DTE Energy Co. Q4 FY2024 earnings call

• 2024 was a successful year with operating EPS of $6.83 per share, meeting the high end of guidance. - 2025 operating EPS guidance range is $7.09 to $7.23, midpoint $7.16, providing 7% growth over 2024 original guidance midpoint. - DTE Electric made progress in improving reliability in 2024 with smart technology reclosers, infrastructure upgrades, and tree trimming. - DTE Electric has a $24 billion 5-year investment plan, $4 billion more than prior plan, for cleaner generation and reliability. - DTE Gas had top quartile cost and operating performance, ranked number one in Midwest for customer satisfaction for business natural gas service. - DTE Vantage is shifting focus to more utility-like investment, expected to drive annual base earnings growth of about $20 million per year.

DTE Electric had earnings of $1.1 billion for the year, $314 million higher than 2023. DTE Gas had operating earnings of $263 million, $31 million lower than 2023. DTE Vantage had $133 million in earnings in 2024. Energy trading finished the year with earnings of $100 million. Corporate and other was unfavorable by $26 million year over year. DTE Electric's earnings growth was driven by base rate implementation, warmer weather, and lower storm expenses, partially offset by higher rate base costs. DTE Gas's earnings were impacted by warmer weather, higher rate base and O&M costs, partially offset by higher IRM revenue and base rate implementation. DTE Vantage's earnings were influenced by timing and one-time items in 2023, partially offset by higher investment tax credits in Q4 2024.

• 2025 operating EPS guidance range: $7.09 to $7.23, midpoint $7.16, 7% growth over 2024 original guidance midpoint. - Long-term target: 6% to 8% operating EPS growth, with 2025 guidance midpoint as base. - Confidence to achieve higher end of 2025 EPS guidance range, supported by 45Z tax credits providing flexibility to exceed high end or support future years. - Data center opportunities provide potential upside to capital investment and EPS growth plan.

Q: Please clarify the data center upside in CapEx plan, are the 2,100 megawatts agreements included in current plan or still upside?

A: The data center agreements are not in the current CapEx plan yet, but there is upside from them as they move to definitive agreements. Near term, excess capacity supports some load, and incremental renewables and storage may come in towards the backside of the five-year plan as definitive agreements are reached.

Q: How does the RNG credit push affect the top end and inflexibility to exceed 6%-8% growth?

A: The RNG credit pushes drive the top end, and the strength is driven by utility investment for cleaner generation and reliability. Vantage has a solid plan with $20 million per year growth, and the stronger 6%-8% long-term EPS growth is mainly from utility investment supporting cleaner generation and customer reliability.

Q: On data center demand impact to load growth CAGR, how is it modeled?

A: Modeling shows data center growth equates to a 4%-5% increase on a CAGR basis for load growth over the time horizon, which is beneficial for customers.

Q: Discuss 2025 execution rate filing cadence and its effect on achieving high end of guidance?

A: For 2025, confident to hit higher end of guidance. Electric rate case likely in second quarter, gas case likely in fourth quarter of 2025. The constructive rate order received supports planning, and dispatching capital as intended. The order helps in incorporating findings from the Liberty audit and expanding IRM.

Q: Walk through near-term and long-term financing considerations and cash flow drivers for equity sizing?

A: Confident in existing plan with minimal equity issuance (0-$100 million) through 2027 due to strong base cash flows and tax credits. Modest increase in equity issuance expected from 2028 to support significant capital investment plan, managed through interest rate hedging and other opportunities.

Q: Speak to Vantage opportunities and how high grading plays out over next few years?

A: Vantage expected to drive $20 million per year income growth. Pursuing long-term fixed-fee behind-the-fence utility services projects like cogeneration, water treatment, etc. Also starting to dip into carbon capture and storage with large ethanol producers, with IRRs north of 10% unlevered after tax and long-term fixed-fee contracts with no commodity risk.

Q: How are you thinking about 45Z and ongoing ability to tap credits beyond 2027 to sustain Vantage growth?

A: $20 million per year at Vantage supports 2028-2029 guidance without counting on 45Z or tax credits. Quality of plan is increased with utility CapEx for cleaner generation and reliability, and potential upside from data centers rolling in outer years.

Q: Speak to data center timeline, MOU status, and potential novel tariff structure?

A: Conversations on data centers are progressing, aiming for definitive agreements this year. Have term sheets with Switch and another party, total potential new load of 2,100 megawatts. Near term, can serve demand with excess capacity, and for longer-term generation needs, may use different tariff structure with fixed volumes and demand response, supported by legislation and commission support.

Q: Touch on learnings from recent electric rate case in terms of affordability, ROE, storm tracker, IRM?

A: Constructive rate order supports investment agenda, no change to ROE or equity layer. Commission extended IRM, which will be expanded using Liberty audit findings. Commission positive about investments improving reliability for customers, and bill growth performance is extraordinary compared to industry and Great Lakes region.

Q: Quantify data center pipeline gigawatts and available capacity on system?

A: Seeing about 3 gigawatts in data center pipeline, and have up to a gigawatt of excess capacity near term that can be used to serve data center demand, with plans to add generation like renewables and batteries as load ramps.

Q: Give rate base growth look over plan duration?

A: Rate base growth is in the 8% range for the plan.

Q: Talk about mechanics of 45Z's and Vantage lower year over year off 2024?

A: Vantage has lumpiness with new projects coming online and associated investment tax credits. 2024 had big new projects with investment tax credits, and 2025 doesn't foresee same level, but projects in 2026-2027 will bring favorability. Past 2027, Vantage forecast doesn't assume 45Z's or tax credits.

Q: Finish up on FFO to debt for 2024?

A: Right at the 15% number.

Q: Follow-up on commentary about potential new generation build, timing of 2026 IRP, and tariff structure change?

A: Plan to file 2026 IRP toward end of 2026, process plays out in 2027 with result by end of 2027/beginning of 2028. Tariff structure change can be done outside rate case, working with commission to have fixed-fee, long-term contracts to protect customers.

Q: Clarify commentary on earnings growth in RNG tax credits, what does 'or support future years' mean?

A: Using Z's to commit to higher end of guidance 2025-2027, with dry powder in plan for potential beyond high end, and flexibility to pull forward expenses from 2028 to secure future growth without needing tax credits for 2028-2029.

Q: Talk about cadence of rate case filings over next few years and expansion of IRM?

A: For electric, likely back to 2-3 year rate case cadence if traditional outcomes, but will depend on next case. Expansion of IRM is work ahead, using Liberty audit as foundation, with audit findings supporting existing plan to deliver reliability improvements.

Q: How much CapEx in plan to flow through IRM and upside from audit?

A: In last case, filed for up to $590 million expanding to $720 million. Upside from audit in areas like pole top maintenance, reconciling with staff and commissioners to incorporate into plan.