SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________________________
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended September 30, 2000March 31, 2001
Registrants; State of | ||||
Commission | Incorporation; Address; and | I.R.S. Employer | ||
File Number | Identification No. | |||
1-11607 | DTE Energy Company | |||
(a Michigan corporation) | ||||
2000 2nd Avenue | ||||
Detroit, Michigan 48226-1279 | ||||
313-235-4000 | ||||
1-2198 | The Detroit Edison Company | |||
(a Michigan corporation) | ||||
2000 2nd Avenue | ||||
Detroit, Michigan 48226-1279 | ||||
313-235-8000 |
Indicate by check mark whether the registrants (1) have filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrants were required to file such reports), and (2) have been subject to such filing requirements for the past 90 days.
Yes No
At October 31, 2000, 142,651,172April 30, 2001, 135,803,708 shares of DTE Energy’s Common Stock, substantially all held by non-affiliates, were outstanding.
DTE ENERGY COMPANY
and
THE DETROIT EDISON COMPANY
FORM 10-Q
For The Quarter Ended September 30, 2000March 31, 2001
This document contains the Quarterly Reports on Form 10-Q for the quarter ended September 30, 2000March 31, 2001 for each of DTE Energy Company and The Detroit Edison Company. Information contained herein relating to an individual registrant is filed by such registrant on its own behalf. Accordingly, except for its subsidiaries, The Detroit Edison Company makes no representation as to information relating to any other companies affiliated with DTE Energy Company.
TABLE OF CONTENTS
Page | ||||||||
Definitions | 3 | |||||||
Quarterly Report on Form 10-Q for DTE Energy Company: | ||||||||
Part I — | Financial Information | 4 | ||||||
Item 1 | 4 | |||||||
Item 2 | ||||||||
Condition and Results of Operations | ||||||||
Item 3 | ||||||||
30 | ||||||||
Part II — | ||||||||
Item 5 — Other Information | 31 | |||||||
Quarterly Report on Form 10-Q for The Detroit Edison Company: | ||||||||
Part I — | Financial Information | |||||||
Item 1 | ||||||||
Item 2 | ||||||||
Condition and Results of Operations | ||||||||
Part II — | Other Information | |||||||
Item 1 | ||||||||
Item 5 | ||||||||
Quarterly Reports on Form 10-Q for DTE Energy Company and The Detroit | ||||||||
Edison Company: | ||||||||
Item 6 | 33 | |||||||
Signature Page to DTE Energy Company Quarterly Report on Form 10-Q | ||||||||
Signature Page to The Detroit Edison Company Quarterly Report on Form 10-Q |
2
Annual Report | ||
Commission on Form 10-K for DTE Energy Company or The | ||
Detroit Edison Company, as the case may be | ||
Annual Report Notes | Notes to Consolidated Financial Statements appearing on | |
pages | ||
Report to the Securities and Exchange Commission on Form | ||
10-K for DTE Energy Company and The Detroit Edison | ||
Company, as the case may be | ||
ABATE | Association of Businesses Advocating Tariff Equity | |
Company | DTE Energy Company and Subsidiary Companies | |
Detroit Edison | The Detroit Edison Company (a wholly owned subsidiary of | |
DTE Energy Company) and Subsidiary Companies | ||
DTE Capital | DTE Capital Corporation (a wholly owned subsidiary of DTE Energy Company) | |
Electric Choice | ||
EPA | United States Environmental Protection Agency | |
FERC | Federal Energy Regulatory Commission | |
kWh | Kilowatthour | |
MCN | MCN Energy Group Inc. | |
MPSC | Michigan Public Service Commission | |
MW | Megawatt | |
MWh | Megawatthour | |
Note(s) | Note(s) to Condensed Consolidated Financial Statements (Unaudited) appearing herein | |
PSCR | Power Supply Cost Recovery | |
Registrant | Company or Detroit Edison, as the case may be |
3
PART I — FINANCIAL INFORMATION
Item 1 — Condensed Consolidated Financial Statements (Unaudited).
The following condensed consolidated financial statements (unaudited) are included herein.
Page | |||||
DTE Energy Company: | |||||
Condensed Consolidated Statement of Income | 5 | ||||
Condensed Consolidated Balance Sheet | 6 | ||||
Condensed Consolidated Statement of Cash Flows | 8 | ||||
Condensed Consolidated Statement of Changes in Shareholders’ Equity | 9 | ||||
The Detroit Edison Company: | |||||
Condensed Consolidated Statement of Income | 11 | ||||
Condensed Consolidated Balance Sheet | 12 | ||||
Condensed Consolidated Statement of Cash Flows | 14 | ||||
Condensed Consolidated Statement of Changes in Shareholder’s Equity | 15 | ||||
Notes to Condensed Consolidated Financial Statements (Unaudited) | 16 | ||||
Independent Accountants’ Report |
Note: | ||
Detroit Edison’s Condensed Consolidated Financial Statements are presented here for ease of reference and are not considered to be part of Item I of the Company’s report. |
4
DTE Energy Company
Condensed Consolidated Statement of Income (Unaudited)
(Millions, Except Per Share Amounts)Amounts; Shares in Thousands)
Three Months Ended | Nine Months Ended | Three Months Ended | ||||||||||||||||||||||||||||
September 30 | September 30 | March 31 | ||||||||||||||||||||||||||||
2000 | 1999 | 2000 | 1999 | 2001 | 2000 | |||||||||||||||||||||||||
Operating Revenues | Operating Revenues | $ | 1,547 | $ | 1,440 | $ | 4,157 | $ | 3,614 | Operating Revenues | $ | 1,842 | $ | 1,182 | ||||||||||||||||
Operating Expenses | Operating Expenses | Operating Expenses | ||||||||||||||||||||||||||||
Fuel and purchased power | 747 | 510 | 1,670 | 1,063 | Fuel and purchased power | 948 | 344 | |||||||||||||||||||||||
Operation and maintenance | 352 | 397 | 1,093 | 1,086 | Operation and maintenance | 385 | 355 | |||||||||||||||||||||||
Depreciation and amortization | 202 | 183 | 580 | 547 | Depreciation and amortization | 184 | 192 | |||||||||||||||||||||||
Taxes other than income | 74 | 69 | 224 | 211 | Taxes other than income | 81 | 76 | |||||||||||||||||||||||
Total Operating Expenses | 1,375 | 1,159 | 3,567 | 2,907 | Total Operating Expenses | 1,598 | 967 | |||||||||||||||||||||||
Operating Income | Operating Income | 172 | 281 | 590 | 707 | Operating Income | 244 | 215 | ||||||||||||||||||||||
Interest Expense and Other | Interest Expense and Other | Interest Expense and Other | ||||||||||||||||||||||||||||
Interest expense | 86 | 95 | 251 | 260 | Interest expense | 91 | 83 | |||||||||||||||||||||||
Other — net | 6 | 4 | 9 | 13 | Other — net | (1 | ) | 2 | ||||||||||||||||||||||
Total Interest Expense and Other | 92 | 99 | 260 | 273 | Total Interest Expense and Other | 90 | 85 | |||||||||||||||||||||||
Income Before Income Taxes | Income Before Income Taxes | 80 | 182 | 330 | 434 | Income Before Income Taxes | 154 | 130 | ||||||||||||||||||||||
Income Taxes | Income Taxes | (24 | ) | 21 | 1 | 48 | Income Taxes | 19 | 13 | |||||||||||||||||||||
Income Before Cumulative Effect of a Change in | Income Before Cumulative Effect of a Change in | |||||||||||||||||||||||||||||
Accounting Principle | 135 | 117 | ||||||||||||||||||||||||||||
Cumulative Effect of a Change in Accounting | Cumulative Effect of a Change in Accounting | |||||||||||||||||||||||||||||
Principle, Net of Tax | 3 | — | ||||||||||||||||||||||||||||
Net Income | Net Income | $ | 104 | $ | 161 | $ | 329 | $ | 386 | Net Income | $ | 138 | $ | 117 | ||||||||||||||||
Average Common Shares Outstanding | 143 | 145 | 143 | 145 | ||||||||||||||||||||||||||
Earnings per Common Share — | ||||||||||||||||||||||||||||||
Basic Earnings per Common Share: | Basic Earnings per Common Share: | |||||||||||||||||||||||||||||
Basic and Diluted | $ | 0.73 | $ | 1.11 | $ | 2.30 | $ | 2.66 | Income Before Cumulative Effect of a Change | |||||||||||||||||||||
In Accounting Principle | $ | 0.96 | $ | 0.81 | ||||||||||||||||||||||||||
Dividends Declared per Common Share | $ | 0.515 | $ | 0.515 | $ | 1.545 | $ | 1.545 | ||||||||||||||||||||||
Cumulative Effect of a Change in Accounting | ||||||||||||||||||||||||||||||
Principle | 0.02 | — | ||||||||||||||||||||||||||||
Net Income | $ | 0.98 | $ | 0.81 | ||||||||||||||||||||||||||
Weighted Average Common Shares — basic | 141,872 | 144,508 | ||||||||||||||||||||||||||||
Diluted Earnings per Common Share: | Diluted Earnings per Common Share: | |||||||||||||||||||||||||||||
Income Before Cumulative Effect of a Change | ||||||||||||||||||||||||||||||
In Accounting Principle | $ | 0.95 | $ | 0.81 | ||||||||||||||||||||||||||
Cumulative Effect of a Change in Accounting | ||||||||||||||||||||||||||||||
Principle | 0.02 | — | ||||||||||||||||||||||||||||
Net Income | $ | 0.97 | $ | 0.81 | ||||||||||||||||||||||||||
Weighted Average Common Shares — diluted | 142,197 | 144,535 |
See Notes to Condensed Consolidated Financial Statements (Unaudited).
5
DTE Energy Company
Condensed Consolidated Balance Sheet (Unaudited)
(Millions, Except Per Share Amounts and Shares)
September 30 | December 31 | March 31 | December 31 | ||||||||||||||||||
2000 | 1999 | 2001 | 2000 | ||||||||||||||||||
ASSETS | ASSETS | ASSETS | |||||||||||||||||||
Current Assets | Current Assets | Current Assets | |||||||||||||||||||
Cash and cash equivalents | $ | 46 | $ | 33 | Cash and cash equivalents | $ | 987 | $ | 64 | ||||||||||||
Restricted cash | 78 | 131 | Restricted cash | 92 | 88 | ||||||||||||||||
Accounts receivable | Accounts receivable | ||||||||||||||||||||
Customer (less allowance for doubtful | Customer (less allowance for doubtful accounts of $21) | 519 | 510 | ||||||||||||||||||
accounts of $21) | 533 | 388 | Accrued unbilled revenues | 182 | 188 | ||||||||||||||||
Accrued unbilled revenues | 157 | 166 | Other | 90 | 140 | ||||||||||||||||
Other | 149 | 144 | Inventories (at average cost) | ||||||||||||||||||
Inventories (at average cost) Fuel | 153 | 175 | Fuel | 163 | 193 | ||||||||||||||||
Materials and supplies | 170 | 168 | Materials and supplies | 143 | 142 | ||||||||||||||||
Assets from risk management activities | 41 | 67 | Assets from risk management activities | 260 | 289 | ||||||||||||||||
Other | 67 | 38 | Other | 117 | 38 | ||||||||||||||||
1,394 | 1,310 | 2,553 | 1,652 | ||||||||||||||||||
Investments | Investments | Investments | |||||||||||||||||||
Nuclear decommissioning trust funds | 398 | 361 | Nuclear decommissioning trust funds | 382 | 398 | ||||||||||||||||
Other | 262 | 274 | Other | 259 | 269 | ||||||||||||||||
660 | 635 | 641 | 667 | ||||||||||||||||||
Property | Property | Property | |||||||||||||||||||
Property, plant and equipment | 11,992 | 11,755 | Property, plant and equipment | 12,382 | 12,179 | ||||||||||||||||
Property under capital leases | 221 | 222 | Property under capital leases | 221 | 221 | ||||||||||||||||
Nuclear fuel under capital lease | 704 | 663 | Nuclear fuel under capital lease | 713 | 705 | ||||||||||||||||
Construction work in progress | 114 | 106 | Construction work in progress | 106 | 57 | ||||||||||||||||
13,031 | 12,746 | 13,422 | 13,162 | ||||||||||||||||||
Less accumulated depreciation and amortization | Less accumulated depreciation and amortization | 5,704 | 5,598 | Less accumulated depreciation and amortization | 5,845 | 5,775 | |||||||||||||||
7,327 | 7,148 | 7,577 | 7,387 | ||||||||||||||||||
Regulatory Assets | Regulatory Assets | 2,695 | 2,935 | Regulatory Assets | 1,137 | 2,686 | |||||||||||||||
Securitized Regulatory Assets (Note 3) | Securitized Regulatory Assets (Note 3) | 1,719 | — | ||||||||||||||||||
Other Assets | Other Assets | 270 | 288 | Other Assets | 255 | 270 | |||||||||||||||
Total Assets | Total Assets | $ | 12,346 | $ | 12,316 | Total Assets | $ | 13,882 | $ | 12,662 | |||||||||||
See Notes to Condensed Consolidated Financial Statements (Unaudited).
6
September 30 | December 31 | March 31 | December 31 | ||||||||||||||||
2000 | 1999 | 2001 | 2000 | ||||||||||||||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | LIABILITIES AND SHAREHOLDERS’ EQUITY | LIABILITIES AND SHAREHOLDERS’ EQUITY | |||||||||||||||||
Current Liabilities | Current Liabilities | Current Liabilities | |||||||||||||||||
Accounts payable | $ | 384 | $ | 404 | |||||||||||||||
Accounts payable | $ | 231 | $ | 273 | Accrued interest | 72 | 59 | ||||||||||||
Accrued interest | 70 | 57 | Dividends payable | 73 | 73 | ||||||||||||||
Dividends payable | 73 | 75 | Accrued payroll | 90 | 103 | ||||||||||||||
Accrued payroll | 86 | 97 | Short-term borrowings | 35 | 503 | ||||||||||||||
Short-term borrowings | 551 | 387 | Income taxes | 77 | 97 | ||||||||||||||
Income taxes | 99 | 61 | Current portion long-term debt | 417 | 256 | ||||||||||||||
Current portion long-term debt | 234 | 270 | Current portion capital leases | 38 | 41 | ||||||||||||||
Current portion capital leases | 93 | 75 | Liabilities from risk management activities | 221 | 280 | ||||||||||||||
Liabilities from risk management activities | 35 | 52 | Liabilities from hedging activities | 103 | — | ||||||||||||||
Other | 305 | 257 | Other | 265 | 218 | ||||||||||||||
1,777 | 1,604 | 1,775 | 2,034 | ||||||||||||||||
Other Liabilities | Other Liabilities | Other Liabilities | |||||||||||||||||
Deferred income taxes | 1,802 | 1,925 | Deferred income taxes | 1,867 | 1,801 | ||||||||||||||
Capital leases | 106 | 114 | Capital leases | 146 | 145 | ||||||||||||||
Regulatory liabilities | 190 | 262 | Regulatory liabilities | 181 | 185 | ||||||||||||||
Other | 586 | 564 | Other | 752 | 588 | ||||||||||||||
2,684 | 2,865 | 2,946 | 2,719 | ||||||||||||||||
Long-Term Debt | Long-Term Debt | 3,936 | 3,938 | Long-Term Debt | 5,316 | 3,894 | |||||||||||||
Shareholders’ Equity | Shareholders’ Equity | Shareholders’ Equity | |||||||||||||||||
Common stock, without par value, 400,000,000 shares | Common stock, without par value, 400,000,000 shares authorized, 138,151,908 and 142,651,172 issued and outstanding, respectively | 1,857 | 1,918 | ||||||||||||||||
authorized, 142,653,454 and 145,041,324 issued | Accumulated other comprehensive loss | (61 | ) | — | |||||||||||||||
and outstanding, respectively | 1,918 | 1,950 | Retained earnings | 2,049 | 2,097 | ||||||||||||||
Retained earnings | 2,031 | 1,959 | |||||||||||||||||
3,845 | 4,015 | ||||||||||||||||||
3,949 | 3,909 | ||||||||||||||||||
Commitments and Contingencies (Note 7) | |||||||||||||||||||
Total Liabilities and Shareholders’ Equity | Total Liabilities and Shareholders’ Equity | $ | 12,346 | $ | 12,316 | Total Liabilities and Shareholders’ Equity | $ | 13,882 | $ | 12,662 | |||||||||
See Notes to Condensed Consolidated Financial Statements (Unaudited).
