DTE Energy Co. Q1 FY2025 earnings call

Management Statement and Operational Highlights

• Employee Engagement: Recognized by Gallup for 13th consecutive year with a Great Workplace Award, employee engagement in 94th percentile globally.
• Grid Reliability: Made significant progress in 2024, with 70% improvement in customer outage time in 2024 and 60% improvement year-to-date in 2025. Plan to increase reliability efforts in 2025, including smart grid devices, infrastructure upgrades, pole replacement, and tree trimming.
• Renewable Energy and Data Centers: Progress on growth plan, including data center projects with nonbinding agreements for 2.1 gigawatts, and renewable energy investments with safe harbor tax credits through 2027.
• Tariffs: Tariff exposure is manageable at 1-2% of capital plan, with 80% of capital plan with service providers not impacted by tariffs and inventory built to mitigate exposure.
• Balance Sheet and Dividends: Strong balance sheet and investment-grade credit ratings, 2025 annual dividend of $4.36 per share.

Segment Performance

• DTE Electric: Earnings of $147 million for the quarter. Driven by timing of taxes, higher rate base costs, partially offset by rate implementation, cooler weather, lower O&M costs, and higher renewable earnings.
• DTE Gas: Operating earnings were $206 million for the quarter, $46 million higher than Q1 2024, driven by more favorable winter weather and rate implementation, partially offset by higher O&M and rate base costs.
• DTE Vantage: Operating earnings were $39 million for Q1 2025, a $31 million increase from 2024, driven by higher RNG earnings (including $15 million of 45Z production tax credits) and higher custom Energy Solutions earnings.
• Energy Trading: Earned $34 million for the quarter, with strong performance in contracted and hedged physical power and gas portfolios.
• Corporate and Other: Favorable by $31 million quarter-over-quarter due to timing of taxes, partially offset by higher interest expense.

Guidance

• EPS Guidance: 2025 operating EPS guidance range $7.9 to $7.23, midpoint $7.16, 7% growth over 2024 original guidance midpoint. Long-term EPS growth target 6-8% with 2025 guidance as base.
• Capital Investment: $30 billion over next 5 years, with over 90% in utilities, focusing on reliability and cleaner generation.
• Data Centers: Nonbinding agreements for 2.1 gigawatts, active discussions with hyperscalers and colocators, potential upside to 5-year plan.

Risks

• Tariffs: Potential impact on capital plan, but exposure is manageable at 1-2%, closely monitoring situation.
• Regulatory Changes: Uncertainty around PBR ruling and potential changes in IRA transferability, but plans are safe harbored through 2027 and have tools to manage impacts.

Question and Answer

• **Q: Flavor of tariff impact on auto sector and economic resilience?

A: Tariffs on parts modified, auto sector resilient in Michigan, weather-adjusted sales up, positive economic indicators in service territory.**

• **Q: Data center uptick and roll into backlog?

A: Data center conversations continuing, 2.1 gigawatts in frame agreements, UFM increased demand, aim to finalize deals by end of year.**

• **Q: Auto margin exposure and data center load impact?

A: Auto margin exposure ~3-4% of total margins, data center load growth would reduce auto exposure, but auto exposure remains comfortable.**

• **Q: PBR ruling and rate case filing?

A: PBR ruling outcome expected later this year, rate case filing in line with earlier articulation, IRM expansion aligned with Liberty audit findings.**

• **Q: Energy trading results and Vantage strategy?

A: Energy trading earned $34 million, guidance $50-60 million for year, Vantage strategy remains shifting to utility-like investments, projects safe under existing IRA.**

• **Q: Renewable energy plan and tax credit transferability?

A: Renewable plan supported by IRP, safe harbored through 2027, transferability likely to continue with support from lawmakers, strong balance sheet and tax equity structure for mitigation.**

• **Q: Solar development pipeline and rate case settlement?

A: Solar development pipeline safe with inventory on hand, rate case settlement discussions possible, outcome expected in August.**

• **Q: Tariff risk on battery storage and gas new build costs?

A: Battery storage in plan with flexibility, gas new build costs affected by EPA rulemaking, excited about potential rescission of 111D provision.**

• **Q: FSO to debt and IRM expansion path?

A: FSO to debt at 15%, IRM expansion proposed to ramp over 3 years, aligned with Liberty audit findings, gives flexibility in next rate case.**

• **Q: RNG tax credits and IRM capital incremental?

A: RNG tax credits confident to continue, IRM expansion capital not incremental, already in plan.**

• **Q: Data center role for Vantage?

A: Early conversations about Vantage building assets or backup generation for data centers.**

• **Q: Tariff structure for data centers and transferability process?

A: No immediate need for tariff for near-term load, transferability supported by regulatory process, tax equity structure already approved with commission.