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F500-2021-250-DTE Energy

The Detroit energy company provides electric and gas services to more than 3 million residential, business, and industrial customers throughout Michigan. It also owns a portfolio of subsidiaries that specialize in natural gas storage, biomass energy, and renewable projects across the U.S.

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The Detroit energy company provides electric and gas services to more than 3 million residential, business, and industrial customers throughout Michigan.

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This year's Fortune 500 marks the 65th running of the list.

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Wal-Mart stayed on top as its sales crept closer to half-a-trillion dollars. Apple moved into the top five. And UnitedHealth Group continued its steady climb. 

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DTE Energy provides electricity and natural gas to millions of customers in Michigan. Its electric segment serves 2.3 million customers with power from coal, nuclear, wind, solar, and hydro sources. The gas segment supplies natural gas to 1.4 million customers and operates extensive pipeline and storage infrastructure. DTE Vantage supports industrial clients with energy, steam, and environmental services, while also running renewable and gas recovery sites. Its energy trading arm handles power, gas, and environmental commodities.

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DTE Energy (DTE): Company Profile, Stock Price, News, Rankings

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DTE Energy

dte energy

Thank you for standing by. My name is Kate, and I will be your conference operator today. At this time, I would like to welcome everyone to the DTE Energy Q4 twenty twenty four Earnings Conference Call. All lines have been placed on mute to prevent any background noise. Thank you.

I would now like to turn the call over to Matt Kropinski, Director of Investor Relations. Please go ahead.

Thank you, and good morning, everyone. Before we get started, I would like to remind you to read the Safe Harbor statement on Page two of the presentation, including the reference to forward looking statements. 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. With us this morning are Jerry Norcia, Chairman and CEO Joy Harris, President and COO and Dave Rood, Executive Vice President and CFO.

And now I'll turn it over to Jerry to start our call this morning.

Thanks, Matt. Good morning, everyone, and thanks for joining us. We have a lot of positive updates to share with you today, including a recap of a very successful year in 2024, which has positioned us well for strong performance in 2025. We will also provide an overview of our long term plan that includes significant utility investment increases that we need to execute for our customers as we continue to build the grid of the future and transition to cleaner generation. This plan also demonstrates our ongoing commitment to affordability for our customers.

Continuing our 6% to 8% operating EPS growth target through 2029 with bias to at least the upper end of the growth rate 2025 through 2027. Joy will provide additional details on our long term plan and Dave will provide updates on our financials, including our 2024 performance and guidance for 2025, and then we will open it up for your questions. Let me start on Slide four. I'll start by saying again that we had a very successful year in 2024 and this success is driven by a team that consistently delivers as a result of our strong culture. Last year, we were recognized by the Gallup Organization for the twelfth consecutive year with a Great Workplace Award, and our employee engagement ranks in the ninety fourth percentile globally amongst thousands of organizations.

As I've said before, our high level of employee engagement is our secret sauce for continued success. We achieved operating EPS of $6.83 per share, delivering at the high end of our guidance and providing over 9% growth over the 2023 original guidance midpoint. And we received a constructive rate order at DTE Electric last month. This all positions us well for another successful year in 2025. Our 2025 operating EPS guidance range is 7.09 to $7.23 with a midpoint of $7.16 per share, which provides 7% growth over the 2024 original guidance midpoint and will be the reference point for our long term growth.

And we are currently positioned to achieve the higher end of our EPS guidance range this year. As we have said, the 45z tax credits give us additional strength in our plan, providing confidence we will reach the higher end of our growth rate, '25 through '27, and provide flexibility to exceed the high end or support future years. And today, I'm really excited to talk to you about our updated five year plan. Our plan is supported by significant investment of $30,000,000,000 over the next five years, a $5,000,000,000 increase from our previous plan primarily driven by the investments we need to make to improve reliability and transition to cleaner generation at our utilities. Additionally, we have the potential for incremental investment above this $30,000,000,000 as we continue to make progress working on data center opportunities.

