EXHIBIT 99.1
May 15, 2006
DTE ENERGY IDLES SYNTHETIC FUEL PRODUCTION
DETROIT -- DTE Energy (NYSE:DTE) today announced it idled production at all
nine synthetic fuel (synfuel) facilities operated by the company.
The decision to idle synfuel production was driven by the current level
and volatility of oil prices and the lack of federal legislation that would have
provided certainty for production economics this year.
Synthetic fuel production may resume, depending on various factors,
including a reduction in oil prices or the enactment of potential federal
legislation. DTE Energy retains production flexibility that could allow it to
make up lost production during the remainder of 2006 if the current shutdown
remains limited in duration.
The company is maintaining its operating earnings guidance, excluding
synfuels, of $2.41-$2.66. Previously, the company provided earnings guidance of
$3.60-$3.90 per diluted share, which included $1.19-$1.24 of synfuel earnings
per diluted share. However, given the uncertainties around the amount and timing
of synfuel production and the ultimate value of the related tax credits, the
company is not providing synfuel earnings guidance at this time.
The company believes that cash flow generated by the synfuel operations
is more indicative of its inherent value than the earnings generated. Therefore,
the company previously entered into oil options to protect a portion of expected
synfuel cash flow and to a lesser extent operating earnings. Prior to this
announcement, DTE Energy provided synfuel cash guidance of $450 million to $470
million. The company believes that a significant portion of the expected 2006
cash flow will be realized through a combination of synfuel operations and
settlement of the oil options. However, the ultimate realized synfuel cash and
operating earnings will depend on the market for the oil options and underlying
oil prices, at the time of settlement. These potential impacts are discussed in
the company's 2005 Form 10K and first quarter 2006 Form 10Q.
The company has produced approximately 8 million tons of synfuels
in 2006. DTE Energy will provide further updates on its synfuel operations
and earnings guidance as conditions warrant.
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SYNTHETIC FUEL BACKGROUND
DTE Energy holds a majority interest in two of the nine synthetic fuel
production facilities and minority interests in the remaining seven facilities.
Synthetic fuel facilities chemically change coal, including waste and marginal
coal, into a synthetic fuel as determined under applicable Internal Revenue
Service (IRS) rules. The production and sale of synthetic fuel produced at these
facilities generates production tax credits under the Internal Revenue Code.
The value of these credits is dependent on the full-year average price
of oil for the year in which the credits are generated. While the full-year
average price of oil cannot be known with certainty prior to the end of the
year, current high oil prices suggest that credits' value could be partially or
fully phased out for 2006.
Legislation was proposed in Congress for inclusion in the recent tax
reconciliation bill that would have impacted the potential phase-out of
production tax credits for 2006 and 2007. However, this provision was not
included in the reconciliation bill as enacted.
The proposed legislation is under consideration for inclusion in
subsequent legislation, such as the "extenders" bill. If included and enacted as
proposed, then there would be no phase-out of tax credits for 2006 and DTE
Energy could resume production at the synthetic fuel facilities it operates.
For a more detailed disclosure of the company's synthetic fuel
operations, please refer to the most recent DTE Energy Form 10-Q which is
available at dteenergy.com/investors.
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.
In this release, DTE Energy discusses 2006 operating earnings guidance.
It is likely that certain items that impact the company's 2006 reported results
will be excluded from operating results. A reconciliation to the comparable 2006
reported earnings guidance is not provided because it is not possible to provide
a reliable forecast of specific line items such as 2007 oil hedging costs and
other charges. These items may fluctuate significantly from period to period and
may have a significant impact on reported earnings.
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DTE Energy is a Detroit-based diversified energy company involved in
the development and management of energy-related businesses and services
nationwide. Its operating units include Detroit Edison, an electric utility
serving 2.2 million customers in Southeastern Michigan, MichCon, a natural gas
utility serving 1.3 million customers in Michigan and other non-utility, energy
businesses focused on power and industrial projects, fuel transportation and
marketing, and unconventional gas production. Information about DTE Energy is
available at dteenergy.com.
The information contained herein is as of the date of this news
release. DTE Energy expressly disclaims any current intention to update any
forward-looking statements contained in this news release as a result of new
information or future events or developments. Words such as "anticipate,"
"believe," "expect," "projected" and "goals" signify forward-looking statements.
Forward-looking statements are not guarantees of future results and conditions
but rather are subject to various assumptions, risks and uncertainties. This
news release contains forward-looking statements about DTE Energy's financial
results and estimates of future prospects, and actual results may differ
materially.
Factors that may impact forward-looking statements include, but are not
limited to: the higher price of oil and its impact on the value of production
tax credits, and the ability to utilize and/or sell interests in facilities
producing such credits; of the potential requirement to refund proceeds received
from synfuel partners; the uncertainties of successful exploration of gas shale
resources and inability to estimate gas reserves with certainty; the effects of
weather and other natural phenomena on operations and sales to customers, and
purchases from suppliers; economic climate and population growth or decline in
the geographic areas where we do business; environmental issues, laws,
regulations, and the cost of remediation and compliance; nuclear regulations and
operations associated with nuclear facilities; implementation of electric and
gas Customer Choice programs; impact of electric and gas utility restructuring
in Michigan, including legislative amendments; employee relations and the impact
of collective bargaining agreements; unplanned outages; access to capital
markets and capital market conditions and the results of other financing efforts
which can be affected by credit agency ratings; the timing and extent of changes
in interest rates; the level of borrowings; changes in the cost and availability
of coal and other raw materials, purchased power and natural gas; effects of
competition; impact of regulation by the FERC, MPSC, NRC and other applicable
governmental proceedings and regulations; contributions to earnings by
non-utility subsidiaries; 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; the ability to recover costs
through rate increases; the availability, cost, coverage and terms of insurance;
the cost of protecting assets against, or damage due to, terrorism; 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; uncollectible accounts
receivable; litigation and related appeals; and changes in the economic and
financial viability of our suppliers, customers and trading counterparties, and
the continued ability of such parties to perform their obligations to the
Company. This news release should also be read in conjunction with the
"Forward-Looking Statements" section in DTE Energy's 2005 Form 10-K and the 2006
quarterly report on Form 10-Q (which sections are incorporated herein by
reference), and in conjunction with other SEC reports filed by DTE Energy.
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For further information, MEMBERS OF THE MEDIA may call:
Scott Simons Lorie N. Kessler
(313) 235-8808 (313) 235-8807
For further information, ANALYSTS may call:
Marc Siwak Dan Miner
(313) 235-8030 (313) 235-8030