Q3 2025 DTE Energy Co Earnings Call
Speaker #1: Please wait . The conference will begin shortly .
Speaker #2: Hello , and would like to ask a question during this time , simply press star . Then the number one on your telephone keypad .
Speaker #2: thank you for standing by . My name is Bella and I will be your conference operator today . At this time , I would like to welcome everyone to DTE Energy Q3 2025 Earnings Conference Call .
Speaker #2: To withdraw your question , press star one . If you Again , I would now like to turn the conference over to Matt Krupinski , director of Investor Relations .
Speaker #2: You may . .
Speaker #3: 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 #3: Our presentation also includes references to operating earnings , which is a non-GAAP financial measure . Please refer to the reconciliation of GAAP earnings to operating earnings provided in the appendix .
Speaker #3: With us this morning are Joi Harris president and CEO and Dave Rood , CFO . And now I'll turn it over to Joy to start our call this morning .
Speaker #4: Thanks , Matt . Good morning , everyone , and thank you for joining us . While this is my first time leading our earnings call as CEO , I've had the privilege of engaging with many of you over the past couple of years , and appreciate the dialogue .
Speaker #4: I'm off to a running start and continuing to build on the strong foundation we've established . I have a number of exciting updates to share with you today , which include highlighting the progress we're making on achieving our 2025 financial goals , providing a strong 2026 operating EPs outlook and outlining our enhanced five year plan that now extends through 2030 .
Speaker #4: A highlight of our strategy is the transformational growth we're seeing in data center demand . I am pleased to announce we finalized an agreement with a leading Hyperscaler to support 1.4GW of data center load .
Speaker #4: This is an exciting milestone that I'll expand on as we walk through our updated strategic plan . Aside from the 1.4GW of new load , we are still in late stage negotiations with an additional three gigawatts of data center load providing potential further upside to our capital plan as we advance these negotiations .
Speaker #4: As a result of this first data center transaction and continued need to modernize our utility assets , our updated plan includes significant increases in utility investments for our customers and delivers 6 to 8% operating EPs growth through 2030 .
Speaker #4: We are confident we will reach the high end of our targeted range in each year, driven by RNG tax credits and the flexibility they provide.
Speaker #4: This plan supports our continued strategic shift toward higher quality utility earnings , fueled by increased demand continues . Our efforts to build the grid of the future .
Speaker #4: While transitioning to cleaner generation and demonstrates our ongoing commitment to affordability for our customers . I will share additional details of our plan over the next few slides .
Speaker #4: I'll start on slide four by saying that we are continuing to deliver strong results in 2025 . And we are well positioned to hit the high end of the guidance .
Speaker #4: This year . As always , our success is a testament to our dedicated and engaged team , committed to serving our customers and communities .
Speaker #4: I am extremely proud that our team was recognized by the Gallup Organization for the 13th consecutive year , with a great workplace Award , and our employee engagement ranks in the 94 percentile globally among thousands of organizations .
Speaker #4: We are well positioned to achieve the high end of our 2025 operating EPs guidance range . Looking ahead to 2026 , our early outlook reflects operating EPs growth of 6 to 8% over our 2025 guidance .
Speaker #4: Midpoint , and we are confident in our ability to deliver at the higher end of that range . Let me move to slide five to provide more details on our long term plan .
Speaker #4: We are in an exciting time for our industry and for DTE, and we are focused on seizing the opportunity to deliver for our customers, communities, and investors.
Speaker #4: We're increasing our five year capital investment plan by $6.5 billion compared to the prior plan , driven by the data center transaction and the continued need to modernize our utility assets .
Speaker #4: DTE electric , the additional investments are strategically focused to support data center load growth , advanced cleaner generation , and to enhance distribution infrastructure that will drive continued improvements in reliability .
Speaker #4: DTE gas is focused on system reliability and infrastructure renewal , ensuring safe , efficient service for our customers while modernizing our network . DTE vantage will continue to prioritize investments in utility like long term fixed fee contracted projects , which aligns well with our strategy to deliver stable , predictable earnings for our investors .
Speaker #4: Our investment plan supports a further strategic shift toward higher quality utility earnings over the next five years, targeting utility operating earnings to increase to 93% of our overall earnings by 2030.
Speaker #4: Importantly , data center opportunities are helping drive this shift as we allocate additional capital to serve this load , which further supports affordability for our existing customers .
Speaker #4: We have incorporated a more conservative growth outlook for DTE vantage , which is largely influenced by commodity pricing assumptions . In our longer term forecast .
Speaker #4: As part of our most recent strategic analysis , we evaluated a range of pathways to drive sustainable long term value . This effort reinforced our that leaning into our core utility business while taking a more conservative view at DTE vantage will best position us to deliver value for our customers and for our investors .
