Q1 2025 DTE Energy Co Earnings Call
Hello, and thank you for standing by my name is Bella and that would be your conference. Operator today at this time I would like to welcome everyone to DTE Energy Q1, 'twenty 25 earnings conference call. All lines have been placed on mute to prevent any background noise.
After the Speakers' remarks, there will be a question and answer session.
If you would like to ask a question. During this time simply press Star then the number one on your telephone keypad.
I would draw your question Press Star one again.
Speaker Change: I would now like to turn the conference over to Matt Krupinski Director of Investor Relations you may begin.
Speaker Change: Thank you and good morning, everyone before we get started I'd like to remind you to read the safe Harbor statement on page two of the presentation, including the reference to forward looking statements.
Speaker Change: Our presentation also includes references to operating earnings which is a non-GAAP financial measure.
Speaker Change: Please refer to the reconciliation of GAAP earnings to operating earnings provided in the appendix.
Speaker Change: With us this morning are Jerry Norcia, Chairman and CEO, Joy, Harris, President and COO, and Dave Ruud Executive Vice President and CFO and now I'll turn it over to Gerry to start our call. This morning.
Speaker Change: Thanks, Matt and good morning, everyone and thanks for joining us I hope everyone is having a healthy and safety are so far.
Speaker Change: This morning, I will discuss the achievements we've made this year as we continue to deliver for all of our key stakeholders.
Speaker Change: Joanne will provide an update on the significant progress we are making to improve reliability for our customers while maintaining affordability.
Joanne: Additionally, she will provide updates on our renewable energy investment that supports our path to cleaner generation and data center opportunities that provide potential upsides.
Joanne: And Dave will provide a financial update and wrap things up before we take your questions.
Dave Ruud: Let me start on slide four.
Dave Ruud: <unk> had a strong start to 2025 and are well positioned to meet our targets this year.
Dave Ruud: Our success is a testament to our dedicated and engaged team committing to serving our customers and our communities.
Dave Ruud: This year, we were recognized by the Gallup organization for the 13th consecutive year with a great workplace Award and our employee engagement ranks in our 94 percentile globally amongst thousands of organizations.
Dave Ruud: As I've mentioned before our high level of employee engagement is our secret sauce for continued success.
Dave Ruud: We remain committed to making the important investments to enhance the grid and improve reliability for our customers.
Dave Ruud: As we are committed to reducing power outages by 30% and coating outage time and half in the next five years.
Dave Ruud: As we continue to make these significant investments in automating and strengthening our grid, we see that the investments are working.
Dave Ruud: We told you earlier this year that investments in reliability helped achieve a 70% improvement in time customer spent without power in 2024.
Dave Ruud: And that metric has improved another 60% year to date versus last year.
Dave Ruud: We're also performing above our aggressive targets for our operational metrics, including reliability and plant performance in.
Dave Ruud: In addition, our team supported our neighboring utilities to help restore power outside of our service area. After our historic ice storm recap back in that region at the end of March.
Dave Ruud: I know the state utilities and their customers are very grateful for our assistance.
Dave Ruud: We remain committed to investing in the communities, where we live and serve to support Michigan's economy and employment opportunities.
Dave Ruud: In 2020 for DTE invested $3 $3 billion with Michigan businesses, creating a sustaining more than 14000 jobs across the state.
Dave Ruud: Last year, DTE invested $1 billion with certified diverse suppliers and nearly $1 billion with companies based in our home city of Detroit.
Dave Ruud: As I said at the beginning of my remarks.
Dave Ruud: We're off to a strong start this year and are well positioned to achieve our 2025 targets.
Dave Ruud: Our 2025 operating EPS guidance range of $7 nine.
Dave Ruud: The $7 23.
Dave Ruud: With a midpoint of $7 16 per share.
Dave Ruud: Which provides 7% growth over 2024 original guidance midpoint.
Dave Ruud: And we remained well positioned to achieve the higher end of our EPS guidance range. This year.
Dave Ruud: Our long term EPS growth rate target remains at 6% to 8% with 2025 original guidance as the base for this growth.
And as I mentioned on our year end call. We have a 45 Z production tax credit for R&D projects coming into the plan this year through 2027.
Dave Ruud: Riding confidence, we will reach the higher end of our growth rate.
Dave Ruud: 2025 through 2027 with flexibility to exceed the high end of our guidance or support future years.
Dave Ruud: So I'm feeling really positive about 2025 in a position where and to continue to achieve long term success.
Dave Ruud: And regarding tariffs, we don't see much of an impact this year or in our long term plan.
Dave Ruud: 80% of our capital plan is with service providers that would not be impacted by tariffs.
Dave Ruud: Of the remaining material spend we have been working closely with domestic suppliers and have built inventory to mitigate most of the tariff exposure.
Dave Ruud: Obviously, we'll see how all this plays out and we are closely monitoring the situation.
Dave Ruud: Summary, our tariff exposure is manageable at 1% to 2% of our capital plan and we continue to work with suppliers to further mitigate that exposure.
Dave Ruud: We continue to maintain a strong balance sheet and investment grade credit ratings to support our customer focused capital investment plan.
Dave Ruud: We remain committed to.
Dave Ruud: To deliver premium shareholder returns that our investors have come to expect.
Dave Ruud: And our 2025 annual dividend of $4 30 success per share aligns with our practice of providing a growing dividend as we continued to deliver EPS growth.
Dave Ruud: Now, let's turn to slide five to provide an overview of the progress we're making on our growth plan.
Dave Ruud: We are building on the great progress that we made last year across all our business units. So far this year.
Dave Ruud: Starting at DTE electric we continue to enhance our reliability efforts following significant progress in 2024.
Dave Ruud: We plan to increase our efforts on all fronts in 2025, including the continued deployment of smart grid devices upgrading existing infrastructure.
Dave Ruud: Replacing the $4 eight kv system and trimming trees.
