus self generation.
Angie: I was always Sylvan impression that you guys were long power I.
Angie: I hope that still the case.
Speaker Change: So just two things.
Angie: The load growth accelerates and ask the R&R market.
Angie: I mentioned the importance of dispatch of coal resources.
Angie: Is there a chance that youre going to make any changes to lab.
Angie: Gentlemen.
Angie: And number two.
Angie: As I said Im assuming youre long power.
Angie: That quick.
Angie: So attract data centers with that.
Michael P. Sullivan: Do I think that it will keep us out of future rate cases? I think it will have to continue to grow in order for us to achieve, I think, a delay in the rate case cadence that we have right now. And that'll take us several years to arrive at, I think, that ramp.
Angie: Simply.
Angie: And just improve.
Angie: Affordability of electric bills for existing customers or would it be actually incremental to earnings again I feel like we're seeing this pick up in the low cost at our utilities without any this is already a commensurate increase in earnings and so I'm just wondering how you envision niche given your generation for Kent.
Speaker Change: Great Great questions, Andrew I'll take them one at a time so in terms of reserve margins DTE.
Michael P. Sullivan: It was unplanned. It actually started last year, and it is resolved. So it's coming. It's back online for the rest of the year.
Speaker Change: Filed our last IRB.
Angie: We filed that with adequate reserve margins as we move through our coal plant retirements and as you know.
Angie: We've built.
Angie: State of the art combined cycle facility is up and operation as part of our coal plant retirement.
Angie: The plan, we are converting the bulk of our power plant from coal to natural gas, which will be a dispatch and will continue to be a dispatch ball plant that will happen in the 25% in 2006 timeframe. In addition to that we've embarked on battery storage, which will provide a short term dispatch ability. So all of that fits into the portfolio between now and 2012.
Sophie Ksenia Karp: Your next question comes from the line of Sophie Karp with KeyBank.
Sophie Ksenia Karp: will yield lower operating costs, which will obviously be transferred to the benefit of our customers. In terms of revenue growth, we see several opportunities, you know, as we look forward.
Angie: The eight that were extremely well as we near the end of that are near the the next phase of the ERP plan, while we want to exit.
Angie: Completely by 2000, 2032, 32, we will need to build more dispatch will generation and what we're pursuing there is current technology, where we can use natural gas low carbon capture and storage and we highlighted that in our AARP. So we do see more dispatch will generation in our future as we continue our exit from coal.
Gerardo Norcia: You know, a lot of discussion in the industry about data centers, certainly that will help as we start to land those, and we need enabling legislation to get that done. We also see EVs, even though they've slowed down a bit, we're still connecting a thousand EVs a month or more, which is encouraging, and we see that growing, and we see the big three here working, you know, heavily to bring new models to bear.
Angie: That plant will also be available to burn hydrogen should hide it and present itself as a viable resource and fuel resource.
Speaker Change: A growth very good question.
Speaker Change: What we see there is if some of this growth accelerates.
Angie: We will need to build and the growth that we're looking at like data centers. For example, our 24 by seven operations that.
Angie: And that will need generation that cannot be and power that cannot be interrupted.
Angie: So we will need 24 by seven to special more 24 by seven dispatch flow generation and renewable resources. So it again it will be a mix. It does have the potential for accelerating our next AARP.
Angie: Should such demand present itself in terms of impact to customers.
Angie: We expect that.
Gerardo Norcia: And as a matter of fact, just quickly here, I was on a video call with the president of General Motors, and he was testing a new EV on their track here at Milford. So, lots of development activities still on new EVs and bringing those to market. So, I think we'll see that help finance some of these investments. So, I would say two things, just to summarize. Very significant capital agenda, $25 billion over the next five years, $50 billion over the next 10 years. So, if you're an investor of DTE, you should be really excited about the long term.
Angie: Those investments will pay for themselves and.
Angie: That should provide a benefit to customer bills to some degree so thats our going in position.
Angie: And we see that is very possible.
Angie: It will also add value to our investors because those investments will be in rate base and <unk>.
Angie: Attracted typical returns.
Angie: So I think it's a win win all around.
Angie: And based on your discussions when when with this incremental load.
Angie: Potentially materialize or are we talking like 2028 and beyond.
Speaker Change: I'm, just wondering how suddenly could see that.
Angie: The earnings impact.
Angie: Angie it's too early to tell these conversations as I mentioned earlier are very early.
Angie: They're sizable.
Angie: Conversations in terms of the load that we're talking about and again, we're really well positioned but in terms of timing, we haven't gotten that far just yet.
Angie: But I think that will come I think the key catalyst here in Michigan.
Angie: We will be this legislation that needs to pass on on the sales and use tax that's a big deal for the data centers that are.
Angie: Our considering Michigan and considering investing.
Angie: Some of the sites that we put in front of us.
Speaker Change: Great. Thank you and that should happen, we expect that to happen hopefully this summer.
Sophie Ksenia Karp: And number two, as I said, I'm assuming you're a long power and that could, you know, sort of attract data centers. Would that simply improve the affordability of electric bills for existing customers, or would it be actually incremental to earnings? Again, I feel like we're seeing this pickup in load growth at our utilities without any necessarily commensurate increase in earnings. And so I'm just wondering how you imagine it given your generation, and we see that as very possible.
Angie: But with an election year.
Angie: It is a volatile year as you know.
Speaker Change: Okay. Thank you.
Angie: Your next question comes from the line of Travis Miller with Morningstar.
Travis Miller: Please go ahead.
Travis Miller: Thank you and good morning, everyone.
Travis Miller: Yes.
Travis Miller: Answered most of my questions and discuss most of my topics I was hoping to hit so just real quick so residential and commercial demand looks like it was up I know this is a small relatively small quarter for that but anything there either relative to plan or notable.
Travis Miller: What are you seeing residential commercial demand pick up a little bit.
Speaker Change: Yes, we did see.
Speaker Change: Initial up quarter over quarter, I would say, though for the year.
Speaker Change: We're expecting it to come in on plan.
Speaker Change: Probably pretty well consistent with last year, we have a lot of energy efficiency, we do with that.
Speaker Change: And the growth kind of work together and will be fairly flat to last year.
Speaker Change: Okay. That's all I have to leave it there thanks a lot. Thanks.
Speaker Change: Ralph.
Speaker Change: Sure.
Speaker Change: I will now turn the call back over to Jerry Norcia for closing remarks. Please go ahead.
Gerardo Norcia: Well. Thank you everyone for joining us today and I'll close by saying that we're feeling really confident about 2024 and of course, our long term plan beyond that in terms of providing value for our customers and for our investors.
Travis Miller: Your next question comes from the line of Travis Miller with Morningstar. Please go ahead. Thank you. Good morning, everyone.
Speaker Change: Have a great morning.
Gerardo Norcia: I will now turn the call back over to Gerry Norcia for his closing remarks. Please go ahead.
Speaker Change: Stay healthy and stay safe.
Speaker Change: Ladies and gentlemen that concludes today's call. Thank you all for joining and you may now disconnect your lines.
Operator: Please wait; the conference will begin shortly.
Speaker Change: Please wait the conference will begin shortly.
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