7
DTE Energy Company
Condensed Consolidated Statement of Cash Flows (Unaudited)
(Millions)
Nine Months Ended | Three Months Ended | |||||||||||||||||||||
September 30 | March 31 | |||||||||||||||||||||
2000 | 1999 | 2001 | 2000 | |||||||||||||||||||
Operating Activities | Operating Activities | Operating Activities | ||||||||||||||||||||
Net Income | $ | 329 | $ | 386 | Net Income | $ | 138 | $ | 117 | |||||||||||||
Adjustments to reconcile net income to net cash from operating activities: | Adjustments to reconcile net income to net cash from operating activities: | |||||||||||||||||||||
Depreciation and amortization | 580 | 547 | Depreciation and amortization | 184 | 192 | |||||||||||||||||
Other | (97 | ) | (72 | ) | Other | (40 | ) | 22 | ||||||||||||||
Changes in current assets and liabilities: | Changes in current assets and liabilities: | |||||||||||||||||||||
Restricted cash | 53 | (11 | ) | Restricted cash | 19 | 2 | ||||||||||||||||
Accounts receivable | (141 | ) | (84 | ) | Accounts receivable | 47 | 44 | |||||||||||||||
Inventories | 20 | 30 | Inventories | 29 | 18 | |||||||||||||||||
Payables | (40 | ) | (43 | ) | Payables | (20 | ) | (63 | ) | |||||||||||||
Other | 20 | (16 | ) | Other | (120 | ) | (148 | ) | ||||||||||||||
Net cash from operating activities | 724 | 737 | Net cash from operating activities | 237 | 184 | |||||||||||||||||
Investing Activities | Investing Activities | Investing Activities | ||||||||||||||||||||
Plant and equipment expenditures | (546 | ) | (530 | ) | Plant and equipment expenditures | (172 | ) | (176 | ) | |||||||||||||
Net cash used for investing activities | (546 | ) | (530 | ) | Net cash used for investing activities | (172 | ) | (176 | ) | |||||||||||||
Financing Activities | Financing Activities | Financing Activities | ||||||||||||||||||||
Issuance of long-term debt | 273 | 265 | Issuance of long-term debt | 1,750 | 219 | |||||||||||||||||
Increase in short-term borrowings | 164 | 65 | Increase (decrease) in short-term borrowings | (468 | ) | 114 | ||||||||||||||||
Increase in restricted cash for debt redemptions | — | (185 | ) | Increase in restricted cash for debt redemptions | (15 | ) | — | |||||||||||||||
Redemption of long-term debt | (310 | ) | (204 | ) | Redemption of long-term debt | (168 | ) | (212 | ) | |||||||||||||
Repurchase of common stock | (70 | ) | — | Repurchase of common stock | (168 | ) | (62 | ) | ||||||||||||||
Dividends on common stock | (222 | ) | (224 | ) | Dividends on common stock | (73 | ) | (75 | ) | |||||||||||||
Net cash used for financing activities | (165 | ) | (283 | ) | Net cash from (used for) financing activities | 858 | (16 | ) | ||||||||||||||
Net Increase (Decrease) in Cash and Cash Equivalents | Net Increase (Decrease) in Cash and Cash Equivalents | 13 | (76 | ) | Net Increase (Decrease) in Cash and Cash Equivalents | 923 | (8 | ) | ||||||||||||||
Cash and Cash Equivalents at Beginning of the Period | Cash and Cash Equivalents at Beginning of the Period | 33 | 130 | Cash and Cash Equivalents at Beginning of the Period | 64 | 33 | ||||||||||||||||
Cash and Cash Equivalents at End of the Period | Cash and Cash Equivalents at End of the Period | $ | 46 | $ | 54 | Cash and Cash Equivalents at End of the Period | $ | 987 | $ | 25 | ||||||||||||
Supplementary Cash Flow Information | Supplementary Cash Flow Information | Supplementary Cash Flow Information | ||||||||||||||||||||
Interest paid (excluding interest capitalized) | $ | 238 | $ | 263 | Interest paid (excluding interest capitalized) | $ | 78 | $ | 91 | |||||||||||||
Income taxes paid | 59 | 102 | Income taxes paid | 22 | 14 | |||||||||||||||||
Noncash Investing and Financing Activities | Noncash Investing and Financing Activities | |||||||||||||||||||||
New capital lease obligations | 41 | 3 | Acquisition of assets by assuming liabilities | 87 | — | |||||||||||||||||
New capital lease obligations | 8 | 40 |
See accompanying Notes to the Condensed Consolidated Financial Statements (Unaudited).
8
DTE Energy Company
Condensed Consolidated Statement of Changes in Shareholders’ Equity (Unaudited)
(Millions, Except Per Share Amounts; Shares in Thousands)
2000 | 2001 | |||||||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||||||
Common Stock | Common Stock | Common Stock | ||||||||||||||||||
Balance at beginning of year | 142,651 | $ | 1,918 | |||||||||||||||||
Repurchase and retirement of common stock | (4,499 | ) | (61 | ) | ||||||||||||||||
Balance at March 31, 2001 | 138,152 | $ | 1,857 | |||||||||||||||||
Accumulated Other Comprehensive Loss | Accumulated Other Comprehensive Loss | |||||||||||||||||||
Net Unrealized Losses on Derivatives Qualified as Hedges: | Net Unrealized Losses on Derivatives Qualified as Hedges: | |||||||||||||||||||
Balance at beginning of year | 145,041 | $ | 1,950 | Balance at beginning of year | $ | — | ||||||||||||||
Repurchase and retirement of common stock | 2,388 | (32 | ) | Net change in unrealized gains and losses(a) | (61 | ) | ||||||||||||||
Balance at September 30, 2000 | 142,653 | $ | 1,918 | Balance at March 31, 2001 | $ | (61 | ) | |||||||||||||
Retained Earnings | Retained Earnings | Retained Earnings | ||||||||||||||||||
Balance at beginning of year | $ | 1,959 | Balance at beginning of year | $ | 2,097 | |||||||||||||||
Net income | 329 | Net income | 138 | |||||||||||||||||
Dividends declared on common stock ($1.545 per share) | (221 | ) | Dividends declared on common stock ($0.515 per share) | (73 | ) | |||||||||||||||
Repurchase and retirement of common stock | (39 | ) | Repurchase and retirement of common stock | (113 | ) | |||||||||||||||
Other | 3 | |||||||||||||||||||
Balance at March 31, 2001 | $ | 2,049 | ||||||||||||||||||
Balance at September 30, 2000 | $ | 2,031 | ||||||||||||||||||
Total Shareholders’ Equity | Total Shareholders’ Equity | $ | 3,949 | Total Shareholders’ Equity | $ | 3,845 | ||||||||||||||
(a) Disclosure of Comprehensive Income (Loss) | (a) Disclosure of Comprehensive Income (Loss) | |||||||||||||||||||
Net income | $ | 138 | ||||||||||||||||||
Other comprehensive loss, net of tax: | ||||||||||||||||||||
Net Unrealized Losses on Derivatives Qualified as Hedges: | ||||||||||||||||||||
Net unrealized holding losses arising during period due to cumulative effect of a change in accounting principle, net of taxes of $24 | (42 | ) | ||||||||||||||||||
Other net unrealized holding losses arising during the period, net of taxes of $12 | (23 | ) | ||||||||||||||||||
Reclassification of losses recognized in net income, net of taxes of $2 | 4 | |||||||||||||||||||
(61 | ) | |||||||||||||||||||
Comprehensive income | $ | 77 | ||||||||||||||||||
See accompanying Notes to the Condensed Consolidated Financial Statements (Unaudited).
9
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10
The Detroit Edison Company
Condensed Consolidated Statement of Income (Unaudited)
(Millions)
Three Months Ended | Nine Months Ended | Three Months Ended | ||||||||||||||||||||||||||
September 30 | September 30 | March 31 | ||||||||||||||||||||||||||
2000 | 1999 | 2000 | 1999 | 2001 | 2000 | |||||||||||||||||||||||
Operating Revenues | Operating Revenues | $ | 1,109 | $ | 1,211 | $ | 3,129 | $ | 3,128 | Operating Revenues | $ | 1,024 | $ | 949 | ||||||||||||||
Operating Expenses | Operating Expenses | Operating Expenses | ||||||||||||||||||||||||||
Fuel and purchased power | 455 | 405 | 1,020 | 888 | Fuel and purchased power | 269 | 229 | |||||||||||||||||||||
Operation and maintenance | 224 | 275 | 736 | 773 | Operation and maintenance | 256 | 240 | |||||||||||||||||||||
Depreciation and amortization | 191 | 176 | 550 | 522 | Depreciation and amortization | 174 | 182 | |||||||||||||||||||||
Taxes other than income | 72 | 69 | 219 | 210 | Taxes other than income | 79 | 75 | |||||||||||||||||||||
Total Operating Expenses | 942 | 925 | 2,525 | 2,393 | Total Operating Expenses | 778 | 726 | |||||||||||||||||||||
Operating Income | Operating Income | 167 | 286 | 604 | 735 | Operating Income | 246 | 223 | ||||||||||||||||||||
Interest Expense and Other | Interest Expense and Other | Interest Expense and Other | ||||||||||||||||||||||||||
Interest expense | 70 | 82 | 209 | 219 | Interest expense | 72 | 69 | |||||||||||||||||||||
Other — net | 4 | 1 | 13 | 3 | Other — net | 5 | 4 | |||||||||||||||||||||
Total Interest Expense and Other | 74 | 83 | 222 | 222 | Total Interest Expense and Other | 77 | 73 | |||||||||||||||||||||
Income Before Income Taxes | Income Before Income Taxes | 93 | 203 | 382 | 513 | Income Before Income Taxes | 169 | 150 | ||||||||||||||||||||
Income Taxes | Income Taxes | 17 | 65 | 118 | 164 | Income Taxes | 53 | 53 | ||||||||||||||||||||
Income Before Cumulative Effect of a Change in | Income Before Cumulative Effect of a Change in | |||||||||||||||||||||||||||
Accounting Principle | 116 | 97 | ||||||||||||||||||||||||||
Cumulative Effect of a Change in Accounting | Cumulative Effect of a Change in Accounting | |||||||||||||||||||||||||||
Principle, Net of Tax | (3 | ) | — | |||||||||||||||||||||||||
Net Income | Net Income | $ | 76 | $ | 138 | $ | 264 | $ | 349 | Net Income | $ | 113 | $ | 97 | ||||||||||||||
See accompanying Notes to the Condensed Consolidated Financial Statements (Unaudited).
11
The Detroit Edison Company
Condensed Consolidated Balance Sheet (Unaudited)
(Millions, Except Per Share Amounts and Shares)
September 30 | December 31 | March 31 | December 31 | ||||||||||||||||||
2000 | 1999 | 2001 | 2000 | ||||||||||||||||||
ASSETS | ASSETS | ASSETS | |||||||||||||||||||
Current Assets | Current Assets | Current Assets | |||||||||||||||||||
Cash and cash equivalents | $ | 12 | $ | 4 | |||||||||||||||||
Cash and cash equivalents | $ | 477 | $ | 24 | |||||||||||||||||
Accounts receivable | Restricted cash | 15 | — | ||||||||||||||||||
Customer (less allowance for doubtful | Accounts receivable | ||||||||||||||||||||
accounts of $20) | 352 | 316 | Customer (less allowance for doubtful accounts of $20) | 290 | 328 | ||||||||||||||||
Accrued unbilled revenues | 157 | 166 | Accrued unbilled revenues | 182 | 188 | ||||||||||||||||
Other | 132 | 138 | Other | 95 | 127 | ||||||||||||||||
Inventories (at average cost) | Inventories (at average cost) | ||||||||||||||||||||
Fuel | 153 | 175 | Fuel | 146 | 163 | ||||||||||||||||
Materials and supplies | 144 | 140 | Materials and supplies | 140 | 139 | ||||||||||||||||
Other | 53 | 29 | Other | 131 | 25 | ||||||||||||||||
1,003 | 968 | 1,476 | 994 | ||||||||||||||||||
Investments | Investments | Investments | |||||||||||||||||||
Nuclear decommissioning trust funds | 398 | 361 | Nuclear decommissioning trust funds | 382 | 398 | ||||||||||||||||
Other | 37 | 34 | Other | 39 | 38 | ||||||||||||||||
435 | 395 | 421 | 436 | ||||||||||||||||||
Property | Property | Property | |||||||||||||||||||
Property, plant and equipment | 11,320 | 11,204 | Property, plant and equipment | 11,489 | 11,431 | ||||||||||||||||
Property under capital leases | 221 | 221 | Property under capital leases | 220 | 220 | ||||||||||||||||
Nuclear fuel under capital lease | 704 | 663 | Nuclear fuel under capital lease | 713 | 705 | ||||||||||||||||
Construction work in progress | 2 | 4 | Construction work in progress | 11 | 2 | ||||||||||||||||
12,247 | 12,092 | 12,433 | 12,358 | ||||||||||||||||||
Less accumulated depreciation and amortization | Less accumulated depreciation and amortization | 5,602 | 5,526 | Less accumulated depreciation and amortization | 5,717 | 5,659 | |||||||||||||||
6,645 | 6,566 | 6,716 | 6,699 | ||||||||||||||||||
Regulatory Assets | Regulatory Assets | 2,695 | 2,935 | Regulatory Assets | 1,137 | 2,686 | |||||||||||||||
Securitized Regulatory Assets (Note 3) | Securitized Regulatory Assets (Note 3) | 1,719 | — | ||||||||||||||||||
Other Assets | Other Assets | 168 | 187 | Other Assets | 204 | 171 | |||||||||||||||
Total Assets | Total Assets | $ | 10,946 | $ | 11,051 | Total Assets | $ | 11,673 | $ | 10,986 | |||||||||||
See accompanying Notes to the Condensed Consolidated Financial Statements (Unaudited).
12
September 30 | December 31 | March 31 | December 31 | |||||||||||||||||
2000 | 1999 | 2001 | 2000 | |||||||||||||||||
LIABILITIES AND SHAREHOLDER’S EQUITY | LIABILITIES AND SHAREHOLDER’S EQUITY | LIABILITIES AND SHAREHOLDER’S EQUITY | ||||||||||||||||||
Current Liabilities | Current Liabilities | Current Liabilities | ||||||||||||||||||
Accounts payable | $ | 209 | $ | 224 | Accounts payable | $ | 222 | $ | 253 | |||||||||||
Accrued interest | 60 | 54 | Accrued interest | 62 | 56 | |||||||||||||||
Dividends payable | 80 | 80 | Dividends payable | 79 | 80 | |||||||||||||||
Accrued payroll | 82 | 90 | Accrued payroll | 87 | 96 | |||||||||||||||
Short-term borrowings | 342 | 362 | Short-term borrowings | — | 245 | |||||||||||||||
Income taxes | 102 | 84 | Income taxes | 121 | 95 | |||||||||||||||
Current portion long-term debt | 159 | 194 | Current portion long-term debt | 318 | 159 | |||||||||||||||
Current portion capital leases | 93 | 75 | Current portion capital leases | 38 | 41 | |||||||||||||||
Other | 130 | 159 | Other | 126 | 167 | |||||||||||||||
1,257 | 1,322 | 1,053 | 1,192 | |||||||||||||||||
Other Liabilities | ||||||||||||||||||||
Other Liabilities | Other Liabilities | |||||||||||||||||||
Deferred income taxes | 1,808 | 1,879 | Deferred income taxes | 1,882 | 1,811 | |||||||||||||||
Capital leases | 106 | 114 | Capital leases | 146 | 145 | |||||||||||||||
Regulatory liabilities | 190 | 262 | Regulatory liabilities | 181 | 185 | |||||||||||||||
Other | 585 | 562 | Other | 711 | 586 | |||||||||||||||
2,689 | 2,817 | 2,920 | 2,727 | |||||||||||||||||
Long-Term Debt | Long-Term Debt | 3,344 | 3,284 | Long-Term Debt | 4,786 | 3,344 | ||||||||||||||
Shareholder’s Equity | Shareholder’s Equity | Shareholder’s Equity | ||||||||||||||||||
Common stock, $10 par value, 400,000,000 shares | Common stock, $10 par value, 400,000,000 shares authorized, 134,287,832 and 145,119,875 issued and outstanding, respectively | 1,343 | 1,451 | |||||||||||||||||
authorized, 145,119,875 issued and outstanding | 1,451 | 1,451 | Premium on common stock | 507 | 548 | |||||||||||||||
Premium on common stock | 548 | 548 | Common stock expense | (44 | ) | (48 | ) | |||||||||||||
Common stock expense | (48 | ) | (48 | ) | Accumulated other comprehensive income | 3 | — | |||||||||||||
Retained earnings | 1,705 | 1,677 | Retained earnings | 1,105 | 1,772 | |||||||||||||||
3,656 | 3,628 | 2,914 | 3,723 | |||||||||||||||||
Commitments and Contingencies (Note 7) | ||||||||||||||||||||
Total Liabilities and Shareholder’s Equity | Total Liabilities and Shareholder’s Equity | $ | 10,946 | $ | 11,051 | Total Liabilities and Shareholder’s Equity | $ | 11,673 | $ | 10,986 | ||||||||||
See accompanying Notes to the Condensed Consolidated Financial Statements (Unaudited).