Speaker #4: As you can see in the appendix of this presentation , the 2030 outlook for vantage is flat to 2025 . Guidance . As our solid project development pipeline offsets the expected roll off of 45 production tax credits after 2029 .
Speaker #4: We're confident this approach also positions us well for consistent future growth , as we expect to continue to make progress on additional data center opportunities that will deliver upside to our base plan .
Speaker #4: Let me move to slide six to highlight updates to our capital plan at DT Electric . Our updated capital investment plan at DTE Electric provides a $6 billion increase over the prior plan , driven by the data center transaction and customer focused initiatives that align with our long term strategy .
Speaker #4: A key component of this plan is new storage investment to support the increased data center load . Importantly , this incremental storage investment is fully funded by the data center customer .
Speaker #4: The plan also includes renewable investments that support the continued success of our migraine power . Voluntary Renewables program and fulfill the requirements of the legislated Clean Energy Plan and to ensure reliable base generation .
Speaker #4: As we transition away from coal . We are planning the construction of a combined cycle gas turbine to replace our retiring coal plant .
Speaker #4: We are submitting a competitive bid for the 2026 Integrated Resource Plan , all source RFP for a new Ccgt to replace Monroe Power Plant .
Speaker #4: We're also continuing to invest in distribution infrastructure to harden the grid and improve reliability for our customers . These grid investments are already delivering results , driving a nearly 90% improvement in the duration of outages since 2023 .
Speaker #4: As we make strong progress toward our goal of reducing power outages by 30% and cutting outage time in half by 2029 , our current rate case filing supports these reliability investments .
Speaker #4: While remaining focused on customer affordability . This filing includes a request for approximately $1 billion in distribution spending to be included in the Infrastructure recovery Mechanism by 2029 , which was largely supported by the Mpsc staff in its recent testimony .
Speaker #4: The IRM will help drive consistent , predictable investments in grid modernization to improve reliability for our customers . While also simplifying future regulatory proceedings .
Speaker #4: The order for this case is expected at the end of February . Overall , I'm thrilled about the opportunities ahead for DTE electric as we continue our efforts to improve reliability for our customers , transition to cleaner generation and execute on economic development opportunities to drive low growth and support affordability for our customers .
Speaker #4: Let me move to slide seven to provide an update on our advancement of data center opportunities . As I mentioned , we successfully executed a significant agreement to support 1.4GW of new data center load representing a major step forward in our utility growth strategy , while also delivering meaningful affordability benefits to our existing customers .
Speaker #4: The demand is expected to ramp up over the next 2 to 3 years , giving us a clear runway to align infrastructure development and resource planning with customer needs .
Speaker #4: While we can use existing capacity to support this ramp , we'll also need to invest in new energy storage solutions to meet the full capacity requirements .
Speaker #4: Our updated plan includes nearly $2 billion of incremental energy storage investment and additional tolling agreements to support this data center load . Given our excess capacity , we will use our existing industrial tariff for this customer and combine it with an energy storage contract to support the incremental storage investment .
Speaker #4: We are including key terms in these agreements that will protect existing customers , including a 19 year power supply contract with minimum monthly charges .
Speaker #4: The data center will fund its own storage needs through a 15 year energy storage contract . These terms are important to us and our customers as we ensure the data center revenue support the required investments to meet this new demand .
Speaker #4: We plan to submit our regulatory filing tomorrow , requesting approval of the data center contract , energy storage investments will begin ramping in 2026 to align with the projected increase in data center load .
Speaker #4: As I mentioned , we also have additional data center opportunities beyond this initial 1.4GW . We are in advanced discussions with additional hyperscalers for over three gigawatts of new load , and we have a pipeline of an additional 3 to 4GW behind that .
Speaker #4: We also expect longer term growth opportunities through the expansion of these initial Hyperscaler projects . The generation investments that will be needed to support these additional opportunities could very well come into the back end of our five year plan , providing incremental capital investments above what we are laying out for you today .
Speaker #4: A key step in preparing for the development of new generation to support large data center loads is integrating these requirements into our next IRP filing , which we expect to file next year .
Speaker #4: So a lot of great opportunities ahead of us on the data center front . We will continue to provide updates along the way as things progress .
Speaker #4: Let me move to slide eight to discuss our commitment to customer affordability . We have a history of executing on our investment plan with a sharp focus on customer affordability .
Speaker #4: As you can see on the chart , our average annual bill increase over the last four years is significantly lower than the national average , and Great Lakes average .
Speaker #4: We remain committed to maintaining this focus on affordability throughout our plan . We are advancing on a number of initiatives to support affordability for our customers .
