Full Year 2024 DTE Energy Co Earnings Call
Kate: Thank you for standing by. My name is Kate, and I will be your conference operator today.
Speaker Change: 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 with the number one on your telephone keypad. If you would like to withdraw your question, press star one again. Thank you. I would now like to turn the call over to Matt Karpinski, Director of Investor Relations. Please go ahead.
David Ruud, Unknown Executive, Gerardo Norcia, David Ruud, Joi Harris
Speaker Change: 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.
Speaker Change: With us this morning are Jerry Norcia, Chairman and CEO, Joi Harris, President and COO, and Dave Ruud, Executive Vice President and CFO. And now I'll turn it over to Jerry to start our call this morning.
Speaker Change: Thanks, Matt. Good morning, everyone, and thanks for joining us. We have a lot of positive updates to share with you today, including a recap of a very successful year in 2024, which has positioned us well for strong performance in 2025. We will also provide an overview of our long-term plan that includes significant utility investment increases that we need to execute for our customers.
Speaker Change: as we continue to build the grid of the future and transition to cleaner generation.
Speaker Change: This plan also demonstrates our ongoing commitment to affordability for our customers.
Speaker Change: Joi will provide additional details on our long-term plan and Dave will provide updates on our financials.
Speaker Change: Including our 2024 performance and guidance for 2025. And then we will open it up for your questions.
David Ruud, Unknown Executive, Gerardo Norcia, David Ruud, Joi Harris
Let me start on slide four.
Speaker Change: I'll start by saying again that we had a very successful year in 2024, and this success is driven by a team that consistently delivers as a result of our strong culture.
Speaker Change: Last year, we were recognized by the Gallup Organization for the 12th consecutive year with a Great Workplace Award, and our employee engagement ranks in the 94th percentile globally amongst thousands of organizations.
Speaker Change: As I've said before, our high level of employee engagement is our secret sauce for continued success.
Speaker Change: This all positions us well for another successful year in 2025.
Speaker Change: Which provides 7% growth over the 2024 Original Guidance Midpoint and will be the reference point for our long-term growth.
Speaker Change: As we have said, the 45Z tax credits give us additional strength in our plan, providing confidence we will reach the higher end of our growth rate, 25 through 27, and provide flexibility to exceed the high end or support future years.
Speaker Change: Today, I'm really excited to talk to you about our updated five-year plan.
Speaker Change: Our plan is supported by a significant investment of $30 billion over the next five years.
Speaker Change: Additionally, we have the potential for incremental investment above this $30 billion as we continue to make progress working on data center opportunities.
We will update you as we progress towards definitive agreements.
Speaker Change: This $5 billion increase is a significant increase to our capital plan and is driven by the need to build out renewables to meet the increased demand from the success of our Migrant Power Voluntary Renewable Program and to support Michigan's clean energy legislation.
Speaker Change: As well as the need to continue to invest to improve reliability for our customers as we continue our efforts to update and modernize our electric grid.
David Ruud, Unknown Executive, Gerardo Norcia, David Ruud, Joi Harris
Speaker Change: And with this heavy customer-focused investment in our utilities that we have been contemplating since 2023 due to the IRP settlement and the clean energy legislation that passed in 2023, we are strategically shifting the focus of our DTE Vantage investments to projects that are more utility-like and deliver solid, long-term contracted earnings.
Speaker Change: DTE continues to be well positioned to deliver the premium total shareholder return that our investors have come to expect with a strong balance sheet that supports our future capital investment plan and a solid dividend that grows consistent with operating EPS.
David Ruud, Unknown Executive, Gerardo Norcia, David Ruud, Joi Harris
Speaker Change: Now let's turn to slide 5 to provide an overview of our updated long-term plan.
Speaker Change: Let me start by highlighting some of the opportunities that we have in front of us that have led to this plan.
Speaker Change: We've seen increased requirements for renewable generation investments above what was presented in our previous plan.
Speaker Change: This increase is driven by the continued success of our Voluntary Renewables Program and our 2023 IRP settlement, which was supported by Michigan's clean energy legislation, also enacted in 2023.
David Ruud, Unknown Executive, Gerardo Norcia, David Ruud, Joi Harris
Speaker Change: Together, this drives a significant need for increased investment in our voluntary and legislated renewable programs.
Speaker Change: With a solid, long-term development pipeline in place, providing clear line of sight on panels, land positions, and permitting.
Speaker Change: and we've also been able to safe harbor investment tax credits for these investments through 2027. Along with this increased investment in cleaner generation, this plan also increases our five-year distribution infrastructure investment by $1 billion. We have made great progress in improving reliability for our customers. We saw a 70% reduction in the duration of outages last year due to our work on the grid and less storm activity, which Joi will talk about more.
David Ruud, Unknown Executive, Gerardo Norcia, David Ruud, Joi Harris
Speaker Change: And these investments ensure that we continue this progress consistent with our communicated plan and customer expectations.
David Ruud, Unknown Executive, Gerardo Norcia, David Ruud, Joi Harris
Speaker Change: It is important to note that this commitment to improve distribution reliability is supported by the electric rate order we received last month and the independent audit of our electric distribution system as directed by the Michigan Public Service Commission last year.
Speaker Change: As we saw the significant need to increase utility investment, we also saw an opportunity to strategically shift our vantage focus to more long-term fixed-fee contracted projects.
Speaker Change: Vantage is a segment that has provided a solid earnings profile over the years and complements our utility businesses well. In recent years, we have had strong contributions from both our R&G and customer energy solutions business.
Speaker Change: With the increased customer-focused investment at our utilities, we are aligning our project development at DTE Vantage to focus more on utility-like projects.
Speaker Change: to provide a high-quality earnings profile with fixed-fee long-term contracts. And as I mentioned earlier, we have 45Z production tax credits for our RNG projects coming into the plan this year through 2027.
Speaker Change: Providing confidence, we will reach the higher end of our growth rate, 25 through 27.
Speaker Change: and also provide flexibility to exceed the high end of our guidance or support future years.
Speaker Change: We are also in discussions with multiple parties for additional opportunities beyond those that I just described.
Speaker Change: Our success in championing the data center legislation with the full support of the governor who has signed the bills into law and bipartisan support has helped intensify these discussions.
