Business Update
Dave Meador, Executive Vice President and CFO
February 7, 2012
Safe Harbor Statement
The information contained herein is as of the date of this presentation. Many factors may impact forward-looking statements including, but not limited to, the following: economic conditions and population changes in our geographic area resulting in changes in demand, customer conservation, increased thefts of electricity and gas and high levels of uncollectible accounts receivable; changes in the economic and financial viability of suppliers and trading counterparties, and the continued ability of such parties to perform their obligations to the Company; access to capital markets and the results of other financing efforts which can be affected by credit agency ratings; instability in capital markets which could impact availability of short and long-term financing; the timing and extent of changes in interest rates; the level of borrowings; the potential for losses on investments, including nuclear decommissioning and benefit plan assets and the related increases in future expense and contributions; impact of regulation by the FERC, MPSC, NRC and other applicable governmental proceedings and regulations, including any associated impact on rate structures; the amount and timing of cost recovery allowed as a result of regulatory proceedings; the potential for increased costs or delays in completion of significant construction projects; the effects of weather and other natural phenomena on operations and sales to customers, and purchases from suppliers; environmental issues, laws, regulations, and the increasing costs of remediation and compliance, including actual and potential new federal and state requirements; health, safety, financial, environmental and regulatory risks associated with ownership and operation of nuclear facilities; impact of electric and gas utility restructuring in Michigan, including legislative amendments and Customer Choice programs; employee relations and the impact of collective bargaining agreements; unplanned outages; changes in the cost and availability of coal and other raw materials, purchased power and natural gas; volatility in the short-term natural gas storage markets impacting third-party storage revenues; cost reduction efforts and the maximization of plant and distribution system performance; the effects of competition; the uncertainties of successful exploration of unconventional gas resources and challenges in estimating gas and oil reserves with certainty; changes in and application of federal, state and local tax laws and their interpretations, including the Internal Revenue Code, regulations, rulings, court proceedings and audits, related appeals or new legislation; the cost of protecting assets against, or damage due to, terrorism or cyber attacks; the availability, cost, coverage and terms of insurance and stability of insurance providers; changes in and application of accounting standards and financial reporting regulations; changes in federal or state laws and their interpretation with respect to regulation, energy policy and other business issues; binding arbitration, litigation and related appeals; and risks discussed in public filings with the SEC. New factors emerge from time to time. We cannot predict what factors may arise or how such factors may cause our results to differ materially from those contained in any forward-looking statement. Any forward-looking statements refer only as of the date on which such statements are made. We undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which such statement is made or to reflect the occurrence of unanticipated events. This presentation should also be read in conjunction with the “Forward-Looking Statements” sections in each of DTE Energy’s and Detroit Edison’s 2010 Forms 10-K and 2011 Forms 10-Q (which sections are incorporated herein by reference), and in conjunction with other SEC reports filed by DTE Energy and Detroit Edison.
Cautionary Note – The Securities and Exchange Commission permits oil and gas companies, in their filings with the SEC, to disclose only proved reserves that a company has demonstrated by actual production or conclusive formation tests to be economically and legally producible under existing economic and operating conditions. We use certain terms in this presentation such as “probable reserves” that the SEC’s guidelines strictly prohibit us from including in filings with the SEC. You are urged to consider closely the disclosure in DTE Energy’s 2010 Form 10-K and 2011 Forms 10-Q, File No. 1-11607, available from our offices or from our website at www.dteenergy.com. You can also obtain these Forms from the SEC by accessing its website at www.sec.gov or by calling 1-800-SEC-0330.