Speaker #4: While continuing to invest in support . Our key priorities . Importantly , near-term data center growth will help create substantial affordability headroom for our existing customers as we sell our excess generation , our continuous improvement culture will ensure O&M and capital investments remain efficient .
Speaker #4: The shift from coal to natural gas and renewables also helps to further reduce O&M costs . While our diverse energy mix ensures economic fuel costs for our customers and finally , the IRA provision support the renewable energy investments while supporting customer affordability goals .
Speaker #4: So to wrap up my comments , I'll say I'm very excited about our long term plan and the opportunities we have ahead of us to continue to deliver for all of our stakeholders , including excellent service to our customers and communities and continued strong financial performance for our investors .
Speaker #4: I'm looking forward to spending more time with many of you at EEI to discuss our updated plan . With that , I'll hand it over to Dave .
Speaker #4: Over to you . Dave .
Speaker #5: Thanks , Joy . Good morning everyone . Let me start on slide nine to review our third quarter financial results . Operating earnings for the quarter were $468 million .
Speaker #5: This translates into $2.25 per share . You can find a detailed breakdown of EPs by segment , including our reconciliation to GAAP reported earnings in the appendix .
Speaker #5: I'll start the review at the top of the page with our utilities. DTE Electric earnings were $541 million for the quarter. Earnings were $104 million higher than the third quarter of 2020.
Speaker #5: For the main drivers of the variance were timing of taxes and rate implementation , partially offset by higher O&M and rate base costs .
Speaker #5: The impact from the timing of tax for the quarter was fairly significant , at $63 million , favorable relative to third quarter 2020 .
Speaker #5: For this is due to the timing of investment tax credits associated with when our solar projects are placed into service . This timing was known and built into our plan , and the remaining year to date timing favorability of $33 million relative to 2024 will reverse in the fourth quarter .
Speaker #5: Moving on to DTE Gas operating earnings were unfavorable $38 million , which is $25 million lower than the third quarter of 2020 . For the earnings variance was primarily driven by higher O&M and rate base costs , with our confidence that we will hit the top end of our overall DTE operating EPs guidance range this year .
Speaker #5: We've been able to unwind one time lean operational measures and other unsustainable reductions that were implemented over the past few years at DTE gas to counteract warmer weather .
Speaker #5: This will likely bring this segment in below its guidance range in 2025 . Let me move to DTV vantage on the third row , operating earnings were $41 million for the third quarter of 2025 .
Speaker #5: This is an $8 million increase from 2024, driven by RNG production tax credits in 2025, partially offset by lower steel-related revenues.
Speaker #5: We remain on track for the full year guidance at vantage . On the next row , you can see energy trading earned $23 million for the quarter .
Speaker #5: We continue to experience strong margins in our contracted and hedged physical power and gas portfolios on a year to date basis . We are currently above the high end of operating earnings guidance for this segment .
Speaker #5: This strong performance places us in a favorable position to leverage any potential further upside across DTE to continue to provide flexibility for future years .
Speaker #5: Finally , corporate and other was unfavorable by $77 million quarter over quarter due primarily to the timing of taxes , which will reverse by year end , as well as higher interest expense .
Speaker #5: Overall , DTE earned $2.25 per share in the third quarter of 2025 , which positions us well to achieve the high end of our guidance range in 2025 .
Speaker #5: Let's move on to slide ten to discuss our 2026 outlook . As Joy mentioned , we are well positioned to deliver another strong year in 2026 .
Speaker #5: Our 2026 Early Outlook range $7.59 per share to $7.73 per share , which provides 6 to 8% growth over our 2025 guidance . Midpoint .
Speaker #5: We are confident that we will deliver at the high end of the guidance range due to the flexibility that the 45 tax credits provide .
Speaker #5: Utility growth will be driven by customer focused investments , including distribution and cleaner generation investments at DTE electric and Maine Renewable and other infrastructure improvements in DT gas .
Speaker #5: DC vantage will see growth from the development of new custom energy solutions projects and continued contributions from RNG production tax credits and an energy trading .
Speaker #5: We continue to see strength in both our structured physical power and physical gas portfolios , giving us confidence in our targets as we head into 2026 .
Speaker #5: We will share additional details on 2026 . During our fourth quarter call . Following the close of a strong 2025 . Let's turn to slide 11 to discuss our balance sheet and equity issuance plan .
Speaker #5: We continue to focus on maintaining solid balance sheet metrics to support the significant increase to our capital investment plan that we need to execute for our customers .
Speaker #5: We have increased our planned equity issuances . We're targeting annual issuances of 500 million to 600 million in 2026 through 2028 . This level of equity supports the capital that is now coming earlier in this plan , relative to our prior plan .
