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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTER ENDED JUNE 30, 1998
COMMISSION REGISTRANTS; STATE OF INCORPORATION; I.R.S. EMPLOYER
FILE NUMBER ADDRESS; AND TELEPHONE NUMBER IDENTIFICATION NO.
1-11607 DTE Energy Company 38-3217752
(a Michigan corporation)
2000 2nd Avenue
Detroit, Michigan 48226-1279
313-235-4000
1-2198 The Detroit Edison Company 38-0478650
(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 X NO
---- ----
At June 30, 1998, 145,075,152 shares of DTE Energy's Common Stock, substantially
all held by non-affiliates, were outstanding.
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DTE ENERGY COMPANY
AND
THE DETROIT EDISON COMPANY
FORM 10-Q
FOR THE QUARTER ENDED JUNE 30, 1998
This document contains the Quarterly Reports on Form 10-Q for the quarter ended
June 30, 1998 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 - Condensed Consolidated Financial Statements (Unaudited)......... 4
Notes to Condensed Consolidated Financial
Statements (Unaudited)......................................... 15
Independent Accountants' Report................................ 19
Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations............................ 20
Item 3 - Quantitative and Qualitative Disclosures about Market Risk..... 27
Part II - Other Information......................................................... 28
Item 4 - Submission of Matters to a Vote of Security Holders.............. 28
Item 5 - Other Information............................................... 29
Quarterly Report on Form 10-Q for The Detroit Edison Company:
Part I - Financial Information..................................................... 30
Item 1 - Condensed Consolidated Financial Statements (Unaudited)........ 30
Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations............................ 30
Part II - Other Information......................................................... 30
Item 5 - Other Information................................................ 30
Quarterly Reports on Form 10-Q for DTE Energy Company and The Detroit Edison Company:
Item 6 - Exhibits and Reports on Form 8-K............................... 32
Signature Page to DTE Energy Company Quarterly Report on Form 10-Q........................ 39
Signature Page to The Detroit Edison Company Quarterly Report on Form 10-Q................ 40
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DEFINITIONS
Annual Report....................1997 Annual Report to the Securities and
Exchange 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 39 through 61 and 65
through 67 of the 1997 Annual Report to the
Securities and Exchange Commission on Form
10-K for DTE Energy Company and The Detroit
Edison Company
Company..........................DTE Energy Company and Subsidiary Companies
Detroit Edison...................The Detroit Edison Company (a wholly owned
subsidiary of DTE Energy Company) and
Subsidiary Companies
Direct Access....................Gives all retail customers equal opportunity
to utilize the transmission system which
results in access to competitive generation
resources
DTE Capital......................DTE Capital Corporation (a wholly owned
subsidiary of DTE Energy Company)
Market Power.....................Exists when one company owns a sufficiently
large percentage of generation,
transmission, or distribution capabilities
in a region which allows it to set the
market price of electricity
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
Quarterly Report.................Quarterly Report to the Securities and
Exchange Commission on Form 10-Q for DTE
Energy Company or The Detroit Edison
Company, as the case may be, for the quarter
ended March 31, 1998
Quarterly Report Notes...........Notes to Condensed Consolidated Financial
Statements (Unaudited) appearing on pages 15
through 16 of the Quarterly Report to the
Securities and Exchange Commission on Form
10-Q for the quarter ended March 31, 1998
for DTE Energy Company and The Detroit
Edison Company
QUIDS............................Quarterly Income Debt Securities
Registrant.......................Company or Detroit Edison, as the case may be
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QUARTERLY REPORT ON FORM 10-Q FOR DTE ENERGY COMPANY
PART I - FINANCIAL INFORMATION
ITEM 1 - CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED):
DTE ENERGY COMPANY
CONDENSED CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)
(In Millions, Except Per Share Amounts)
Three Months Ended Six Months Ended
June 30 June 30
-------------------------------------------------------------
1998 1997 1998 1997
-------------------------------------------------------------
OPERATING REVENUES $ 1,064 $ 892 $ 2,009 $ 1,761
- -----------------------------------------------------------------------------------------------------------------------
OPERATING EXPENSES
Fuel and purchased power 285 197 493 395
Operation and maintenance 300 240 568 474
Depreciation and amortization 162 165 327 330
Taxes other than income 69 66 140 135
- -------------------------------------------------------------------------------------------------------------------------
Total Operating Expenses 816 668 1,528 1,334
- -------------------------------------------------------------------------------------------------------------------------
OPERATING INCOME 248 224 481 427
- -------------------------------------------------------------------------------------------------------------------------
INTEREST EXPENSE AND OTHER
Interest expense 79 72 153 143
Preferred stock dividends
of subsidiary 2 3 5 6
Other - net 5 3 5 8
- -------------------------------------------------------------------------------------------------------------------------
Total Interest Expense and Other 86 78 163 157
- -------------------------------------------------------------------------------------------------------------------------
INCOME BEFORE INCOME TAXES 162 146 318 270
Income Taxes 61 61 113 114
- -------------------------------------------------------------------------------------------------------------------------
NET INCOME $ 101 $ 85 $ 205 $ 156
=========================================================================================================================
AVERAGE COMMON SHARES OUTSTANDING 145 145 145 145
- -----------------------------------------------------------------------------------------------------------------------
EARNINGS PER COMMON SHARE -
BASIC AND DILUTED $ 0.69 $ 0.59 $ 1.41 $ 1.07
- -----------------------------------------------------------------------------------------------------------------------
See notes to condensed consolidated financial statements (unaudited).