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Overview
Utility Growth
Non—Utility Growth
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Investment Thesis
DTE Energy has a plan it believes will provide 5%—6% long-term operating EPS growth, an attractive dividend yield and a strong balance sheet
– Utility growth plan driven by mandated investments
– Constructive regulatory structure and continued cost savings enable utilities to earn their authorized returns
– Plans in place to achieve operational excellence and customer satisfaction that are distinctive in our industry, with a focus on customer affordability
– Meaningful, low-risk growth opportunities in non-utility businesses continue to provide diversity in earnings and geography
5%-6% Average Annual EPS Growth Attractive Dividend
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DTE Energy is an Integrated Energy Company
Strong, Stable and Growing Utilities
~80% of DTE Energy’s 2010 Earnings
Detroit Edison
Electric generation and distribution
2.1 million customers
Fully regulated by Michigan Public Service Commission (MPSC)
MichCon
Natural gas distribution
1.2 million customers
Fully regulated by MPSC
Complementary Non-Utility Businesses
~20% of DTE Energy’s 2010 Earnings
Gas Storage & Pipelines
Power & Industrial Projects
Unconventional Gas Production
Energy Trading
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Growth and Value Creation
Targeting 5%—6% Long-Term Operating EPS Growth
DTE Energy Operating Earnings Per Share*
$2.89
2008A 2009A 2010A 2011E 2012E 2013E 2014E 2015E
CAGR = ~7%
* Reconciliation to GAAP reported earnings included in the appendix
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Dividend is Well Supported
Dividend Yield (as of January 2012)
-1% 0% 1% 2% 3% 4% 5% 6% TEG
VVC AEP
TE PGN WR PCG
PNW DTE 4.4% CMS
CNP SCG LNT
SO GXP
ED NI XEL NST WEC NVE
NU
DTE Energy Annualized Dividend
$2.35 $2.24 $2.12
2009 2010 2011
5.3% CAGR
Payout ratio in-line with 60%—70% target
Future increases supported by targeted 5%—6% EPS growth
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Constructive Regulatory Environment
2008 Legislation Supports Utility Investment
File & Use Rates with 6 month self-implementation
Final order in 12 months
Forward-looking test year
Electric Choice cap
Renewable Portfolio Standard / Energy Optimization with fixed surcharge
Certificate of Need for large capital projects
Recent 2011 Detroit Edison Rate Order
$175 million rate increase
Full recovery/return on projected capital investments
10.5% authorized ROE
Modified revenue decoupling
Choice fully recovered in base rates
Economics support DTE Energy’s EPS Growth Plan
We remain focused on continuous improvement and customer satisfaction to support our constructive regulation
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Continuous Improvement Efforts Offsetting Inflation and Other Costs
Utility Operations and Maintenance Expense*
($ millions)
inflation-adjusted O&M expense
$1,635
Target
$1,550 ~$1,575** $1,550
~$1,900
~$350
2005 2006 2007 2008 2009 2010 2011E 2012E
Utility O&M reduction of $60 million since 2005
*Excludes bad debt expense, energy efficiency and renewable energy **Includes $25 million of higher storm costs vs. 2010
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Continuous Improvement Initiatives Driving Customer Satisfaction
MichCon Customer Complaints to the MPSC 578
150
2008 2009 2010 2011 Target
J.D. Power and Associates
2007 Gas Utility Residential Customer Satisfaction Study
High
Ranking MichCon
Low
Key Initiatives
Implemented 4 hour appointment blocks for service calls (97% on-time)
Focus on reducing errors in customer orders
Increased outreach to assist low-income customers
250,000 customer callbacks in 2011
J.D. Power and Associates
2011 Gas Utility Residential Customer Satisfaction Study
High
MichCon Ranking
Low
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Overview
Utility Growth
Non—Utility Growth
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Detroit Edison
Investment Profile, 2011 – 2016
Near term growth driven by mandated renewable energy and environmental investments
Potential longer term investments in additional environmental or new generation
(millions)