Speaker #5: The increased equity will help fund the increase in our capital plan , including the storage investments related to our data center agreement . While ensuring that we maintain a strong balance sheet .
Speaker #5: We will continue to maximize the use of internal mechanisms to issue equity , but will also incorporate manageable external issuances . Our five year plan fully incorporates the equity needs and continues to deliver 6 to 8% operating EPs growth with a bias toward the upper end each year through 2030 .
Speaker #5: Our long term plan also includes debt refinancing and new debt issuances . We expect to strategically utilize hybrid securities to support our financing plan , and we will continue to manage future debt issuances through interest rate hedging and other opportunities .
Speaker #5: Importantly , we continue to focus on maintaining our strong investment grade credit rating and solid balance sheet metrics as we target an FFO to debt ratio of approximately 15% .
Speaker #5: This plan ensures that DTE continues to be well positioned to make the necessary investments for our customers , while delivering the premium total shareholder returns that our investors have come to expect over the past decade .
Speaker #5: With strong utility growth and a dividend growing with operating EPs . Let me wrap up on slide 12 . And then we will open the line for questions .
Speaker #5: Our team continues our commitment to deliver for all of our stakeholders . We are delivering solid results in 2025 . We are on track to achieve the high end of our operating EPs guidance range , and we are confident we will achieve the high end of our 2026 early outlook .
Speaker #5: Again , due to the flexibility that the 45 tax credits provide , our updated five year plan provides high quality , long term , 6 to 8% EPs growth through increased customer focus , utility investment , which increases our utility operating earnings to 93% of our overall earnings by 2030 .
Speaker #5: This plan increases our five year capital investment by $6.5 billion over the previous plan , supported by the data center transaction and the continued need to modernize our utility assets .
Speaker #5: Additional data center opportunities provide potential upside to this five year capital investment and EPs growth plan . We continue to target 6 to 8% long term operating EPs growth , with 2026 operating EPs midpoint as a base for this growth .
Speaker #5: We are confident that we will reach the high end of our target range in each year , driven by RNG tax credits and the flexibility they provide .
Speaker #5: We continue to target a strong dividend that grows with operating EPs . Overall , we are well positioned to deliver the premium total shareholder returns that our investors have come to expect with a strong balance sheet that supports our capital investment plan .
Speaker #5: With that , I thank you for joining us today and look forward to seeing many of you at EEI . We can open the line for questions .
Speaker #2: 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 .
Speaker #2: We will pause for just a moment to compile the Q&A roster . Your first question comes from the line of Shah Parisa with with Wells Fargo .
Speaker #2: Your line is now open . Please go ahead .
Speaker #6: Hey , guys . Good morning .
Speaker #7: Hey , can you hear me ?
Speaker #6: Morning . Morning . So obviously the upside . Slide . It seems fairly material around incremental data center opportunities are the data center deals kind of .
Speaker #6: Are they an inflection point to rebase higher or shift that 6 to 8 . Kegger ? Or should we still kind of assume length and strengthen ?
Speaker #6: I guess . What do you need to see to revisit that ? Got it . Trajectory , especially since some of it can hit the back end of the plan and you're already growing at the higher end .
Speaker #6: Thanks .
Speaker #8: Hey, Shah, and good morning.
Speaker #7: Good morning .
Speaker #8: Question . Yeah , we're really excited about the first 1.4GW deal we have on the table . And we'll feel well positioned to execute on that .
Speaker #8: We're continuing conversations . As I mentioned in the the intro , we've got four gigawatts . Well 3 to 4GW that we're continuing to work with hyperscalers with a total pipeline of roughly seven .
Speaker #8: That said , as we are advancing these negotiations , our intent would be to find terms that we can then and the ramp that we can then incorporate into our next year's IRP .
Speaker #8: And then determine the generating resource to support that load . It could be a large generating load or a combination of batteries and renewables , but the intent would be to get it into the five year plan , if at all possible .
Speaker #8: And that would give us growth opportunities above and beyond where we are today . So we feel really good about the deal we have on the table and our ability to execute on it .
Speaker #6: Okay . Got it . But just I guess just to is it accretive to the 6 to 8 , I guess . How do we sort of think about how you currently guide ?
Speaker #8: Yeah , I think that I think that is a fair assumption that it would be upside to our current 6 to 8 .
Speaker #6: Perfect . Thank you . And then just and obviously you noted a more conservative outlook for vantage due to commodity pricing . But I guess what are you seeing on the energy service side .
Speaker #6: And does it make sense to monetize certain assets , especially with the inflection of equity needs starting in 26 ?
Speaker #8: Yeah , we're continuing our our focus on our energy service business line and vantage . We're working on a behind the meter project .