13
The Detroit Edison Company
Condensed Consolidated Statement of Cash Flows (Unaudited)
(Millions)
Nine Months Ended | Three Months Ended | |||||||||||||||||||||
September 30 | March 31 | |||||||||||||||||||||
2000 | 1999 | 2001 | 2000 | |||||||||||||||||||
Operating Activities | Operating Activities | Operating Activities | ||||||||||||||||||||
Net Income | $ | 264 | $ | 349 | Net Income | $ | 113 | $ | 97 | |||||||||||||
Adjustments to reconcile net income to net cash from operating activities: | ||||||||||||||||||||||
Adjustments to reconcile net income to net cash from operating activities: | Adjustments to reconcile net income to net cash from operating activities: | |||||||||||||||||||||
Depreciation and amortization | 550 | 522 | Depreciation and amortization | 174 | 182 | |||||||||||||||||
Other | (86 | ) | (34 | ) | Other | (71 | ) | 58 | ||||||||||||||
Changes in current assets and liabilities: | Changes in current assets and liabilities: | |||||||||||||||||||||
Accounts receivable | (21 | ) | (46 | ) | Accounts receivable | 76 | 49 | |||||||||||||||
Inventories | 18 | 26 | Inventories | 16 | 6 | |||||||||||||||||
Payables | (17 | ) | (61 | ) | Payables | (34 | ) | (49 | ) | |||||||||||||
Other | (53 | ) | (53 | ) | Other | (109 | ) | (108 | ) | |||||||||||||
Net cash from operating activities | 655 | 703 | Net cash from operating activities | 165 | 235 | |||||||||||||||||
Investing Activities | Investing Activities | Investing Activities | ||||||||||||||||||||
Plant and equipment expenditures | (413 | ) | (429 | ) | Plant and equipment expenditures | (126 | ) | (130 | ) | |||||||||||||
Net cash used for investing activities | (413 | ) | (429 | ) | Net cash used for investing activities | (126 | ) | (130 | ) | |||||||||||||
Financing Activities | Financing Activities | Financing Activities | ||||||||||||||||||||
Issuance of long-term debt | 270 | 265 | Issuance of long-term debt | 1,750 | 219 | |||||||||||||||||
(Decrease) increase in short-term borrowings | (20 | ) | 65 | Decrease in short-term borrowings | (245 | ) | (46 | ) | ||||||||||||||
Increase in restricted cash for debt redemptions | — | (185 | ) | Increase in restricted cash for debt redemptions | (15 | ) | — | |||||||||||||||
Redemption of long-term debt | (245 | ) | (159 | ) | Redemption of long-term debt | (150 | ) | (194 | ) | |||||||||||||
Dividends on common stock | (239 | ) | (239 | ) | Repurchase of common stock | (846 | ) | — | ||||||||||||||
Dividends on common stock | (80 | ) | (80 | ) | ||||||||||||||||||
Net cash used for financing activities | (234 | ) | (253 | ) | ||||||||||||||||||
Net cash from (used for) financing activities | 414 | (101 | ) | |||||||||||||||||||
Net Increase in Cash and Cash Equivalents | Net Increase in Cash and Cash Equivalents | 8 | 21 | Net Increase in Cash and Cash Equivalents | 453 | 4 | ||||||||||||||||
Cash and Cash Equivalents at Beginning of the Period | Cash and Cash Equivalents at Beginning of the Period | 4 | 5 | Cash and Cash Equivalents at Beginning of the Period | 24 | 4 | ||||||||||||||||
Cash and Cash Equivalents at End of the Period | Cash and Cash Equivalents at End of the Period | $ | 12 | $ | 26 | Cash and Cash Equivalents at End of the Period | $ | 477 | $ | 8 | ||||||||||||
Supplementary Cash Flow Information | Supplementary Cash Flow Information | Supplementary Cash Flow Information | ||||||||||||||||||||
Interest paid (excluding interest capitalized) | $ | 203 | $ | 229 | Interest paid (excluding interest capitalized) | $ | 66 | $ | 84 | |||||||||||||
Income taxes paid | 142 | 186 | Income taxes paid | 41 | 16 | |||||||||||||||||
New capital lease obligations | 41 | 3 | New capital lease obligations | 8 | 40 |
See accompanying Notes to the Condensed Consolidated Financial Statements (Unaudited).
14
The Detroit Edison Company
Condensed Consolidated Statement of Changes in Shareholder’s Equity (Unaudited)
(Millions, Except Per Share Amounts; Shares in Thousands)
2000 | 2001 | ||||||||||||||||||
Shares | Amount | Shares | Amount | ||||||||||||||||
Common Stock | Common Stock | Common Stock | |||||||||||||||||
Balance at beginning of year | 145,120 | $ | 1,451 | Balance at beginning of year | 145,120 | $ | 1,451 | ||||||||||||
Repurchase and retirement of common stock | (10,832 | ) | (108 | ) | |||||||||||||||
Balance at September 30, 2000 | 145,120 | $ | 1,451 | ||||||||||||||||
Balance at March 31, 2001 | 134,288 | $ | 1,343 | ||||||||||||||||
Premium on Common Stock | Premium on Common Stock | Premium on Common Stock | |||||||||||||||||
Balance at beginning of year | $ | 548 | Balance at beginning of year | $ | 548 | ||||||||||||||
Repurchase and retirement of common stock | (41 | ) | |||||||||||||||||
Balance at September 30, 2000 | $ | 548 | |||||||||||||||||
Balance at March 31, 2001 | $ | 507 | |||||||||||||||||
Common Stock Expense | Common Stock Expense | Common Stock Expense | |||||||||||||||||
Balance at beginning of year | $ | (48 | ) | ||||||||||||||||
Repurchase and retirement of common stock | 4 | ||||||||||||||||||
Balance at March 31, 2001 | $ | (44 | ) | ||||||||||||||||
Accumulated Other Comprehensive Income | Accumulated Other Comprehensive Income | ||||||||||||||||||
Net Unrealized Gains on Derivatives Qualified as Hedges: | Net Unrealized Gains on Derivatives Qualified as Hedges: | ||||||||||||||||||
Balance at beginning of year | $ | — | |||||||||||||||||
Balance at beginning of year | $ | (48 | ) | Net change in unrealized gains and losses(a) | 3 | ||||||||||||||
Balance at September 30, 2000 | $ | (48 | ) | Balance at March 31, 2001 | $ | 3 | |||||||||||||
Retained Earnings | Retained Earnings | Retained Earnings | |||||||||||||||||
Balance at beginning of year | $ | 1,677 | Balance at beginning of year | $ | 1,772 | ||||||||||||||
Net income | 264 | Net income | 113 | ||||||||||||||||
Dividends declared on common stock ($1.65 per share) | (239 | ) | Dividends declared on common stock ($0.55 per share) | (79 | ) | ||||||||||||||
Other | 3 | Repurchase and retirement of common stock | (701 | ) | |||||||||||||||
Balance at September 30, 2000 | $ | 1,705 | Balance at March 31, 2001 | $ | 1,105 | ||||||||||||||
Total Shareholder’s Equity | Total Shareholder’s Equity | $ | 3,656 | Total Shareholder’s Equity | $ | 2,914 | |||||||||||||
(a) Disclosure of Comprehensive Income (Loss) | (a) Disclosure of Comprehensive Income (Loss) | ||||||||||||||||||
Net income | $ | 113 | |||||||||||||||||
Other comprehensive income, net of tax: | |||||||||||||||||||
Net Unrealized Gains on Derivatives Qualified as Hedges: | |||||||||||||||||||
Net unrealized holding gains arising during period due to cumulative effect of a change in accounting principle, net of taxes of $6 | 13 | ||||||||||||||||||
Other net unrealized holding losses arising during the period, net of taxes of $5 | (10 | ) | |||||||||||||||||
3 | |||||||||||||||||||
Comprehensive income | $ | 116 | |||||||||||||||||
See accompanying Notes to the Condensed Consolidated Financial Statements (Unaudited).
15
DTE Energy Company and The Detroit Edison Company
Notes to Condensed Consolidated Financial Statements (Unaudited)
NOTE 1 — SIGNIFICANT ACCOUNTING POLICIES– ANNUAL REPORT NOTES
These condensed consolidated financial statements (unaudited) should be read in conjunction with the Annual Report Notes and the Quarterly Report Notes. The Notes contained herein update and supplement matters discussed in the Annual Report Notes and the Quarterly Report Notes.
The preparation of the financial statements in conformity with accounting principles generally accepted accounting principlesin the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
The condensed consolidated financial statements are unaudited, but in the opinion of the Company and Detroit Edison, with respect to its own financial statements, include all adjustments necessary for a fair statement of the results for the interim periods. Financial results for this interim period are not necessarily indicative of results that may be expected for any other interim period or for the fiscal year.
Certain prior year balances have been reclassified to conform to the current year’s presentation.
NOTE 2 – MERGER AGREEMENT
As discussed in Notes 2 and 17 of the Annual Report Notes, on February 28, 2001, the Company and MCN announced a revised merger agreement that provides that the Company will acquire all outstanding shares of MCN for $24.00 per share in cash, or 0.715 shares of Company common stock for each share of MCN common stock. Certain allocation and proration procedures provided for in the original agreement continue to apply and will be used to ensure that the aggregate number of shares of MCN common stock that will be converted into cash and the Company’s common stock will be equal to 55% and 45%, respectively, of the total number of shares of MCN common stock outstanding immediately prior to the pending merger. MCN’s common shareholders have been asked to approve the revised merger agreement at a special meeting scheduled for May 15, 2001. The Company is currently awaiting approval of the merger from the Securities and Exchange Commission under the Public Utility Holding Company Act of 1935, as amended. Although no assurances can be given, and the merger may be completed later, the Company currently expects that the merger will be completed on May 31, 2001. If this expectation does not change by May 24, 2001, the Company will publicly announce May 31, 2001 as the closing date. Even then, the closing could be delayed if SEC approval is not received prior to May 31, 2001.
Effective March 21, 2001, the Federal Trade Commission accepted a proposed consent order and easement agreement and granted DTE and MCN early termination of the Hart-Scott-Rodino Anti-trust Improvements Act of 1976 pre-merger waiting period. The easement agreement, which addresses the FTC’s competitive concerns, conveys an easement to Exelon Corp., an unaffiliated company, over the Michigan Consolidated Gas Company’s (“MichCon’s”) local natural gas distribution system that will allow Exelon Corp. to engage in the distribution, storage and sale of natural gas in MichCon’s and Detroit Edison’s overlapping distribution areas. MichCon, a natural gas utility
16
serving 1.2 million customers in more than 530 communities throughout Michigan, is MCN’s largest subsidiary.
The revised merger agreement expires December 31, 2001, in order to allow for sufficient time to obtain necessary regulatory approvals. The value of the revised transaction is approximately $4.1 billion, including the assumption of approximately $1.8 billion of MCN’s debt. The Company estimates that closing on the merger will occur in second quarter 2001.
NOTE 3 – SECURITIZATION
On June 5, 2000, Michigan Public Acts 141 and 142 became effective, providing Detroit Edison with the right to recover certain stranded costs through securitization, assuming such recovery was authorized by an appropriate order of the MPSC.
In an order issued on November 2, 2000, and clarified on January 4, 2001, the MPSC approved the issuance of up to $1.774 billion of securitization bonds for the benefit of Detroit Edison. Detroit Edison formed The Detroit Edison Securitization Funding LLC (“Securitization LLC”), a wholly owned single member Michigan limited liability corporation, for the purpose of securitizing its stranded costs (referred to as qualified costs and securitization property in the Michigan statutes). The securitization property created by the MPSC’s order consists of certain of Detroit Edison’s qualified costs (primarily unamortized costs related to Detroit Edison’s Fermi 2 nuclear power plant), an irrevocable right to recover amounts sufficient to pay the principal of and interest on the securitization bonds, as well as amounts sufficient to pay ongoing costs associated with the securitization bond transaction and the Securitization LLC.
On March 9, 2001, the Securitization LLC issued $1.750 billion of its Securitization Bonds, Series 2001-1 and Detroit Edison sold $1.750 billion of stranded costs to its Securitization LLC. The Securitization Bonds mature over a period of up to fifteen years and have an average interest rate of 6.3%. Detroit Edison has implemented a non-bypassable surcharge on its customer bills, effective March 26, 2001. The MPSC’s securitization order also permits Detroit Edison to recover taxes associated with securitization.
The Securitization LLC is independent of the Company and Detroit Edison, as is its ownership of the securitization property. Due to principles of consolidation, stranded costs sold by Detroit Edison to the Securitization LLC and the $1.750 billion of its securitization bonds appear on the Company’s and Detroit Edison’s balance sheets. Neither the Company nor Detroit Edison make claim to these assets and ownership of such assets has vested in the Securitization LLC and been assigned to the trustee for the Securitization Bonds. Funds collected by Detroit Edison, acting in the capacity of a servicer for the Securitization LLC, are remitted to the trustee for the Securitization Bonds. Neither the securitization property nor funds collected from Detroit Edison’s customers for the payment of costs related to the Securitization LLC and Securitization Bonds are available to the Company’s or Detroit Edison’s creditors.
17
NOTE 4 – SHORT-TERM CREDIT ARRANGEMENTS AND BORROWINGS
At March 31, 2001, Detroit Edison had total short-term credit arrangements of approximately $518 million, under which no amounts were outstanding. Additionally, Detroit Edison had a $200 million short-term financing agreement secured by its customer accounts receivable and unbilled revenues portfolios, under which no amounts were outstanding at March 31, 2001.
On April 9, 2001, DTE Capital was merged into the Company, with the Company assuming all of DTE Capital’s assets and liabilities. The Company has assumed DTE Capital’s $400 million commercial paper program, as well as direct liability for $400 million of remarketed notes originally issued by DTE Capital. At March 31, 2001, $35 million in commercial paper was outstanding, and the Company assumed direct liability for this commercial paper. Support agreements for the benefit of DTE Capital have been terminated. Guarantees of non-regulated affiliate obligations, of which $296 million were outstanding and $700 million were authorized at March 31, 2001, will now be issued solely by the Company.
NOTE 5 – FINANCIAL AND OTHER DERIVATIVE INSTRUMENTS
In June 1998, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS)SFAS No. 133. SFAS No. 133, “Accountingas amended, establishes accounting and reporting standards for Derivative Instrumentsderivative instruments and Hedging Activities.” This statementfor hedging activities. It requires companies to record derivatives on the balance sheetthat all derivative instruments be recognized as either assets andor liabilities, measured at fair value. Gains or losses resulting fromThe accounting for changes in fair value depends upon the values of those derivatives would be accounted for depending on the usepurpose of the derivative instrument and whether it is designated as a hedge and qualifies for hedge accounting. In June 1999,To the FASB issued SFAS No. 137 delayingextent derivative instruments qualify as hedges and are designated as hedges of the variability of cash flows associated with forecasted transactions, the effective dateportion of the gain or loss on such derivative instruments is generally reported in other comprehensive income. The ineffective portion, if any, is reported in net income. Such amounts reported in other comprehensive income are reclassified into net income when the forecasted transaction affects earnings. If a cash flow hedge is discontinued because it is probable that the forecasted transaction will not occur, the net gain or loss is immediately reclassified into earnings. To the extent derivative instruments qualify as hedges and are designated as hedges of changes in fair value of an existing asset, liability or firm commitment, the gain or loss on the hedging instrument is recognized in earnings along with the changes in fair value of the hedged asset, liability or firm commitment attributable to the hedged risk.
SFAS No. 133 to fiscal years beginning after June 15, 2000. In June 2000,requires that as of the FASB issued SFAS No. 138 which amendeddate of initial adoption, the difference between the fair market value of derivative instruments recorded on the balance sheet and the previous carrying amount of those derivatives be reported in net income or other comprehensive income, as appropriate, as the cumulative effect of a change in accounting principle in accordance with Accounting Principles Board Opinion 20, “Accounting Changes.”
18
THE COMPANY
As of January 1, 2001, the Company adopted SFAS No. 133, for certain implementation issues.as required. The Company will adopt these accounting standards as required on January 1, 2001. The Company is currently assessing the financial impactcumulative effect of the adoption; however, such impact is not determinable at this time. The Company believes that the adoption of SFAS No. 133 may affect the variabilitywas an after-tax increase in net income of future periodic earnings$3 million, and an after-tax increase in other comprehensive income as market conditions and resulting portfolio valuations change from time to time.
loss of $42 million. The Securities and Exchange Commission Staff (“Staff”) issued Staff Accounting Bulletin (“SAB”) No. 101 in December 1999. This SAB summarizes certainfinancial statement impact of recording the Staff’s views in applying generally accepted accounting principles to revenue recognition in financial statements. The effective date of SAB No. 101 has been delayed until the fourth quarter ended December 31, 2000. At September 30, 2000,various SFAS 133 transactions for the Company and Detroit Edison have determined the adoption of SAB No. 101 will not have a material impact on the Company’s and Detroit Edison’s financial statements.