We will update you as we progress towards definitive agreements. This $5,000,000,000 increase is a significant increase to our capital plan and is driven by the need to build out renewables to meet the increased demand from the success of our My Green Power voluntary renewable program and to support Michigan's clean energy legislation, as well as the need to continue to invest to improve reliability for our customers as we continue our efforts to update and modernize our electric grid. And with this heavy customer focused investment in our utilities that we have been contemplating since 2023 due to the IRP settlement and the clean energy legislation that passed in 2023, we are strategically shifting the focus of our DTE Vantage investments to projects that are more utility like and deliver solid long term contracted earnings. I'll go over our plan more on the next slide. But what I'll tell you is that altogether this plan delivers even higher quality, long term 68% operating EPS growth with a 2025 guidance midpoint as the base for this growth and provides flexibility and potential upside throughout the plan.

DTE continues to be well positioned to deliver the premium total shareholder return that our investors have come to expect with a strong balance sheet that supports our future capital investment plan and a solid dividend that grows consistent with operating EPS. Now let's turn to Slide five to provide an overview of our updated long term plan. Let me start by highlighting some of the opportunities that we have in front of us that have led to this plan. We have seen increased requirements for renewable generation investments above what was presented in our previous plan. This increase is driven by the continued success of our voluntary renewables program and our 2023 IRP settlement, which was supported by Michigan's clean energy legislation also enacted in 2023.

Together, this drives a significant need for increased investment in our voluntary and legislated renewable programs requiring over $3,000,000,000 of incremental clean energy investment from our prior plan, and we are well positioned to execute these renewable investments. With a solid, long term development pipeline in place, providing clear line of sight on panels, land positions and permitting, and we've also been able to safe harbor investment tax credits for these investments through 2027. Along with this increased investment in cleaner generation, this plan also increases our five year distribution infrastructure investment by $1,000,000,000 We have made great progress in improving reliability for our customers. We saw a 70% reduction in the duration of outages last year due to our work on the grid and less storm activity, which Joy will talk about more. And these investments ensure that we continue this progress consistent with our communicated plan and customer expectations.

It is important to note that this commitment to improve distribution reliability is supported by the electric rate order we received last month and the independent audit of our electric distribution system as directed by the Michigan Public Service Commission last year. As we saw this significant need to increase utility investment, we also saw an opportunity to strategically shift our Vantage focus to more long term fixed fee contracted projects. Vantage is a segment that has provided a solid earnings profile over the years and complements our utility businesses well. In recent years, we have had strong contributions from both our RNG and Customer Energy Solutions business. With the increased customer focused investment at our utilities, we are aligning our project development at DTE Vantage to focus more on utility like projects to provide a high quality earnings profile with fixed fee long term contracts.

And as I mentioned earlier, we have 45Z production tax credits for our RNG projects coming into the plan this year through 2027. Providing confidence, we will reach the higher end of our growth rate '25 through '27 and also provide flexibility to exceed the high end of our guidance or support future years. And the increased need for customer focused investment in our utilities and utility like growth advantage gives us confidence we are delivering a long term plan that provides a higher quality, long term 68% EPS growth rate. We also have potential upside to this updated investment plan and our 68% EPS growth rate, driven by potential demand growth at DT Electric to serve data center opportunities in our service area. Along with the switch and University of Michigan projects we recently announced for a total of 1,500 megawatts, we have signed another non binding preliminary agreement with an additional party, bringing a total for the three agreements to approximately 2,100 megawatts of potential new load.

We are also in discussions with multiple parties for additional opportunities beyond those that I just described. Our success in championing the data center legislation with the full support of the Governor who has signed the bills into law and bipartisan support has helped intensify these discussions. We have some existing capacity to serve the incremental load from these data centers, but we'll likely need to build additional capacity in the near term. And we will look to our 2026 IRP to incorporate new baseload generation to support new data center load. Importantly, as we execute this plan, we will continue to focus on maintaining customer affordability.

DTE has a top tier track record in maintaining customer affordability, which Joy will highlight shortly, that will continue through our plan. And our strong cash flows, supportive energy policy and a constructive regulatory environment continue to support our customer focused investment plan. I'll close out my remarks by saying how proud I am of our team in delivering great results in 2024 for our customers and our investors. We are positioned to hit the higher end of our guidance this year with lots of dry powder in the plant. And I feel great about the opportunities we have in front of us to continue this success.