~$1,500
~$1,400
~$1,300 ~$1,300
~$1,250 ~$1,250
~$850
620 650 550 580 531 520
2007-2010 2011E 2012E 2013E 2014E 2015E 2016E Average
2012 – 2016
New Environmental/
Generation ~$550 Other Projects* ~$600
Renewables / EE ~$900 Environmental ~$1,300 Base ~$3,350 Depreciation
Rate
$10.4B $14.2B
Base
* Includes AMI, Ludington expansion and other investments
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Detroit Edison
Strategic Options for EGU MACT*
Belle River Power Plant
Dry Sorbent Injection (DSI)
Testing of DSI is ongoing; expect to complete by year-end 2011
Flue Gas Desulfurization (FGD)
If DSI is not effective/economical, FGD may be economical at larger units
Retire unit if control technology is uneconomical
Reduced Emissions Fuel (REF)
Reduces Mercury and NOx
Expect to have facilities at 3 Detroit Edison plants
*Electric Generating Unit Maximum Achievable Control Technology
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Detroit Edison
Coal Fleet Assessment
Assessment* of Detroit Edison Coal-Fired Capacity MW
313 MW (4%) 1,000 MW
(14%)
3,095 MW (43%)
Monroe
1,500 MW (21%)
Monroe Power Plant
1,260 MW (18%)
Belle River
*Based on preliminary testing
Monroe—largest plant comprising ~40% of the coal fleet—is deploying FGDs and SCRs
Belle River (18% of capacity)—may deploy either FGDs or DSI
Additional 21% of capacity – based on early testing DSI appears to work; retirement unlikely
Future viability of 14% of our fleet is highly dependent on success with DSI
– Potential for combined cycle gas turbine generation to backfill possible retirements
– Retirements beginning as early as 2015 4% of fleet will be retired
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Detroit Edison
Renewable Energy Portfolio
17 MW Biomass
26 MW Wind
Gratiot Wind Energy
212 MW Wind
~$250M Capital Investment On-Line Late 2011/Early 2012
(102 MW Owned/110 MW Contracted)
Detroit Edison Owned Contracted
120 MW Wind
Thumb Wind Farms
~110 MW Wind
~$250M Capital Investment
On-Line 2012 / 2013
6 MW Landfill Gas
SolarCurrents Pilot:
7 MW Contracted
* Reconciliation to GAAP reported earnings included in the appendix
Projected Operating Earnings*
~$55
(millions, after-tax)
$30—$35
$10—$15
2011E 2012E 2013E 2014E 2015E 2016E
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MichCon
Investment Profile, 2011 – 2016
Growth driven by investments in cast iron main renewal and meter move out program
(millions)
~$215 ~$210 ~$210 ~$210
~$195
~$180
102 105
95 99
88 91
2011E 2012E 2013E 2014E 2015E 2016E
Rate $2.5B $3.0B Base
2012 – 2016
Meter Move Out ~$115
Main Renewal ~$250
Base ~$675
Depreciation
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MichCon
Main Renewal Program
Program Overview
10-year Main Replacement 670 miles
Capital Investment ~$500 million
Projected Impact on Leaks
Le aks of Number
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
Benefits
Improved safety and reliability
Accelerated replacement and retirement of poor performing mains
Reduction in operating costs through lower leak repair costs and lost gas
Fewer customer reported leaks, improving overall customer satisfaction
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Overview
Utility Growth
Non—Utility Growth
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Gas Storage and Pipeline
Strong Growth Potential in the Marcellus Shale
Bluestone
180K Acres Within
5 Miles of Bluestone
Southwestern Acreage
Bluestone Growth Opportunities
Initial investment (~$280 million) will serve Southwestern Energy production
Anticipated in-service beginning Q2 2012
Significant expansion opportunities
Potential to expand Bluestone north into NY
Looking for additional “Bluestone-like” opportunities
Millennium Mainline Expansions
Expect first two expansions to be on-line late 2012 and 2013
– Expands capacity by ~50% to 0.8 Bcf/d
Can be economically expanded to 1.5 Bcf/d
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Power & Industrial Projects
Reduced Emissions Fuel (REF) Overview
REF facility at St. Clair Power Plant
REF facility at Monroe Power Plant
Program Overview
Facilities blend proprietary additives with coal, resulting in reduced mercury and NOx emissions
Demonstrated emissions reductions in excess of 40% mercury and 20% NOx