Speaker #8: In fact , outside of the state of Michigan for data center . And that could be an additional vertical that we pursue . But , you know , vantage has been a really great part of our portfolio for over 20 years with a really strong pipeline and opportunities for really good returns .
Speaker #8: So but as always , we look for ways to optimize value for shareholders . We don't have anything imminent right now , but it's something that we'll continue to examine .
Speaker #6: Got it . Perfect . And big congrats , joy on your first earnings call . I know Jerry's listening . He's proud . And just keep that dividend growing for him .
Speaker #6: Now that he's on a fixed income . Appreciate it guys .
Speaker #8: Thanks . Sure .
Speaker #2: Thanks for that . And your next question comes from the line of Jeremy Tonet with J.P. Morgan . Please go ahead .
Speaker #9: Hey guys . Good morning . This is actually Aidan Kelly on for Jeremy .
Speaker #7: Hey .
Speaker #8: Hey , Aidan .
Speaker #9: Yeah . So just regarding the EPs kegger , is the right math to think about . Like , 2026 , high end and then growing 8% , 8% off that until 2030 .
Speaker #9: Or should we think about the EPs kegger kind of being based off the midpoint each year ?
Speaker #8: So midpoint each year is is the way we we guide and the 45 is give us the potential to hit the upside . The top end of our range .
Speaker #8: And as you know , those 45 Zs extend through 2029 .
Speaker #9: Got it . Okay . That's helpful . And then just on the incremental load , maybe just how much should we think about the load as needed to trigger a new gas plant versus just more energy storage at this point ?
Speaker #9: I mean , like when you look at the seven gigawatt pipeline , you know , how should we think about , like , what's needed for for new base load versus just like incremental storage ?
Speaker #8: Yeah . So , you know , think of it this way . Any any new data center load that we bring on after this 1.4GW will require additional resources .
Speaker #8: If we bring on something in the gigawatt range , it would require a combined cycle to support it . Anything lower than that , we could do a combination of , you know , either a smaller ccgt and some renewables and batteries , but we'll know all of that for certain once we sign the deal .
Speaker #8: And incorporate it into next year's IRP. That will really dictate the resource requirements and the resource mix.
Speaker #2: Your next question comes from the line of Julien Dumoulin-smith with Jefferies . Please go ahead .
Speaker #10: Hey , congratulations again , Joy . And to the whole team here . Nicely done . Here . I gotta say , and nicely done on firming up this contract here .
Speaker #10: As you say . Now , with that said , and just to follow up on some of the last questions here , how do you think about the data center timing here ?
Speaker #10: You talk about it being accretive to the plan . How do you think about the timeline for its ramp ? I know that you already cautioned that it wasn't entirely clear cut , but how do you think about it being accretive versus perhaps serial and an extension of the 6 to 8 ?
Speaker #10: We don't mean to nitpick too much here , but I think we heard your comments early on . I just wanted to come back and understand when that would really start to kick in and be accretive .
Speaker #8: Yeah , you can think of it toward the tail end , given just the lead times on some of the materials and the construction cycle .
Speaker #8: Julien , you could think of it toward the back end of plan . So call it , you know , late 2029 into the early 2030s .
Speaker #10: Got it . So that uptick would potentially be probably that first year really would be that 2030 time frame . And then the question would be how sustained that elevated growth rate would be predicated on the success of the three gigawatts in late stage negotiations .
Speaker #8: Yeah . And again , I'll repeat , we're going to take all of this and incorporate it into next year's IRP . And really that will dictate not only the timing but the right resource mix with will .
Speaker #8: Then drive timing of construction , lead times for materials and such .
Speaker #10: Right . Indeed . You're owned versus a contracted piece , etc. , etc. .
Speaker #8: Exactly . our
Speaker #10: Excellent . Perfect . All right . Well , I've taken enough . Thank you guys very much . I appreciate it . Good luck and congrats .
Speaker #7: Again man . Thanks , Julien .
Speaker #2: Your next question comes from the line of David Arcaro with Morgan Stanley . Please go ahead .
Speaker #11: Hi. Thanks so much. Good morning.
Speaker #7: Hey .
Speaker #8: Good morning .
Speaker #7: David .
Speaker #11: Hey , I was wondering just on the advanced stage , data center pipeline . Is there any rough timing for when you'd expect the potential to finalize those those deals ?
Speaker #11: And bring them forward or advance other projects , maybe into the from the from the earlier stage pipeline into the advanced stage pipeline .
Speaker #11: What's the pace of crystallization of some of the projects ?
Speaker #8: Yeah , thanks for the question . So we're in active negotiations and we have been for some time . We are still , you know , settling on some key terms and ramp rates .