With a higher quality annual operating EPS growth rate of 6% to 8% and with multiple opportunities to drive the growth beyond the 6% to 8% EPS growth rate. Now I'll turn it over to Joy to give an overview of our accomplishments and opportunities. Joy, over to you.

Thanks, Jerry, and good morning, everyone. 2024 was a very successful year across many areas of DTE. In particular, one area where we demonstrated significant improvement was enhancing reliability for our customers as a result of our distribution investments. And all of our businesses are in a strong position to deliver superior performance in 2025 and beyond. Let me start with DTE Electric.

I am very proud of the progress we have made to improve reliability for our customers. In 2024, we installed more than four fifty smart technology reclosers, upgraded existing infrastructure, including eight fifty miles of power lines and 3,400 utility poles and trimmed more than 4,300 miles of trees. These efforts to create a smarter, stronger and more resilient grid combined with less extreme weather in 2024 made a significant impact, resulting in customers experiencing a nearly 70% improvement in time spent without power. We also continued our significant investment in clean energy generation, placing multiple projects in service and initiating construction on our two twenty megawatt battery energy storage center. We currently have 2,300 megawatts of renewable generation and service with additional projects totaling over 1,000 megawatts coming online as we are building to meet increased demand for clean energy.

We are investing 24,000,000,000 over the next five years at DTE Electric, which is $4,000,000,000 higher than our prior plan, a significant increase to further support cleaner generation and improve reliability for our customers. Required investments in cleaner generation continue to grow with $10,000,000,000 of investments planned over the next five years, an increase of $3,000,000,000 from last year's plan. This is driven by the continued success of our voluntary renewables program and the requirements under Michigan's legislated Clean Energy Law. It's important to note that we have been able to build an extensive development pipeline to support this growth in renewable investments. Solid land positions combined with our ability to successfully move these projects through the interconnection and permitting processes provide confidence that we can execute these investments.

We have panels secured through mid-twenty twenty seven land positions that should take us into the 2030s and beyond and permits secured for majority of our projects through 2027. We also have been able to safe harbor investment tax credits for these renewable projects through 2027. Investments in distribution infrastructure increases by $1,000,000,000 in this plan as we focus on continuing to improve reliability for our customers. Recent regulatory outcomes support this investment plan. The constructive rate order we received last month supports the customer focused investments we are making to build the grid of the future.

And the electric distribution audit report that was completed last year confirmed that our proposed investment plan will deliver the dramatic improvements in reliability that we have committed to our customers. Over the next five years, we expect to reduce power outages by 30% and cut outage time in half as a result of these investments in our improved operations. As Gerry mentioned, there is potential upside to the five year capital plan driven largely by data center opportunities in our service territory as well as further economic development in Michigan. Let me move to slide seven to highlight some of these opportunities. Southeast Michigan continues to be a great region for economic development, attracting many large companies that contribute to the progress of our state and its residents.

General Motors, Henry Ford Health and the University of Michigan are among the large companies with major investments in our service territory, providing significant economic development and providing thousands of jobs. We continue to collaborate with economic development partners throughout the state to target key business segments to drive further economic growth. And as you know, data center development and the impact of the potential load from the data centers have been an important focus over the last year. We're making great progress with data centers. Our success in championing the data center legislation for the sales and use tax exemption has helped us further progress discussions.

We continue to work with a number of hyperscalers and co locators on opportunities within our service territory. We recently announced that we have advanced one of those discussions to a non binding term sheet that is moving toward a definitive agreement. Switch, a leading co locator plans to build this 1.4 gigawatt site using some of our land from an existing site with the project expected to ramp up through 02/1932. As Gerry mentioned, we have signed another non binding preliminary agreement with an additional party. Together with the switch agreement, along with the University of Michigan project we announced recently, these projects bring a total of approximately 2,100 megawatts of potential new load onto our system, which represents approximately 40% overall load growth when it all comes online.