Qualifies for federal income tax credit* of ~$6.33 per ton in 2011
Host utility retains environmental benefits
*Section 45 (adjusts each year with inflation)
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Power & Industrial Projects REF Development Update
Utility In Annual
Host Sites Service Tons
(# of units) Date (millions)
Detroit 2009 (2) 2—5
Edison
(3) 2011 (1) 7—9
Midwest
Utility 2011 4—5
(1)
Midwest
Utility 2011 1—2
(1)
To Be 2009 (3)
Relocated TBD
(4) 2011 (1)
Tax Credit Monetization Status
Executed one agreement
Agreement executed
Partner search in progress
Partner search in progress
Search to commence following relocation
Key Development Activities
Achieved facility in-service by 12/31/11 for new units
Complete test burns and commercial agreements with host utilities
Attract tax credit monetization partners (price & structure)
Achieve targeted production volumes
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Summary
Constructive regulatory structure and focus on operational excellence and customer satisfaction enable meaningful growth at utilities
Continue to see attractive/premium return on non-utility investments
Long-term plan supports 5%—6% operating EPS growth
Year-End Earnings Call with Gerry Anderson and Dave Meador February 16, 2012, 9:00AM (ET)
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Contact Us
DTE Energy Investor Relations www.dteenergy.com/investors 313-235-8030
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Appendix
Michigan Public Service Commission (MPSC)
The Michigan Public Service Commission is composed of three members appointed by the Governor with the advice and consent of the Senate.
Commissioners are appointed to serve staggered six-year terms.
No more than two Commissioners may represent the same political party.
One commissioner is designated as chairman by the Governor.
John Quackenbush Orjiakor Isiogu Greg White
Chairman Commissioner Commissioner
Appointed: 9/15/11 Appointed: 9/9/07 Appointed: 12/4/09
Term Ends: 7/2/17 Term Ends: 7/2/13 Term Ends: 7/2/15 (Republican) (Democrat) (Independent)
Source: MPSC website—www.michigan.gov/mpsc—Jan. 2010
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Gas Storage & Pipeline: Overview
Storage Assets
Pipeline Interests
Vector Pipeline – 40%
Fully contracted (6 year avg. term)
348 miles of pipe; 120,000 H.P. of compression at five stations
Millennium Pipeline – 26.25%
100% contracted (> 10 year avg. term)
222 miles of pipe; 15,000 H.P. of compression
DTE Gas Storage
Fully contracted (6 year avg. term)
90 Bcf of storage capacity in Michigan
26,200 H.P. of compression
Michigan Gathering Assets
Comprised of MichCon Lateral and
MichCon Gathering Companies
Two systems: One designed to handle liquid rich gas and the other for dry production gas
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Barnett Shale Operating Metrics
Reserves (Bcfe)
555 489
201 Proven 234
354
255 Probable
(Unaudited)
YE2009 YE2010
Gross Producing Wells
194 209
YE2010 3Q 2011
Acreage Position (000’s Acres)
86 70
17 Net Developed 16 Acres
69 Net 54
Undeveloped Acres
YE2010 3Q 2011
Net Production (Bcfe) 5.5 4.8
YE2010 YE 2011 Est.
YTD September 30, 2011 Results
15 new wells on-line, 4 in progress
Production of 3.8 Bcfe
56% increase in oil sales volume year-over-year
Capital expenditures $23 million
Acquired 16k acres, net
2011 Goals
Continue to prudently manage and develop Barnett assets
Invest $25—$30 million
Drill 20—25 wells
Produce 5.5 Bcfe net, increase oil production
Develop oil reserves
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DTE Energy Trading Reconciliation of Operating Earnings* to Economic Net Income
(millions)
$10 $46 $36
YTD Sept. 30, 2011 Accounting YTD Sept. 30, 2011 Operating Earnings* Adjustments** Economic Net Income
$23 $23
$0
YTD Sept. 30, 2010 Accounting YTD Sept. 30, 2010 Operating Earnings* Adjustments** Economic Net Income
Economic net income equals economic gross margin*** minus O&M expenses and taxes. DTE Energy management uses economic net income as one of the performance measures for external communications with analysts and investors. Internally, DTE Energy uses economic net income as one of the measures to review performance against financial targets and budget.