Dave Ruud: We filed the rate case, providing support for our customer focused capital investment plan that will allow us to further improve reliability and focus on grid modernization, while minimizing the impact on customer bills.
Dave Ruud: We are making great progress with data centers having.
Dave Ruud: Having executed non binding agreements are three different parties for projects totaling 2100 megawatts.
Dave Ruud: We are also actively engaged in discussions with additional opportunities working with several hyper scaler and co locators and opportunities within our service territory.
Dave Ruud: This work will drive affordability for our customers and provide additional upside to our plan.
Dave Ruud: The renewable energy and storage investments.
Dave Ruud: At DTE gas, we continue to progress on our main renewal program as we modernize the gas transmission <unk>.
Dave Ruud: And distribution systems.
Dave Ruud: Over the years, we have made significant investments in this program.
Dave Ruud: And realize timely recovery of these investments through the well established infrastructure recovery mechanism.
Dave Ruud: We completed nearly 2000 miles since the IRS began which is about half of the total miles set to be renewed.
Dave Ruud: At DTE advantage, we continue to advance custom energy solutions projects, along with our R&D and carbon capture and sequestration projects.
Dave Ruud: <unk> project to highlight is the Ford Motor Company custom energy solutions project that is in construction.
Dave Ruud: This project will provide central utility plant services, the <unk> facility in Marshall, Michigan and.
Dave Ruud: It is underpinned by long term fixed fee contracts with no commodity risk.
Dave Ruud: We expect commercial operations to begin next year.
Dave Ruud: We are also progressing on another customer energy solutions project of 42 megawatt combined heat and power project, which will serve a large industrial customer and is expected to begin construction later this year.
Dave Ruud: And we continue to have a strong development pipeline behind these projects that support future growth.
Dave Ruud: Before I turn it over to Joy I just wanted to highlight on the next slide how Michigan continues to be a great place for economic development.
Dave Ruud: Michigan continues to attract many large companies, particularly in southeast Michigan to.
Speaker Change: For the benefit of our state and our residents.
Speaker Change: A number of large companies, including General Motors, Henry Ford Health and the University of Michigan are making significant investments in our service territory, providing significant economic development and providing thousands of jobs.
Speaker Change: Michigan is an attractive state for data center opportunities, particularly after legislation for the sales and use tax exemption was passed.
Speaker Change: And as we've discussed datacenter development will support customer affordability.
Speaker Change: Just to highlight a few data points that show the strength of Michigan's economy, a number of economic indicators show positive growth for the first quarter of 2025.
Speaker Change: Versus the first quarter of 2024, including housing permits are up nearly 10%.
Speaker Change: Real estate GDP is up two 6%.
Speaker Change: And payroll employment up nearly 1%.
Speaker Change: And we are seeing customer growth in our service territory with both residential and commercial customer accounts up over a half a percent in the first quarter this year versus last year.
Speaker Change: There is a lot of economic development in Michigan and the business climate here is an attractive one to support the investments that will fuel significant growth for the state.
Speaker Change: So to wrap up my comments I will just say I'm very excited about our start in 2025, and how we are well positioned to continue to deliver for our customers communities and investors now and into the future.
Speaker Change: Now I'll turn it over to Joy Joy.
Speaker Change: To you.
Joy Harris: Thanks, Jerry and good morning, everyone.
Joy Harris: As we discussed on our year end call DTE has a significant customer focused capital plan investing $30 billion over the next five years with well over 90% of this investment in our utility.
Joy Harris: At DTE electric we plan to invest $24 billion over the next five years to significantly improve reliability for our customers and further transition to cleaner generation supporting the success of our voluntary renewables program and Michigan clean energy legislation.
Joy Harris: And we are doing this with a continued focus on customer affordability.
Speaker Change: Gary mentioned in his opening comments, we are confident that we do not have significant exposure to tariffs.
Speaker Change: And we continue to be in a great position to execute on our plan.
Speaker Change: Our grid modernization and renewable programs are on pace to deliver the targeted performance.
Starting with our reliability efforts, we continue to make significant progress building off of our success, we achieved in 2024.
Speaker Change: In 2025, we are expecting to exceed last year's effort by installing 600 smart technology with closings. After installing 450 in 2024, completing 950 miles of pole top maintenance, replacing 5500 utility pole and increase of 2100 call.
Speaker Change: Being replaced from last year, and turning over 6500 miles of trees, a significant increase from last year's total up 43 100 miles.
Speaker Change: We are committed to our infrastructure investments and are focused on improving reliability for our customers.
Speaker Change: And the investments are working.
Speaker Change: As Jerry mentioned, our electric grid reliability has continued to show significant improvement over the past two years.
Speaker Change: During a recent high when weather event, we had one of our fastest restoration with 95% of our customers restored in 24 hours and nearly 100% within 48 hours.
And we are making great progress toward our goal of reducing power outages by 30% and cutting out each time in half in the next five years.
Speaker Change: Our recently filed electric rate case is an important step in our customer focused investment agenda. This filing addresses our continued infrastructure investments designed to improve reliability and generation investment to bring cleaner energy faster to the state.
Speaker Change: One important item to note in the filing is the request to advance the infrastructure recovery mechanism or IRR.
Speaker Change: Our previous quarter up through $290 million for 2025, and we are looking to increase that to $1 billion by 2029 in the current firewall.
Speaker Change: This filing is consistent with the electric distribution audits that was completed last year, which confirm that our proposed investment plan will deliver the dramatic improvements in reliability, we are committed to our customers.
Speaker Change: We continue to deliver top tier affordability through superior cost management operational excellence with our power plant and one of the larger energy efficiency programs in the country.
Speaker Change: Our historical average annual Bill increase is much lower than the industry average with our annual Bill increase since 2021, well below the utility great Lakes average and the National average through 2024, and also well below the general rate of inflation.
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: Data center opportunities along with our distinctive continuous improvement culture to drive cost management will continue to support affordability for our customers.