And we continue to have discussions with multiple other major data center companies. As we said before, we can begin to serve this demand quickly because we have some excess capacity. In addition, these projects will require additional build of new generation to support the early load ramp in the near term and could provide longer term investment opportunities in new baseload generation, which would be supported by our 2026 IRP. Of course, as we continue to invest in our system and as these incremental opportunities come into our plan, we remain very focused on maintaining customer affordability. These data center additions, along with our distinctive continuous improvement culture to drive cost management, will continue to support affordability for our customers.

We are delivering top tier affordability through continued superior cost management, operational excellence with our power plant and one of the larger energy efficiency programs in the country. As a matter of fact, our historical average annual bill increase demonstrates the extraordinary results in the affordability arena. Even after including the electric rate order we received last month, our annual bill increase since 2021 is well below the utility Great Lakes average and national average through 2024 and also well below the general rate of inflation. Let's move to Slide eight to discuss DTE Gas. Our gas business had another great year in 2024 as we continue to deliver our customers with top quartile cost and operating performance.

I'm proud to highlight that DTE Gas ranked number one in the Midwest for customer satisfaction for business natural gas service by J. D. Power last year. We are incredibly proud of this recognition. It shows our team is truly committed to providing service excellence to our customers.

We continue to progress our gas main renewal program as we modernize the gas transmission system and our distribution system. Over the years, we have made significant investments into this program and recovered this investment through our infrastructure recovery mechanism. Since the program began and through 2024, we have renewed nearly 1,900 miles. Over the next five years, we are planning to invest $4,000,000,000 to upgrade and replace aging infrastructure. I'll just close out my comments by saying how excited I am about the opportunities ahead of us.

Our updated five year plan supports the investments we need to make for our customers. It includes significant increased utility investments focused on enhancing our systems to further improve reliability and to support our growing renewable programs. This updated utility plan also provides the opportunity for us to focus on more utility like investments at DTE Vantage, which is expected to drive annual base earnings growth of about $20,000,000 per year. Overall, our plan provides an earnings profile that is high quality, continues to target 6% to 8% operating EPS growth with confidence we can reach the high end of our growth rate 2025 through 2027 as 45B production tax credits come into the plan with flexibility to exceed the high end or support future years. And the opportunity in data center development provide potential upside to the plan.

And with that, I'll turn it over to Dave to give you a financial update.

Thanks, Joy. Good morning, everyone. Let me start on Slide nine to review our 2024 financial results. Operating earnings for the year were $1,400,000,000 which translates to operating earnings of $6.83 per share, putting us at the high end of our 2024 guidance with 9% growth over the 2023 original guidance midpoint. You can find a detailed breakdown of EPS by segment, including a reconciliation to GAAP reported earnings in

appendix. I'll start the review at the top of the page with our utilities. DT Electric earnings were $1,100,000,000 for the year, dollars $314,000,000 higher than 2023. The main drivers of the earnings variance were implementation of base rates, warmer weather and lower storm expenses, partially offset by higher rate base costs. Moving on to DTE Gas, operating earnings were $263,000,000 30 1 million dollars lower than 2023.

'20 '20 '4 was the warmest winter in over sixty years and this is coming off the fourth warmest year in 2023. Along with the impact of warmer weather, the earnings variance was driven by higher rate base and O and M costs, partially offset by higher IRM revenue and implementation of base rates. Let's move to DT Vantage on the third row. Vantage had another strong year in 2024 with $133,000,000 of earnings. The variance from 2023 was due to a combination of some timing and one time items in 2023, primarily in our steel related business.

This was partially offset by higher investment tax credits that primarily occurred in the fourth quarter of twenty twenty four. On the next row, you can see Energy Trading finished the year with earnings of $100,000,000 This strong performance in our contracted and hedged physical power and physical gas portfolios that we experienced in 2023 continued into 2024. And we expect to see some of this strength continue this year, which is reflected in our 2025 guidance on the next slide. Finally, corporate and other was unfavorable by $26,000,000 year over year, partially due to higher interest expense. Overall, DTE earned $6.83 per share in 2024, delivering at the high end of our 2024 original guidance.

Let's turn to Slide 10 to review our 2025 earnings guidance. Our 2025 operating EPS guidance midpoint is $7.16 per share, which provides 7% growth over our 2024 original guidance midpoint. And we continue to target 6% to 8% long term growth with 2025 original guidance midpoint as a base of this growth. And as Gerry mentioned, we are currently positioned to achieve the high end of our 2025 EPS guidance range as the RNG tax credits come into the plan. In 2025, DT Electric growth will be driven by investments in grid reliability and cleaner generation.