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DTE ENERGY COMPANY
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
(In Millions)
Three Months Ended Six Months Ended
June 30 June 30
------------------------------------------------------------
1998 1997 1998 1997
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OPERATING ACTIVITIES
Net Income $ 101 $ 85 $ 205 $ 156
Adjustments to reconcile net income to net cash
from operating activities:
Depreciation and amortization 162 165 327 330
Other (6) (43) (3) 8
Changes in current assets and liabilities:
Accounts receivable (95) (7) (48) (25)
Inventories (42) (29) (30) (25)
Payables 55 (74) 60 (41)
Other 46 35 (51) (36)
- ------------------------------------------------------------------------------------------------------------------------------
Net cash from operating activities 221 132 460 367
- ------------------------------------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES
Plant and equipment expenditures (116) (336) (241) (427)
Investment in limited partnership - - (200) -
Nuclear decommissioning trust funds (12) (27) (41) (37)
Other (17) 1 (11) 1
- ------------------------------------------------------------------------------------------------------------------------------
Net cash used for investing activities (145) (362) (493) (463)
- ------------------------------------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES
Issuance of long-term debt 200 243 200 250
(Decrease) Increase in short-term borrowings (115) 215 262 209
Redemption of long-term debt (18) (139) (187) (185)
Redemption of preferred stock (100) - (100) -
Dividends on common stock (75) (75) (149) (149)
Other 3 - 2 (1)
- ------------------------------------------------------------------------------------------------------------------------------
Net cash (used for) from financing activities (105) 244 28 124
- ------------------------------------------------------------------------------------------------------------------------------
NET (DECREASE) INCREASE IN CASH AND CASH
EQUIVALENTS (29) 14 (5) 28
CASH AND CASH EQUIVALENTS AT
BEGINNING OF THE PERIOD 123 67 99 53
- ------------------------------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT END OF THE PERIOD $ 94 $ 81 $ 94 $ 81
==============================================================================================================================
SUPPLEMENTARY CASH FLOW INFORMATION
Interest paid (excluding interest capitalized) $ 61 $ 61 $ 146 $ 138
Income taxes paid 30 127 66 128
New capital lease obligations 31 - 48 33
See notes to condensed consolidated financial statements (unaudited).
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DTE ENERGY COMPANY
CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED)
(In Millions, Except Per Share Amounts and Shares)
June 30 December 31
1998 1997
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ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 94 $ 99
Accounts receivable
Customer (less allowance for doubtful
accounts of $20) 304 305
Accrued unbilled revenues 167 137
Other 97 78
Inventories (at average cost)
Fuel 164 130
Materials and supplies 171 173
Assets from risk management activities 129 -
Other 52 13
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1,178 935
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INVESTMENTS
Nuclear decommissioning trust funds 280 239
Other 267 57
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547 296
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PROPERTY
Property, plant and equipment 14,692 14,495
Property under capital leases 256 256
Nuclear fuel under capital lease 655 607
Construction work in progress 22 16
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15,625 15,374
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Less accumulated depreciation and amortization 6,728 6,440
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8,897 8,934
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OTHER ASSETS
Regulatory assets 747 856
Other 226 202
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973 1,058
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TOTAL ASSETS $ 11,595 $ 11,223
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See notes to condensed consolidated financial statements (unaudited).