* Reconciliation to GAAP reported earnings included in the appendix
** Consists of the income statement effect of not recognizing changes in the fair market value of certain non-derivative contracts including physical inventory and capacity contracts for transportation, transmission and storage. These contracts are not MTM, instead are recognized for accounting purposes on an accrual basis.
*** Economic gross margin is the change in net fair value of realized and unrealized purchase and sale contracts including certain non-derivative contract costs
Energy Trading Operating
Earnings*
($ millions, after-tax)
YTD YTD
9/30/2011 9/30/2010
Realized $51 $30
Unrealized 24 11
O&M / Other (39) (41)
$36 $0
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Reconciliation of YTD September 30, 2011 Reported to Operating Earnings
Use of Operating Earnings Information – DTE Energy management believes that operating earnings provide a more meaningful representation of the company’s earnings from ongoing operations and uses operating earnings as the primary performance measurement for external communications with analysts and investors. Internally, DTE Energy uses operating earnings to measure performance against budget and to report to the Board of Directors.
YTD 2011 Net Income (millions)
Gas Power &
DTE Electric Gas Storage & Unc. Gas Indust. Energy Corporate
Energy Utility Utility Pipelines Prod. Projects Trading & Other
Reported Earnings $561 $345 $69 $42 ($5) $27 $36 $47
Michigan Corporate Income Tax
Adjustment (88) —————— (88)
Fermi 1 Asset Retirement Obligation 9 9 ————— -
Operating Earnings $482 $354 $69 $42 ($5) $27 $36 ($41)
YTD 2011 EPS
Gas Power &
DTE Electric Gas Storage & Unc. Gas Indust. Energy Corporate
Energy Utility Utility Pipelines Prod. Projects Trading & Other
Reported Earnings $3.30 $2.03 $0.41 $0.25 ($0.03) $0.16 $0.21 $0.27
Michigan Corporate Income Tax
Adjustment (0.52) —————— (0.52)
Fermi 1 Asset Retirement Obligation 0.05 0.05 ————— -
Operating Earnings $2.83 $2.08 $0.41 $0.25 ($0.03) $0.16 $0.21 ($0.25)
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Reconciliation of 2010 Reported to Operating Earnings
Use of Operating Earnings Information – DTE Energy management believes that operating earnings provide a more meaningful representation of the company’s earnings from ongoing operations and uses operating earnings as the primary performance measurement for external communications with analysts and investors. Internally, DTE Energy uses operating earnings to measure performance against budget and to report to the Board of Directors.
2010 Net Income ($millions)
Gas Power &
DTE Electric Gas Storage & Unc. Gas Indust. Energy Corporate
Energy Utility Utility Pipelines Prod. Projects Trading & Other
Reported Earnings $630 $441 $127 $51 ($11) $85 $6 ($69)
Performance Excellence Process—
Cost to Achieve Deferral* (20) — (20) ———— -
Settlement with Detroit Thermal (3) (3) ————— -
Operating Earnings $607 $438 $107 $51 ($11) $85 $6 ($69)
2010 $EPS
Gas Power &
DTE Electric Gas Storage & Unc. Gas Indust. Energy Corporate
Energy Utility Utility Pipelines Prod. Projects Trading & Other
Reported Earnings $3.74 $2.62 $0.75 $0.30 ($0.06) $0.50 $0.04 ($0.41)
Performance Excellence Process—
Cost to Achieve Deferral* (0.12) — (0.12) ———— -
Settlement with Detroit Thermal (0.02) (0.02) ————— -
Operating Earnings $3.60 $2.60 $0.63 $0.30 ($0.06) $0.50 $0.04 ($0.41)
* Deferral of previously expensed cost to achieve as allowed for in June 3, 2010 MPSC order (case—U-15985)
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Reconciliation of 2009 Reported to Operating Earnings
Use of Operating Earnings Information – DTE Energy management believes that operating earnings provide a more meaningful representation of the company’s earnings from ongoing operations and uses operating earnings as the primary performance measurement for external communications with analysts and investors. Internally, DTE Energy uses operating earnings to measure performance against budget and to report to the Board of Directors.