DT Gas will see continued customer focused investments in main renewal and other infrastructure improvements that enhance operational performance and support decarbonization. At DPVantage, twenty twenty five earnings are driven by the development of new custom energy solutions projects that serve as a base for growth going forward and we do expect to recognize 45z tax credits from 2025 through 2027. We expect these credits on average to contribute about $50,000,000 to $60,000,000 in earnings during these years, providing confidence we'll reach the high end of our growth rate in 2025 through 2027 and provide flexibility to exceed the high end or support future years. We expect continued consistent growth at DTE Vantage with a strong pipeline of long term contracted fixed fee projects, which will drive about $20,000,000 in average annual base earnings growth, giving us confidence in our longer term earnings targets in this segment. You can find additional detail on DTE's Vantage long term earnings growth plan in the appendix of this presentation.

At Energy Trading, as I mentioned, we expect to see continued strength in both our structured physical power and physical gas portfolios as we continue to see favorability from these contracted and hedged positions giving us confidence in our guidance range. And in Corporate and Other, the change is driven by higher interest expense. Let's move to Slide 11 to highlight our strong balance sheet and credit profile. We continue to focus on maintaining solid balance sheet metrics. Due to our strong cash flows, DTE has minimal equity issuances in our plan targeting annual issuances of $0 to $100,000,000 through 2027.

We do see some modest increases to equity issuances beginning in 2028 to support our significant capital investment plan. Our long term plan includes debt refinancing and new issuances and we continue to manage these future issuances through interest rate hedging and other opportunities. We continue to focus on maintaining our strong investment grade credit rating and solid balance sheet metrics. We target an FFO to debt ratio of 15% to 16%. Let me wrap up on Slide 12 and then we open the line for questions.

Our team continues our commitment to deliver for all of our stakeholders. We delivered solid growth in 2024, achieving earnings per share of 6.83 delivering at the high end of our guidance range. The 2025 operating EPS guidance midpoint provides 7% growth over the 2024 original guidance midpoint and we are currently positioned to achieve the high end of our EPS guidance range this year. Our updated five year plan provides higher quality long term 6% to 8% EPS growth through increased customer focused utility investments and shifting to more utility like investments than our non utility. This plan increases our five year capital investment by $5,000,000,000 over the previous plan, primarily to support the needs in our cleaner energy and reliability focused investment areas.

Data center opportunities provide potential upside to this five year capital investment and EPS growth plan. We continue to target 6% to 8% operating EPS growth and are well positioned to deliver at the high end of this growth rate in 2025 through 2027 with flexibility to exceed the high end and support future years. And we continue to target dividend increases in line with operating EPS growth. 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. With that, I thank you for joining us today and we can open the line for questions.

Your first question comes from the line of Shar Pourreza with Guggenheim Partners. Please go ahead.

Hi, good morning team. Roughly, great quarter. It's actually Tom and Tim here for Shar.

Good morning. Just starting off maybe on the CapEx plan updates, maybe to clarify the data center upside, you noted that 2,100 megawatts in current agreements. Are those included in the current plan or is that still all upside? And as these agreements get converted into CapEx, how should we be thinking about the future cadence of CapEx and financial update?

Yeah. Great question. As you heard, we see a lot of great opportunity with these data centers, but we haven't put any of the benefits of this into the five year plan or a CapEx plan yet. So, as we move towards these definitive agreements, we do see upside to our plan from this. So, yeah, we have some excess capacity as we've said in the past and, you know, that will support some of the data center load and gets us in a good position to get this to come on early.

And then as we move to definitive agreements and understand their load ramp a little more, work through our IRP process, we'll understand better the generation mix needed. But I'll say in the near term, you know, as we're supporting that up to a thousand megawatts, we're expecting incremental renewables and storage within our plan, probably towards the backside of our five year plan because that supports their desire for cleaner power. And so that is something we do expect to come in within our five year plan as we move towards definitive agreement. So, as we said, you know, we're kind of in the term sheet stage right now, working towards definitive agreement. And then when we get there, we'll update our capital plan before.