Speaker Change: Let me move to slide eight to highlight progress in supporting our clean energy transition with potential increased load growth.
Speaker Change: We have plans for significant investment in cleaner generation over the next five years and into the next decade significantly increasing our generation of both solar and wind as well as battery storage.
We currently have well over $2 and 300 megawatts of renewable generation and surface.
Speaker Change: And we are building 800 megawatts of renewable energy per year on average over the next five years.
Speaker Change: Solid land position combined with our ability to successfully move these projects through the interconnection and permitting processes provides the pathway to execute these investments.
Speaker Change: This progress has allowed us safe Harbor investment tax credits for these renewable projects through 2027.
Speaker Change: And with the support we are seeing we remain confident that key provisions of the iron <unk> will stay in place supporting our ability to execute these investments affordably for our customers.
Speaker Change: So we are in a great position to execute our transition to cleaner energy preparing to serve our customers for years to come.
Speaker Change: We are also well positioned to serve increased load that may come into our service territory, mainly from the potential significant demand from data center development as well as further economic development in Michigan.
Speaker Change: We are currently making great progress with data centers executing non binding agreements with three different parties for projects totaling two one gigawatt.
Speaker Change: We are also actively engaged in discussions with additional opportunities as we continue to work with a number of hyper scaler and co locators on opportunities within our service territory.
Speaker Change: As you know key legislation was passed for the sales and use tax exemption and this has helped US further progressed discussions for data Center project.
Speaker Change: Excess capacity of up to one gigawatt puts us in a great position to serve this demand quickly.
Speaker Change: These projects require some additional investment to support the early load ramp in the near term and will provide longer term investment opportunities and new base load generation, which would be supported by the 2026 ERP.
Speaker Change: And as we have said the data center opportunities are all upside to our five year plan.
Speaker Change: And with that I'll turn it over to Dave to give you a financial update.
Dave Ruud: Thanks, Julie and good morning.
Speaker Change: Everyone.
Speaker Change: Open by saying that 2025 is off to a strong start and we remain positioned to achieve the high end of our guidance this year.
Speaker Change: Let me start on slide nine to review, our first quarter financial results.
Speaker Change: Operating earnings for the quarter were $436 million.
Speaker Change: This translates into $2 10 per share despite 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 $147 million for the quarter.
Speaker Change: Overall DTE electric had a strong first quarter and is on track to achieve full year guidance.
Speaker Change: Earnings were $47 million lower than the first quarter of 2024.
Speaker Change: The main drivers of the variance where timing of taxes and higher rate based cost, partially offset by rate implementation cooler weather lower O&M costs and higher renewable earnings.
Speaker Change: The impact from the timing of taxes was fairly significant at $67 million relative to 2024.
Speaker Change: This is related to investment tax credits on two solar projects went into service in the first quarter at.
Speaker Change: This timing was known and built into our plan and it will reverse during the balance of the year.
Speaker Change: Moving onto DTE gas operating earnings were $206 million for the quarter $46 million higher than the first quarter of 2024.
Speaker Change: The earnings variance was driven by more favorable winter weather and rate implementation.
Speaker Change: Partially offset by higher O&M and rate based costs.
Speaker Change: Let's move to <unk> vantage on the third row.
Speaker Change: Operating earnings were $39 million for the first quarter of 2025.
Speaker Change: This is a $31 million increase from 2024, driven by higher R&D earnings, including $15 million of 45 Z production tax credits.
Speaker Change: And higher customer energy solutions earnings.
Speaker Change: On the next row, you can see energy trading earned $34 million for the quarter.
We continue to experience favorability and strong margins in our contracted and hedged physical power and gas portfolios, putting us in a strong position to start 2025.
Speaker Change: Finally <unk>.
Speaker Change: Corporate and other was favorable at $31 million quarter over quarter due to the timing of taxes.
Speaker Change: Partially offset by higher interest expense.
Speaker Change: As with DTE electric this timing will reverse during the year and we expect to end the year in the guidance range for this segment.
Speaker Change: Overall DTE earned $2 10 per share in the first quarter of 2025, which positions us well to achieve the high end of our guidance range in 2025.
Speaker Change: Let me wrap up on Slide 10, and then we'll open the line for questions.
Speaker Change: Our team continues our commitment to deliver for all of our stakeholders.
Speaker Change: For 2025, operating EPS guidance midpoint provide 7% growth over the 2024 original guidance midpoint.
Speaker Change: And we are positioned to achieve the high end of our guidance this year.
Speaker Change: Our recently updated five year plan increased capital investment by $5 billion over the previous plan to $30 billion.
Speaker Change: Primarily to support our customer focus reliability investments and our cleaner generation is joy discussed.
Speaker Change: Additional data center opportunities provide upside to this five year capital investment and EPS growth plan.
Speaker Change: Our plan provides high quality long term, 6% to 8% EPS growth through these increased customer focused utility investments and the shift to more utility like investments at DTE vantage.
Speaker Change: DTE 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 with modest equity issuances of zero to $100 million over the next three years.
Speaker Change: We are confident in our long term operating EPS growth rate target of 6% to 8% through 2029.
Speaker Change: With R&D tax credits, providing additional confidence we will reach the high end of our growth through 2027, and also provide us flexibility to exceed the high end or support future years.
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 Press Star then the number one on your telephone keypad.
We will pause for just a moment to compile the Q&A roster.
Speaker Change: Your first question comes from the line of Nick Campanella with Barclays. You May begin your line is now open.
Nick Campanella: Hey, good morning, everyone. Thanks for taking my questions hope everyone's well.
Speaker Change: Hey, good morning so.
Speaker Change: Maybe just to start good message on tariffs I appreciate the color.
Speaker Change: Maybe you can kind of just give us a flavor of how you see this maybe impacting the auto sector. What your exposure is there and then just general economic activity in the service territory.
