DTE Energy Company JR SUB DB 2017 E Q1 FY2025 earnings call

Jerry Norcia noted a strong start to 2025, recognized by Gallup for a Great Workplace Award for 13 consecutive years, and employee engagement in 94th percentile globally. Committed to reducing power outages by 30% and cutting outage time in half in 5 years, with 70% improvement in 2024 and 60% year-to-date improvement in 2025. Invested $3.3 billion in Michigan businesses in 2024. 2025 operating EPS guidance range $7.9 to $7.23 with midpoint $7.16, 7% growth over 2024 original guidance midpoint. DTE Electric enhancing reliability efforts, filing rate case for customer-focused capital investment. Data centers making progress with nonbinding agreements for 2,100 MW projects. DTE Gas progressing on main renewal program. Joi Harris discussed $30 billion 5-year customer-focused capital plan, $24 billion for DTE Electric to improve reliability and transition to cleaner generation, filing electric rate case to advance infrastructure recovery mechanism. Dave Ruud reviewed Q1 financial results and discussed 5-year plan with $30 billion investment, including $24 billion for DTE Electric, and data center opportunities providing upside.

Operating earnings for Q1 2025 were $436 million, translating to $2.10 per share. DTE Electric earnings were $147 million, down $47 million from Q1 2024 due to timing of taxes and higher rate base costs but partially offset by rate implementation, cooler weather, lower O&M costs, and higher renewable earnings. DTE Gas operating earnings were $206 million, $46 million higher than Q1 2024 driven by more favorable winter weather and rate implementation but offset by higher O&M and rate base costs. DTE Vantage operating earnings were $39 million, a $31 million increase from 2024 due to higher RNG earnings and custom Energy Solutions earnings. Energy Trading earned $34 million, and Corporate and Other was favorable by $31 million quarter-over-quarter due to timing of taxes but offset by higher interest expense.

2025 operating EPS guidance range is $7.9 to $7.23 with midpoint $7.16, providing 7% growth over 2024 original guidance midpoint and well positioned to achieve higher end of EPS guidance range. Long-term EPS growth rate target remains 6% to 8% with 2025 original guidance as base. 45Z production cash credit for RNG projects from 2025 through 2027 provides confidence to reach higher end of growth rate 2025 through 2027, with flexibility to exceed high end of guidance or support future years. Tariff exposure manageable at 1% to 2% of capital plan, closely monitoring situation. 2025 annual dividend $4.36 per share.

Potential impact of tariffs on capital plan, though manageable at 1% to 2%. Uncertainty around regulatory decisions related to rate cases and IRM expansion. Potential changes in transferability of tax credits, though DTE feels confident in current provisions and has tools to manage impacts if they occur. Impact of economic downturn on auto sector and overall economic activity in service territory, though Michigan economy remains resilient so far.

Q: Hey, good morning everyone. Thanks for taking my questions. Hope everyone is well. Maybe just to start, a good message on tariffs. I appreciate the color. Maybe you can kind of just give us a flavor of how you see this maybe impacting the auto sector, what your exposure is? And then just general economic activity in the service territory just noticed like the C&I weather normalized trends were a little bit lower quarter-to-quarter. I don’t know if that’s timing, but just maybe kind of talk about how the plan is resilient to potential economic downturn if it goes that way?

A: Sure. Thanks Nick. So certainly, we got some encouraging news for the autos on tariffs, where – the tariffs were modified significantly for parts. That was the big deal for the automakers, especially. When I talked to several of the auto execs, the feeling I got was that relief on the import and export of parts, which move across the U.S. and Canadian border here quite frequently into Canada and from Canada, that provided significant relief. I think the assembly portion of 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 as we mentioned in our opening thoughts, I think you can see that we – the economy here in Michigan remain 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. I’ll hand it over to Dave to talk about the sales results and what we’re seeing there as well. Dave, you want to add to that?

A: Sure. Hey, Nick, it’s good to talk to you. I’ll start by saying our actual sales were actually up because weather was great. And even when you look at the weather adjusted numbers. Our sales for the quarter were pretty good after you adjust for a leap year last year and energy efficiency. So leap year accounts for about 1% because there was an extra day last year. And then our energy efficiency is about 2%. So we had really good base growth across our customer classes. And then as we discussed in our presentation and Jerry mentioned on Page 6, we’re seeing some positive economic indicators with housing permits being up 10% and in Southeast Michigan here, real estate GDP being up over 2.5%, and payroll employment up about 1%. So we’re still feeling good about our load and the economic prospects for it as well.Q: Hey, good morning. Thank you for giving the time. Just I wanted to follow up on Nick’s question. And obviously, we’ve been in a lot of discussion with investors on your auto exposure as well. Just maybe some more meter on the board. Can you clarify what your margin exposure is? I know the sales number is pretty big as it relates to autos. So what’s your margin exposure, let’s say, for 2025? And with all this hyperscaler activity in the region, where do you see that going, let’s say, through ‘27, ‘28? Just high level color, please. Thank you.