Is there any specific cadence for that between kind of the third and fourth quarter that we've seen in these cycles?

Yeah. That's probably what we'll, when we'll be able to give a deeper update. We'll update throughout the year as we make progress. And then as we see, when the capital would flow into our plan, it would probably come out again in the fourth quarter with that.

Okay, perfect. And then you know that the RNG credit pushed you towards the top end and there's some flexibility to exceed the six to eight. Is that tail end kind of strength driven by the 20% CapEx plan increase or is there an assumption on 45% fee extension above the 6% to 8%? Do you envision any changes in the cash flow profile advantage just based on some of these assumptions and shifting to more utility like contracts?

Yeah. We've kept a similar capital investment overall at Vantage and it is more utility like. So the returns on those projects aren't as high as what we saw with RNG. So, we've put in a really solid plan for, Vantage that kind of gets us our $20,000,000 a year and gets us to the long term plan we need there. We don't assume any, production tax credits or really investment tax credits as we get past 27%.

So, when you look at our overall plan, that stronger 6% to 8% long term EPS growth is really driven by our utility investment that we're making to support a cleaner generation and build out reliability for our customers.

And this, Constine, just so give you a little bit of context on the development of this plan, we started to see some really significant positive tailwinds in 2023 in our utility CapEx plans. That was really driven by several events. One was the IRP that we settled in 2023. Then on the heels of that, we got clean energy legislation done here in the state in late 'twenty three. Then we had tremendous success with the voluntary renewables program.

Then further to that in 2024, we got a very supportive audit report for our wires business. So when we packaged all that together, we saw this significant lift of $4,000,000,000 in our electric CapEx plant in the new five year plan that we just rolled out. And this really did give us the opportunity to start thinking about a shift advantage to higher quality earnings with long term fixed fee contracts. And overall, I think as you've seen, '25 through '27, we're positioned to be at the higher end and also gives us flexibility to exceed the higher end of guidance and prepare for future years when the credits roll off at the end of twenty twenty seven. So I would say overall, we feel very confident in achieving all of this and that we got a much higher quality plan on the table.

Excellent. I think we can leave it at that. Thanks for taking the questions.

Your next question comes from the line of Nick Campanella with Barclays. Please go ahead.

Hi, good morning, team. Hey, this is actually Faye for Nick today. And thanks for taking my questions. And congrats on strong twenty twenty four. Hey, good morning.

Hey. So I just just first on data center demand, I guess, as it rolls into the plan, just generally how do you think about the impact to your low growth CAGR? Obviously, you've been pretty conservative. You've been planning conservatively with only the specific projects you announced, but just trying to have a more holistic understanding on this matter.

Hey, good morning. This is Joy. Thanks for the question. Yes, exciting times with data centers and it will be great for our customers if you think about what that can do for affordability and allow us to invest behind it in our wires business. But we are looking at modeling what we know of the potential for data center growth and it it equates to something in the range of four to 5% increase on a CAGR basis for our loan growth over that time horizon, which is excellent, for customers.

And, we're making sure that, you know, we're working these, agreements and bringing home, this data growth, data center growth in our plan.

Great. That's super helpful. And I guess, just quickly on 2025 execution, could you just discuss on your rate filing cadence and how those different rate case outcome or just different scenarios could drive 2025 execution? And to what extent would they affect your confidence to achieve the high end of the range this year during the year? Thanks.

I think how we're feeling about 2025, we're feeling very, very confident on 2025. We're going to at least hit the higher end of guidance. I mean, the start to the year is actually building contingency in our plan. So we're feeling really, really good. And I always judge how we're doing in the year by what we're working on in the moment.

And I can tell you, we're deep into 2026 planning, and the details of that. So that always is a measure for me is how confident we are in 2025. So 2025 looks rock solid, in terms of performance. Joining on the rate case?

Yeah. On the rate case, yeah. So the order we received, last month, a constructive order, within our planning scenario. So we're going to work on, you know, just dispatching the capital as we had intended. In terms of our filing cadence, your question around, one electric probably gonna be in the second quarter, we'll follow another case, given the level of investments that we're making and our desire to incorporate the findings for the Liberty audit.