David Ruud, Unknown Executive, Gerardo Norcia, David Ruud, Joi Harris
Speaker Change: We have some existing capacity to serve the incremental load from these data centers, but will likely need to build additional capacity in the near term.
Speaker Change: Importantly, as we execute this plan, we will continue to focus on maintaining customer affordability. DTE has a top-tier track record in maintaining customer affordability, which Joi will highlight shortly, that will continue through our plan.
Speaker Change: And our strong cash flows, supportive energy policy, and a constructive regulatory environment continue to support our customer-focused investment plan.
Speaker Change: I'll close out my remarks by saying how proud I am of our team and delivering great results in 2024 for our customers and our investors.
Speaker Change: We are positioned to hit the higher end of our guidance this year with lots of dry powder in the plan.
Speaker Change: And I feel great about the opportunities we have in front of us to continue this success.
Speaker Change: with a higher quality annual operating EPS growth rate of 6 to 8 percent and with multiple opportunities to drive the growth beyond this 6 to 8 percent EPS growth rate. Now I'll turn it over to Joi to give an overview of our accomplishments and opportunities. Joi, over to you.
Joi Harris: Thanks, Jerry, and good morning, everyone. 2024 was a very successful year across many areas of DTE. In particular, one area where we demonstrated significant improvement was enhancing reliability for our customers as a result of our distribution investments.
Joi Harris: And all of our businesses are in a strong position to deliver superior performance in 2025 and beyond.
Let me start with DTE Electrics.
Joi Harris: I am very proud of the progress we have made to improve reliability for our customers.
Joi Harris: In 2024, we installed more than 450 smart technology reclosers, upgraded existing infrastructure, including 850 miles of power lines and 3400 utility poles and trim more than 4300 miles of trees.
Joi Harris: These efforts to create a smarter, stronger, and more resilient grid combined with less extreme weather in 2024 made a significant impact, resulting in customers experiencing a nearly 70% improvement in time spent without power.
Joi Harris: We currently have 2,300 megawatts of renewable generation in service with additional projects totaling over 1,000 megawatts coming online as we are building to meet increased demand for clean energy.
David Ruud, Unknown Executive, Gerardo Norcia, David Ruud, Joi Harris
David Ruud, Unknown Executive, Gerardo Norcia, David Ruud, Joi Harris
Speaker Change: This is driven by the continued success of our voluntary renewables program and the requirements under Michigan's legislated clean energy law.
Speaker Change: Solid Land Positions combine with our ability to successfully move these projects through the interconnection and permitting processes.
provide confidence that we can execute these investments.
Speaker Change: We have panels secured through mid-2027, land positions that should take us into the 2030s and beyond, and permits secured for a majority of our projects through 2027.
Speaker Change: We also have been able to safe harbor investment tax credits for these renewable projects through 2027.
Speaker Change: Investments in distribution infrastructure increases by $1 billion in this plan as we focus on continuing to improve reliability for our customers.
David Ruud, Unknown Executive, Gerardo Norcia, David Ruud, Joi Harris
Recent regulatory outcomes support this investment plan.
Speaker Change: The constructive rate order we received last month supports the customer-focused investments we are making to build the grid of the future.
Speaker Change: And the electric distribution audit report that was completed last year confirmed that our proposed investment plan will deliver the dramatic improvements and reliability that we have committed to our customers.
Speaker Change: Over the next five years, we expect to reduce power outages by 30% and cut outage time in half as a result of these investments in our improved operations.
Speaker Change: As Jerry mentioned, there is potential upside to the five-year capital plan driven largely by data center opportunities in our service territory, as well as further economic development in Michigan.
Speaker Change: Let me move to slide seven to highlight some of these opportunities.
Speaker Change: Southeast Michigan continues to be a great region for economic development, attracting many large companies that contribute to the progress of our state and its residents.
Speaker Change: General Motors, Henry Ford Health, and the University of Michigan are among the large companies with major investments in our service territory, providing significant economic development and providing thousands of jobs.
Speaker Change: And as you know, data center development and the impact of the potential load from the data centers have been an important focus over the last year.
Speaker Change: We recently announced that we have advanced one of those discussions to a non-binding term sheet that is moving toward a definitive agreement.
Speaker Change: Switch, a leading co-locator, plans to build this 1.4 gigawatt site using some of our land from an existing site, with a project expected to ramp up through 2032.
Speaker Change: As Jerry mentioned, we have signed another non-binding preliminary agreement with an additional party.
Speaker Change: Together, with the switch agreement, along with the University of Michigan project we announced recently, these projects bring a total of approximately 2100 megawatts of potential new load onto our system.
Speaker Change: which represents approximately 40% overall load growth when it all comes online. And we continue to have discussions with multiple other major data center companies.
Speaker Change: As we said before, we can begin to serve this demand quickly because we have some excess capacity.
Speaker Change: In addition, these projects will require additional build of new generation to support the early load ramp in the near term, and could provide longer term investment opportunities in new base load generation, which would be supported by our 2026 IRP.
Speaker Change: Of course, as we continue to invest in our system and as these incremental opportunities come into our plan, we remain very focused on maintaining customer affordability.
Speaker Change: We are delivering top-tier affordability through continued superior cost management, operational excellence with our power plants, and one of the larger energy efficiency programs in the country.
Speaker Change: As a matter of fact, our historical average annual bill increase demonstrates the extraordinary results in the affordability arena.
Speaker Change: Even after including the electric rate order we received last month, our annual bill increase since 2021 is well below the utility Great Lakes average and national average through 2024, and also well below the general rate of inflation.
David Ruud, Unknown Executive, Gerardo Norcia, David Ruud, Joi Harris
Let's move to slide 8 to discuss DTE gas.
Speaker Change: Our gas business had another great year in 2024 as we continue to deliver our customers with top quartile cost and operating performance.
Speaker Change: I'm proud to highlight that DTE Gas ranked number one in the Midwest for customer satisfaction for business natural gas service by J.D. Power last year.
Speaker Change: We are incredibly proud of this recognition. It shows our team is truly committed to providing service excellence to our customers.
David Ruud, Unknown Executive, Gerardo Norcia, David Ruud, Joi Harris
Speaker Change: We continue to progress our gas main renewal program as we modernize the gas transmission system and our distribution system.