Speaker Change: Noticed like the C&I weather normalized trends were a little bit lower quarter to quarter I don't know if thats timing, but just maybe kind of talk about.
Speaker Change: How the plan is resilient to potential economic downturn, if it goes that way.
Speaker Change: Sure. Thanks, Thanks, Nik So certainly we got some encouraging news for the autos on tariffs were.
Speaker Change: <unk>.
Speaker Change: The tariffs were modified significantly for parts that was the big deal for the automakers, especially.
Speaker Change: When I talked to several of the auto exacts the feeling I got was that relief.
Speaker Change: Import and export of parts, which can move across the U S and Canadian border here in Detroit quite frequently in the Canada and from Canada.
Speaker Change: That provided significant relief I think the assembly.
Speaker Change: Fortunately the tariff remains in place some of the automakers are positioned better than others in the sense that they can have flexibility as to where they can assemble vehicles and move some of that production domestically. So much still remains to be seen but.
Speaker Change: As we mentioned in our opening thoughts I think you can see that we the.
Speaker Change: The economy here in Michigan remains very resilient and we're not seeing any significant reductions in production or any plant adjustments of significance at this point in time, so looking pretty bright.
Speaker Change: I hand, it over to Dave to talk about the sales results.
Speaker Change: And what we're seeing there as well Dave do you want to add to that sure.
Dave Ruud: It's good to talk to you.
Dave Ruud: I'll start by saying our actual sales were actually up because weather weather was great and even when you look at the weather adjusted numbers.
Dave Ruud: Our sales for the quarter were pretty good after you adjust for leap year last year and energy efficiency.
Dave Ruud: So leap year accounts for about 1% because there was an extra day last year.
Dave Ruud: And then our energy efficiency is about 2%. So we had really good.
Dave Ruud: Good base growth crest across our customer classes and then.
Dave Ruud: As we discussed in our presentation and Jerry mentioned on page six we're seeing some positive economic indicators, but housing permits being up 10% and.
Speaker Change: In southeast, Michigan here real estate GDP being up over two 5% in payroll employment up about 1%.
Speaker Change: So we're feeling we're still feeling good about our load and the economic prospects for it as well.
Speaker Change: That's great. Thanks for all those clarifications.
Speaker Change: And then just on the data center and large load customer conversation.
Speaker Change: I think those conversations haven't slowed down at all.
Speaker Change: You are having additional conversations so just can you give us some color on when we can ADC an uptick to that two one gigawatt number it sounds like youre, having kind of multiple.
Speaker Change: Congo's with Aggregators and Hyperscale.
Speaker Change: Is there a chance that you could maybe roll more and to the formal backlog by the second and the third quarter. Thanks.
Speaker Change: Yeah. Good morning, Nick Yes data center conversations are continuing.
Speaker Change: Really no slowdown obviously, we've got excess capacity so that that makes our service territory ideal and the legislation is helping to create some urgency because it requires construction to begin no later than 2028 to take advantage of the tax exemption is with that said we did announce.
Speaker Change: The two one gigawatt gigawatts of frame agreements.
Speaker Change: With switch and you have them you of them has already up their demand from the 100 megawatts to 220 megawatts and we're working on finalizing that deal and then we're continuing to work the energy service agreements for the remaining providers. We've got an additional pipeline of roughly three gigawatts.
Speaker Change: With hyper scaler and co locators and those entities are making significant inroads on securing the land that they need. So this is all moving in a very positive direction.
Speaker Change: We have a shared goal of getting something finalized before the end of the year.
Speaker Change: And we will incorporate any near term changes to our long term plan based on those agreements later this fall likewise, if we have to move towards Baseload increases.
Speaker Change: We'll incorporate that into our AARP filing next year.
Speaker Change: Okay. That's all really helpful. Hope you guys have a great day. Thanks, Thanks a lot.
Speaker Change: Your next question comes from the line of Keith <unk> with Evercore ISI. Please go ahead.
Speaker Change: Hey, good morning, Thank you for giving me good morning.
Speaker Change: Alright, thanks, guys.
Speaker Change: Good morning, Julie.
Speaker Change: Hey, just I wanted to follow up on Nick's question.
Speaker Change: Obviously, we've been in a lot of discussion with investors on your auto exposure as well.
Speaker Change: Maybe some more meat around the board can you clarify what's your margin exposure as I know.
Speaker Change: Sales number it's pretty big as it relates to autos. So what's your margin exposure and lots of 125 and with all of this hyper scaler activity in the region, where do you see that going lets say through 2720 <unk> just high level color. Please thank you.
Speaker Change: Yes, yes.
Speaker Change: Yes, yes, our margin from autos is around three 3% to 4% of our total margin. So even if we had like a 10% change up or down it doesn't have that much of an impact overall on our on our plan.
Speaker Change: So and we're feeling pretty good right now that the auto exposure based especially on some of the information yesterday I think I think we're in a good place with that going forward too.
Speaker Change: Well what was your second question on <unk>.
Speaker Change: Yes, yes.
Speaker Change: Kind of gauge with all of this data center activity, what do you see that going forward right.
Speaker Change: Presumably you have all this data center load coming into Michigan.
Speaker Change: Your relative weighting of the auto sector, we're probably shrink over time right. So just any high level thoughts there.
Speaker Change: Oh, yes.
Speaker Change: Because it.
Speaker Change: Just from the two Gigawatts, we've talked about if you look at that that provides like 4% load growth over the next five years. So yes. It would it would put a little less.
Speaker Change: A little less on our auto exposure.
Speaker Change: We still feel comfortable with our auto exposure also.
Speaker Change: Okay perfect.
Speaker Change: One quick follow up I know, it's small but the PBR.
Speaker Change: Kind of ruling.
Speaker Change: Has that been factored into the rate case filing.
Speaker Change: I know, it's small, but just any thoughts or color you could share there.
Joy Harris: Yes, yes, yes, hi, this is joy the.