16
NOTE 2 — MERGER AGREEMENT
As discussed in Note 2 of the Annual Report Notes, the Company has entered into a definitive merger agreement with MCN. The proposed merger is being reviewed by the Federal Trade Commission (FTC) pursuant to the Hart-Scott-Rodino Act. The FTC staff has focused primarily on possible competition between the Company and MCN for cogeneration load and other gas/electric displacement technologies in the companies’ coincident retail distribution areas. The Company and MCN are taking action to address issues raised by the FTC staff, including the proposed transfer of a property interest to a unit of Exelon Corp. (previously Unicom Corp.) allowing for the utilization of up to 20 billion cubic feet of natural gas transportation capacity annually on the Michigan Consolidated Gas Co. (a subsidiary of MCN) system in the applicable distribution area. The agreement is subject to regulatory approvals (including the MPSC) and consummation of the merger. Specific terms regarding the ultimate utilization of capacity under the agreement are still being discussed with the FTC. The Company and MCN believe that the proposal will be the basis for addressing the FTC’s concerns. While the Company cannot predict the timing or outcome of the FTC’s review, the Company and MCN are targeting a first quarterat January 1, 2001 closing date for the merger.
NOTE 3 — REGULATORY MATTERS
On June 3, 2000, Michigan Governor John Engler signed Enrolled Senate Bill No. 937, Public Act 141 of 2000 (PA 141), which provides Detroit Edison with the right to recover stranded costs, codifies and establishes a date certain for the MPSC’s existing Electric Choice program, and requires the MPSC to reduce electric residential rates by 5%.
On that same date, the Governor signed Enrolled Senate Bill No. 1253, Public Act 142 of 2000 (PA 142). PA 142 provides for the recovery through securitization of “qualified costs,” which consist of an electric utility’s regulatory assets plus various costs associated with, or resulting from, the establishment of a competitive electric market, and the issuance of securitization bonds. In order to recover its “qualified costs,” on July 5, 2000, Detroit Edison applied to the MPSC for authority to issue securitization bonds, which may not exceed 15 years in term. PA 142 requires Detroit Edison to retire debt and equity with the proceeds of securitization bonds. An annual reconciliation of securitization charges is also required by statute.
In an order issued on November 2, 2000, the MPSC approved the issuance of securitization bonds to recover up to $1.774 billion (compared to approximately $1.850 billion requested by Detroit Edison) of qualified costs. The qualified costs approved by the MPSC include Fermi 2 costs, costs of certain regulatory assets, Electric Choice implementation costs, the initial and periodic costs of issuance associated with securitization bonds, and the costs of retiring and refunding securities with the proceeds of securitization. Detroit Edison expects to use the proceeds of securitization bonds to retire debt and equity in a manner that will maintain its debt /equity ratio at approximately 50%.
17
The issuance of securitization bonds will result in an overall revenue requirement reduction for Detroit Edison. Acting pursuant to PA 141, in an order issued June 5, 2000, the MPSC immediately reduced Detroit Edison’s residential electric rates by 5%, or approximately $65 million on an annual basis, and imposed a rate freeze for all classes of customers through 2003. Detroit Edison proposed deferral and securitization of the residential rate reduction from June 5, 2000 to the date of issuance of the bonds. The MPSC concluded that PA 141 did not intend that the effect of the residential rate reduction prior to the order be securitized. Therefore, the MPSC did not approve Detroit Edison’s request for deferral from June 5, 2000 to November 2, 2000. Savings resulting from securitization are, by statute, to be utilizedwas as available in the following priority order: the 5% residential rate reduction, rate reductions for other customers up to 5%, funding of the low income/energy efficiency fund, and to pay for transition costs. To make the order effective, Detroit Edison must file with the MPSC its understanding of and acceptance of the conditions contained in the order. Detroit Edison is reviewing the order and is determining whether interpretive guidance from the MPSC is necessary.
NOTE 4 — SHAREHOLDERS’ EQUITYfollows:
Amount | ||||
Financial Statement Line Item | Increase (Decrease) | |||
(millions) | ||||
Asset from Risk Management Activities | $ | 26 | ||
Liabilities from Hedging Activities | $ | 85 | ||
Income Taxes Payable | $ | (20 | ) | |
Other Comprehensive Loss | $ | 42 | ||
Cumulative Effect of a Change in Accounting Principle | $ | 3 |
The Company’s boardprimary market risk exposures are associated with interest rates and commodity prices. The Company has risk management policies to monitor and assist in mitigating these market risks and uses derivative instruments to manage some of directors has authorized the repurchaseexposures. Except for the activities of up to 10 million common shares, with the current program, which began in February 2000, tentatively set to not exceed $100 million. Stock purchases are made from time to time on the open market or through negotiated transactions. All common stock repurchased will be canceled. During the nine month period ended September 30, 2000,DTE Energy Trading (DTE ET), the Company repurchased approximately 2.3 million shares at an aggregate costdoes not hold or issue derivative instruments for trading purposes.
Interest Rate Risk
Hedge of approximately $70 million.Anticipated Issuance of Long-Term Debt
NOTE 5 — SHORT-TERM CREDIT ARRANGEMENTS AND BORROWINGS
At September 30, 2000, Detroit Edison had total short-term credit arrangements of approximately $509 million under which $142 million of commercial paper was outstanding. Additionally, Detroit Edison had a $200 million trade receivables sales agreement under which $200 million was outstanding at September 30, 2000.
At September 30, 2000, DTE Capital had $209 million of commercial paper outstanding. A $400 million short-term credit arrangement, backed by a Support Agreement fromIn accordance with its risk management policy, the Company provided credit support for this commercial paper.
During the first quarter of 2000, plans were announced to terminate DTE Capital’s operations. Subsequently, the Company assumed all of DTE Capital’s outstanding guarantees. Currently the Company is authorized to issue up to $350 million of new guarantees. At September 30, 2000, the Company had assumed and/or issued guarantees of various consolidated affiliate obligations of approximately $230 million.
NOTE 6 — FINANCIAL INSTRUMENTS
The Company has entered into a series of forward startingforward-starting interest rate swaps and Treasury locks in order to limit the Company’sits sensitivity to market interest rate fluctuationsrisk associated with its anticipatedforecasted issuance of long-term debt to be used to finance the
18
pending merger with MCN. The Company hasSuch instruments have been formally designated as cash flow hedges for accounting purposes, are measured at fair market value and are recorded as liabilities in the Company’s consolidated balance sheet. Losses on these instruments are included in other comprehensive loss. At March 31, 2001, the Company recorded $63 million, net of tax in other comprehensive loss for this hedge. Amounts recorded in other comprehensive loss will be reclassified to interest expense as hedges.the forecasted interest payments associated with the debt issuance affect earnings. The maximum length of time over which the Company expects to issue this debt subsequentis hedging its exposure to the merger. The forward starting swaps, which include notionalvariability of future cash flows for this forecasted transaction is 30 years.
During the three-month period ended March 31, 2001, no amounts were recognized in earnings due to hedge ineffectiveness of $250 million and $450 million in 5 and 10-year maturities, respectively, havethis hedging relationship. However, a weighted average interest rate of 7.55% and 7.61%, respectively. The Treasury locks, which include notional amounts of $50 million and $150 million in 10 and 30-year maturities, respectively, have a weighted average interest rate of 6.01% and 6.26%, respectively. At September 30, 2000, the fair value of these derivative financial instruments indicated an unrealized loss of approximately $35.5 million. The unrealized$6 million was reclassified from accumulated other comprehensive loss isinto earnings since management determined it was probable that certain forecasted transactions within a series of interest payments associated with this issuance of long-term debt would not reflected inoccur within the financial statements at September 30, 2000, but would be recognizedtime frame originally anticipated. This loss was reported as a deferred item upon issuancecomponent of the anticipated long-term debt. The deferred item would be amortized through interest expense over the life of the associated long-term debt as a yield adjustment.
The Company’s non-regulated energy marketing subsidiary enters into commitments to deliver electricity to retail customers outside southeast Michigan. To limit its exposure to price volatility on the electricity it purchases to fulfill its commitments, it enters into forward purchase commitments with DTE ET. DTE ET also enters into forward purchase commitments with third parties to cover its commitments to deliver electricity to the energy marketing subsidiary. All such contracts have been designated as hedges of the anticipated sale of electricity to the energy marketing company and the retail customer, respectively. As such, unrealized losses on these contracts of $10 million have not been reflected inwithin the consolidated financial statements at September 30, 2000.
NOTE 7 — COMMITMENTS AND CONTINGENCIES
As discussed in the Annual Report, in July 1999, ABATE made a filing with the MPSC indicating that Detroit Edison’s retail rates produce approximately $333 millionstatement of excess revenues. Of this amount, approximately $202 million is related to ABATE’s proposed reversal of the December 28, 1998 MPSC Order authorizing the accelerated amortization of Fermi 2. On June 19, 2000, the MPSC dismissed with prejudice the complaint filed initially by ABATE in 1997. A Proposal for Decision issued in March 2000 by an administrative law judge had recommended that Detroit Edison’s electric rates be reduced by approximately $101.6 million. In dismissing the complaint, the MPSC indicated that adjusting rates would be inconsistent with PA 141. ABATE has filed a motion with the MPSC requesting rehearing, asking that the parties be allowed to address whether excess earnings can be used as an offset against, at least, Electric Choice implementation costs. The MPSC has not acted on the motion. The Company is unable to predict the outcome of this proceeding.
As discussed in the Annual Report and the June 30, 2000 Quarterly Report, the EPA has issued ozone transport regulations and final new air quality standards relating to ozone and particulate air pollution. In September 1998, the EPA issued a State Implementation Plan (SIP) call, giving states a year to develop new regulations to limit nitrogen oxide emissions because of their contribution to ozone formation. It is estimated that Detroit Edison will incur $460 million of capital expenditures to comply. In March 2000, the U.S. Court of Appeals D.C. Circuit ruled in favor of the EPA’s SIP call regulations. The new air quality standards have been upheld in legal challenges in
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income. The estimated net amount of existing losses at March 31, 2001 that is expected to be reclassified into earnings within the U.S. Courtnext 12 months is approximately $6 million.
Interest Rate Swap
PCI Enterprises Company (PCI), a wholly owned coal pulverizing subsidiary of Appeals but the U.S. Supreme Court has agreed to hearCompany, entered into a seven-year interest rate swap agreement beginning June 30, 1997, with the appeal. Untilintent of reducing the legal issues are resolved it is impossible to predict the full impact of certain cash flows due to changes in LIBOR associated with its variable rate non-recourse debt. The swap has been formally designated as a cash flow hedge for accounting purposes, is measured at fair market value and is recorded as a liability in the new air quality standards. UnderCompany’s consolidated balance sheet. The holding loss on the recently enacted Michigan electric restructuring legislation, beginningswap is included in other comprehensive loss. At March 31, 2001, the Company recorded $0.7 million, net of tax in other comprehensive loss for this hedge. During the three-month period ended March 31, 2001, no amounts were recognized in earnings due to ineffectiveness of this hedging relationship. No amounts are expected to be reclassified into earnings within the next 12 months.
The effects of adopting SFAS No. 133 are recorded in the following line items in the accompanying Balance Sheet of the Company at March 31, 2001:
Financial Statement Line Item | Balance | |||
Assets from Risk Management Activities | $ | 30 | ||
Other Current Assets | $ | 7 | ||
Liabilities from Hedging Activities | $ | 103 | ||
Other Liabilities — Other | $ | 3 |
DETROIT EDISON
The cumulative effect of the adoption of SFAS No. 133 was an after-tax decrease in net income of $3 million, and an after-tax increase in other comprehensive income of $13 million. The financial statement impact of recording the various SFAS 133 transactions at January 1, 2004, annual return2001 was as follows:
Amount | ||||
Financial Statement Line Item | Increase (Decrease) | |||
(millions) | ||||
Other Current Assets | $ | 26 | ||
Other Current Liabilities | $ | 10 | ||
Income Taxes Payable | $ | 6 | ||
Other Comprehensive Income | $ | 13 | ||
Cumulative Effect of a Change in Accounting Principle | $ | (3 | ) |
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Commodity Price Risk
Forward Energy Purchase Contracts
Detroit Edison uses over-the-counter (OTC) forward contracts and options to manage the risk of fluctuations in the market price of electricity. To achieve its hedging objectives, Detroit Edison chooses the time to enter into purchase and on this capital expenditure, in excesssale contracts and selects the types of current depreciation levels, would be deferred, in ratemaking, until afterinstruments. The forward contracts used to financially hedge electricity price risks are relatively liquid instruments and provide Detroit Edison the expirationflexibility to execute its hedging strategies and meet its objectives.
Certain of these contracts have been formally designated as cash flow hedges of the rate cap period presentlyforecasted purchase of power for accounting purposes. Such contracts are measured at fair market value and are recorded as assets and liabilities in the consolidated balance sheets. Gains and losses on these instruments are included in other comprehensive income. At March 31, 2001, Detroit Edison recorded $3 million, net of tax in other comprehensive income for these hedges. Amounts recorded in other comprehensive income will be reclassified to fuel and purchased power expense as the forecasted purchases of electricity affect earnings. At March 31, 2001, the estimated net amount of existing gains that is expected to endbe reclassified into earnings within the next 12 months is approximately $3 million. The maximum length of time over which Detroit Edison is hedging its exposure to the variability of future cash flows is seventeen months. Ineffectiveness recognized in these hedging relationships was immaterial for the three months ended March 31, 2001. As forward contracts settle in the second and third quarters of 2001, existing gains and losses that are currently reported in accumulated other comprehensive income will be reclassified into earnings.
Other Derivative Instruments
Certain of Detroit Edison’s electricity forward purchase and sale contracts and purchased option contracts, entered into for the purpose of economically hedging its exposure to commodity risk, do not qualify for hedge accounting under the provisions of SFAS No. 133. Detroit Edison marks these contracts to market on its consolidated balance sheet and records an offsetting gain or loss in earnings. Such holding gains and losses are recorded in revenues or fuel and purchased power expense, depending on the type of contract.
The effects of adopting SFAS No. 133 are recorded in the following line items in the accompanying Balance Sheet of Detroit Edison at March 31, 2001:
Financial Statement Line Item | Balance | |||
Other Current Assets | $ | 37 | ||
Other Liabilities — Other | $ | 2 |
Certain of Detroit Edison’s forward electric contracts are considered “normal purchases and sales,” as defined by SFAS No. 133, and therefore are excluded from the scope of SFAS No. 133. In April 2001, the Derivatives Implementation Group (DIG), a committee
21
of the FASB responsible for providing guidance on the implementation of SFAS No. 133, reached tentative conclusions regarding certain contracts in the power generation industry. Depending on the final decision of the FASB, certain commodity contracts currently considered “normal purchases and sales” may no longer qualify for this exclusion, and may be required to be accounted for under SFAS No. 133. In this case, Detroit Edison would follow the transition provisions for applying the implementation guidance for SFAS No. 133. Management believes such contracts would qualify as cash flow hedges and be recorded at fair value on the balance sheet, with the effective portion of the hedge recognized in accumulated other comprehensive income.
TRADING ACTIVITIES
DTE ET markets and trades electricity and natural gas physical products and financial instruments, and provides risk management services utilizing energy commodity derivative instruments, which include futures, exchange traded and over-the-counter options, and forward purchase and sales commitments.
Notional Amounts and Terms
The notional amounts and terms of DTE ET’s outstanding energy trading financial instruments as of March 31, 2001 were:
Fixed Price | Fixed Price | Maximum | ||||||||||
Payor | Receiver | Terms in Years | ||||||||||
(Thousand of MWh) | ||||||||||||
Electricity Commodities | 1,010 | 1,308 | 1 |
At March 31, 2001, DTE ET also had sales and purchase commitments for physical delivery of electricity associated with contracts based on fixed prices totaling 216,556 net MWh purchased with terms extending up to 2 years.
Notional amounts reflect the volume of transactions, but do not necessarily represent the amounts exchanged by the parties to the energy commodity derivative instruments. Accordingly, notional amounts do not accurately measure DTE ET’s exposure to market or credit risks. The maximum terms in years detailed above are not indicative of likely future cash flows as these positions may be offset in the markets at any time in response to DTE ET’s risk management needs.
Fair Values
The average fair values of DTE ET’s derivative assets and liabilities were $271.8 million and $263.7 million, respectively, during the first quarter ended March 31, 2001, and $80.5 million and $62.0 million, respectively, during the first quarter ended March 31, 2000. At March 31, 2001 and December 31, 2005.2000, the fair values of the derivative assets and liabilities were approximately $228 million and $221 million, and $288.9 million and
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$279.9 million, respectively. Net unrealized gains were $6.1 million and $9.0 million at March 31, 2001 and December 31, 2000, respectively.