Speaker Change: Over the years, we have made significant investments into this program and recovered this investment through our infrastructure recovery mechanism. Since the program began and through 2024, we have renewed nearly 1,900 miles.
Speaker Change: Over the next five years, we are planning to invest $4 billion to upgrade and replace aging infrastructure.
Speaker Change: I'll just close out my comments by saying how excited I am about the opportunities ahead of us.
Speaker Change: Our updated five-year plan supports the investments we need to make for our customers.
Speaker Change: It includes significant increased utility investments focused on enhancing our systems to further improve reliability and to support our growing renewable programs.
Speaker Change: This updated utility plan also provides the opportunity for us to focus on more utility-like investments at DTE Vantage, which is expected to drive annual base earnings growth of about $20 million per year.
Speaker Change: A detailed breakdown of EPS by segment, including a reconciliation to GAAP reported earnings in the appendix.
Speaker Change: I'll start the review at the top of the page with our utilities.
Speaker Change: DTE electric earnings were $1 1 billion for the year $340 million higher than 2023.
Speaker Change: The main drivers of the earnings variance, where implementation of base rates warmer weather and lower storm expenses, partially offset by higher rate base costs.
Speaker Change: Moving onto DTE gas operating.
Speaker Change: Operating earnings were $263 million.
Speaker Change: $31 million lower than 2023.
Speaker Change: 2024 was the warmest winter in over 60 years.
Speaker Change: This is coming off the fourth warmest year in 2023.
Speaker Change: Along with the impact of warmer weather the earnings variance was driven by higher rate base and O&M costs, partially offset by higher <unk> revenue and implementation of base rates.
Speaker Change: Let's move to DTE vantage on the third row.
Vantage had another strong year in 2024 with $133 million of earnings.
Speaker Change: The variance from 2023 was due to a combination of some timing and one time items in 2023, primarily in our steel related business.
Speaker Change: This was partially offset by higher investment tax credits primarily occurred in the fourth quarter of 2024.
Speaker Change: On the next row, you can see energy trading finished the year with earnings of $100 million.
Speaker Change: This strong performance in our contracted and hedged physical power and physical gas portfolios that we experienced in 2023 continued into 2024.
Speaker Change: And we expect to see some of this strength continue this year, which is reflected in our 2025 guidance on the next slide.
Speaker Change: Finally, corporate and other was unfavorable by $26 million year over year.
Speaker Change: Due to higher interest expense.
Speaker Change: Overall DTE earned $6 83 per share in 2020 for delivering at the high end of our 2024 original guidance.
Speaker Change: Let's turn to slide 10 to review, our 2025 earnings guidance.
Speaker Change: Our 2025 operating EPS guidance midpoint of $7 16 per share, which provides 7% growth over our 2024 original guidance midpoint.
Speaker Change: And we continue to target, 6% to 8% long term growth with 2025 original guidance midpoint is the base of this growth.
Speaker Change: And as Jerry mentioned, we are currently positioned to achieve the high end of our 2025 EPS guidance range as the RMG tax credits come into the plan.
Speaker Change: In 2025, DTE electric growth will be driven by investments in grid reliability and cleaner generation.
Speaker Change: <unk> gas, we will see continued customer focused investments in main renewal and other infrastructure improvements that enhance operational performance and support decarbonization.
Speaker Change: At DTE Vantage 2025 earnings are driven by the development of new custom energy solutions projects that serve as a base for growth going forward.
Speaker Change: And we do expect to recognize 45 Z tax credits from 2025 through 2027.
Speaker Change: We expect these credits on average to contribute about $50 million to $60 million in earnings during these years.
Speaker Change: Providing confidence we'll reach the high end of our growth rate in 25 through 27.
Speaker Change: And provide flexibility to exceed the high end or support future years.
Speaker Change: We expect continued consistent growth at DTE vantage with a strong pipeline of long term contracted fixed fee projects.
Speaker Change: Well to drive about $20 million in average annual base earnings growth.
Speaker Change: Giving us confidence that our longer term earnings targets in this segment.
Speaker Change: You can find additional detail on Dts vantage long term earnings growth plan in the appendix of this presentation.
Speaker Change: At energy trading as I mentioned, we expect to see continued strength from both our structured physical power and physical gas portfolios as we continue to see favorability from these contracted and hedged positions.
Speaker Change: We have confidence in our guidance range.
Speaker Change: And the corporate and other the change is driven by higher interest expense.
Speaker Change: Let's move to slide 11 to highlight our strong balance sheet and credit profile.
Speaker Change: We continue to focus on maintaining solid balance sheet metrics.
Speaker Change: Due to our strong cash flows DT is minimal equity issuances and our plan targeting annual issuances of zero to $100 million through 2027.
Speaker Change: We do see some modest increases to equity issuances, beginning in 2028 to support our significant capital investment plan.
Speaker Change: Our long term plan includes debt refinancing and new issuances and we continue to manage these future issuances through interest rate hedging and other opportunities.
Speaker Change: We continue to focus on maintaining our strong investment grade credit rating and solid balance sheet metrics, we've targeted <unk> to debt ratio of 15% to 16%.
Speaker Change: Let me wrap up on slide 12, and then we open the line for questions.
Speaker Change: Our team continues our commitment to deliver for all of our stakeholders.
Speaker Change: We delivered solid growth in 2024, achieving earnings per share of $6 83.
Speaker Change: Delivering at the high end of our guidance range.
Speaker Change: The 2025 operating EPS guidance midpoint provides 7% growth over the 2024 original guidance midpoint.
Speaker Change: And we are currently positioned to achieve the high end of our EPS guidance range. This year.
Speaker Change: Our updated five year plan provides higher quality loans, 6% to 8% EPS growth through increased customer focused utility investments and shifting to more utility like investments in our non utility.
Speaker Change: This plan increases our five year capital investment by $5 billion over the previous plan primarily to support the needs in our cleaner energy and reliability focused investment areas.
Speaker Change: Data center opportunities provide potential upside to this five year capital investment in EPS growth plan.
Speaker Change: We continue to target, 6% to 8% operating EPS growth and are well positioned to deliver at the high end of this growth rate and 25 through 2027 with flexibility to exceed the high end and support future years.
Speaker Change: And we continue to target dividend increases in line with operating EPS growth.
Speaker Change: Overall, we are well positioned to deliver the premium total shareholder returns that our investors have come to expect.