Joy Harris: The Commission did issued an order in February and they essentially adopted the straw proposal and they weren't responsive to our concerns on cemetery. So we're really satisfied with the outcome the mechanism.
Joy Harris: Go into effect in 2026, and it's capped at $10 million or incentives and penalties.
Joy Harris: As for the proposed metrics I mean, we are really happy with the metrics in fact, our performance across all of those metrics as green for the year. So we're on target. We did file our response to the order last month and we're expecting to hear something back from the Commission later this year, but all of this would impact 2026.
Speaker Change: Necessarily at 2025.
Joy Harris: In terms of our rate case filing.
Joy Harris: Our filing is in line with what we had articulated earlier staying the course on the IRS and incorporating the Liberty audit findings in our plans.
Joy Harris: In terms of PBR, there isn't anything specific but the reliability improvements will only improve how we are performing relative to the bps sorry.
Joy Harris: PBR requirements.
Joy Harris: Got it very helpful. Thank you very much.
Joy Harris: Your next question comes from the line of Jeremy Tonet with J P. Morgan. Please go ahead.
Jeremy Tonet: Hi, good morning.
Speaker Change: Good morning, Jeremy.
Speaker Change: I know, it's not the biggest part of the business, but energy trading just wondering if you could expand a bit there and if.
Speaker Change: Results in the quarter were in line with your expectations, how we should think about shaping across the year or is there any kind of.
Speaker Change: Upward look versus budget.
Speaker Change: Yeah, Hey, Jeremy it's Dave.
Speaker Change: It was a good good quarter in energy trading.
Speaker Change: We earned $34 million of guidance is $50 million to $60 million for the year and it's really strong performance continuing in our contracted and hedged both our physical power and gas portfolios. Here. This is what we experienced in 'twenty three continued in 'twenty four and we're seeing some.
Speaker Change: Strong margins on some of these contracts are one to three year contracts. So there. Some of it is historical that has continued to come through.
Speaker Change: And as we go through the year.
Speaker Change: We could continue to see some favorability from these positions its a little too early to say, but if it does.
Speaker Change: Where are we.
Speaker Change: We'll be able to use that strength to support and.
Speaker Change: And invest across our segments again to support future years as we go as we look to 'twenty six and beyond.
Speaker Change: I was just going to add a bit to that Jeremy.
Speaker Change: I can tell you the leadership team here were deep really deepen the 26 and also starting to plan for 2007.
Speaker Change: We're seeing strength across all our be use right now.
Speaker Change: We will use that strength as Dave said really strengthened 26 and 27% so.
Speaker Change: Really good position to be in.
Gil: This is gil.
Speaker Change: What I would say traditional DTE.
Speaker Change: Turning forward, so we feel really good about it.
Speaker Change: Okay.
Speaker Change: Got it.
Speaker Change: Well, thank you for that.
Speaker Change: And maybe just touching on vantage quickly here just wondering any updated thoughts I guess on the business I looked at the business mix.
Speaker Change: Any changes in strategy in light of.
Speaker Change: Potential.
Speaker Change: Rea changes or just anything else on the federal side that might influence your thinking at this point.
Speaker Change: No our strategy at advantaged continues as we've talked about in our.
Speaker Change: Our year end call.
Speaker Change: We are shifting to more utility like investments there so thats more of our Utah.
Speaker Change: Utility like Central plant services contracts, we have with large industrial and large commercial customers.
Speaker Change: But.
Speaker Change: All the projects that we have that are that we've talked about are either safe harbor or already under the existing IRA So nothing thats changing at the federal level really changes our strategy at all advantage.
Speaker Change: Got it great Thats it for me thanks.
Speaker Change: Churn comes from the line of sharp <unk> with Guggenheim Partners. Please go ahead.
Constantine: Hi, Good morning, it's actually Constantine here for sure.
Speaker Change: Good morning, guys good morning.
Speaker Change: Maybe just starting off on the renewable energy plan and kind of the level of ERP in the proposed decision.
Speaker Change: How supportive of that just the renewable demand that you anticipate over the next couple of years.
Speaker Change: And does the.
Speaker Change: How does that decision.
Speaker Change: Play into the IRB process and any kind of early takeaways that you could highlight.
Speaker Change: Can you repeat the first part based on which decision.
Speaker Change: The renewable energy plan.
Speaker Change: Oh, yes.
Speaker Change: Yes, so the RFP I think.
Speaker Change: What we filed just was in line with our ERP.
Speaker Change: And we are continuing to advance our renewable program, we have a strong pipeline. We've got like good land positions. It doesn't really change what we had already laid out so we're going to continue down that path and then the additional.
Interest that we see from data centers may bring some additional renewables into our plan as well so.
Speaker Change: The RFP filing we'll get the outcome of that over the next couple of weeks of full outcome will have a full reading of that over the next couple of weeks, but nothing is changing at least near term in our plant based on what we've heard this fact.
Speaker Change: Excellent great to hear and maybe in the rate case proceeding that was just filed contrast on anything that is new in the current rate case versus prior requests and with regards to the IRS of expansion.
Learn are you building into this cycle the commission receptor.
Speaker Change: More substantial IRR.
Yes. Thanks for the question I'll, just I'll just recap the case again. This is all about the capital we need to continue to improve reliability and transition to cleaner generation for our customers.
Speaker Change: The full ask as you've seen is $574 million.
Speaker Change: Roughly 44 sets of day for our customers and when the case is finalized the total bill growth is still expected to be below the rate of inflation. So you can look at page 16 in the deck and you can see where we are relative to the rate of inflation.
Speaker Change: We've put forth a solid case, we've got some really compelling circuit level benefit cost analysis and performance data that is showing that these investments are working some of the key initiatives in the case.
Speaker Change: Include the expansion of the IRS as you mentioned and they align with the Liberty audit. So we upped the ask and the ire ramp or Pull-top maintenance, specifically and that was called out in the audit. We're continuing our work for automation, we are showing that that automation is reducing the duration of our.