NOTE 8 —6 – SEGMENT AND RELATED INFORMATION
The Company’s reportable business segments are its electric utility, Detroit Edison, which is engaged in the generation, purchase, transmission, distribution and sale of electric energy (transmission services are performed by Detroit Edison’s wholly owned subsidiary, International Transmission Company), in a 7,600 square mile7,600-square-mile area in Southeastern Michigan, and its energy trading company.company, and energy services business, which develops and manages energy-related projects and services primarily concentrated in the steel industry. All Other includes non-regulated energy-related businesses and services, which develop and manage electricity and other energy-related projects.involved in new energy technologies. Inter-segment revenues are not material. Income taxes are allocated based on intercompanyinter-company tax sharing agreements, which generally allocate the tax benefit of alternate fuels tax credits and accelerated depreciation to the respective subsidiary, without regard to the subsidiary’s own net income or whether such tax benefits are realized by the Company. Financial data for business segments are as follows:
Energy | |||||||||||||||||||||||
Electric | Trading | All | Reconciliations | ||||||||||||||||||||
Utility | Company | Other | and Eliminations | Consolidated | |||||||||||||||||||
Three Months Ended September 30, 2000 | (Millions) | ||||||||||||||||||||||
Operating revenues | $ | 1,109 | $ | 295 | $ | 143 | $ | — | $ | 1,547 | |||||||||||||
Net income | 76 | — | 30 | (2 | ) | 104 | |||||||||||||||||
Nine Months Ended September 30, 2000 | |||||||||||||||||||||||
Operating revenues | $ | 3,129 | $ | 664 | $ | 364 | $ | — | $ | 4,157 | |||||||||||||
Net income | 264 | 6 | 68 | (9 | ) | 329 | |||||||||||||||||
Three Months Ended September 30, 1999 | (Millions) | ||||||||||||||||||||||
Operating revenues | $ | 1,211 | $ | 108 | $ | 121 | $ | — | $ | 1,440 | |||||||||||||
Net income | 138 | (1 | ) | 24 | — | 161 | |||||||||||||||||
Nine Months Ended September 30, 1999 | |||||||||||||||||||||||
Operating revenues | $ | 3,128 | $ | 184 | $ | 302 | $ | — | $ | 3,614 | |||||||||||||
Net income | 349 | (2 | ) | 49 | (10 | ) | 386 | ||||||||||||||||
Reconciliations | ||||||||||||||||||||||||||
Electric | Energy | Energy | All | and | ||||||||||||||||||||||
Utility | Trading | Services | Other | Eliminations | Consolidated | |||||||||||||||||||||
(Millions) | ||||||||||||||||||||||||||
Three Months Ended | ||||||||||||||||||||||||||
March 31, 2001 | ||||||||||||||||||||||||||
Operating revenues | $ | 1,024 | $ | 685 | $ | 134 | $ | 15 | $ | (16 | ) | $ | 1,842 | |||||||||||||
Net income (loss) | 113 | 1 | 33 | (7 | ) | (2 | ) | 138 | ||||||||||||||||||
Three Months Ended | ||||||||||||||||||||||||||
March 31, 2000 | ||||||||||||||||||||||||||
Operating revenues | $ | 949 | $ | 126 | $ | 107 | $ | 17 | $ | (17 | ) | $ | 1,182 | |||||||||||||
Net income (loss) | 97 | 6 | 25 | (9 | ) | (2 | ) | 117 |
This Quarterly Report on Form 10-Q, including the report of Deloitte & Touche LLP (on page 21)24) will automatically be incorporated by reference in the Prospectuses constituting part of the Registration Statements on Form S-3 (Registration Nos. 33-53207, 33-64296 and 333-65765) of The Detroit Edison Company and Form S-8 (Registration No. 333-00023), Form S-4 (Registration No. 333-89175) and Form S-3 (Registration No. 33-57545)Nos. 33-57545 and 333-58834) of DTE Energy Company, filed under the Securities Act of 1933. Such report of Deloitte & Touche LLP, however, is not a “report” or “part of the Registration Statement” within the meaning of Sections 7 and 11 of the Securities Act of 1933 and the liability provisions of Section 11(a) of such Act do not apply.
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Independent Accountants’ Report
To the Board of Directors and Shareholders of DTE Energy Company and
The Detroit Edison Company
We have reviewed the accompanying condensed consolidated balance sheets of DTE Energy Company and subsidiaries and of The Detroit Edison Company and subsidiaries as of September 30, 2000,March 31, 2001, and the related condensed consolidated statements of income for the three-month and nine-month periods ended September 30, 2000 and 1999, the condensed consolidated statements of cash flows for the nine-monththree-month periods ended September 30,March 31, 2001 and 2000, and 1999, and the condensed consolidated statements of changes in shareholders’ equity for the nine-monththree-month period ended September 30, 2000.March 31, 2001. These financial statements are the responsibility of DTE Energy Company’s management and of The Detroit Edison Company’s management.
We conducted our reviews in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data and of making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with auditing standards generally accepted in the United States of America, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our reviews, we are not aware of any material modifications that should be made to such condensed consolidated financial statements for them to be in conformity with accounting principles generally accepted in the United States of America.
We have previously audited, in accordance with auditing standards generally accepted in the United States of America, the consolidated balance sheets of DTE Energy Company and subsidiaries and of The Detroit Edison Company and subsidiaries as of December 31, 1999,2000, and the related consolidated statements of income, changes in shareholders’ equity, and cash flows for the year then ended (not presented herein); and in our report dated January 26, 2000,24, 2001, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheets as of December 31, 19992000 is fairly stated, in all material respects, in relation to the consolidated balance sheets from which it has been derived.
DELOITTE & TOUCHE LLP
Detroit, MichiganNovember 13, 2000May 9, 2001
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Item 2-2 – Management’s Discussion and Analysis of Financial Condition
and Results of Operations.
This analysis for the three and nine months ended September 30, 2000,March 31, 2001, as compared to the same periodsperiod in 1999,2000, should be read in conjunction with the condensed consolidated financial statements (unaudited), the accompanying Notes, the Quarterly Report Notes, and the Annual Report Notes.
Detroit Edison is the principal operating subsidiary of the Company and, as such, unless otherwise identified, this discussion explains material changes in results of operations of both the Company and Detroit Edison and identifies recent trends and events affecting both the Company and Detroit Edison.
GROWTH
The Company and Detroit Edison have developedis focused on prudently growing its earnings base. For the past three years, it has articulated a growth strategy that is expected to increase earningshas consistently achieved its 6% growth fromobjective (after adjustment in 2000 for one-time legislative and merger items). Given its prior successes, depth of management team and strategic asset base, the previously achieved 6% toCompany has increased its growth objective up to 8% over the next several years. The new anticipated growth rate is expected to be achieved by doubling ofstrengthening our core electric and gas (after the growthpending merger with MCN) utility businesses in earnings contributed bythe short term, building our non-regulated businesses in the next three to four years, continued strength ofmid term and leveraging investments in energy technology over the utility business and development of technologies such as distributed generation.long term. The growth strategy, focused on the greater Midwest region, leverages and expands existing assets and skills and includes a merchant energy business. The merchant energy business will include optimizing fuel supply and plant operations, broadening coal marketing and coal tolling efforts, rapidly expanding power marketing and trading operations, growing an emerging base of non-regulated generation projects in the Midwest region and capitalizing on MCN’s storage and pipeline assets to serve the rapidly expanding generation sector.skills.
As discussed in Note 2, the Company and MCN have entered intoannounced a revised merger agreement. The Company expects that completion of the pending merger will result in the issuance of approximately 3029 million shares of its common stock and approximately $1.4$1.2 billion in external financing. The pending merger is expected to create a fully integrated electric and natural gas company that is expectedanticipated to strongly support the Company’s commitment to a long-term earnings growth rate of up to 8%. The merger is expected to permit the Companybe accretive to be responsive to competitive pressures. The external financing needs of the merger may create a sensitivity to interest rate changes; and the Company will need to successfully integrate the two operations in order to be able to service the expected debt requirements and achieve aggregate operating cost reductions. The delayearnings in the receiptfirst full year of regulatory approvals may impactoperation as a combined company. In addition, it is expected that approximately $1.1 billion of cost savings will be realized over the accretive effect on earnings in 2001 resulting from the proposed transaction.next 10 years. See Notes 2 and 6Note 5 for furthera discussion of the pending DTE/MCN merger and the financial instruments used to hedge the interest rate risk associated with financing the pending merger.
As a result of Detroit Edison’s sale of certain of its stranded costs and the related sale of Securitization Bonds, Detroit Edison’s operating revenues and income are expected to be reduced in 2001 and future years. This revenue reduction is offset by the certainty of stranded cost recovery that resulted from the issuance of the Securitization Bonds. Earnings per share are not expected to be impacted due to the reduction in average common shares outstanding resulting from the buyback of common shares.
The Company’s earnings are largely dependent upon the earnings of Detroit Edison and the utilization of alternate fuels tax credits generated from non-regulated businesses. Securitization, discussed in Note 3, is expected to reduce Detroit Edison’s earnings, which may impact the Company’s ability to utilize all future available alternate fuels tax credits. However, if that is the case, the tax credits may be monetized through sale of interests inCompany projects that generateearnings (excluding the credits.impact of goodwill and merger restructuring charges) will be approximately $3.50 to $3.60 per share in 2001 and $4.10 to $4.20 per share in 2002.
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ELECTRIC INDUSTRY RESTRUCTURING
Michigan’s Customer ChoicePursuant to Michigan legislation and Electricity Reliability Act
See Note 3 for a discussionMPSC orders, on March 9, 2001, Detroit Edison sold $1.750 billion of Public Acts 141stranded costs to its Securitization LLC subsidiary, and 142the Securitization LLC issued $1.750 billion of 2000 (PA 141 and PA 142), new legislation signed into effect on June 3, 2000 by Michigan Governor John Engler.
Michigan Public Service Commission
See Note 3 for a discussionsecuritization bonds. Detroit Edison is in the process of using the proceeds of the November 2, 2000 MPSC order regarding securitizationbonds to retire debt and equity, as required, in a manner that will maintain its debt/equity ratio at approximately 50%. The Company will likewise retire approximately 50% debt and 50% equity with the proceeds received as the sole holder of Detroit Edison’s qualified costs.
On October 24, 2000, the MPSC initiated a case to determine the methodology of calculating net stranded costs, as required by PA 141. Methods to be considered include: (1) the relationship of market value to net book value of generation assets and purchase power contracts, (2) evaluations based on the market price of power in relation to price assumed by the MPSC in prior orders and (3) any other method the MPSC considers appropriate. Detroit Edison is unable to determine the timing or outcome of these proceedings.
Federal Energy Regulatory Commission
On September 28, 2000, the FERC conditionally approved an open access transmission tariff designed to allow for the collection of $138 million in annual revenues for transmission services provided by the International Transmission Company (ITC), a wholly owned subsidiary of Detroit Edison. These revenues may not be collected until such time as ITC notifies FERC that the Company’s Board of Directors has approved a spin off of the transmission business to a fully independent transmission company that has no active or passive ownership interests by the Company or Detroit Edison. The ITC must become independent within 24 months of the September 28, 2000 order and join a FERC approved Regional Transmission Organization (RTO) by December 15, 2001; otherwise the innovative transmission rates will revert back to present tariff rates, and revenue collected under the new transmission tariff will be refunded back to customers. If ITC becomes independent, but has not joined an RTO in the required time frame, the FERC has the authority to assign ITC to an RTO. The Company and Detroit Edison intend to comply with the FERC rulings. Detroit Edison’s transmission assets’ net book value is approximately $400 million.equity.
LIQUIDITY AND CAPITAL RESOURCES
Cash From Operating Activities
Net cash from operating activities was lowerhigher for the Company due primarily to increased net income and changes in other current assets and liabilities.
Net cash from operating activities was lower for Detroit Edison due primarily to decreased net income.
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increases in other assets.
Cash Used for Investing Activities
Net cash used for investing activities was higher for the Company due to increased non-regulated plant and equipment expenditures.
Net cash used for investing activities was lower for Detroit Edison due to decreased plant and equipment expenditures.
Cash Used forFrom Financing Activities
Net cash used forfrom financing activities was lower for the Companyhigher due primarily to the issuance of long-term debt and increased short-term borrowings,Securitization Bonds, partially offset by the redemptionresulting redemptions of common stockshort-term borrowings and long-term debt.
Net cash used for financing activities was lower for Detroit Edison due primarily to increased issuances of long-term debt and restricted cashthe buyback of common stock. Remaining proceeds from securitization will be used for additional debt redemptions in the prior period, partially offset by decreased short-term borrowings.and buyback of common stock.
RESULTS OF OPERATIONS
For the three months ended September 30, 2000,March 31, 2001, the Company’s net income was $104$138 million, or $0.73$0.98 per common share as compared to $161 million or $1.11 per common share during the same period in 1999. For the nine months ended September 30, 2000, net income was $329 million or $2.30 perbasic common share, compared to $386$117 million, or $2.66$0.81 per basic common share duringfor the same period in 1999.three months ended March 31, 2000.
DueThe 2001 three-month earnings were higher than 2000 due to higher utility revenues due to the fuelsuspension of the PSCR clause and higher non-regulated income, partially offset by higher purchased power costs, higher operating expenses and the effect of the implementation of the new accounting standard for derivatives (FAS 133).
As a result of the suspension included inof the June 2000 legislation,PSCR clause, the Company expects that the distribution of yearly earnings will shift significantly. The first and fourth quarters of the year willare expected to show higher earnings, while lower earnings are expected in the second and third quarters. In addition, the fuel clause suspension maywill have an impact on earnings, since rates will no longer be adjusted for changes in fuel and purchased power expenses.
The 2000 three and nine months earnings were lower compared to 1999 due to the change in seasonality of the Company’s earnings, a five percent residential rate reduction effective with the June 2000 legislation, lower sales and higher purchased power costs in the utility business. These items were partially offset by lower operating expenses in the utility and higher non-regulated earnings. A share repurchase program in 2000 accounted for slight differences in year over year earnings per common share amounts. The five percent residential rate reduction will result in a revision of the Company’s projection of earnings per share for 2000 to a range of $3.25 to $3.30.
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Operating Revenues
Operating revenues were $4.16$1.842 billion, up approximately 15%55.8% from 19992000 operating revenues of $3.61$1.182 billion. Operating revenues increased (decreased) due to the following:
Three Months | Nine Months | 2001 | 2000 | |||||||||||||||||||
(Millions) | (Millions) | |||||||||||||||||||||
Detroit Edison | Detroit Edison | Detroit Edison | ||||||||||||||||||||
Rate change | $ | (52 | ) | $ | (39 | ) | Rate change | $ | — | $ | 4 | |||||||||||
System sales volume and mix | (49 | ) | — | Residential rate reduction | (17 | ) | — | |||||||||||||||
Suspension of PSCR mechanism | (7 | ) | 39 | System sales volume and mix | (2 | ) | 36 | |||||||||||||||
Wholesale sales | 4 | (6 | ) | Suspension of PSCR mechanism | 46 | — | ||||||||||||||||
Other — net | 2 | 7 | Wholesale sales | 32 | (7 | ) | ||||||||||||||||
Other — net | 16 | 5 | ||||||||||||||||||||
Total Detroit Edison | (102 | ) | 1 | |||||||||||||||||||
Total Detroit Edison | 75 | 38 | ||||||||||||||||||||
Non-regulated | ||||||||||||||||||||||
Non-Regulated | Non-Regulated | |||||||||||||||||||||
DTE Energy Resources | 13 | 55 | DTE Energy Services | 27 | 26 | |||||||||||||||||
(excluding DTE Energy Trading) DTE Energy Trading | 187 | 480 | DTE Energy Trading | 559 | 99 | |||||||||||||||||
Other — net | 9 | 7 | Other — net | (1 | ) | (5 | ) | |||||||||||||||
Total Non-Regulated | 209 | 542 | Total Non-Regulated | 585 | 120 | |||||||||||||||||
Total | Total | $ | 107 | $ | 543 | Total | $ | 660 | $ | 158 | ||||||||||||
Detroit Edison MWh sales for 2001 and the percentage change by year were as follows: |
2001 | 2001 | 2000 | |||||||||||
(Thousands of MWh) | |||||||||||||
Sales | |||||||||||||
Residential | 3,671 | 5.5 | % | (0.1 | )% | ||||||||
Commercial | 4,503 | (3.3 | ) | 3.3 | |||||||||
Industrial | 3,674 | (7.3 | ) | 11.6 | |||||||||
Other (primarily sales for resale) | 674 | (2.5 | ) | 3.8 | |||||||||
Total System | 12,522 | 1.1 | 4.7 | ||||||||||
Wholesale sales | 727 | 49.5 | (56.8 | ) | |||||||||
Total | 13,249 | (0.2 | ) | (0.5 | ) | ||||||||
Detroit Edison kWhIn 2001, residential sales increased (decreased) as compareddue to greater heating demand. Commercial sales decreased due to increased migration of customers to Electric Choice program. Industrial sales decreased due to reduced auto and steel production.
