1
July 6, 2001
DTE ENERGY CONFIRMS 2001 EARNINGS GUIDANCE
DETROIT, Mich. - DTE Energy Co. (NYSE:DTE) today reiterated year-end
2001 earnings guidance of $3.50 to $3.60 and provided second quarter earnings
guidance of $0.30 to $0.40. Both ranges exclude one-time merger restructuring
impacts and goodwill amortization.
"While we are very comfortable with the annual guidance we recently
provided at a June 7 analyst meeting, we want to provide clarity around factors
that are impacting the seasonality of our earnings stream," said Anthony F.
Earley Jr., DTE Energy chairman and chief executive officer.
While total year earnings guidance is unchanged, the company expects
significant variations in quarterly earnings due to the suspension of fuel and
purchased-power cost recovery as part of last year's restructuring legislation.
For example, second quarter 2000 showed higher revenue due to one-time fuel and
purchased-power adjustments that will not appear in the second quarter 2001. In
addition, the second quarter 2001 will reflect the seasonality of the newly
acquired MCN Energy gas business and one month of merger-related impacts such as
debt interest expense and additional shares outstanding. These factors were not
present in the second quarter last year.
Anticipated second quarter 2001 earnings impacts, as compared to second
quarter 2000, include the following:
- - Lower revenues from the absence of the fuel clause recovery present in
2000, including one-time adjustments, will result in $0.25 to $0.30 lower
earning per share.
- - Earnings per share are expected to be $0.03 to $0.08 lower, as a result of
the seasonality based differences in earnings which will be reversed in the
third and fourth quarters of 2001.
- - Operating merger impacts, such as interest expense and additional shares
outstanding, will result in $0.08 lower earnings per share. While merger
cost synergies will not be realized immediately following the merger close,
the month of June reflects merger debt interest expense and additional
shares outstanding without the up-side benefit of cost synergies.
-more-
2
-2-
"DTE Energy has shown four years of delivering on our earnings
projections," said Earley. "We are comfortable with the total year projections
for 2001 and 2002, given the impacts caused by the mid-year merger."
Earley maintained that DTE Energy's quarterly earnings are shifting in
their seasonal patterns as a result of the merger and Michigan's 2000 electric
restructuring legislation. He emphasized that the company's operations continue
to be solid and that DTE Energy plans to deliver on previous 2001 guidance of
$3.50 to $3.60, excluding one-time merger restructuring impacts and goodwill
amortization.
Following the fuel clause suspension included in Michigan restructuring
legislation in June 2000, the company expected the distribution of yearly
earnings to shift significantly. The seasonality of earnings is now tied to the
cost of power, as well as overall sales levels. In the absence of a normalizing
mechanism, summer months that have a higher associated cost of power will have
generally lower margins, whereas winter months will have generally higher
margins than historically recorded.
Since the fuel clause was not frozen until June 5, 2000, the company
was able to normalize its fuel and purchased-power costs over most of the second
quarter last year. In addition, legislation resulted in the dismissal of the
1998 and 1999 Power Supply Cost Recovery (PSCR) reconciliation cases and
prior-year adjustments of fuel and purchased power. The net effect of these
PSCR-related items positively impacted the second quarter of 2000 by
approximately $59.5 million pre-tax. That positive impact will not recur in
2001.
The following table summarizes the pre-tax impact of the PSCR during
1999, 2000 and 2001:
PSCR Quarter-Ending Quarter-Ending Quarter-Ending Quarter-Ending
Impacts March 31 June 30 September 30 December 31
- ------- -------- ------- ------------ -----------
1999 ($35.6 million) $16.8 million $49.9 million ($39.5 million)
2000 ($46.1 million) $59.5 million ($6.5 million) No Impact
2001 No impact No impact No impact No impact
- more -
3
-3-
The third and fourth quarter earnings are expected to benefit from
continued, significant non-regulated growth, additional after-tax cost synergies
of about $10 million to $15 million related to the higher-than-expected employee
acceptance rate of early retirement packages and a projected $60 million in
additional earnings resulting from MCN Energy operations. In addition, the
remaining quarters will reflect a reversal of timing issues that impact the
second quarter. Although weather and market conditions will impact summer
results, Earley said he is confident that the year-end 2001 guidance of $3.50 to
$3.60 is both realistic and achievable.
DTE Energy expects to release its second quarter earnings Aug. 13.
DTE Energy is a Detroit-based diversified energy company involved in
the development and management of energy-related businesses and services
nationwide. DTE Energy's principal operating subsidiaries are Detroit Edison, an
electric utility serving 2.1 million customers in Southeastern Michigan, and
Michigan Consolidated Gas Co. (MichCon), a natural gas utility serving 1.2
million customers in Michigan. Information about DTE Energy is available at
http://www.dteenergy.com.
This press release contains forward looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995. These
statements involve risks and uncertainties, including, but not limited to, those
that are discussed in SEC reports filed by DTE Energy and MCN Energy Group (now
DTE Enterprises). The statements contained in this press release are based upon
DTE's current estimates, but actual results may differ materially.
-30-
For Further Information:
Media Analysts
Lorie N. Kessler Lisa A. Muschong
(313) 235-8807 (313) 235-8030