Speaker Change: And making the grid more safe.
Speaker Change: We've also included funding for sub transmission in the Iran.
Speaker Change: And some maintenance on other aging equipment, so feeling really good about what we've included in how it aligns with the Liberty audit. We're also are requesting an expansion of our three Trump efforts, we're increasing the scope.
Speaker Change: We've seen that by increasing the scope, we can reduce outages, even further and we shared all of this.
Speaker Change: With the commission so the ramp that we've proposed is significant but we've tiered is such that they can get consideration for the results that we're achieving and they've got some flexibility in how they respond to our request. If you look at how we've performed on this I think is really compelling and I'm really proud of the team.
Speaker Change: We mentioned that there's been a 70% improvement in reliability from 2023 to 24, and a 60% improvement in reliability year to date based on performance last year for the same time.
Speaker Change: So I think the commission acknowledges and they did acknowledge publicly.
Speaker Change: During the hearing in February that these investments are working and the reliability is it's showing up in positive ways for our customers. So we're looking forward to their response in August to see how staff feels about the case, but I think we have offered a lot of compelling testimony that supports yes.
Speaker Change: That's great color, Thanks, and maybe just a quick follow up to Nick's question on the data center conversations is there a targeted timeframe that incremental deals are currently seeking in terms of in service dates or ramp up timeframes.
Speaker Change: Yes, I think what's driving a lot of the urgency is the way that the legislation is is up.
Speaker Change: <unk>.
Speaker Change: It put together it requires that they start construction by 2028, so that means they have there is some urgency on their part to get something done.
Speaker Change: And the activity just continues on me and the team is out talking to new data center providers, each and every day in fact theyre having.
Speaker Change: Conversations with our current pipeline.
Speaker Change: Participants and then looking to source additional demand from other providers in and around the area. So I think we're making really good progress I think we'll have something done by the end of the year, we're continuing to work and like we said the <unk> deal has already increased from where it started so this is all positive movement.
Speaker Change: Excellent I appreciate that thanks for taking my questions.
Speaker Change: Your next question comes from the line of David Arcaro with Morgan Stanley. Please go ahead.
David Arcaro: Hey, Thank you good morning.
Speaker Change: Morning, David.
Speaker Change: Yes.
Speaker Change: Hey, I was wondering if you could touch on tax credit transfers.
Speaker Change: I was curious how much do you embed in your plan currently and.
Speaker Change: How might you manage the financing outlook is transferability were to change or go away under some of the inflation reduction Act discussions.
Speaker Change: Yes first of thanks, David for the question first of all say, we feel comfortable with the IRA and the provisions of the IRA.
Speaker Change: Hum.
Speaker Change: Pretty.
Speaker Change: We've as we've discussed there is a bunch of Republican congressmen and senators that are supporting it and then that Theyre also supporting transferability. So.
Speaker Change: We feel good about the IRS provisions that support our plan and transferability.
Speaker Change: It was specifically made part of the Iras and linked to the credit program to drive support so we're going to continue to.
Speaker Change: Work with lawmakers to ensure that that stays aligned going forward.
Speaker Change: Okay.
Speaker Change: As you know we do have transferability as part of our plan in fact, we used $230 million of transferability benefit in 2024.
Speaker Change: Really.
Speaker Change: A testament to the success, we're having in developing affordable renewable projects for our customers as part of the Michigan clean energy plan. So.
Speaker Change: First I will say, we think the likelihood of anything around transferability or any risk is low.
Speaker Change: But if there if it were at risk we think we're in a good position to manage the impacts and continue on our growth rate.
Jordan: First of all like as Jordan mentioned earlier.
Jordan: Safe harbored a renewable investments through 2027.
Jordan: And we think there'll be strong support in any scenario for the transferability related to these investments to continue to be supported because.
Jordan: Historically Congress has.
Jordan: Insistently kept incentives in place of taxpayers relied upon we're making investments so that alone would support our IRA you invested alright IRA related cash flows through 'twenty seven.
Jordan: And then we have additional tools to so just prior to the IAA being enacted.
Jordan: We again support for a tax equity structure with our commission. So we can continue to support our projects and delivered to benefit for our customers as we build to meet Michigan's clean energy plan.
Jordan: And then we.
Jordan: We have a strong balance sheet and so that provides flexibility to maintain our position while we build out our plan. So we look at other equity and financing needs. Some hybrid like junior sub that would help us so.
Jordan: We think through the safe harboring tax equity strong balance sheet and the options, we have will be able to mitigate the impact in the unlikely event there'd be any.
Jordan: The impact of transferability going forward, so David just.
Jordan: At a summary of that.
Jordan: Even at the highest level.
Jordan: Our investments are really dictated by the AARP settlement, we made in 2023.
Jordan: And also the Michigan clean energy legislation that passed in 2023, so that kind of sets our investment agenda in the renewables battery systems and also natural gas development for that matter.
And really the IRA provides affordability for our customers and I think as you heard Dave described.
Jordan: We're safe Harbor through 2027 and then.
Jordan: If there if there's a remote possibility that something could change we have many other tools that will help us manage that affordability for our customers, but we're committed to this investment in our legislation and IRB settlement sort of.
Jordan: Dictates these investments for us.
Speaker Change: Yeah. Okay got you absolutely that's helpful color I think I'll leave it there I appreciate it.
Speaker Change: Your next question comes from the line of Sophie Karp with Keybanc. Your line is now open. Please go ahead.
Speaker Change: Hi, good morning, and thank you for the question.
Speaker Change: I just wanted to.
So up on the solar development pipeline I understand you guys, saying you safe harbored through 2027 does that actually mean that you have.
Speaker Change: Panels on the ground already.
Speaker Change: Okay.
Speaker Change: Or just some part of that.
Speaker Change: What is the outlook beyond that and I'm, asking because some solar companies coming.
