DTE Energy Co. Q2 FY2024 earnings call

Key Points

• Strong first half of 2024 with commitment to customers and communities. Employees recognized with Gallup Great Workplace Award for 12th consecutive year and Best Employers award.
• Progress in storm restoration, with fastest restorations in 2024 and efforts during heat wave to support customers.
• Expansion of Energy Efficiency Academy in Detroit and Grand Rapids.
• Long-term capital plan focused on modernizing grid, transitioning to renewables, and gas infrastructure renewal.
• Reliability improvements including installing 10,000 smart devices, updating infrastructure, rebuilding grid portions, and tree trimming efforts.

DTE Electric had earnings of $279 million for the quarter, $101 million higher than Q2 2023. DTE Gas operating earnings were $12 million lower than Q2 2023. DTE Vantage had operating earnings of $14 million, a $12 million decrease from 2023. Energy trading finished the quarter with earnings of $31 million, a $5 million decrease from last year. Corporate another was favorable by $18 million quarter over quarter.

Guidance

• DTE remains on track to achieve full year targets. Long-term operating EPS growth rate remains strong at 6% to 8% with 2023 original guidance as the base.
• 2024 operating EPS guidance midpoint provides 7% growth over the 2023 original guidance midpoint.
• Confident in full year guidance for DTE Vantage with second half earnings notably higher due to project timings.

Risks

• Regulatory uncertainties in rate cases for electric and gas.
• Weather impacts affecting utility earnings, such as warm winter affecting gas business.
• Potential changes in federal politics that could impact tax credits and energy regulations, though state mandates for clean energy standards are expected to drive investment.

Q: Jeremy Tonet asked about updates on hyperscalers and Michigan sales and use tax legislation, and the impact of taxes on earnings.

A: Gerardo Norcia said conversations with hyperscalers continue, awaiting sales and use tax legislation to pass in fall. David Ruud discussed tax timing and guidance on energy trading.

Q: Shar Pourreza inquired about the rate case filing, Vantage's business mix, and portfolio optimization.

A: Joi Harris said rate case testimony is expected, and Gerardo Norcia discussed Vantage's focus on Greenfield RNG and custom energy solutions, with no immediate need for portfolio optimization.

Q: Durgesh Chopra asked about weather impacts on 2024 earnings and the Liberty Consulting review.

A: Gerardo Norcia mentioned weather offsets and Joi Harris said the audit is wrapping up with positive feedback and report expected in September.

Q: David Arcaro asked about Performance Based Rates and data center demand.

A: Gerardo Norcia said PBR is progressing with aligned metrics, and DTE is seeing demand in data centers in the thousands of megawatts, with sales and use tax legislation aiding momentum.

Q: Michael Sullivan asked about trading business performance and gain on sale of equity investment.

A: David Ruud said trading is tracking well, and Gerardo Norcia discussed the gain from selling a landfill gas project.

Q: Andrew Weisel asked about tree trimming progress and reliability spending in the 5-year CapEx plan.

A: Joi Harris said tree trimming is on track for a 5-year cycle, and spending is embedded in the $25 billion 5-year plan, contingent on rate case outcomes.

Q: Julien Dumoulin-Smith asked about self build vs PPA and custom energy solutions.

A: Gerardo Norcia said self build is more competitive for customers and investors, and discussed custom energy solutions like the Ford project.

Q: Anthony Crowdell asked about credit cushion and long-term sales growth.

A: Gerardo Norcia said credit cushion is healthy, and long-term sales growth is around 1% with potential impact from data centers and EV load.

Q: Travis Miller asked about new intervenors in rate cases and the impact of audit results.

A: Joi Harris said there are new intervenors, and audit results in September may influence investment buckets but not the need for reliability investment.