Speaker #8: I would envision that we would have at least an idea of the ramp and firming up some of the terms before we file next year's IRP .
Speaker #8: We're pulling that forward . That's the idea . Until the third quarter . So we would want to be able to understand the ramp , understand exactly when that ramp would lay out over a five year plan , and incorporate it into our modeling so we can put it into the IRP .
Speaker #11: Okay . Perfect . Yeah , that's helpful . And then you piqued my interest with the behind the meter project that you're working on for vantage for a data center .
Speaker #11: I was just wondering if you might be able to elaborate on , on maybe how big of a project that might be , what kind of power generation technology you're using ?
Speaker #11: Any thoughts on , maybe how returns stack up for that type of a project versus others ? In the vantage pipeline ? Yeah , curious about that .
Speaker #11: Overall opportunity .
Speaker #8: Yeah , we're still we're still in discussions with the the data center provider . It's primary power . So it's behind the meter .
Speaker #8: You can think of that as more like CTS . And again , it's a little too early for us to give a lot of details around this deal .
Speaker #8: We haven't fully closed it yet , but it's a really good opportunity for the vantage team . And it's right down the fairway .
Your next question comes from the line of Michael Sullivan, with wolf research. Please go ahead.
Hey, good morning.
Good morning. Hey, hey, hey. Hey guys. Uh, sorry, I just wanted to pick right up on that last question. Dave, so in 2030, when the 45 Z's
Go away. What is it that pushes you to the high end? Or is there like some way you can?
Continue to book those a year beyond the expiration or just just a little more color on. That would be helpful.
Yeah, well what we see with these 45 Z is flexibility, right? So what we've been able to as we've done this year, is find ways to pull forward. Some expenses to help help future years. And we just see that favorability from 2029 helping us in 2030 as well, to be able to be in a good position to reach the higher end. When we get
Out there too.
Okay, that's really helpful. Um, and then another 1 for for you, Dave, I I think in the past you you may have all pointed to more of like a 15 to 16% ffo to debt range and looks like now, just 15% any color on what what's going on there.
Well, I'll just say like we've got great growth opportunity. And our utility is we're doing this work that Joy described for uh reliability and cleaner generation also the data center. So yeah, we're we're comfortable targeting this. 15% range continues to give us the the right cushion over the uh over the threshold. So we think and you know, it's puts us in a really good place, remain committed to having a good balance sheet and and we're we're working with the rating agencies to ensure, they fully understand our financing plan, um really our strong cash flows too and they'll be comfortable with it going forward.
okay, and 1 last Quick 1 just the um
The 2 and a half billion for ccgt, investment. You're, I Think You're Building A 1 and a half gigawatt. Um, plant is, is that the full
amount or are you not capturing the full investment in the 5 year and it the the plan itself could cost a little more than that? Because that that just seemed a little on the lower end. I would I would have thought of what a combined cycle would cost.
Yeah, it trails into 31. So, beyond the 5-year.
Okay, thank you both very much.
Thanks Mike.
Your next question comes from the line of Andrew weasel with his Scotia Bank. Please go ahead.
Hey, good morning, everyone.
Good morning. I
Dave, the question for you first, you mentioned that I guess you're unwinding some cost cutting efforts from the past few years. I know that as a company your masterful about being Nimble with o&m expenses, but I thought that was typically more short term like within the year maybe 2. So I'm a little surprised to hear you talk about it over a multi-year period. Can you discuss some examples of what might be included in there? What type of actions you're referring to? And then, as we look to 26 and Beyond? How should we think about the onma outlook for the gas business?
Yeah, we've we've essentially, uh, let some of the backlogs maintenance backlogs. Uh, we allowed those to rise, and we're unwinding a lot of that this year. So that's just an example of some, of the things that we typically do in the gas company. And we were ahead of plan, uh, when before we saw warmer weather. So, we had some opportunities to relax, our maintenance efforts, and this is non-emergent, uh, maintenance backlog. And this year, we're just getting back on track, we're getting back to our normal run rate.
For maintenance and other expenses.
And Andrew, I'll say like on our ability to be nimble. Like we had a, we had a couple years of warmer weather at, uh, at gas and so, you know, that did extend over a couple years but it's still. Um, still shows that we're we're able to balance things across our business, to make sure we do everything to to hit the hit the numbers.
Okay, great. And then, as far as the Outlook,
Yeah, the onm for gas this is I think this is a normal run rate that we would typically see. And then as usual, we build in some flexibility where we can lean if we need to or invest uh should we see uh, colder than normal temperatures?