Speaker Change: Coming up with pretty dire commentary in that.
Speaker Change: Calling some of the solar projects at <unk>.
Speaker Change: To support the level of Fedex and the economics right. So I guess, what's your outlook.
Speaker Change: There.
Speaker Change: How do you see how do you see you saw the development pipeline.
Speaker Change: Okay, I just want to come.
Speaker Change: Come back in.
Joy Harris: Hi, Sophie this is joy yeah. We are we're feeling good about our solar positioning we did in fact safe Harbor and we do have those panels in warehouses right. Now so we've got adequate inventory on hand to complete projects through 2027, and we're continuing to.
Joy Harris: Source additional panel at from providers that have minimal tariff risk even some of the providers that we have now our theyre onshoring their production.
Joy Harris: One of the one of the.
Joy Harris: The panel for providers as it is breaking ground as we speak cutting the ribbon on their production facilities right here in the U S. So that's been our mode of operation, where we do see some tariff risks we tried to insulate ourselves.
Joy Harris: And have the provider take on that tariff risk so far they are delivering their furnishing on the panels. So we're not seeing any near term.
Joy Harris: Risk to our plans and we feel good about the inventories that we have on hand.
Speaker Change: Great. Thank you and then my other question was on the rate case right. So.
Speaker Change: Electric rate case is there do you expect to I guess fully litigate. The case. So is there a new pathway to settle in this this time around but has anything changed in the same.
Speaker Change: I'll take the landscape since the last time.
Speaker Change: Yes.
Speaker Change: Too early to say, we also we always it will entertain settlement discussions I will know in August when we see our staff and intervenor testimony.
Speaker Change: But worst case scenario, we will get an order in the February timeframe.
Speaker Change: Sounds good. Thank you. Thank you I appreciate it.
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: Good morning, Michael.
Michael Sullivan: Hey, Gerry sticking with with <unk>.
Michael Sullivan: Tariffs.
Michael Sullivan: Tariff risk mainly can you just remind us do you have any.
Michael Sullivan: Battery storage in your plan and what we should be expecting in terms of.
Michael Sullivan: Central.
Michael Sullivan: Cost pressures there.
Michael Sullivan: So we do have battery storage in our plan, we have not purchased the batteries. So we actually have flexibility in terms of how we manage that but as I mentioned in my opening thoughts just go back to the tariff impact 80% to 85% of our spend is on services.
Michael Sullivan: When we look at the balance of spend.
Michael Sullivan: And you know that we focus for many years on domestic supply and local supply. So I mentioned in my thoughts early opening thoughts over $3 billion of our spend is in Michigan.
Michael Sullivan: This puts us in a really good position.
Michael Sullivan: I asked the team to do a deep dive on all tariff exposures in our gas electric advantage business and when we look at all of that the summary is in the worst case, it's a 1% to 2% impact.
Michael Sullivan: Over the near term and long term and Thats, a very manageable for us and as a matter of fact with the conversations we're having we're going to come well below that is our expectation.
Michael Sullivan: Also just to add some little bit of color on that the number of conversations that our supply chain team is having about onshoring for domestic production.
Michael Sullivan: I know the IRA you kind of gave an incentive for domestic production and I think the tariffs are a bit of an accelerant. Those conversations. So for example, inverter supplier transformers solar panels battery manufacturing.
Michael Sullivan: Many many conversations about the ability to sort of onshore that.
Joy Harris: <unk> manufacturing so like Joy mentioned, there's plants that are opening up those plants are already open.
Joy Harris: It's quite a quite interesting quite interesting opportunity for a more holistic perspective for for our service territory and for the country.
Joy Harris: That's great.
Joy Harris: Flipping over to maybe the fossil side I know you are.
Joy Harris: It's not until next year, but what.
Joy Harris: What are you seeing in terms of.
Joy Harris: Gas newbuild cost and.
Joy Harris: Timing and are you considering at all potentially pushing out coal retirements like Monro just given some of the lead time.
Joy Harris: Pushback that push out that we've seen.
Joy Harris: I think with the executive orders that that have rolled out the one that's most encouraging for us at the highest level as you know there is a section 170 provision and EEP.
Joy Harris: Rules that was going to be very expensive to build new gas plants, but we're really excited with the prospect of <unk>.
Joy Harris: That being.
Joy Harris: Sort of rescinded I know the industry has made a big push for that last year and I think with this new administration, we have an opportunity to see that actually happen.
Speaker Change: So we were excited to see that move forward in a positive direction, which will make the economics of building new gas plants, which is something we have to do Michael.
Speaker Change: Our coal plants are old and we may get some flexibility with our coal plants, but in the end, we got a we got to shut them down or quite old and needs to be replaced with new technology high quality technology, and a form of renewables batteries and combined cycle plants. So.
Speaker Change: We're looking forward a little more flexibility with gas plants, primarily.
Speaker Change: Okay, Great and just one quick one if I could squeeze in for Dave.
Speaker Change: 45 C tax credits for this year, the $50 million to $60 million or the projects associated with that all online already or are there. Some you still have to bring into service.
Michael Sullivan: Hey, Michael.
Michael Sullivan: They are all in line and in fact, we're kind of we're earning on those right now so of the 50 to 60. If you look at our quarter, we will have $15 million of the credits that we've we've earned this quarter already.
Michael Sullivan: Perfect. Thank you very much I appreciate it thank.
Thank you.
Speaker Change: Your next question comes from the line of Andrew Wilson with Scotiabank. Please go ahead.
Michael Sullivan: Hey, good morning, everybody good morning, Andrew Andrew.
Speaker Change: I've got one housekeeping and one follow up please firstly what was the <unk> to debt on a trailing 12 months. Please.
Michael Sullivan: We're right at 15% Andrew.
Michael Sullivan: Okay great.
Michael Sullivan: And then the follow up for Joey. Please you talked about the IRS and plans to increase it from $290 million to $1 billion by 2029, how are you thinking about the path to get there or are you hoping to get it kind of all in one shot or will it be gradually ramping over time I know, it's been a multiyear conversation but.