We wanna make sure that we are in a position to expand the IRM using that as the basis. And we've gotten some positive feedback from the commissioners, from the bench and also in our discussions, with the staff. And then for gas, we'll likely file another case toward the back half back end, I should say, the fourth quarter of twenty twenty five. Again, to continue our investments in distribution and transmission and then also to look to continue our IRM, which has worked really, really well for the gas company.

Got it. Great. That's super helpful. Thanks again.

Your next question comes from the line of Jeremy Tonet with JPMorgan. Please go ahead.

Hi, good morning. This is actually Rich on for Jeremy.

Starting with some of the near term and long term financing considerations, can you walk through those and maybe the cash flow drivers behind sizing minimal equity in 2025 versus the kind of uptick in equity beginning in 2028?

Yes. Let me just start by saying, we're confident in our existing plan with this $0 to $100,000,000 in $2,025,000,000 dollars through $2,027,000,000 dollars and it's really driven by a strong base cash flows. And then, some of the, some of the monetization, some of the tax credits we'll be getting. So, it puts us in a great position to continue our 15% to 16% FFO to debt with that minimal equity. And what we did say is that, as you see some more of this capital come into our plan in the outer years, we could see some increased equity needs fast then.

You know, we're going to keep working that. It's right now, it feels like a modest increase, but we'll keep trying to manage cash and what we can do in the meantime to minimize that as much as possible. We do see some equity that would come in, in 2028 and beyond to support the growth capital we have.

Great. Thank you for that. And then I know we hit on Vantage a little bit earlier in Q and A, but just wanted to revisit this. Could you speak a little bit more to the opportunities that you're now most focused on? And just curious how you expect this high grading to play out over the next few years?

Yes. I think as Dave mentioned, we're looking at about $20,000,000 a year of income growth. And if you look at the history of this business, we've done about $20,000,000 to $30,000,000 a year. So we think we've got a good conservative plan and the type of projects that we're pursuing. You've seen some recent announcements of projects that are coming out this year as well as next year, where there are long term fixed fee behind the fence utility services.

So things like cogen, water treatment, compressed air, those type of utility services that we've been able to do with very large industrial partners. And we got more of that in the hopper and we've got a pretty strong pipeline. We're also starting to dip our toe and carbon capture and storage with large ethanol producers. And we've got several agreements and we're working to prove out some of the geology there. But those are all also small in nature like $60,000,000 to $100,000,000 CapEx to get our toes in the water, if you will dip our toes in the water on that one with IRRs that are north of 10% unlevered after tax and they're long term fixed fee type contracts with no commodity risk.

So again, early there, but we're feeling pretty good about the pipeline and the strength of the pipeline advantage to generate that $20,000,000 per year. So that once these tax credits all roll off, in 2028, '20 '20 '9, we're sitting right on top of where we want to be.

Your next question comes from the line of Julien Dumoulin Smith with Jefferies. Please go ahead.

Hey, good morning, team. Thank you guys very much. Julien is on the line. Hi, Julien. So with that said hey.

Good morning. Hey. Just coming back to a couple of things that maybe this helps tie things together. Right? First off, on the, the the look beyond '27, how are you thinking about '45 zed and just the the ongoing ability to tap some kind of credits, you know, as far as it goes to sustain or continue to grow that Vantage piece.

Just wondering, obviously, you're making very strong comments here on the front end of the plan. I just want to understand the cadence at the back end of the plan. And then related, I know Rich just got at this a little bit, but how do you think about the potential less contribution from Vantage? And I don't know if you're insinuating more equity beyond '27 as you see an uptick in electric spend, but I just want to understand maybe some of the moving pieces because it seems like the plan on the front end seems very locked in. There's a little bit more ambiguity here between the equity and the RNG contributions in the back half that I wanted to try to understand.

Yes. Julien, I may take the income profile and then Dave can talk about the financing of it. Look at this $20,000,000 a year advantage, certainly will support our '28 '20 '9 guidance. And I think that's how we're positioned to do it. We're not counting on any fees or any tax credits in '28 and '29.