Okay, got it. Thank you and then joy in your prepared remarks. I want to ask about affordability a bit. I, I think you said the 1.4 gigawatts of new data center load should bring meaningful affordability benefits to the existing customers, but then you also talked about protecting them. So I'm just wondering, can you get more specific? Are you expecting the new data centers? And this specific deal to be neutral to residential customer rates or monthly bills or deflationary. And how will that impact flow through? Will that go through rate cases, or through the industrial tariff? How, how is that going to work for existing customers?
Yeah, this is great for existing customers because we don't have to build anything substantial to support the low. We're using our excess capacity to support the load and building batteries on top of it, just for Peak shaving purposes, and the customers get that full benefit. So it will show up in the form of a lower asked over our next rate case cycle. So customers will get that flow through and and that form uh, in terms of the protections, the contract terms protect uh, our customers from Stranded assets or rate shock.
uh, over a period of time when we're serving the customers, the data center customers that is
All right, very good. Thank you very much. And congrats.
Thank you.
Your next question comes from the line of Anthony crowd doll with mizuho. Please go ahead.
Hey, good morning, team. Hope all is well. I just wanted to follow up on two quick cleanups. One is regarding Mike's question earlier on the FFO to debt. Dave, as Vantage becomes a smaller and smaller portion of the company's earnings mix.
Any conversation with the agencies of an improved or a lower downgrade threshold.
Uh, we are in constant communication with the rating agencies.
I think right now you know be and and because we have a lot of really utility like projects Advantage. I don't know if that will lead to lower thresholds, but we will continue those conversations because you know, we we will be moving more into that going forward as well.
And and the current threshold is 14 or 15%.
Uh, it's down around, 140, depends on the way they measure it. Also relative to how we do but more in the 13- to 14%
Great. And then, uh, 1 of the earlier questions. I think Bill was asking on the ERM mechanism. Uh, you highlighted, I think staff is a 1.2 billion dollars. I guess just is the Cadence of spend, if you could just talk about that. And then also, uh, the company previously or historically would file, maybe an electric case, every maybe 12 to 24 months, does that stretch out the filings, the frequency of the filings?
Yeah, um, so the way the ERM is is a billion dollars. It's starts in 2027, we have an existing ERM but it starts to ramp up in our filing in 2027 and grows to a billion dollars over 3 years. And, uh, the way that we've laid this out, um, we would, uh, start to see that investment grow and make adjustments along the way, um, based on, you know, performance. So in our next filing, we will look to update it and increase it even further. You asked about, will that keep us out of rate cases? Uh where we have it right now? We will give us maybe 6 to 8 months worth of uh I think benefit that we could push out a rate case for that period of time. Uh as it continues to grow that time will lengthen.
Great, thanks again. And uh Joy, such an improvement versus Jerry.
Great move.
Thank you. Thanks Anthony. Your next question comes from the line of Paul Freeman. Will ladenburg. Please go ahead.
Uh, thank you very much. Uh, I guess my first question is the junior subordinated debt. Hey, you talk about is that uh, instead of, or in addition, uh, to the um, to the to the uh planned uh, Equity annual issuance of equity.
To the equity that is laid out, we've laid out what we would need to do for, um, true equity issues. It's $500 million to $600 million.
Right. And then uh, on the ccgt, what is what is the cost per KW that we should assume for uh, for the ccgt?
Well, we're seeing ranges. Um, so right now it's roughly 2500 and we're still updating our estimates. We'll know for certain once we get the finalization of our rfps and see, you know, what is coming out? We've got the irps for our power Island but there's still some additional work, but that's our initial estimate at this point.
Great. And then uh, turbine availability. If you get the 3 gigawatts that you're in advanced stage negotiation. Um, do you see uh, uh, you know, what time frame do you see sort of being able to get turbines?
Yeah. Well we're actually
in the queue for our turbines that we want to uh, bring it on to, to replace Monroe only. Uh, and that that ccgt, we have in the plan, it only supports the retirement of Monroe. It has nothing to do with data centers. If we want to uh, bring on another ccgt to support uh data centers. We're still seeing a 3 to 4 year timeline uh, for at least a gigawatt and above. There is some flexibility.
Ability, we're seeing for smaller turbines. It just depends on, you know, how big of a data center low. We're trying to serve and when the ramp kind of gets to the the top end. Uh, so we'll flesh all of this out in next year's IRP. And again, pick the right resource mix to support the load.
So, I guess, just theoretically if some of the uh 3 gigawatts uh were to be finalized.
um,
if their need were sort of before that 3 to 4 year timeline, you would serve that load potentially through purchase power or
How would that work?
Yeah.
I,
The way that we're going to address these, these contracts is really get a sense of how quickly they want to ramp and then use the IRP modeling to tell us. What is the optimal resource mix to support that load? It could be a combination of Renewables and battery storage similar to what we're doing with this. Uh, the deal that we have on the table or it could require a ccgt, still too early to say, all of that will get flushed out as we finalize the the negotiations and incorporate it into the IRP next year.