Non-regulated revenues were higher due to an increased level of operations, primarily at DTE Energy Trading, and the prior year as follows:
Three | Nine | ||||||||
Months | Months | ||||||||
Residential | (8.4) | % | (3.0) | % | |||||
Commercial | 0.1 | 0.3 | |||||||
Industrial | (0.8 | ) | 5.8 | ||||||
Other (includes primarily sales for resale) | (0.8 | ) | 2.2 | ||||||
Total System | (2.7 | ) | 1.1 | ||||||
Wholesale sales | 29.9 | (38.7 | ) | ||||||
Total | (1.3 | ) | (1.3 | ) |
27
Operating Expenses
Fuel and Purchased Power
Fuel and purchased power expense increased for the Company due primarily to non-regulated subsidiary expenses, principally energy trading operations.DTE Energy Trading. Detroit Edison fuel and purchased power expense increased due to greater plant generation and increased purchasesmarket prices of energy. The increased costs were incurred to ensure the availability of power by purchasing contracts to cover the projected high demand for electricity expected during the summer. Actual
25
demand was lower than expected and Detroit Edison was unable to sell some of its purchased power contracts.energy. The increased costs are partially offset by increased usage of lower cost coal and nuclear generation, costs.decreased usage of higher cost gas and oil generation, and reduced purchased energy quantities.
System output and average delivered fuel and purchased power unit costs for Detroit Edison were as follows:
Three Months | Nine Months | Three Months | ||||||||||||||||||||||||
2000 | 1999 | 2000 | 1999 | 2001 | 2000 | |||||||||||||||||||||
(Thousands of MWh) | (Thousands of MWh) | |||||||||||||||||||||||||
Power plant generation | Power plant generation | Power plant generation | ||||||||||||||||||||||||
Fossil | 11,556 | 11,847 | 31,449 | 32,021 | Fossil | 10,228 | 9,856 | |||||||||||||||||||
Nuclear | 2,422 | 2,377 | 5,774 | 7,028 | Nuclear | 2,413 | 2,389 | |||||||||||||||||||
Purchased power | Purchased power | 1,897 | 1,988 | 7,115 | 5,761 | Purchased power | 1,532 | 1,972 | ||||||||||||||||||
System output | System output | 15,875 | 16,212 | 44,338 | 44,810 | System output | 14,173 | 14,217 | ||||||||||||||||||
Average unit cost ($/MWh) Generation | $ | 12.29 | $ | 12.80 | $ | 13.12 | $ | 12.54 | ||||||||||||||||||
Average unit cost ($/MWh) | Average unit cost ($/MWh) | |||||||||||||||||||||||||
Generation | $ | 12.34 | $ | 12.72 | ||||||||||||||||||||||
Purchased power | $ | 138.14 | $ | 101.62 | $ | 67.42 | $ | 60.38 | ||||||||||||||||||
Purchased power | $ | 43.32 | $ | 28.98 | ||||||||||||||||||||||
Operation and Maintenance
The Company’s operation and maintenance expenses decreasedwere higher by $30 million. Higher non-regulated expenses ($14 million) were due to an increased level of operations and the addition of new businesses, partially offset by a gain on the sale of an interest in a coke battery. Higher Detroit Edison expenses ($16 million) resulted primarily from an increase in storm expense, distribution system and plant maintenance in preparation for the three-month periodsummer and increased for the nine-month period due to the following:
Three | Nine | ||||||||
Months | Months | ||||||||
(Millions) | |||||||||
Detroit Edison | |||||||||
Catastrophic storms | $ | (26 | ) | $ | (15 | ) | |||
Merger | 4 | 16 | |||||||
Generation reliability and maintenance | (14 | ) | 6 | ||||||
System and customer enhancements | (4 | ) | (11 | ) | |||||
Year 2000 | (7 | ) | (42 | ) | |||||
Other | (4 | ) | 9 | ||||||
(51 | ) | (37 | ) | ||||||
Non-regulated subsidiaries | |||||||||
Increased level of operations and addition of new businesses | 6 | 44 | |||||||
$ | (45 | ) | $ | 7 | |||||
Depreciation and Amortization
Depreciation and amortization expense was higherlower due to higher levelsan extension of plant in service and the accelerated amortization period resulting from the securitization of regulatory assets associated with unamortized nuclear costs.
26
in March 2001.
Income Taxes
Income tax expense for the Company decreased for the three and nine month periods ended September 30, 2000,increased due primarily to theincreased pretax income, partially offset by increased utilization of alternate fuels tax credits generated from non-regulated businesses. The majority of alternate fuels credits are available through 2002, while others have been extended through 2007.
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ACCOUNTING FOR DERIVATIVES
Effective January 1, 2001, The Company adopted Statement of Financial Accounting Standards No. 133 (SFAS No. 133), as amended. SFAS No. 133 establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities.
In general, SFAS No. 133 requires that companies recognize all derivatives as either assets or liabilities on the non-regulated businesses,balance sheet, measured at fair value. SFAS No. 133 provides an exemption for certain contracts that qualify as “normal purchases and sales.” To qualify for this exemption, certain criteria must be met, including that it must be probable that the decreasecontract will result in pre-taxphysical delivery.
The Company’s adoption of SFAS No. 133 on January 1, 2001 resulted in the recognition of derivative assets on the consolidated balance sheet at January 1, 2001 in the amount of $26 million, with offsetting amounts, net of tax, recorded in other comprehensive income of $13 million, and adjustmentscumulative effect of a change in accounting principle of $3 million. As of January 1, 2001, derivative liabilities in the amount of $85 million were also recorded as a result of adopting SFAS No. 133, with an offsetting amount, net of tax, recorded in other comprehensive loss, of $55 million.
Detroit Edison’s adoption of SFAS No. 133 on January 1, 2001 resulted in the recognition of derivative assets on the consolidated balance sheet at January 1, 2001 in the amount of $26 million, with offsetting amounts, net of tax, recorded in other comprehensive income of $13 million, and cumulative effect of a change in accounting principle of $3 million. As of January 1, 2001, derivative liabilities in the amount of $10 million were also recorded as a result of adopting SFAS No. 133, with an offsetting amount, net of tax, recorded in cumulative effect of a change in accounting principle of $(6) million.
See “Note 5 – Financial and Other Derivative Instruments” herein for the filed income tax return.additional information.
FORWARD-LOOKING STATEMENTS
Certain information presented herein is based on the expectations of the Company and Detroit Edison, and, as such, is forward-looking. The Private Securities Litigation Reform Act of 1995 encourages reporting companies to provide analyses and estimates of future prospects and also permits reporting companies to point out that actual results may differ from those anticipated.
Actual results for the Company and Detroit Edison may differ from those expected due to a number of variables including, but not limited to, interest rates, the level of borrowings, weather, actual sales, changes in the cost of fuel and purchased power due to the suspension of the PSCR mechanism (including natural gas subsequent to the pending merger with MCN), the effects of competition and the phased-in implementation of Electric Choice, the implementation of utility restructuring in Michigan (which involves pending regulatory and proposed regulatoryrelated judicial proceedings, the recovery of stranded costs, and actual and possible reductions in rates and earnings), environmental and nuclear requirements,
29
the impact of FERC proceedings and regulations, and the contributions to earnings by non-regulated lines of business.businesses. In addition, expected results will be affected by the Company’s pending merger with MCN.MCN and the timing of the accretive effect of such merger. While the Company and Detroit Edison believe that estimates given accurately measure the expected outcome, actual results could vary materially due to the variables mentioned, as well as others.
27
Item 3 — Quantitative and Qualitative Disclosures About Market Risk.
INTEREST RATE RISKInterest Rate Risk
The Company is subject to interest rate risk in conjunction with the anticipated issuance of long-term debt to be used to finance the merger with MCN. The Company’s exposure to interest rate risk arises from market fluctuations in interest rates until the date of the anticipated debt issuance. In order toTo limit the sensitivity to interest rate fluctuations, the Company has entered into a series of forward startingforward-starting interest rate swaps and Treasury locks and designated such instruments as hedges. See Note 65 for further discussion of these derivative financial instruments.
A sensitivity analysis model was used to calculate the fair values of the Company’s derivative financial instruments, utilizing applicable market interest rates in effect at September 30, 2000.March 31, 2001. The sensitivity analysis involved increasing and decreasing the market rates by a hypothetical 10% and calculating the resulting change in the fair values of the interest rate sensitive instruments. The favorable (unfavorable) changes in fair value are as follows:
Assuming | Assuming | |||||||||||||||||||||||||||||||
A 10% | A 10% | |||||||||||||||||||||||||||||||
Increase in | Decrease in | Assuming 10% | Assuming 10% | |||||||||||||||||||||||||||||
Rates | Rates | Increase in Rates | Decrease in Rates | |||||||||||||||||||||||||||||
(Millions) | (Millions) | |||||||||||||||||||||||||||||||
Interest Rate Risk | Interest Rate Risk | Interest Rate Risk | ||||||||||||||||||||||||||||||
Interest Rate Sensitive | ||||||||||||||||||||||||||||||||
Interest Rate Sensitive Forward Starting Swaps – 5-year | Interest Rate Sensitive Forward Starting Swaps – 5-year | $ | 6.1 | $ | (6.3 | ) | ||||||||||||||||||||||||||
Forward Starting Swap - 5-year | 5.5 | (8.6 | ) | – 10-year | 19.6 | (20.9 | ) | |||||||||||||||||||||||||
- - 10-year | 9.4 | (32.0 | ) | Treasury Locks – 10-year | 1.8 | (1.9 | ) | |||||||||||||||||||||||||
Treasury Lock - 10-year | 2.0 | (2.1 | ) | – 30-year | 12.0 | (12.3 | ) | |||||||||||||||||||||||||
- - 30-year | 11.7 | (13.6 | ) |
MARKET RISKCommodity Price Risk
The Company measuresDetroit Edison is subject to commodity price risk in conjunction with the anticipated purchase of electricity to meet reliability obligations during times of peak customer demand. Detroit Edison's exposure to commodity price risk inherentarises from market fluctuations in DTE Energy Trading, Inc.’s (DTE ET) portfolio utilizing VaR analysis and other methodologies, which simulate forward price curves in electric power markets to quantify estimatescommodity prices until the date of the magnitudeanticipated purchase of electricity. To limit the sensitivity to commodity price fluctuations, Detroit Edison has entered into a series of forward electricity contracts and probabilityoption contracts. See Note 5 for further discussion of potential future losses relatedthese derivative instruments.
A sensitivity analysis model was used to open contract positions. DTE ET’s VaR expressescalculate the potential lossfair values of Detroit Edison's derivative instruments, utilizing applicable commodity prices in effect at March 31, 2001. The sensitivity analysis involved increasing and decreasing the commodity prices by a hypothetical 10% and calculating the resulting change in the fair values of the commodity price sensitive instruments. The favorable (unfavorable) changes in fair value of its forward contract and option position over a particular period of time, with a specified likelihood of occurrence, due to an adverse market movement. The Company reports VaRare as a percentage of its earnings, based on a 95% confidence interval, utilizing 10 day holding periods. As of September 30, 2000, the Company’s VaR from its power marketing and trading activities was less than 1% of the Company’s consolidated “Income Before Income Taxes” for the nine month period ended September 30, 2000. The VaR model uses the variance-covariance statistical modeling technique, and implied and historical volatilities and correlations over the past 20 day period. The estimated market prices used to value thesefollows:
Assuming 10% | Assuming 10% | |||||||||||||||||||||
Increase in | Decrease in | |||||||||||||||||||||
Commodity Prices | Commodity Prices | |||||||||||||||||||||
(Millions) | ||||||||||||||||||||||
Forward Electricity and Option Contracts | $ | (8.4 | ) | $ | 8.2 |
28
transactions for VaR purposes reflect the use of established pricing models and various factors including quotations from exchanges and over-the-counter markets, price volatility factors, the time value of money, and location differentials.
2930
QUARTERLY REPORT ON FORM 10-Q FOR
DTE ENERGY COMPANY
Item 1 — Legal Proceedings.
See Detroit Edison’s “Item 1 — Legal Proceedings” for discussion of a lawsuit pending in Wayne County Circuit Court regarding Plug Power, a developer of fuel cell technology, which is incorporated herein by reference.
Item 5 —– Other Information.
DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Effective September 5, 2000, Eric H. PetersonDavid E. Meador was elected Senior Vice President and General Counsel. Prior to joiningChief Financial Officer of the Company and Detroit Edison, effective with the close of the pending merger with MCN. Mr. Meador was Controller, Mopar Parts Division, at Chrysler Corporation, an international automotive manufacturer, from November 1996 until February 1997. From 1986 to 1996, he held a variety of executive financial positions at Chrysler. Effective February 28, 1997, he was elected Vice President and effective March 29, 1997, he assumed the duties of Controller. Effective April 28, 1999, he was elected Vice President – Finance and Accounting and effective May 15, 2000, he was elected Senior Vice President and Treasurer.
Larry G. Garberding, current Executive Vice President and Chief Financial Officer, will continue as executive vice president and a partner with Worsham Forsythe Wooldridge LLPmember of Dallas, Texas for 15 years.the board of directors until his retirement at year-end.
30Effective February 28, 2001, Daniel G. Brudzynski was elected Vice President and Controller, respectively, of the Company and Detroit Edison. Mr. Brudzynski was Manager, Product Development Finance and Manager, Forecasting Redesign and Implementation at Chrysler Corporation, an international automotive manufacturer, from 1995 until 1997. He joined Detroit Edison in 1997 as Assistant Controller. Effective April 28, 1999, he was elected Controller and Assistant Vice President.
31
Item 1 —– Condensed Consolidated Financial Statements (Unaudited).
See pages 11 through 15.
Item 2 —– Management’s Discussion and Analysis of Financial Condition and Results
of Operations.
See the Company’s and Detroit Edison’s “Item 2 —– Management’s Discussion and Analysis of Financial Condition and Results of Operations,” which is incorporated herein by this reference.
Item 1 —– Legal Proceedings.
On September 25, 2000,In April 2001, the Michigan Court of Appeals denied plaintiffs’ application for leave for an order was enteredinterlocutory hearing on the trial court’s denial of class certification inCoch, et al v.Detroit Edison (Circuit Court for Wayne County, Michigan), a lawsuit involving. This matter, which alleges employment-related claims of discrimination, denying plaintiffs’ motion for class certification. An appeal of this motion has been filed.
A hearing on a motion for class certification is scheduled in November 2000 in Lotharp, et al v. Detroit Edison (Circuit Court for Wayne County, Michigan), a lawsuit brought by employment applicants claiming race/ethnic and gender-based discrimination in Detroit Edison’s employment testing programs.
Edison Development Corporation, a Company subsidiary, is an investor in Plug Power, a developer of fuel cell technology. DCT, Inc. v. Detroit Edison, et al (Circuit Court for Wayne County, Michigan) is a pending lawsuit claiming breach of a nondisclosure agreement and a letter of intentproceeding as well as misappropriation of trade secrets in connection with the evaluation and eventual investment by Plug Power in fuel cell technology. Plug Power and Edison Development are co-defendants. Discovery is underway.nine separate claims. Detroit Edison believes all claims are without merit and is vigorously defending the action.merit.
Item 5 —– Other Information.
A collective bargainingOn March 20, 2001, the International Transmission Company (ITC), currently a wholly owned subsidiary of Detroit Edison, along with other members of the Alliance Regional Transmission Organization (RTO), filed with FERC a settlement agreement which expiredwith parties of the Midwest Independent System Operator (ISO). Both parties are developing proposals for a regional transmission organization in the Midwest. The settlement allows the business models for the Midwest ISO and the Alliance RTO to continue developing. The development of a single rate was agreed to and any eligible customer taking service under either the Midwest ISO Open Access Transmission Tariff (OATT) or the Alliance RTO OATT will be able to obtain service at this single rate. This rate will be in effect until at least December 31, 2004. The parties will also coordinate activities for transmission and transmission-related services, and plan to be operational by December 15, 2001.
The MPSC initiated a case in February 2001 to address the August 2000 was extended until September 2005 for 572request by ABATE to consider the consequences of the transfer of transmission assets from Detroit Edison employees represented by Local 17 ofto ITC. In March 2001, ABATE filed a motion to consolidate its request with the International Brotherhood of Electrical Workers.
As discussed in the Annual Report, in January 1999, the Department of Justice (DOJ) on behalf of the EPA sentapplication that Detroit Edison a Demand Letter requiring the payment of $2.3 million in civil penaltiesmust file by June 5, 2001, proposing to unbundle its commercial and an unconditional commitment to abandon the use of the Conners Creek Power Plant as a coal-fired facility. In the face of Detroit Edison’s
31
rejection, the DOJ/EPA filed suit. In March 1999, the United States District Court for the Eastern District of Michigan issued an Interim Remedial Order which allowed the company to convert the plant and operate it as a gas-fired facility. This was accomplished in time for the Conners Creek Power Plant to help meet record electricity demand in the summer of 1999.industrial rates. Detroit Edison has continued to try to resolvesupported ABATE’s consolidation request, and the remaining outstanding issues through settlement discussions. Tentative agreementcase has been reached with the parties andadjourned until Detroit Edison has proposed to pay a settlement amount of $450,000.
The EPA has initiated enforcement actions against several major electric utilities citing violations of new source provisions of the Clean Air Act. Detroit Edison has received and responded to information requests from the EPA on this subject. It is impossible at this time to predict the future impact of this issue upon Detroit Edison.
Detroit Edison will proceed with the radiological decommissioning of Fermi 1 over the next five to seven years. The cost of such decommissioning is estimated at $34 million. Detroit Edison anticipates that there are sufficient funds available in the Fermi 1 Nuclear Decommissioning Trust Fund to pay the costs offiles its planned decommissioning activities.case.