Speaker Change: With a strong balance sheet that supports our capital investment plan.
Speaker Change: With that I. Thank you for joining us today, and we can open the line for questions.
Speaker Change: At this time I would like to remind everyone in order to ask a question. Please use your handset impressed star then the number one on your telephone keypad.
Speaker Change: Just a moment to compile the Q&A roster.
Speaker Change: Your first question comes from the line of sharp <unk> with Guggenheim Partners. Please go ahead.
Constantine: Hi, good morning team congrats on a great quarter, it's actually Constantine here for sure.
Speaker Change: Good morning, Steve.
Speaker Change: Good morning.
Speaker Change: Starting off maybe on the Capex plan updates maybe to clarify the data center upsides. We noted that 2100 megawatts in current agreements are those included in the current plan or is that still all upside in.
Speaker Change: These agreements get converted into Capex, how should we be thinking about in the future cadence of Capex and financial update.
Speaker Change: Yes, great question.
Speaker Change: As you heard we see a lot of great opportunity that these data centers, but we haven't put any of the benefits of this into the five year plan or a capex plan yet.
Speaker Change: So as we move towards definitive agreements, we do see upside to our plan from this.
Speaker Change: So yes, we have some excess capacity as we've said in the past.
Speaker Change: That will support some of the data center load and gets us in a good position to get this to come on early.
Speaker Change: And as we move to definitive agreements.
Speaker Change: And understand their load ramp a little more.
Speaker Change: Worked through our IRB process, we will understand better the generation mix needed, but I'll say in the near term it.
Speaker Change: We're supporting that.
Speaker Change: Up to 1000 megawatts, we're expecting incremental renewables and storage within our plan probably towards the back side of our five year plan.
Speaker Change: Cause that supports their desire for cleaner power.
Speaker Change: That is something we do expect to come in within our five year plan as we move towards definitive agreements. So as we said we're kind of in the term sheet stage right now working towards definitive agreement and then when we get there we will update our capital plan.
Speaker Change: And is there any specific cadence to that between kind of the third and fourth quarter that we've seen.
Speaker Change: The cycles.
Speaker Change: Yes, that's probably when we'll be able to give a deeper update we will update throughout the year as we make progress and then as we see when the capital flow into our plan it would.
Speaker Change: Probably come out again in the fourth quarter with that.
Speaker Change: Okay perfect.
Speaker Change: And then you noted the R&D credits pushing towards the top end and there is some flexibility to exceed the six to eight.
Speaker Change: That tailwind kind of strength driven by the 20% Capex plan increase or is there an assumption on 45 expansion above.
Speaker Change: Above the 60 to 80.
Speaker Change: Envision any changes in the cash flow profile advantage just based on some of these assumptions and shifting to more utility like contracts.
Speaker Change: Yeah, we've kept a similar capital investment overall AD advantage and it is more utility like so the returns on those projects.
Speaker Change: Hi, as what we saw with R&D. So we've put in a really solid plan for vantage that kind of gets us our $20 million a year and gets us to that long term plan, we need there.
Speaker Change: We don't assume any production tax credits are really investment tax credits.
Speaker Change: As we get past 2007, so when you look at our overall plan.
Speaker Change: Stronger, 6% to 8% long term EPS growth is really driven by our utility investment that we're making.
Speaker Change: Supported a cleaner generation and build out reliability for our customers.
Speaker Change: And this kind of thing just so give you a little bit of context on the development of this plan. We started to see some really significant positive tailwind in 2023, and our utility Capex plans.
Speaker Change: It was really driven by several events one was the ERP.
Speaker Change: ERP that we settled in 'twenty three.
Speaker Change: On the heels of that we got clean energy legislation done here in the state in late 'twenty three.
Speaker Change: We had tremendous success with the voluntary renewables program.
Speaker Change: And then further to that in 2024, we got a very supportive audit report.
Speaker Change: For our wires business, so we packaged it together.
Speaker Change: This significant lift a $4 billion in our electric Capex plan and the new five year plan that we just rolled out and this really did give us the opportunity to start thinking about a shift advantage to higher quality earnings long term fixed fee contracts.
Speaker Change: And overall.
Speaker Change: As you've seen.
Speaker Change: 25 through 27, we're positioned to be at the higher end and also gives us flexibility that could exceed the higher end of guidance.
Speaker Change: And prepare for future years, when when the credits roll off at the end of 2027, So I would say overall.
Speaker Change: We feel very confident in achieving all of this and that we got a much higher quality plan on the table.
Speaker Change: Excellent and I think we can leave it at that thanks for taking the questions.
Speaker Change: Your next question comes from the line of Nick Campanella with Barclays. Please go ahead.
Nick Campanella: Hi, Good morning team Hey, this is actually say for Nick today, and thanks for taking my questions.
Speaker Change: Thats all from 'twenty to 'twenty four.
Speaker Change: Excellent.
Speaker Change: Hey.
Speaker Change: So I just just.
Speaker Change: First on data center demand I guess as it rolls into the plan just generally how do you think about the impact to your load growth CAGR, obviously been pretty.
Speaker Change: Conservative.
Speaker Change: Planning conservatively with only the specific projects you announced but just trying to have a more holistic understanding on this matter.
Josh: Hey, good morning, this is Josh.
Speaker Change: Thanks for the question, yes, exciting times with data centers and it would be great for our customers. If you think about what that can do for affordability and allow us to invest behind it.
Speaker Change: Wires business, but we are looking at modeling what we know the potential for data center growth and it equates to something in the range of 4% to 5% increase on a CAGR basis for our loan growth over that time horizon, which is excellent for customers and we're making sure that we are.
Speaker Change: Working these agreements and bringing home this data growth data center growth in our plan.
Speaker Change: Great that's super helpful.
Speaker Change: And I guess.
Speaker Change: Just quickly on 2025 execution.
Speaker Change: Could you just discussed.
Speaker Change: <unk> filing cadence and how and how those different rate case outcome or just different scenarios could drive 2025 execution and to what extent with the effect of our confidence to achieve the high end of the range to start during the year.
Speaker Change: <unk>.
Speaker Change: How were feeling about 2025, we're feeling very very confident on 2025, we're going to.
Speaker Change: At least hit the higher end of guidance.