Michael Sullivan: And you mentioned the support is there from the Liberty audit, but how are you thinking about the path to get there and the way you see the world today with a 1 billion dollar approval be enough to stay out for longer than you've been typically going in kind of annually or how do you think about the timing of the next rate case if you.
Michael Sullivan: Work to get it at that $1 billion level. Thank you.
Speaker Change: Hey, Andrew Yes, we proposed a ramp right. So we're stepping in into this over a three year timeframe and that's how we proposed it and in previous cases.
Michael Sullivan: The difference being we've got some really solid data.
Speaker Change: For the investment categories that shell.
Speaker Change: How these investments are delivering better reliability for our customers and it's at the circuit level. So we'd be we believe that solid support for expansion of the IRR.
Speaker Change: And then likewise the areas of investment align perfectly with what the Liberty audit offered in its findings and so we believe the commission will take this into account, but we've offered two tiers one that ramps immediately to $1 billion and then a step below so it gives them some.
Speaker Change: <unk> in their decision, making if we get to $1 billion ramp that would keep us out of cases.
Speaker Change: I would say it put some distance maybe six eight not quite 12, I don't think but it would certainly.
Speaker Change: Put some distance between our next filing but we won't know for certain until we hear back from them in the early indicator will be.
Speaker Change: August timeframe.
Speaker Change: Alright, thank you so much.
Speaker Change: So our next question comes from the line of Travis Miller with Morningstar. Please go ahead.
Speaker Change: Thank you and good morning, everyone.
Hey, Travis Travis.
Speaker Change: And for most of my questions, but a couple of quick follow ups one on the RMG tax credits any discussion at the federal level about those.
Speaker Change: Pro or con going away are those pretty much locked in.
Speaker Change: Sure.
Speaker Change: We're feeling we're feeling good about the position of the RMG credits right now.
Speaker Change: There is some rulemaking thats still has to go on but we're confident that the final position is going to be what Congress intended so.
Speaker Change: I think it's still going forward and as we just said, we booked $50 million of debt for the quarter.
Speaker Change: Yes, okay, Okay, and then on the <unk>.
Speaker Change: If you get the expansion is that capital that would be incremental or is that capital that you're already planning or even plan ends would simply flow through the IRR them instead of a traditional <unk>.
Speaker Change: Base rate case.
Yes.
Speaker Change: That's non incremental capital that's what's in our plan.
Speaker Change: At this point.
Speaker Change: Okay very good and then one more quick one if I may.
Speaker Change: Data centers is there a role that vantage.
Speaker Change: Play there are people advantage involved in some of those conversations about us a role they can play.
Speaker Change: There are some early conversations that vantage is having about building.
Speaker Change: Really generating assets or backup.
Speaker Change: Generation for data centers, so there could be an opportunity, but I would say it's really early.
Speaker Change: Okay very good that's all I had thanks.
Speaker Change: Thank you.
Speaker Change: Our next question comes from the line of Paul Fremont with Ladenburg. Please go ahead.
Speaker Change: Congratulations on the quarter and my questions have all been answered. Thank you.
Speaker Change: Thanks, Paul.
Your last question comes from the line of Paul Zimbardo with Jefferies.
Speaker Change: Your line is now open. Please go ahead.
Paul Zimbardo: Hi, Good morning, even go rich Har Har Paul.
Speaker Change: Morning.
Speaker Change: Hi, most of my questions have been answered, but I do have a question.
Speaker Change: Related to the tariff structure I mean, I know you have a gigawatt of extra capacity. So how should we think about the tariff structure for data centers.
Speaker Change: Forget gigawatt Thats out there and then beyond that in particular, given that CMS has a filing outstanding.
Speaker Change: To set up a data center carrier.
Speaker Change: Hi, good morning.
As we mentioned, we don't need a tariff right away for the near term low ramps, because we have excess capacity and we would use batteries.
Renewables and arent my Green power.
Speaker Change: Along with other riders to support that load over time, though if we get to a point, where we've got to build baseload generation.
<unk> wood structure would be most appropriate and we're looking to insulate our existing customers from stranded asset. So think of a long term agreement with minimum volume commitments, but again, we don't see a need right away. We're just starting to formulate our thoughts based on what consumers filed and then disc.
Speaker Change: <unk> that we're having with our data center providers.
Speaker Change: Okay. Thank you and I have a quick follow up on mall, Keith Jensen ability I just want to make sure that I understand that you are able to use tax equity structure at the utility level.
Speaker Change: Trust, our ability is no longer available.
Speaker Change: Yes, we did get support from the commission for a tax equity structure. Just it was just prior to the IAA been enacted we have been working on that so yeah.
Speaker Change: Yes, we would be able to we think we'd be able to work through that with them again.
Speaker Change: Okay. So you would have to go through the regulatory process No no no I think we've got support already for it we just have to.
Speaker Change: You have to work the process.
Speaker Change: Okay. Thank you and we received the notice we received we received an order that allowed us to deploy.
Speaker Change: Deploy tax equity structures in a certain manner.
Speaker Change: <unk> said once we have the inputs of what we're pursuing.
Speaker Change: Obviously put that into the end of that process.
Speaker Change: Okay, great. Thank you very much thanks.
Speaker Change: That concludes our Q&A session I will now turn the call back over to Jerry Norcia for closing remarks.
Jerry Norcia: Well, thank everyone for joining us today I'll, just close by saying that we're feeling really great about 2025, as well as our long term position and growth for future years I'm sure I'll see many of you at EOG conference in a few weeks have a great morning stay healthy and safe.
Jerry Norcia: Ladies and gentlemen that concludes today's call. Thank you all for joining you may now disconnect.
Jerry Norcia: Okay.
Speaker Change: Please wait the conference will begin shortly.
Speaker Change: [music].