FY 2009 Net Income ($ millions)
Gas Power &
DTE Electric Gas Storage and Unc. Gas Indust. Energy Corporate
Energy Utility Utility Pipelines Prod. Projects Trading & Other
Reported Earnings $532 $376 $80 $49 ($9) $31 $75 ($70)
Gain on Sale—gathering and treating
assets (before goodwill allocation) (13) — (13) ———— -
Goodwill allocation—gathering and
treating assets 13 — 13 ———— -
Chrysler Bad Debt 5 4 ——— 1 — -
General Motors Bad Debt 3 ———— 3 — -
Antrim Hedge 3 —————— 3
Operating Earnings $543 $380 $80 $49 ($9) $35 $75 ($67)
FY 2009 $EPS
Gas Power &
DTE Electric Gas Storage and Unc. Gas Indust. Energy Corporate
Energy Utility Utility Pipelines Prod. Projects Trading & Other
Reported Earnings $3.24 $2.28 $0.49 $0.30 ($0.05) $0.19 $0.46 ($0.43)
Gain on Sale—gathering and treating
assets (before goodwill allocation) (0.08) — (0.08) ———— -
Goodwill allocation—gathering and
treating assets 0.08 — 0.08 ———— -
Chrysler Bad Debt 0.03 0.02 ——— 0.01 — -
General Motors Bad Debt 0.02 ———— 0.02 — -
Antrim Hedge 0.01 —————— 0.01
Operating Earnings $3.30 $2.30 $0.49 $0.30 ($0.05) $0.22 $0.46 ($0.42)
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Reconciliation of 2008 Reported to Operating Earnings
Use of Operating Earnings Information – DTE Energy management believes that operating earnings provide a more meaningful representation of the company’s earnings from ongoing operations and uses operating earnings as the primary performance measurement for external communications with analysts and investors. Internally, DTE Energy uses operating earnings to measure performance against budget and to report to the Board of Directors.
FY 2008 Net Income ($ millions)
Gas Power &
DTE Electric Gas Storage and Unc. Gas Indust. Energy Corporate
Energy Utility Utility Pipelines Prod. Projects Trading & Other Synfuel
Reported Earnings $546 $331 $85 $38 $84 $40 $42 ($94) $20
Performance Excellence Process 6 — 4 —— 1 1 — -
Core Barnett Sale (81) ——— (81) ——— -
Antrim hedge 13 —————— 13 -
Barnett Lease impairment 5 ——— 5 ——— -
Crete Sale—Tax True up 2 —————— 2 -
Synfuel Discontinued Operations (20) ——————— (20)
Operating Earnings $471 $331 $89 $38 $8 $41 $43 ($79) $0
FY 2008 $EPS
Gas Power &
DTE Electric Gas Storage and Unc. Gas Indust. Energy Corporate
Energy Utility Utility Pipelines Prod. Projects Trading & Other Synfuel
Reported Earnings $3.34 $2.03 $0.52 $0.23 $0.52 $0.25 $0.26 ($0.59) $0.12
Performance Excellence Process 0.05 — 0.03 —— 0.01 0.01 — -
Core Barnett Sale (0.50) ——— (0.50) ——— -
Antrim hedge 0.08 —————— 0.08 -
Barnett Lease impairment 0.03 ——— 0.03 ——— -
Crete Sale—Tax True up 0.01 —————— 0.01 -
Synfuel Discontinued Operations (0.12) ——————— (0.12)
Operating Earnings $2.89 $2.03 $0.55 $0.23 $0.05 $0.26 $0.27 ($0.50) $0.00
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