Speaker Change: For the year is actually building contingency in our plan. So we're feeling really really good and I always judge.
Speaker Change: We're doing a new year by what we're working on in a moment and I can tell you we're deep into 2026 planning and.
Speaker Change: The details of that so that always is a measure for me is how confident we are in 2025.
Speaker Change: 25 looks rock solid.
Speaker Change: Performance.
Speaker Change: Joining us on the rate case on the rate case, yes. So the order we received last month, a constructive order within our planning scenarios. So we're going to work on.
Speaker Change: Just dispatching the capital as we had intended.
Speaker Change: In terms of our filing cadence question around one electric probably going to be in the second quarter. We will file another case, given the level of investments that we're making and our desire to incorporate the findings for the Liberty audit we want to make sure that we are in a position to expand the eye around using that as the basis.
Speaker Change: And we've gotten some positive feedback on the commissioners from the bench and also in our discussions.
Speaker Change: With the staff.
Speaker Change: And then for gas will likely file another case towards the back half back end I would just say the fourth quarter of 2025 again.
Speaker Change: To continue our investments in distribution and transmission and then also to look to continue our IRR, which has worked really really well for the gas company.
Speaker Change: Got it great that's super helpful. Thanks again.
Greg: Thanks, Greg.
Speaker Change: Your next question comes from the line of Jerry We connect with Jpmorgan. Please go ahead.
Rich: Hi, Good morning, this is actually rich on for Jeremy.
Speaker Change: Hey, rich.
Speaker Change: Starting with some of the near term and long term financing considerations can you walk through those and maybe the cash flow drivers behind sizing minimal equity in 2025 versus the <unk>.
Speaker Change: The uptick in equity beginning in 2028.
Speaker Change: Yeah, Let me let me just start by saying, we're confident our existing plan with this year at $100 million and 25% to 27% and it's really driven by strong based cash flows and then some of the some of the monetization of some of the tax credits will be getting so puts us in a great position to continue our 15% to 16.
Speaker Change: <unk> to debt with that minimal equity. We did say is that as you see some more of this capital come into our plan in the outer years, we could see some increased equity needs past then.
We're going to keep to keep working that right.
Speaker Change: Right now it feels like a modest increase but we'll keep trying to manage cash and what we can do in the meantime to.
Speaker Change: To minimize that as much as possible, we do see some equity that would come in in 2028 and beyond to support the growth capital we have.
Speaker Change: Great. Thank you for that and then I know, we hit on vantage a little bit earlier in Q&A, but just wanted to revisit this could you speak a little bit more to the opportunities that you are now most focused on and just curious how you expect this high grading to play out over the next few years.
Speaker Change: Yes, I think as Dave mentioned, we're looking at about $20 million a year of income growth and if you look at the history of this business, we've done about $20 million to $30 million a year.
Speaker Change: So we think we've got a good <unk>.
Speaker Change: <unk> plan and the type of projects that we're pursuing youll you've seen some recent announcements of projects that are coming on this year as well as next year.
Speaker Change: Where there are long term fixed fee behind the fence utility services, so things like co Gen water treatment compress there.
Speaker Change: Those type of utility services that we've been able to do a very large industrial partners.
Speaker Change: We got more of that in the half.
Speaker Change: Copper and we've got a pretty strong pipeline.
Speaker Change: Also starting to dip our toe in carbon capture and storage with large ethanol producers and we've got several agreements.
Speaker Change: We're working to prove out some of the geology there, but those are all also small in nature like $60 million to $100 million Capex.
Speaker Change: Yet our toes in the water if you if you're all dip our toes in the water on that one with IRS that are north of 10% Unlevered after tax and our long term fixed fee type contracts with no commodity risk so again.
Speaker Change: Early there, but we're feeling pretty good about the pipeline the strength of the pipeline advantage to generate that $20 million per year. So that once these tax credits all roll off.
Speaker Change: On 28 29 were sitting.
Speaker Change: Right on top of where we want to be.
Speaker Change: Great very helpful. Thank you.
Operator: Your next question comes from the line of Julien Dumoulin Smith with Jefferies. Please go ahead.
Speaker Change: Hey, good morning team. Thank you guys very much Julian has done the warning Julien so with that said.
Speaker Change: Hey, good morning, Hey, just coming back to a couple of things that maybe this helps tie things together right first off on the look beyond 'twenty seven how are you thinking about 45 is that and just the ongoing ability to tap some kind do credits as far as it goes to sustained or continue to grow that vantage beef just wondering if obviously youre may be very strong.
Speaker Change: Here on the front end of the plan I just wonder if you had the cadence in the back into the plan and then related I know rich just got at this a little bit, but how do you think about the potential less contribution from our vantage and.
Speaker Change: I don't know if you're insinuating more equity beyond 'twenty seven as you see an uptick in electric spend but I just want to understand maybe some of the moving pieces because it seems like the plan on the front end it seems very locked in there's a little bit more ambiguity here between the equity and the R&D contributions in the back half, but I wanted to try to understand.
Speaker Change: Yes, Julian let me take the.
Speaker Change: The income profile and then Dave can talk about the financing of it.
Speaker Change: Okay.
Speaker Change: This $20 million a year advantage.
Speaker Change: Certainly we will support our 28 and 29 guidance and I think that's how we're positioned to do it we're not counting on any of these or any tax credits in 2008 and 29%. So that's how we built the plan. So that gives us great confidence that we will achieve our goals, but I got to tell you the utility the quality of our plan is.
Speaker Change: <unk> increase with the amount of Capex that we got coming in from the utilities to drive superior growth certainly.
Speaker Change: At the higher end of our guidance 25 through 27 in.
Speaker Change: With good potential to exceed it.
Speaker Change: I view, our prospects in the utility businesses as even having more potential upside as data centers start to roll in.
Speaker Change: We've got about 1000 megawatts of.
Speaker Change: Capacity that we can deploy early on.
Speaker Change: We also have very large land positions that these data centers are very interested in and so we're getting a lot of action.
Speaker Change: Now, we just got to turn that action into definitive agreements. This year and I think that starts to lineup to future potential upside to our plan in those outer years Julien. So that's how that's how we're feeling about it. So we're feeling very positive about the long term outlook of our growth plans.