A: Yes. Thanks, Durgesh. Yes, our margin from autos is around 3% to 4% of our total margins. So even if we had like a 10% change, up or down, it doesn’t have that much of an impact overall on our plan. So – and we’re feeling pretty good right now that the auto exposure good right now that the auto exposure based especially on some of the information yesterday, I think we’re in a good place with that going forward, too. What was your second question on data center, Durgesh.

A: Yes. Just I was trying to gauge with all this data center activity, where do you see that going forward, right? Presumably, you have all this data center load coming into Michigan and your relative weighting of the auto sector will probably shrink over time, right just any high level thoughts there?

A: Yes, it will because just from the 2 gigawatts we’ve talked about, if you look at that, that provides like 4% load growth over the next 5 years. So yes, it would put a little less on our auto exposure, but we still feel comfortable with our auto exposure also.Q: Hi. Good morning team. It’s actually Constantine [ph] here for Shar. Maybe just starting off on the renewable energy plan and kind of the level of the IRP and the proposed decision and how supportive is that of just the renewable demand that you anticipate over the next couple of years? And how does that decision kind of play into the IRP process and any kind of early takeaways that you could highlight?

A: Constantine, can you repeat the first part based on which decision.

A: That’s the renewable energy plan?

A: Yes.

A: The IRP. Yes. So, the IRP, I think it’s what we filed just was in line with our IRP. And we are continuing to advance our renewable program. We have a strong pipeline. We have got good land positions. It doesn’t really change what we had already laid out. So, we are 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, the IRP filing, we will get the outcome of that over the next couple of weeks. The full outcome will have a full rendering of that over the next couple of weeks. But nothing is changing at least near-term in our plan based on what we have heard thus far.Q: Hey. Good morning. I was wondering if you could touch on tax credit transfers. I was curious how much you embed in your plan currently and how might you manage the financing outlook if transferability were to change or go away under some of the Inflation Reduction Act discussions?

A: Yes. First, thanks David, for the question. First, let’s say we feel comfortable with the IRA and the provisions of the IRA. And as we have discussed, there is a bunch of Republican congressmen and senators that are supporting it. And in that, they are also supporting transferability. So, we feel good about the IRA provisions that support our plan and transferability. It was specifically made part of the IRA and linked to the credit program to drive support. So, we are going to continue to work with lawmakers to ensure that that stays aligned going forward. And as you know, we do have transferability as part of our plan. In fact, we used $230 million of transferability benefit in 2024. That’s really a testament to success we are having in developing affordable renewal projects for our customers as part of the Michigan clean energy plan. So, first, I will say we think the likelihood of anything around transferability or any risk is low. But if it were at risk, we think we are in a good position to manage the impacts and continue on our growth rate. First of all, like as Joi mentioned earlier, we have safe harbored our renewable investments through 2027. And we think there would be strong support in any scenario for the transferability related to these investments to continue to be supported because historically, Congress has consistently kept incentives in place that taxpayers relied upon when making investments. So, that alone would support our IRA invested – IRA related cash flows through ‘27. And then we have additional tools too. So, just prior to the IRA being enacted, we gained support for a tax equity structure with our commission. So, we could continue to support our projects and deliver the benefit for our customers as we build to meet Michigan’s clean energy plan. And then 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, hybrids like Junior Sub that would help us. So, we think through the safe harboring tax equity, strong balance sheet, and the options we have, we will be able to mitigate the impact in the unlikely event there would be any impact to transferability going forward.Q: Hi. Good morning and thank you for the question. So, I just wanted to really follow-up on the solar development pipeline. I understand you guys saying you are safe harbored through 2027. Does that actually mean that you have panels on the ground already, or to say, or just some part of that? And what is the outlook beyond that? And I am asking because some solar companies, they are coming up with pretty dire commentary and calling some of the solar projects at the reciprocal level of tax and economic, right? So, I guess what’s your outlook there? How do you see your development pipeline if the reciprocal tariffs would come back in?

A: Hey Sophie, this is Joi. Yes, we are feeling good about our solar positioning. We did in fact safe harbor and we do have those panels in warehouses right now. So, we have got adequate inventory on hand to complete projects through 2027. And we are continuing to source additional panels from providers that have minimal tariff risk. Even some of the providers that we have now are, they are on-shoring their production. I think one of the panels for providers 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 risk, we have tried to insulate ourselves and have the provider take on that tariff risk. So far, they are delivering, they are furnishing on the panel. So,我们 are not seeing any near-term risk to our plans and we feel good about the inventory that we have on hand.Q: Hey. Good morning. Sticking with tariff and the tariff risk mainly, can you just remind us, do you have any battery storage in your plan and what we should be expecting in terms of potential cost pressures there?