Great. And then the last question for me, um, you're looking at potentially higher trading contributions in 25. Can you give us a sense of uh uh how much and we'll we'll next year's trading contribution be sort of back at the 50 to 60 level that it was this year.
Hey, alright, Paul trading. Trading is having a really good year. We're we're seeing these strong margins. We talked about both gas and physical power portfolio, you know, against structured and hedged. Um, right now, you know, our year to date. It's above the range and that's giving us some flexibility across across our business. You know, we don't plan for earnings to continue at that pace. You know, we put in the 50 to 60 as you mentioned. Um, however, because some of these contracts are longer term, we do see some favorability that could come into 26, but we don't, uh,
You know, we don't forecast that long term, we we forecast around the 50 to 60. So,
Great. Thank you so much. Thanks Paul. Thanks Paul.
Your next question comes from the line of Angie shanik with cport please. Go ahead.
Good morning. Uh, so lots of questions, uh, ahead of me but I can you give me a sense, you know, the um, the 1 and a half gigs or the cons data center contract that you just finalized 1.4 and then the address additional contracts in the works. I mean, how, how do they compare versus the load that you currently serve? Um,
Yeah. As like a percentage wise how big of an impact is it? Yeah, yeah.
So, the 1.4 increases are low by 25%, so that should give you a sense of what an additional, you know, gigawatt could equate to if we were able to bring it on.
Of uh, growth opportunities for Vantage in in this day and age. Where you have this uh, streaming seemingly an explosion of, uh, behind the meter generation like co-gen, seems to be such a hot investment right now. Um, you know, if only because it's behind a meter, if if only because it's, uh, time to power. Um, so again, you, you did mention some some commodity price pressures, but I'm, you know, a little bit surprised to see this, this lower growth kicker, for that business.
Yeah, Angie we're going to continue to work the the ability pipeline there and you know, this first deal that we're we're getting um at least trying to get under our belt. Uh it would inform you know if this isn't a a vertical that we can pursue further. And again this is outside of the state of Michigan. We're hearing more and more that this behind the meter option is something that data center providers want to pursue. And so, um, to your point and we're going to keep working at it and ensure that we've got the execution capability, we've settled on a design, we think that works and that gives the resy. So, we think that could position us to be, uh, really attractive to data centers that are looking to pursue this type of solution.
Okay. And Dave, um, could you comment on on growth expectations for your dividend in this new higher? Higher capex, environment.
Yeah, Andrew we we we're going to continue to revisit the dividend growth. You know, we we've said in our prepared remarks, we we're going to grow them with our operating EPs and you know right now we're in a in a payout ratio. That's right in the midpoint of our peers, but we're going to continue to look at that and make sure that it supports both growth and what our investors prefer here.
Very good. Congrats. Thank you. Thank you.
Your last question comes from the line of Travis Miller with Morning Star. Please go ahead.
Good morning everyone. Thank you.
Good morning. Just want to confirm the cash flow and earnings mixer over the next couple of years. So that your hearing correct, the the ramp comes for this data center. The ramp comes next year
And then there's really no incremental Capital that you would find because they're funding the storage, right? So cash flow and earnings should be pretty close.
At least over the next.
1 to 2 years. As this data center contract ramps up, is that correct?
Well, we're we're investing the storage to to fund the storage assets and then we'll be getting the cash flows, um, from the ramp which does ramp up really quick, but we will be investing in those storage assets. And that's why, you know, 1 1 of the reasons why we're pulling some of our Capital forward and need some of this additional equity.
Okay. Okay, no, that would be over a short period of time though, right? Yeah, yeah, short periods. Next, few years. Okay. And what size is the storage?
Investment, not dollars. But what how many gigawatts or
It's 1. It's it's it's a it's a gigawatt of storage and then we're going to use tolling agreements so and in accordance with our IRP settlements, uh we are going to build 2/3 of the requirement. And then we're going to use tolling agreements for the other third, which are, um, we'll get the fcm on the the uh, tolling agreements.
Okay. Okay. Very good. That's all I have. Thanks so much.
Thank you everyone for joining us today. I'll just close out by saying, uh, DTE continues to have a really strong year in 2025. And, and we are, well, positioned for our 2026, and I am just really excited about our long-term plan, and the opportunities ahead. And I look forward to seeing many of you at eei in just over a couple weeks. So, thank you all for joining us today. Have a great morning, stay safe and be healthy.
Ladies and gentlemen, that concludes today's call, thank you all for joining and you may now disconnect everyone have a great day.
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