Speaker Change: Yeah, Julian we wanted to put a more conservative plan out there for vantage long term that it doesn't have any of those tax credits, but as you know in our history. We've found opportunities for those so there could be some upside with.
Speaker Change: With what would go on and then as far as the equity.
Speaker Change: We usually just gave a three year plan and so we our three year plan as you heard $100 million from 25 to 27.
Speaker Change: But as we're bringing in this capital we just wanted to start to signal that there.
Speaker Change: There would be some additional equity.
Speaker Change: Within our plan will work.
Speaker Change: We'll work to minimize that but I think there is some modest increased equity that would come in in the 2008 2009 period into the plan.
Speaker Change: Excellent. Thank you guys for clarifying and then maybe it's a nice follow up here can you speak a little bit on the data center front just to how the timeline here I know that there is.
Speaker Change: Kind of Mou is out there, but given the nascency of the legislation itself.
Speaker Change: I imagine that this could still take some degree of time to come to fruition and no more.
Speaker Change: <unk> do you want to just give some sense of expectation on that and then also in parallel we've seen some of your adjacent states talk about data center tariff as they've become more serious about this opportunity as well.
Speaker Change: And then Diana could we see you guys elect to pursue some kind of novel data center specific tariff structure at this point and put that forward.
Speaker Change: Hi, there Julien yes.
Speaker Change: Conversations are progressing we have a shared goal to get something done more definitively this year.
Speaker Change: And the yes.
Speaker Change: The range that we have the agreement that we have with switch the term sheet really is we're trying to line out the ramp the ramp of the generation over the next several years.
Speaker Change: And then we also have a signed agreement with.
Speaker Change: University of Michigan for 100 210 megawatt.
<unk>.
Speaker Change: Jerry spoke about another agreement that we've already.
Speaker Change: Move toward I'd say, a term sheet with and that's with an undisclosed party, but all of this is coming together with a potential for a 21 megawatt 'twenty 100 megawatts of.
Speaker Change: AD load for data centers, which is which is phenomenal and we're continuing those conversations we.
Speaker Change: We've got the <unk>.
Speaker Change: Right land positions, we've got the right climate, we've got the legislation now behind us. So that's increased the interest I would say in Michigan overall, so really feeling positive about the opportunity that's before us and the team is hard at work at making those agreements more definitive in nature.
Speaker Change: When it comes to figuring out long term, what the generation needs might be near term we can serve.
Speaker Change: The demand based on the ramp that we understand right now with what we have on hand, so we have some excess capacity that we can put to work.
Speaker Change: Think of it as we may have to bring on some renewables and battery storage to support this slow but generally speaking near term. This is really a great affordability play for our customers because we can bring on to load and not making really huge investments.
Speaker Change: As the load ramps, we will have to look to expansion of renewables more batteries and potentially something pharma are fixed in terms of generation. So I would think of a combined cycle or carbon capture or an example, but that will be logarithm range.
Speaker Change: Probably look to.
Speaker Change: Use a different tariff structure, we can use our existing tariffs now, but if we have to build something significant.
Speaker Change: Significant we'd have to bring on a different tariff structure and think of it as more of the fixed volumes and certainly.
Speaker Change: Demand response incorporated with that as well so that's kind of where we're sitting with data centers right now Julian.
Speaker Change: New tariff that we would need to say build a combined cycle plant or some.
Speaker Change: Surrounded with more renewables and battery storage would be long term in nature as well as fixed fee.
Speaker Change: Type arrangement, so that we don't put any kind of risk on our customers.
Speaker Change: And the commission the Governor is very supportive of that legislation actually <unk>.
Speaker Change: Or is it so I think we're in good shape from a legislative perspective.
Speaker Change: Strong.
Speaker Change: Support from the Commission.
Speaker Change: Hey, excellent guys nicely done to date seriously think of at the time, all the best Sir well connected.
Julien: Thank you Julien.
Speaker Change: Your next question comes from the line of David Arcaro with Morgan Stanley. Thank you. Please go ahead.
Speaker Change: Oh, Hey, Thanks, Good morning, Good morning, David Good morning.
David Arcaro: Wondering if you could touch on maybe learnings from the recent electric rate case in terms of what.
David Arcaro: The Commission you think wants to see in terms of affordability ROE storm tracker.
David Arcaro: Iran et cetera would be curious your thoughts.
David Arcaro: Yeah, Good morning, David.
David Arcaro: And this was a constructive order and it supports our investment agenda and so there was no change to our OE or the equity layer. So that was all positive.
David Arcaro: Commission extended the IRR, which was really a positive news.
David Arcaro: Signaling that we can continue to build on that and expand it using the liberty audit.
David Arcaro: We are going to work now on just understanding how we incorporate the audit findings into our plan and we look to incorporate that in our next proceeding.
And the commission was really positive about what these investments are yielding in terms of benefits to customers.
David Arcaro: If you listened to the call and you get here the positive tone.
And they spoke about the improvement that we experienced last year and how they are proud of the progress we're making on improving reliability for customers. So that's the work ahead of us is too.
David Arcaro: Work on getting aligned on how we expand the Iran. And then looking to bring these investments online over the next several years, we've got the distribution grid plan that lays out.
David Arcaro: Our plan that aligns to our 30 50 goal. So this is to reduce the frequency of outages by 30% and cut duration and half by 50, and we've proven that when we invest it works. So I think the the commissioned and want to continue down that path as do we.
David Arcaro: We're looking to get that all incorporated in our next regulatory case, Hey, David.
Speaker Change: You asked about affordability as well so just add the joys comment if you're going to take a minute and look at page 16 of our baggage.
Speaker Change: Our performance on Bill gross is extraordinary when you compare it to the industry and even when you compare it to our neighbors in the Great Lakes region.
Speaker Change: Two 4% absolute Bill gross is 2021, including the most recent rate case so.
Speaker Change: When I talked to the commissioners I mean affordability is really not on their screen.
Speaker Change: They see this data they know about this data we actually have within our filings when we talk about it so I.
Speaker Change: I feel really good about our affordability posture.
Speaker Change: On top of that if you look at this last rate order last year, if you recall, we reduced the.
Speaker Change: Power supply cost recovery costs by $300 million and so this last rate order and there was really no increase for customers because it is being offset by the PSC or reduction. So that's just an example of how we continue to go to work on behalf of our customers to keep our bills affordable.