A: So, we do have battery storage in our plan. We have not purchased the battery, 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. So, when we look at the balance of spend, and you know that we have focused for many years on domestic supply and local supply. As I mentioned in my thoughts, our early opening thoughts, over $3 billion of our spend is in Michigan. So, this puts us in a really good position. And I have asked the team to do a deep dive on all tariff exposures in our gas, electric, and Vantage business. And when we look at all of that, the summary is, in the worst case, it’s a 1% to 2% impact over the near-term and long-term. And that’s very manageable for us. And as a matter of fact, with the conversations we are having, we are going to come well below that is our expectation. Also, just to add a little bit of color on that, the number of conversations that our supply chain team is having about on-shoring for domestic production, the IRA kind of gave an incentive for domestic production. And I think the tariffs are a bit of an accelerant on those conversations. So, for example, inverter supply, transformers, solar panels, battery manufacturing, all many, many conversations about the ability to sort of on-shore that equipment manufacturing. So, like Joi mentioned, there is plants that are opening up, there is plants that are already open. So, it’s quite an interesting opportunity for a more holistic perspective for our service territory and for the country.Q: Thank you. Good morning everybody. I have got one housekeeping and one follow-up, please. Firstly, what was the FSO to debt on a trailing 12 months, please?

A: We are right at 15%, Andrew.

A: Then the follow-up for, Joi, please. You talked about the IRM and plan to increase it from $290 million to $1 billion by 2029. How are you thinking about the path to get there? 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 multi-year conversation, but I – 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你 see the world today, would a $1 billion approval be enough to stay out for longer than you have been typically going in kind of annually, or how do you think about the timing of the next rate case if you were to get it at that $1 billion level? Thank you.

A: Hey Andrew. Yes, we proposed a ramp, right. So, we are stepping into this over a 3-year timeframe, and that’s how we proposed it in previous cases. The difference being we have got some really solid data for the investment categories that show how these investments are delivering better reliability for our customers. And it’s at the circuit level. So, we believe that’s solid support for expansion of the IRM. 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 have offered two tiers, one that ramps immediately to a $1 billion and then a step below, so it gives them some flexibility in their decision making. If we get to a $1 billion ramp, that would keep us out of cases. I would say it puts some distance, maybe 6, 8, not quite 12, I don’t think, but it would certainly put some distance between our next filing. But we won’t know for certain until we hear back from them and the early indicator will be in the August timeframe.Q: Thank you. Good morning everyone. You answered most of my questions, but a couple of quick follow-ups. One on the RNG tax credits. Any discussion at the Federal level about those pro-work going away or are those pretty much locked in?

A: We are feeling good about the position on the RNG credits right now. There is some rulemaking still has to go on, but we are confident that the final position is going to be what Congress intended. So, I think it’s still going forward. And as we just said, we booked $15 million of that for the quarter.

A: And then on the IRM, if you get the expansion, is that capital that would be incremental or is that capital that you are already planning, already in plan and would simply flow through the IRM instead of a traditional base rate case?

A: Yes, that’s not incremental capital. That’s what’s in our plan at this point.

A: And then one more quick one, if I may, data centers, is there a role that Vantage could play, or are people at Vantage involved in some of those conversations about a role they could play?

A: There are some early conversations that Vantage is having about building, really generating assets or backup generation for data centers. So, there could be an opportunity, but我 would say it’s really early.Q: Thanks. Congratulations on the quarter and my questions have all been answered. Thank you.

A: Thanks Paul.Q: Hi. Good morning. It’s Ivan [indiscernible] for Paul. I think most of my questions have been answered, but I do have a question related to the tariff structure. I know you have a big amount of extra capacity. So, how should we about a tariff structure for data centers for that gigawatt that’s out there and then beyond that, in particular given that CMS has a filing outstanding to set up a data center tariff?

A: Hi. Good morning. Yes. As we mentioned, we don’t need a tariff right away for the near-term load ramps because we have excess capacity and we would use batteries, renewables, and my green power along with other riders to support that load. Over time though, if we get to a point where we have got to build base load generation, a tariff would – structure would be most appropriate. And we are looking to insulate our existing customers from stranded assets. So, think of a long-term agreement with minimum volume commitments. But again, we don’t see a need right away. We are just starting to formulate our thoughts based on what consumers filed and then discussions that we are having with our data center providers.

A: And I have a quick follow-up on the transferability. I just want to make sure that I understand that you are able to use tax equity structure at the utility level if transferability is no longer available.

A: Yes, we did get support from the commission for tax equity structure. It was just prior to the IRA being enacted. We had been working on that. So, yes, we think we would be able to work through that with them again.

A: Okay, so you would have to go through like a regulatory process?

A: No. I think we have got support already for it. We just have to work the process.

A: Okay. Thank you.