So that's how we've built the plan. So that gives us great confidence that we'll achieve our goals. But I got to tell you, the utility, the quality of our plan is significantly increased with the amount of CapEx that we've got coming in from the utilities to drive the superior growth. Certainly, at the higher end of our guidance, '25 through '27 and with good potential to exceed it. And I view our prospects in the utility businesses as even having more potential upside as data centers start to roll in.

We've got about 1,000 megawatts of capacity that we can deploy early on. And we also have very large land positions that these data centers are very interested in. And so we're getting a lot of action. Now we just got to turn that action into definitive agreements this year and I think that starts to line up future potential upside to our plan in those outer years, Julian. So that's how we're feeling about it.

So we're feeling very positive about the long term outlook of our growth plans.

Julian, we wanted to put a more conservative plan out there for Vantage long term that doesn't have any of those tax credits. But as you know in our history, we've found opportunities for those, you know, so there could be some upside with, with what would go on. And then as far as the equity, you know, we usually just give a three year plan. And so our three year plan is 0 to 100,000,000 from '25 to '27. But as we're bringing in this capital, you know, we just wanted to start to signal that there, there would be some additional equity within a plan.

We'll work to minimize that. But I think there's some modest increased equity that would come in, in 2028, '20 '20 '9 period into the plan.

Excellent. Thank you guys for clarifying. Then maybe it's a nice follow-up here. Can you speak a little bit on the data center front? Just to how the timeline here?

I know that there's kind of MOUs out there. But given the nascency of legislation itself, I mean, I imagine that this could still take some degree of time to come to fruition in a more firm sense. Do you want to just give some sense of expectation on that? And then also, in parallel, we've seen some of your adjacent states talk about, data center tariffs as they've become more serious about this opportunity as well between Ohio and Indiana. Could we see you guys, elect to pursue some kind of novel data center specific tariff structure at this point and put that forward?

Hey there, Julian. Yeah. The conversations are progressing. We have a shared goal to to get something done, more definitively, this year. And, the the the arrangement that we have, the agreement that we have with, switch, the term sheet really is we're trying to line out the ramp.

Right? The ramp of the generation over the next several years. And then we also, have a sign agreement with, University of Michigan for a hundred and two 10 megawatts. And, and Jerry spoke about, another agreement that we've already, moved toward, I'd say, a term sheet with, and that's with an undisclosed party. But all of this is coming together with, you know, a potential for a 21 megawatt 2,100 megawatts of added load for data centers, which is was is phenomenal.

And we're continuing those conversations. We've got, the right land positions, we've got the right climate, we've got, the legislation now behind us. So that's increased the interest, I would say, in Michigan overall. So really feeling positive about the opportunity that's before us and the team is hard at work at making those agreements, more definitive in nature. When it comes to, figuring out, you know, long term what the generation needs might be.

Near term, we can serve the, the demand, based on the ramp that we understand right now with what what we have on hand. So we have some excess capacity that we can put to work. It think of it as, you know, we may have to bring on some renewables and battery storage, to support this load. But generally speaking, near term, this is really a great affordability play for our customers because we can bring on the load and not make really huge investments. As the load ramps, we'll have to look to, you know, expansion of renewables, more batteries and potentially something, firmer or fixed in terms of generation.

So think of a combined cycle with carbon capture for an example, but that will be longer in range. And we would probably look to, use a different tariff structure. We can use our existing tariffs now, but if we have to build something, significant, we'd have to bring on a different tariff structure and think of it as more of, you know, fixed volumes and certainly, demand response incorporated with that as well. So that's kind of where we're sitting, with, data centers right now.

And Julian, that that new tariff that we would need to say build a combined cycle plant or some, you know, surrounded with more renewables and battery storage would be long term in nature as well as, you know, fixed fee, type arrangement so that we don't put any kind of risk on our customers. And the commission and the governor is very supportive of that. The legislation actually points to it and requires it. So I think we're in good shape from a legislative perspective and strong support from the commission.

Excellent guys. Nicely done today. Seriously, thank you

for the time. All the best, Dara. We'll connect soon.

DTE Energy (DTE) Q4 2024 Earnings Call Transcript

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