Speaker Change: Yes, absolutely and I appreciate that color.
Speaker Change: Strong position to be coming from given that track record.
Speaker Change: And then I was curious maybe one more question here on data center activity, but would you be able to.
Speaker Change: Let's see quantify how much of a pipeline in terms of Gigawatts of data centers you might be.
Speaker Change: <unk> seen out there is opportunities in Michigan and just on the capacity available capacity you have on your system.
Speaker Change: Do you think of that as being fully exhausted at this point or are there still.
Speaker Change: Near term capacity Thats left to allocate to some of these potential incremental new customers beyond the ones that you've mentioned.
Speaker Change: Yes, we're seeing about three three.
Speaker Change: <unk> 3000, Gigawatts in our pipeline 3000 gigawatt I mean 3000 I wanted to say three then.
Speaker Change: Megawatts or three gigawatts in our pipeline.
Speaker Change: It was $3 billion gigawatt.
Speaker Change: And we aren't at a point, where we've used the total excess capacity as yet we've got up to a gigawatt of excess capacity near term and as I mentioned before as we understand the ramps from these data center providers will look to add generation along the way.
Speaker Change: Okay.
Speaker Change: So that's where we're sitting right now David.
Speaker Change: Perfect Super helpful. Thanks, So much great update.
Michael Sullivan: Your next question comes from the line of Michael Sullivan with Wolfe Research. Please go ahead.
Michael Sullivan: Hey, good morning.
Speaker Change: Thanks, Michael.
Michael Sullivan: Hey, Gerry just.
Speaker Change: For the duration of the plan can you give us what rate base growth looks like.
Speaker Change: Yes rate base growth is in the 8% range for the plan.
Speaker Change: Okay. Thanks.
Speaker Change: And then I'm sorry, just another one on some of the mechanics with.
Speaker Change: 45, <unk> I guess.
Speaker Change: If you strip that out of 2025 can you just talk about what's driving vantage lower year over year off of a 24.
Speaker Change: Yeah, well, let me start by saying we love. The 45 these are great and they are.
Speaker Change: Providing us some flexibility, but what you see in vantage has some lumpiness as some of these new projects come online and their associated investment tax credit. So in 'twenty for you look we had some big new projects come on in investment tax credits with that we don't foresee those projects coming on at the same level in two.
Speaker Change: 25.
We've been talking about some of these projects that will be coming on again in 'twenty six 'twenty, seven but kind of give us some of that favorability in investment tax credits in those years too.
Michael Sullivan: And then again, Michael look we said when you look past 2007.
Speaker Change: <unk>.
Speaker Change: We are vantage, our vantage forecast doesn't assume any.
Speaker Change: Of the 45, <unk> or investment tax credits and the planned pass that.
Speaker Change: Okay that was going to be my next question.
Speaker Change: And then last one just real quick Dave where did you all finish up on our <unk> to debt for 24.
Speaker Change: And we were right at that 15% number.
Speaker Change: Okay perfect. Thank you very much.
Speaker Change: Thank you.
Speaker Change: Your next question comes from the line of Andrew Weisel with Scotia Bank. Please go ahead.
Andrew Weisel: Hey, good morning, everybody good.
Andrew Weisel: Good morning, Andrew first question first question I wanted to follow up a little on the commentary about potential new generation build can you remind us the timing of the 2026 ERP when it would be filed approved and implemented and Julia I think you talked about some changes in tariff structure, adding things like fixed volume contracts.
Andrew Weisel: Would that be tuned two rate cases, or some other regulatory or legislative vehicle and how would those processes work together or independently.
Andrew Weisel: Yeah. So let me start with your FERC question and good morning.
Andrew Weisel: So we plan to file our next ERP toward the end of 2026 and that process will play out over.
Andrew Weisel: 2027, we will get a result, either we settle or we.
Andrew Weisel: Go to a fully contested ERP and that would put us at the end of 2027% right in the beginning of 2028.
Speaker Change: Also asked about.
Speaker Change: The tariffs so a tariff structure would have to be something that we work with the commission on.
Speaker Change: And it can be done outside of a rate case, but certainly as we learn more about the demand for data centers, we will keep the commissioner's apprised as the progress we're making in and try to do some of the pre work I think we're aligned that we want to make sure that anything that we bring on in terms of new generation.
Speaker Change: Protecting existing customer base. So we would wanted to have fixed fee line long term contracts in place and we've got some models here that to look to too.
Speaker Change: Make sure we're incorporating best practices from other geographies.
Speaker Change: Okay, Great that's helpful and then.
Speaker Change: Second I wanted to clarify the commentary about the earnings growth in the R&D tax credit as this has come up a few times, but I just want to understand you talked about the high end and 25 through 27 I understand that but then you talked about exceeding the high end to end support and supporting future years.
Speaker Change: I'm almost certain I heard all three of you Jerry Julien.
Speaker Change: We're support future years, rather than and support future years, maybe I'm getting too specific here, but what exactly does that mean are you, saying talking about pulling forward expenses from 2008 2009 are you talking about maybe your earnings growth.
Speaker Change: 9% for something like we saw in 2024 can you just elaborate about that.
Speaker Change: I guess itself of the above I think you hit on it.
Speaker Change: We're really using disease to commit to the higher end.
Speaker Change: 25 through 27.
We got.
Speaker Change: Dry powder potentially in the plan that can take us beyond that high end.
Speaker Change: But we also want the flexibility to do the things you said like Hey, maybe we can we find it is hard to predict where we'll find ourselves at a highly detailed level in 27 26, and so we want to make sure. We have some flexibility in the plan to deliver really high quality growth for our shareholders.
Speaker Change: The top end or higher.
Speaker Change: Or make sure that when you start to secure the future as well as we as we move into 2008 and beyond.
Speaker Change: We don't need to do that.
Speaker Change: We want to we want to retain the flexibility to do that maybe that's a better way to clarify we don't need tax credits to make our numbers in 2008 2009, we didn't we're not saying hey, we need some of the rollover or anything like that.
Speaker Change: But we do want to retain the flexibility that hey, if we find ourselves in a position to.
Speaker Change: This high quality position in 2027, where we can pull forward expenses from 2008 and produce an even higher quality 28 than what we're talking about right now we're going to do that so that's the flexibility we're talking about.