32
Item 6 —– Exhibits and Reports on Form 8-K.
(a) Exhibits
(i) Exhibits filed |
Exhibit | ||||||
Number | ||||||
4-223 | First Supplemental Indenture, dated as of | |||||
4-224 | ||||||
4-225 | Third Supplemental Indenture, dated as of | |||||
10-42 | ||||||
10-43* | ||||||
10-44* | ||||||
DTE Energy Company Basic and Diluted Earnings Per Share of | ||||||
Common Stock. | ||||||
DTE Energy Company Computation of Ratio of Earnings to | ||||||
Fixed Charges. | ||||||
The Detroit Edison Company Computation of Ratio of | ||||||
Earnings to Fixed Charges. | ||||||
Awareness Letter of Deloitte & Touche LLP regarding | ||||||
their report dated | ||||||
33
Exhibit | ||
Number | ||
99-40 | Assignment and Assumption Agreement, dated as of April 9, 2001, among DTE Capital, DTE Energy, Citibank, N.A., as agent for the Lenders Party to the Fourth Amended and Restated $400 million Credit Agreement, dated as of January 16, 2001. | |
99-41 | Inter-Creditor Agreement dated as of March 9, 2001, among Citicorp North America, Inc., Citibank, N.A., The Bank of New York, The Detroit Edison Securitization Funding LLC and Detroit Edison. | |
99-42 | Amendment, dated March 9, 2001, to Trade Receivables Purchase and Sale Agreement, dated as of February 28, 1989, as amended, among Detroit Edison, Citibank, N.A. and Citicorp North America, Inc. | |
99-43 | Amended and Restated Trade Receivables Purchase and Sale Agreement, dated March 9, 2001, among Detroit Edison, Corporate Asset Funding Company, Inc., Citibank, N. A. and Citicorp North America, Inc. | |
(ii) | Exhibits incorporated herein by reference. | |
2(a) - | Agreement and Plan of Merger, among DTE Energy, MCN Energy Group, Inc. and DTE Enterprises, Inc., dated as of October 4, 1999 and amended as of November 12, 1999, as further amended as of February 28, 2001. (Exhibit 2-2 to Form 10-K for the year ended December 31, 2000.) | |
3(a) - | Amended and Restated Articles of Incorporation of DTE Energy Company Energy Company dated December 13, 1995. (Exhibit 3-5 to Form 10-Q for quarter ended September 30, 1997.) | |
3(b) - | Certificate of Designation of Series A Junior Participating Preferred Stock of DTE Energy Company. (Exhibit 3-6 to Form 10-Q for quarter ended September 30, 1997.) | |
3(c) - | Restated Articles of Incorporation of Detroit Edison, as filed December 10,1991 with the State of Michigan, Department of Commerce — Corporation and Securities Bureau (Exhibit 3-13 to Form 10-Q for quarter ended June 30, 1999.) | |
3(d) - | Articles of Incorporation of DTE Enterprises, Inc. (Exhibit 3.5 to Registration No. 333-89175.) | |
3(e) - | Rights Agreement, dated as of September 23, 1997, by and between DTE Energy Company and The Detroit Edison Company, as Rights Agent (Exhibit 4-1 to DTE Energy Company Current Report on Form 8-K, dated September 23, 1997.) |
34
Exhibit | ||
Number | ||
3(f) - | Agreement and Plan of Exchange (Exhibit 1(2) to DTE Energy Form 8-B filed January 2, 1996, File No. 1-11607.) | |
3(g) - | Bylaws of DTE Energy Company, as amended through September 22, 1999. (Exhibit 3-3 to Registration No. 333-89175.) | |
3(h) - | Bylaws of The Detroit Edison Company, as amended through September 22, 1999. (Exhibit 3-14 to Form 10-Q for quarter ended September 30, 1999.) | |
3(i) - | Bylaws of DTE Enterprises, Inc. (Exhibit 3.6 to Registration No. 333-89175.) | |
4(a) - | Mortgage and Deed of Trust, dated as of October 1, 1924, between Detroit Edison (File No. 1-2198) and First Chicago Trust Company of New York as Trustee (Exhibit B-1 to Registration No. 2-1630) and indentures supplemental thereto, dated as of dates indicated below, and filed as exhibits to the filings as set forth below: |
September 1, 1947 | Exhibit B-20 to Registration No. 2-7136 | |
November 15, 1971 | Exhibit 2-B-38 to Registration No. 2-42160 | |
January 15, 1973 | Exhibit 2-B-39 to Registration No. 2-46595 | |
June 1, 1978 | Exhibit 2-B-51 to Registration No. 2-61643 | |
June 30, 1982 | Exhibit 4-30 to Registration No. 2 78941 | |
August 15, 1982 | Exhibit 4-32 to Registration No. 2-79674 | |
December 1, 1989 | Exhibit 4-211 to Form 10-K for year ended December 31, 2000 | |
February 15, 1990 | Exhibit 4-212 to Form 10-K for year ended December 31, 2000 | |
April 1, 1991 | Exhibit 4-15 to Form 10-K for year Ended December 31, 1996 | |
November 1, 1991 | Exhibit 4-181 to Form 10-K for year ended December 31, 1996 | |
January 15, 1992 | Exhibit 4-182 to Form 10-K for year ended December 31, 1996 | |
February 29, 1992 | Exhibit 4-187 to Form 10-Q for Quarter ended March 31, 1998 | |
April 15, 1992 | Exhibit 4-188 to Form 10-Q for quarter ended March 31, 1998 | |
July 15, 1992 | Exhibit 4-189 to Form 10-Q for Quarter ended March 31, 1998 | |
November 30, 1992 | Exhibit 213 to Form 10-K for year ended December 31, 2000 | |
January 1, 1993 | Exhibit 4-131 to Registration No. 33-56496 | |
March 1, 1993 | Exhibit 4-191 to Form 10-Q for quarter ended March 31, 1998 | |
April 1, 1993 | Exhibit 4-214 to Form 10-K for year ended December 31, 2000 |
3335
Exhibit 4-215 to Form 10-K for Year ended December 31, 2000 | ||||||
May 31, 1993 | Exhibit 4-148 to Registration No. 33-64296 | |||||
June 30, 1993 | Exhibit 4-216 to Form 10-K for year ended December 31, 2000 (1993 Series AP) | |||||
June 30, 1993 | Exhibit 4-150 to Form 10-Q for quarter ended June 30, 1993 (1993 Series H) | |||||
September 15, 1993 | Exhibit 4-217 to Form 10-K for Year ended December 31, 2000 | |||||
March 1, 1994 | Exhibit 4-163 to Registration No. 33-53207 | |||||
June 15, 1994 | Exhibit 4-218 to Form 10-K for year ended December 31, 2000 | |||||
August 15, 1994 | Exhibit 4-220 to Form 10-K for year Ended December 31, 2000 | |||||
August 1, 1995 | Exhibit 4-221 to Form 10-K for year ended December 31, 2000 | |||||
August 1, 1999 | Exhibit 4-204 to Form 10-Q for quarter ended September 30, 1999 | |||||
August 15, 1999 | Exhibit 4-205 to Form 10-Q for quarter ended September 30, 1999 | |||||
January 1, 2000 | Exhibit 4-205 to Form 10-K for year ended December 31, 1999 | |||||
April 15, 2000 | Exhibit 206 to Form 10-Q for quarter ended March 31, 2000. | |||||
August 1, 2000 | Exhibit 4-210 to Form 10-Q for Quarter ended September 30, 2000 |
4(b) - | Collateral Trust Indenture (notes), dated as of June 30, 1993 (Exhibit 4-152 to Registration No. 33-50325). | |
4(c) - | First Supplemental Note Indenture, dated as of June 30, 1993 (Exhibit 4-153 to Registration No. 33-50325). | |
4(d) - | First Amendment, dated as of July, 2000, to the First Supplemental Indenture, dated as of June 30, 1993, to the Collateral Trust Indenture (Notes), dated as of June 30, 1993 (Exhibit 4-208 to Form 10-Q for quarter ended September 30, 2000). | |
4(e) - | Second Supplemental Note Indenture, dated as of September 15, 1993 (Exhibit 4-159 to Form 10-Q for quarter ended September 30, 1993). | |
4(f) | First Amendment, dated as of August 15, 1996, to Second Supplemental Note Indenture (Exhibit 4-17 to Form 10-Q for quarter ended September 30, 1996). |
36
4(g) - | Third Supplemental Note Indenture, dated as of August 15, 1994 (Exhibit 4-169 to Form 10-Q for quarter ended September 30, 1994). | |
4(h) - | First Amendment, dated as of December 12, 1995, to Third Supplemental Note Indenture, dated as of August 15, 1994 (Exhibit 4-12 to Registration No. 333-00023). | |
4(i) - | Sixth Supplemental Note Indenture, dated as of May 1, 1998, between Detroit Edison and Bankers Trust Company, as Trustee, creating the 7.54% Quarterly Income Debt Securities (“QUIDS”), including form of QUIDS. (Exhibit 4-193 to Form 10-Q for quarter ended June 30, 1998.) | |
4(j)- | Seventh Supplemental Note Indenture, dated as of October 15, 1998, between Detroit Edison and Bankers Trust Company, as Trustee, creating the 7.375% QUIDS, including form of QUIDS. (Exhibit 4-198 to Form 10-K for year ended December 31, 1998.) | |
4-(k)- | Eighth Supplemental Indenture, dated as of April 15, 2000, appointing Bank One Trust Company of New York as Trustee under the Detroit Edison Trust Indenture (Notes), dated as of June 30, 1993. (Exhibit 4-207 to form 10-Q for the quarter ended March 31, 2000.) | |
4(l)- | Standby Note Purchase Credit Facility, dated as of August 17, 1994, among The Detroit Edison Company, Barclays Bank PLC, as Bank and Administrative Agent, Bank of America, The Bank of New York, The Fuji Bank Limited, the Long-Term Credit Bank of Japan, LTD, Union Bank and Citicorp Securities, Inc. and First Chicago Capital Markets, Inc. as Remarketing Agents (Exhibit 99-18 to Form 10-Q for quarter ended September 30, 1994.) | |
4(m)- | Amended and Restated Indenture, dated as of April 9, 2001, between DTE Energy Corporation and The Bank of New York, as Trustee. (Exhibit 4.1 to Registration No. 333-58834.) | |
99(a)- | Belle River Participation Agreement between Detroit Edison and Michigan Public Power Agency, dated as of December 1, 1982 (Exhibit 28-5 to Registration No. 2-81501). | |
99(b)- | Belle River Transmission Ownership and Operating Agreement between Detroit Edison and Michigan Public Power Agency, dated as of December 1, 1982 (Exhibit 28-6 to Registration No. 2-81501). | |
99(c)- | 1988 Amended and Restated Loan Agreement, dated as of October 4, 1988, between Renaissance Energy Company (an unaffiliated company) (“Renaissance”) and Detroit Edison (Exhibit 99-6 to Registration No. 33-50325). |
37
99(d) — | First Amendment to 1988 Amended and Restated Loan Agreement, dated as of February 1, 1990, between Detroit Edison and Renaissance (Exhibit 99-7 to Registration No. 33-50325). | |
99(e) — | Second Amendment to 1988 Amended and Restated Loan Agreement, dated as of September 1, 1993, between Detroit Edison and Renaissance (Exhibit 99-8 to Registration No. 33-50325). | |
99(f) — | Third Amendment, dated as of August 28, 1997, to 1988 Amended and Restated Loan Agreement between Detroit Edison and Renaissance. (Exhibit 99-22 to Form 10-Q for quarter ended September 30, 1997.) | |
99(g) — | $200,000,000 364-Day Credit Agreement, dated as of September 1, 1993, among Detroit Edison, Renaissance and Barclays Bank PLC, New York Branch, as Agent (Exhibit 99-12 to Registration No. 33-50325). | |
99(h) — | First Amendment, dated as of August 31, 1994, to $200,000,000 364-Day Credit Agreement, dated September 1, 1993, among The Detroit Edison Company, Renaissance Energy Company, the Banks party thereto and Barclays Bank, PLC, New York Branch, as Agent (Exhibit 99-19 to Form 10-Q for quarter ended September 30, 1994). | |
99(i) — | Third Amendment, dated as of March 8, 1996, to $200,000,000 364-Day Credit Agreement, dated September 1, 1993, as amended, among Detroit Edison, Renaissance, the Banks party thereto and Barclays Bank, PLC, New York Branch, as Agent (Exhibit 99-11 to Form 10-Q for quarter ended March 31, 1996). | |
99(j) — | Fourth Amendment, dated as of August 29, 1996, to $200,000,000 364-Day Credit Agreement as of September 1, 1990, as amended, among Detroit Edison, Renaissance, the Banks party thereto and Barclays Bank, PLC, New York Branch, as Agent (Exhibit 99-13 to Form 10-Q for quarter ended September 30, 1996). | |
99(k) — | Fifth Amendment, dated as of September 1, 1997, to $200,000,000 Multi-Year Credit Agreement, dated as of September 1, 1993, as amended, among Detroit Edison, Renaissance, the Banks Party thereto and Barclays Bank PLC, New York Branch, as Agent. (Exhibit 99-24 to Form 10-Q for quarter ended September 30, 1997.) | |
99(l) — | Seventh Amendment, dated as of August 26, 1999, to $200,000,000 364-Day Credit Agreement, dated as of September 1, 1993, as amended among The Detroit Edison Company, Renaissance Energy Company, the Banks parties thereto and Barclays Bank PLC, New York branch as Agent. (Exhibit 99-30 to Form 10-Q for quarter ended September 30, 1999.) |
38
99(m)- | Eighth Amendment, dated as of August 24, 2000, to | |
the $200,000,000 364-Day Credit Agreement, dated as of | ||
September 1, 1993, as amended, among Detroit Edison, | ||
Renaissance, the Banks party thereto and Barclays Bank | ||
PLC, New York Branch, as agent. | ||
99(o)- | ||
99(p)- | ||
99(q)- | Fourth Amendment, dated as of September 1, 1996, to $200,000,000 Multi-Year (formerly Three-Year) Credit Agreement, dated as of September 1, 1993, as amended among Detroit Edison, Renaissance, the Banks party thereto and Barclays Bank, PLC, New York Branch, as Agent (Exhibit 99-14 to Form 10-Q for quarter ended September 30, 1996). | |
99(r)- | Fifth Amendment, dated as of August 28, 1997, to $200,000,000 364-Day Credit Agreement, dated as of September 1, 1990, as amended, among Detroit Edison, Renaissance, the Banks Party thereto and Barclays Bank PLC, New York Branch, as Agent. (Exhibit 99-25 to Form 10-Q for quarter ended September 30, 1997.) | |
1988 Amended and Restated |
39
99(u) — | First Amendment to 1988 Amended and Restated Nuclear Fuel Heat Purchase Contract, dated as of February 1, 1990, between Detroit Edison | |
99(v) — | ||
August 26, 1999 to 1988 Amended and Restated Nuclear Fuel heat Purchase Contract between | ||
10-Q for quarter ended September 30, 1999.) | ||
99(x) — | ||
99(y) — | Fourth Amended and Restated Credit Agreement, Dated as of January 16, 2001 among DTE Capital Corporation, the Initial Lenders, Citibank, N.A., as Agent, and ABN AMRO Bank N.V., Bank One N.A., Barclays Bank PLC, Bayerische [Landesbank Girozertrale, Cayman Islands Branch, Comerica Bank and Den Daske Bank Aktieselskab], as Co-Agents. | |
99(z) — | Order, dated November 2, 2000, of the Michigan Public Service Commission in U-12478 (Exhibit 99-3780 to Form 10-Q for quarter ended September 30, 2000). | |
99(aa) — | Order, dated January 4, 2001, of the Michigan Public Service Commission in U-12478. |
* | Denotes management contract or compensatory plan or arrangement. |
(b) | On March 8, 2001, the Company filed a Current Report on Form 8-K giving post merger earnings guidance. |
40
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
DTE ENERGY COMPANY | |||||||
(Registrant) | |||||||
By /s/ DANIEL G. BRUDZYNSKI | |||||||
Daniel G. Brudzynski | |||||||
Vice President and Controller | |||||||
Date | May 9, 2001 | /s/ ELAINE M. GODFREY | |||||
Elaine M. Godfrey | |||||||
Assistant Corporate Secretary | |||||||
Date | May 9, 2001 | /s/ DANIEL G. BRUDZYNSKI | |||||
Daniel G. Brudzynski | |||||||
Vice President and Controller |
41
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
THE DETROIT EDISON COMPANY | |||||||
(Registrant) | |||||||
By /s/ DANIEL G. BRUDZYNSKI | |||||||
Daniel G. Brudzynski | |||||||
Vice President and Controller | |||||||
Date | May 9, 2001 | /s/ ELAINE M. GODFREY | |||||
Elaine M. Godfrey | |||||||
Assistant Corporate Secretary | |||||||
Date | May 9, 2001 | /s/ DANIEL G. BRUDZYNSKI | |||||
Daniel G. Brudzynski | |||||||
Vice President and Controller |
42
Exhibit Index
Exhibit | ||
Number | ||