Speaker Change: So I guess maybe to bring it together is there anything besides conservatism, keeping you at 6% to 8% rather than increasing it.
Speaker Change: I would say we are.
Speaker Change: Like to under promise and over deliver that's been our pattern.
Speaker Change: We'd like that to keep it up thank you very much.
Speaker Change: Yes.
Speaker Change: Your next question comes from the line of Bill up Sally with UBS. Please go ahead.
Hi, good morning, Thanks for Ed.
Speaker Change: Taking the question here.
Yes, I mean, I think Andrew hit hit on the question. There that I was I was getting at which is you know it sounds like putting this all together right you guys would be.
Speaker Change: Comfortable.
Speaker Change: Targeting or being disappointed if youre not sort of at the high end of the range over this forecast period, even extending beyond the roll off the tax credits.
Speaker Change: Is that fair.
Speaker Change: I think what we've said is helps us a lot in 25 through 27 and when you look at long term based off of 25 original guidance, we're comfortable with the six to eight long term EPS growth rate in the long term.
Yeah, and the upside to that would be if we start getting incremental capex that comes into the plan from datacenters or our other demand, but right now the most glaring opportunity.
Where we're actually have paper signed and we're trying to work towards firm agreements. It is data center load. So as we look out we got some heat and a planned 25 through 27 as we get beyond that we're saying hey, six to eight until we can tell you more about these data centers.
Speaker Change: Okay. That's clear. Thank you and then just remind us the cadence of the rate case filings over the next few years. So you have the DTE gas case that youre going to file here later this year, but.
Speaker Change: Is the assumption that there will be continuing.
Speaker Change: In a regular cadence of filings over the next few years.
Speaker Change: For it's for electric Yeah, I think you can assume based on the level of investments that we're making.
Speaker Change: The only thing that would extend the time between filings would be an expansion of the IRS electric.
Speaker Change: And gas if we get more traditional outcomes.
Speaker Change: We would like to be back to the two to three year timeframe between rate cases, but we'll let that play out in the next one.
Speaker Change: How it plays out.
Speaker Change: And then as far as expansion of the IRS.
Speaker Change: How do you guys evaluate that that has to be proceeding now.
Speaker Change: Now that the electric cases over.
Speaker Change: Yes, I mean, that's the work ahead of us is getting alignment.
Speaker Change: With the PSC staff and commissioners on what should go into the IRS.
Speaker Change: Thank the Liberty audit will serve as that foundation and the good news is that that the audit findings generally point to the plan that we have in place is a good plan and we will deliver the reliability improvements that we're targeting over the next five years. So we will go to work with the staff and the commissioners and just make.
Speaker Change: Sure that the units that we want to incorporate and the types of work that we want to incorporate in the plan.
Speaker Change: Yeah.
Speaker Change: Alright, great.
Speaker Change: Congrats on a great call here, Thank you very much.
Speaker Change: Thank you.
Moderator: Your next question comes from the line of Travis Miller with Morningstar. Please go ahead.
Speaker Change: Thank you and good morning, everyone.
Travis Miller: You've answered my questions on the IRS, rather several times here, but just a quick follow up.
Speaker Change: How much Capex is in your plan that you would hope to flow through the IRI I'm, assuming that the regulators continue to approve that in the future rate cases.
Speaker Change: And then is there upside that you could flow through the <unk> in terms of Capex from the audit depending on how that comes out. So just those two quick follow ups.
Speaker Change: And our last case, we filed for an expansion of like.
Speaker Change: Up to like $590 million, and then growing to like $720 million right. So think of it. That's just order of magnitude if you want to use that as a gauge.
Speaker Change: And then.
Speaker Change: How do we see that growing over time, and what kind of units and if there is upside to the plan what we know in the audit.
Speaker Change: The auditors called out Pull-top maintenance as being an area, where they want to see increased investment and we see that as an opportunity to add some upside to our plan. So we're reconciling all of that right now and certainly trying to get alignment before we file anything in terms of our next rate case.
Speaker Change: Okay perfect. That's all I got I appreciate it.
Speaker Change: Thank you. Your next question. Your next question comes from the line of fault, Paul Fremont with Ladenburg. Please go ahead.
Paul Fremont: Thank you very much and congratulations on a strong quarter.
Speaker Change: Just wanted to sort of follow up on.
Speaker Change: On vantage.
Speaker Change: You talked about having significant tax credit contribution in 'twenty four was that associated with Ford and can you quantify what what that tax benefit was.
Speaker Change: ITC ISO.
David Arcaro: Yeah, Hi, Paul This is Dave yes, it was associated with the <unk> project and it was a little over $50 million was the ITC associated with the <unk> project.
Speaker Change:
Speaker Change: Great.
Speaker Change: That's it in terms of questions for me. Thank you.
Speaker Change: Thanks, Paul.
Speaker Change: Your next question comes from the line of Ryan Levine with Citi. Please go ahead.
Ryan Levine: Good morning.
Ryan Levine: Quick question in terms of the potential tariff for data centers would you look to file something soon.
Ryan Levine: And then should.
Ryan Levine: Should we look forward to be somewhat similar to your peer utilities filing from last week.
Ryan Levine: Yes, I think good morning, first Ryan I think as we learn more about the ramp will determine whether or not we need to file a new tariff I think those discussions are underway, but you can anticipate that as the load growth I will eventually get to a point, where we have to build something to support that.
Ryan Levine: Load incremental to the generation we have on hand.
Ryan Levine: And we will look to incorporate as I said before our best practices.
Ryan Levine: From other geographies and certainly learnings that we gained here within the state.
Ryan Levine: Okay, Alright, Thanks that was my question.
Jeremy: I will turn the call back over to Jeremy interim CEO for closing remarks.
Jeremy: Well. Thank you everyone for joining us today I'll, just close by saying, we're feeling great about 2025, and our long term future plans have a great morning stay healthy and safe.
Jeremy: Ladies and gentlemen that concludes today's call. Thank you all for joining you may now disconnect.
Jeremy: Thank you.
Speaker Change: Please wait the conference will begin shortly.
Speaker Change: [music].
Speaker Change: Great.
Speaker Change: [music].
Speaker Change: Yes.
Speaker Change: Okay.
Speaker Change: Sure.