4-222 | Supplemental Indenture, dated as of March 15, 2001, between Detroit Edison and First Chicago Trust Company of New York, establishing the 2001 Series AP Mortgage Bonds. | |
4-223 | First Supplemental Indenture, dated as of April 9, 2001, between DTE Energy and The Bank of New York, as trustee. | |
4-224 | Second Supplemental Indenture, dated as of April 9, 2001, between DTE Energy and the Bank of New York, as trustee. | |
4-225 | Third Supplemental Indenture, dated as of April 9, 2001, among DTE Capital Corporation, DTE Energy and The Bank of New York, as trustee | |
10-41* | Executive Vehicle Plan | |
10-42 | Securitization Property Sale Agreement, dated March 9, 2001, between Detroit Edison and The Detroit Edison Securitization Funding LLC | |
10-43* | DTE Energy 2001 Stock Incentive Plan | |
10-44* | DTE Energy Annual Incentive Plan | |
11-22 — | DTE Energy Company Basic and Diluted Earnings Per Share of Common Stock. | |
12-30 — | DTE Energy Company Computation of Ratio of Earnings to Fixed Charges. | |
12-31 — | The Detroit Edison Company Computation of Ratio of Earnings to Fixed Charges. | |
15-16 — | Awareness Letter of Deloitte & Touche LLP regarding their report dated May 9, 2001. |
34
99-40 | Assignment and Assumption Agreement, dated as of April 9, 2001, among DTE Capital, DTE Energy, Citibank, N.A., as agent for the Lenders Party to the Fourth Amended and Restated $400 million Credit Agreement, dated as of January 16, 2001. | |
99-41 | Inter-Creditor Agreement dated as of March 9, 2001, among Citicorp North America, Inc., Citibank, N.A., The Bank of New York, The Detroit Edison Securitization Funding LLC and Detroit Edison. | |
99-42 | Amendment, dated March 9, 2001, to Trade Receivables Purchase and Sale Agreement, dated as of February 28, 1989, as amended, among Detroit Edison, Citibank, N.A. and Citicorp North America, Inc. | |
99-43 | Amended and Restated Trade Receivables Purchase and Sale Agreement, dated March 9, 2001, among Detroit Edison, Corporate Asset Funding Company, Inc., Citibank, N. A. and Citicorp North America, Inc. | |
(ii) | Exhibits incorporated herein by reference. | |
2(a) — | Agreement and Plan of Merger, among DTE Energy, MCN Energy Group, Inc. and DTE Enterprises, Inc., dated as of October 4, 1999 and amended as of November 12, 1999, as further amended as of February 28, 2001. (Exhibit 2-2 to Form 10-K for the year ended December 31, 2000.) | |
3(a) — | Amended and Restated Articles of Incorporation of DTE Energy Company Energy Company dated December 13, 1995. (Exhibit 3-5 to Form 10-Q for quarter ended September 30, 1997.) | |
3(b) — | Certificate of Designation of Series A Junior Participating Preferred Stock of DTE Energy Company. (Exhibit 3-6 to Form 10-Q for quarter ended September 30, 1997.) | |
3(c) — | Restated Articles of Incorporation of Detroit Edison, as filed December 10, 1991 with the State of Michigan, Department of Commerce — Corporation and Securities Bureau (Exhibit 3-13 to Form 10-Q for quarter ended June 30, 1999.) | |
3(d) — | Articles of Incorporation of DTE Enterprises, Inc. (Exhibit 3.5 to Registration No. 333-89175.) | |
3(e) — | Rights Agreement, dated as of September 23, 1997, by and between DTE Energy Company and The Detroit Edison Company, as Rights Agent (Exhibit 4-1 to DTE Energy Company Current Report on Form 8-K, dated September 23, 1997.) |
3(f) — | Agreement and Plan of Exchange (Exhibit 1(2) to DTE Energy Form 8-B filed January 2, 1996, File No. 1-11607.) | |
3(g) — | Bylaws of DTE Energy Company, as amended through September 22, 1999. (Exhibit 3-3 to Registration No. 333-89175.) | |
3(h) — | Bylaws of The Detroit Edison Company, as amended through September 22, 1999. (Exhibit 3-14 to Form 10-Q for quarter ended September 30, 1999.) | |
3(i) — | Bylaws of DTE Enterprises, Inc. (Exhibit 3.6 to Registration No. 333-89175.) | |
4(a) | Mortgage and Deed of Trust, dated as of October 1, | |
1924, between Detroit Edison (File No. 1-2198) and | ||
Registration No. 2-1630) and indentures supplemental | ||
thereto, dated as of dates indicated below, and | ||
filed as exhibits to the filings as set forth below: |
September 1, 1947 | Exhibit B-20 to Registration No. 2-7136 | |
November 15, 1971 | Exhibit 2-B-38 to Registration No. 2-42160 | |
January 15, 1973 | Exhibit 2-B-39 to Registration No. 2-46595 | |
June 1, 1978 | Exhibit 2-B-51 to Registration No. 2-61643 | |
June 30, 1982 | Exhibit 4-30 to Registration No. | |
August 15, 1982 | Exhibit 4-32 to Registration No. 2-79674 | |
Exhibit | ||
February 15, 1990 | Exhibit | |
April 1, 1991 | Exhibit 4-15 to Form 10-K for year Ended December 31, 1996 | |
November 1, 1991 | Exhibit 4-181 to Form 10-K for year ended December 31, 1996 | |
January 15, 1992 | Exhibit 4-182 to Form 10-K for year ended December 31, 1996 | |
February 29, 1992 | Exhibit 4-187 to Form 10-Q for Quarter ended March 31, 1998 | |
April 15, 1992 | Exhibit 4-188 to Form 10-Q for quarter ended March 31, 1998 | |
July 15, 1992 | Exhibit 4-189 to Form 10-Q for Quarter ended March 31, 1998 | |
Exhibit | ||
January 1, 1993 | Exhibit 4-131 to Registration No. | |
March 1, 1993 | Exhibit 4-191 to Form 10-Q for quarter ended March 31, 1998 | |
April 1, 1993 | Exhibit |
April 26, 1993 | Exhibit | |
May 31, 1993 | Exhibit 4-148 to Registration No. 33-64296 | |
June 30, 1993 | Exhibit 4-216 to Form 10-K for year ended December 31, 2000 (1993 Series AP) | |
June 30, 1993 | Exhibit 4-150 to Form 10-Q for quarter ended June 30, 1993 (1993 Series H) | |
September 15, 1993 | Exhibit 4-217 to Form 10-K for Year ended December 31, 2000 | |
March 1, 1994 | Exhibit 4-163 to Registration No. 33-53207 | |
June 15, 1994 | Exhibit 4-218 to Form 10-K for year ended December 31, 2000 | |
August 15, 1994 | Exhibit 4-220 to Form 10-K for year Ended December 31, 2000 | |
August 1, 1995 | Exhibit 4-221 to Form 10-K for year ended December 31, 2000 | |
August 1, 1999 | Exhibit 4-204 to Form 10-Q for quarter ended September 30, 1999 | |
August 15, 1999 | Exhibit 4-205 to Form 10-Q for quarter ended September 30, 1999 | |
January 1, 2000 | Exhibit 4-205 to Form 10-K for year ended December 31, 1999 | |
April 15, 2000 | Exhibit 206 to Form 10-Q for quarter ended March 31, 2000. | |
August 1, 2000 | Exhibit 4-210 to Form 10-Q for Quarter ended September 30, 2000 |
4(b) — | Collateral Trust Indenture (notes), dated as of June 30, 1993 (Exhibit 4-152 to Registration No. 33-50325). | |
4(c) — | First Supplemental Note Indenture, dated as of June 30, 1993 (Exhibit 4-153 to Registration No. 33-50325). | |
4(d) — | First Amendment, dated as of July, 2000, to the First Supplemental Indenture, dated as of June 30, 1993, to the Collateral Trust Indenture (Notes), dated as of June 30, 1993 (Exhibit 4-208 to Form 10-Q for quarter ended September 30, 2000). | |
4(e) — | Second Supplemental Note Indenture, dated as of September 15, 1993 (Exhibit 4-159 to Form 10-Q for quarter ended September 30, 1993). | |
4(f) — | First Amendment, dated as of August 15, 1996, to Second Supplemental Note Indenture (Exhibit 4-17 to Form 10-Q for quarter ended September 30, 1996). |
4(g) — | Third Supplemental Note Indenture, dated as of August 15, 1994 (Exhibit 4-169 to Form 10-Q for quarter ended September 30, 1994). | |
4(h) — | First Amendment, dated as of December 12, 1995, to Third Supplemental Note Indenture, dated as of August 15, 1994 (Exhibit 4-12 to Registration No. 333-00023). | |
4(i) — | Sixth Supplemental Note Indenture, dated as of May 1, 1998, between Detroit Edison and Bankers Trust Company, as Trustee, creating the 7.54% Quarterly Income Debt Securities (“QUIDS”), including form of QUIDS. (Exhibit 4-193 to Form 10-Q for quarter ended June 30, 1998.) | |
4(j) — | Seventh Supplemental Note Indenture, dated as of October 15, 1998, between Detroit Edison and Bankers Trust Company, as Trustee, creating the 7.375% QUIDS, including form of QUIDS. (Exhibit 4-198 to Form 10-K for year ended December 31, 1998.) | |
4-(k) — | Eighth Supplemental Indenture, dated as of April 15, 2000, appointing Bank One Trust Company of New York as Trustee under the Detroit Edison Trust Indenture (Notes), dated as of June 30, 1993. (Exhibit 4-207 to form 10-Q for the quarter ended March 31, 2000.) | |
4(l) — | Standby Note Purchase Credit Facility, dated as of August 17, 1994, among The Detroit Edison Company, Barclays Bank PLC, as Bank and Administrative Agent, Bank of America, The Bank of New York, The Fuji Bank Limited, the Long-Term Credit Bank of Japan, LTD, Union Bank and Citicorp Securities, Inc. and First Chicago Capital Markets, Inc. as Remarketing Agents (Exhibit 99-18 to Form 10-Q for quarter ended September 30, 1994.) | |
4(m) — | Amended and Restated Indenture, dated as of April 9, 2001, between DTE Energy Corporation and The Bank of New York, as Trustee. (Exhibit 4.1 to Registration No. 333-58834.) | |
99(a) — | Belle River Participation Agreement between Detroit Edison and Michigan Public Power Agency, dated as of December 1, 1982 (Exhibit 28-5 to Registration No. 2-81501). | |
99(b) — | Belle River Transmission Ownership and Operating Agreement between Detroit Edison and Michigan Public Power Agency, dated as of December 1, 1982 (Exhibit 28-6 to Registration No. 2-81501). | |
99(c) — | 1988 Amended and Restated Loan Agreement, dated as of October 4, 1988, between Renaissance Energy Company (an unaffiliated company) (“Renaissance”) and Detroit Edison (Exhibit 99-6 to Registration No. 33-50325). |
35
36
37
99(d) | First Amendment to 1988 Amended and Restated Loan Agreement, dated as of February 1, 1990, between Detroit Edison and Renaissance (Exhibit 99-7 to Registration No. 33-50325). | |
99(e) | Second Amendment to 1988 Amended and Restated Loan Agreement, dated as of September 1, 1993, between Detroit Edison and Renaissance (Exhibit 99-8 to Registration No. 33-50325). |
38
99(f) | Third Amendment, dated as of August 28, 1997, to 1988 Amended and Restated Loan Agreement between Detroit Edison and Renaissance. (Exhibit 99-22 to Form 10-Q for quarter ended September 30, 1997.) | |
99(g) | $200,000,000 364-Day Credit Agreement, dated as of September 1,1993, among Detroit Edison, Renaissance and Barclays Bank PLC, New York Branch, as Agent (Exhibit 99-12 to Registration No. 33-50325). | |
99(h) | First Amendment, dated as of August 31, 1994, to $200,000,000 364-Day Credit Agreement, dated September 1, 1993, among The Detroit Edison Company, Renaissance Energy Company, the Banks party thereto and Barclays Bank, PLC, New York Branch, as Agent (Exhibit 99-19 to Form 10-Q for quarter ended September 30, 1994). | |
99(i) | Third Amendment, dated as of March 8, 1996, to $200,000,000 364-Day Credit Agreement, dated September 1, 1993, as amended, among Detroit Edison, Renaissance, the Banks party thereto and Barclays Bank, PLC, New York Branch, as Agent (Exhibit 99-11 to Form 10-Q for quarter ended March 31, 1996). | |
99(j) | Fourth Amendment, dated as of August 29, 1996, to $200,000,000 364-Day Credit Agreement as of September 1, 1990, as amended, among Detroit Edison, Renaissance, the Banks party thereto and Barclays Bank, PLC, New York Branch, as Agent (Exhibit 99-13 to Form 10-Q for quarter ended September 30, 1996). | |
99(k) | Fifth Amendment, dated as of September 1, 1997, to $200,000,000 Multi-Year Credit Agreement, dated as of September 1, 1993, as amended, among Detroit Edison, Renaissance, the Banks Party thereto and Barclays Bank PLC, New York Branch, as Agent. (Exhibit 99-24 to Form 10-Q for quarter ended September 30, 1997.) | |
99(l) | Seventh Amendment, dated as of August 26, 1999, to $200,000,000 364-Day Credit Agreement, dated as of September 1, 1993, as amended among The Detroit Edison Company, Renaissance Energy Company, the Banks parties thereto and Barclays Bank PLC, New York branch as Agent. (Exhibit 99-30 to Form 10-Q for quarter ended September 30, 1999.) | |
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40
41
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
42
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
43
EXHIBIT INDEX
35
99(m) — | ||||||||||
99(n) — | $200,000,000 Three-Year Credit Agreement, dated September | |||||||||
99(o) — | ||||||||||
99(p) — | Third Amendment, dated as of March 8, 1996, to $200,000,000 Three-Year Credit Agreement, dated September 1, 1993, as amended among Detroit Edison, Renaissance, the Banks party thereto and Barclays Bank, PLC, New York Branch, as Agent (Exhibit 99-12 to Form 10-Q for quarter ended March 31, 1996). | |||||||||
99(q) — | Fourth Amendment, dated as of September 1, 1996, to $200,000,000 Multi-Year (formerly Three-Year) Credit Agreement, dated as of September 1, 1993, as amended among Detroit Edison, Renaissance, the Banks party thereto and Barclays Bank, PLC, New York Branch, as Agent (Exhibit 99-14 to Form 10-Q for quarter ended September 30, 1996). | |||||||||
99(r) — | Fifth Amendment, dated as of August 28, 1997, to $200,000,000 364-Day Credit Agreement, dated as of September 1, 1990, as amended, among Detroit Edison, Renaissance, the Banks Party thereto and Barclays Bank PLC, New York Branch, as Agent. (Exhibit 99-25 to Form 10-Q for quarter ended September 30, 1997.) | |||||||||
99(s) — | Sixth Amendment, dated as of August 27, 1998, to $200,000,000 364-Day Credit Agreement dated as of September 1, 1990, as amended, among Detroit Edison, Renaissance, the Banks party thereto and Barclays Bank PLC, New York Branch, as agent. (Exhibit 99-32 to Registration No. 333-65765.) | |||||||||
99(t) — | 1988 Amended and Restated Nuclear Fuel Heat Purchase Contract, dated October 4, 1988, between Detroit Edison and Renaissance (Exhibit 99-9 to Registration No. 33-50325). |
First Amendment to 1988 Amended and Restated Nuclear Fuel Heat Purchase Contract, dated as of February 1, 1990, between Detroit Edison and Renaissance (Exhibit 99-10 to Registration No. 33-50325). | ||
99(v) — | Eighth Amendment, dated as of August 26, 1999 to 1988 Amended and Restated Nuclear Fuel heat Purchase Contract between Detroit Edison and Renaissance Energy Company. (Exhibit 99-31 to Form 10-Q for quarter ended September 30, 1999.) | |
99(w) — | U.S. $160,000,000 Standby Note Purchase Credit Facility, dated as of October 26, 1999, among Detroit Edison, the Bank’s signatory thereto, Barclays Bank PLC, as Administrative Agent and Barclays Capital Inc., Lehman Brothers Inc. and Banc One Capital Markets, Inc., as Remarketing Agents. (Exhibit 99-29 to Form 10-Q for quarter ended September 30, 1999. |
99(x) — | Standby Note Purchase Credit Facility, dated as of September 12, 1997, among The Detroit Edison Company and the Bank’s Signatory thereto and The Chase Manhattan Bank, as Administrative Agent, and Citicorp Securities, Inc., Lehman Brokers, Inc., as Remarketing Agents and Chase Securities, Inc. as Arranger. (Exhibit 99-26 to Form 10-Q for quarter ended September 30, 1997.) | |
99(y) — | ||
99(z) — | ||
99(aa) — | Order, dated January 4, 2001, of the Michigan Public Service Commission in U-12478. |
* | ||