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June 30 December 31
1998 1997
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LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 194 $ 161
Accrued interest 56 57
Dividends payable 76 78
Accrued payroll 86 81
Short-term borrowings 304 42
Liabilities from risk management activities 135 -
Accumulated deferred income taxes 83 64
Current portion long-term debt 159 205
Current portion capital leases 131 110
Other 236 219
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1,460 1,017
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OTHER LIABILITIES
Accumulated deferred income taxes 1,930 1,983
Accumulated deferred investment tax credits 294 301
Capital leases 132 137
Other 283 302
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2,639 2,723
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LONG-TERM DEBT 3,835 3,777
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SHAREHOLDERS' EQUITY
Detroit Edison cumulative preferred stock, $100 par value, 6,747,484
shares authorized, 5,207,657 issued, 500,000 and 1,501,223 shares
outstanding, respectively 48 144
Common stock, without par value, 400,000,000 shares
authorized, 145,075,152 and 145,097,829 issued
and outstanding, respectively 1,951 1,951
Retained earnings 1,662 1,611
--------------- ----------------
TOTAL SHAREHOLDERS' EQUITY 3,661 3,706
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CONTINGENCIES (NOTE 5)
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 11,595 $ 11,223
=============== ================
See notes to condensed consolidated financial statements (unaudited).
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DTE ENERGY COMPANY
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
(UNAUDITED)
(In Millions, Except Per Share Amounts; Shares in Thousands)
1998
-----------------------------------
Shares Amount
-----------------------------------
DETROIT EDISON CUMULATIVE PREFERRED STOCK
Balance at beginning of year 1,501 $ 144
Redemption of cumulative preferred stock (1,001) (100)
Preferred stock expense 4
------------- --------------
Balance at June 30, 1998 500 $ 48
- -------------------------------------------------------------------------------------------------------------------
COMMON STOCK
Balance at beginning of year 145,098 $ 1,951
Repurchase and retirement of common stock (23) -
-------------- --------------
Balance at June 30, 1998 145,075 $ 1,951
- -------------------------------------------------------------------------------------------------------------------
RETAINED EARNINGS
Balance at beginning of year $ 1,611
Net income 205
Dividends declared on common stock ($0.515 per share) (150)
Preferred stock expense (4)
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Balance at June 30, 1998 $ 1,662
- -------------------------------------------------------------------------------------------------------------------
TOTAL SHAREHOLDERS' EQUITY $ 3,661
===================================================================================================================
See notes to condensed consolidated financial statements (unaudited).
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THE DETROIT EDISON COMPANY
CONDENSED CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)
(In Millions)
Three Months Ended Six Months Ended
June 30 June 30
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1998 1997 1998 1997
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OPERATING REVENUES $ 992 $ 878 $ 1,893 $ 1,742
- -----------------------------------------------------------------------------------------------------------------------------------
OPERATING EXPENSES
Fuel and purchased power 266 197 474 395
Operation and maintenance 247 226 470 454
Depreciation and amortization 161 165 324 330
Taxes other than income 70 65 140 134
- -----------------------------------------------------------------------------------------------------------------------------------
Total Operating Expenses 744 653 1,408 1,313
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OPERATING INCOME 248 225 485 429
- -----------------------------------------------------------------------------------------------------------------------------------
INTEREST EXPENSE AND OTHER
Interest expense 68 70 136 141
Other - net 5 4 10 9
- -----------------------------------------------------------------------------------------------------------------------------------
Total Interest Expense and Other 73 74 146 150
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INCOME BEFORE INCOME TAXES 175 151 339 279
Income Taxes 80 65 146 119
- ----------------------------------------------------------------------------------------------------------------------------------
NET INCOME 95 86 193 160
PREFERRED STOCK DIVIDENDS 2 3 5 6
- ----------------------------------------------------------------------------------------------------------------------------------
NET INCOME AVAILABLE FOR COMMON STOCK $ 93 $ 83 $ 188 $ 154
===================================================================================================================================
Note: Detroit Edison's condensed consolidated financial statements
(unaudited) are presented here for ease of reference and are not
considered to be part of Item 1 of the Company's report.
See notes to condensed consolidated financial statements (unaudited).
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THE DETROIT EDISON COMPANY
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
(In Millions)
Three Months Ended Six Months Ended
June 30 June 30
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1998 1997 1998 1997
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OPERATING ACTIVITIES
Net Income $ 95 $ 86 $ 193 $ 160
Adjustments to reconcile net income to net cash
from operating activities:
Depreciation and amortization 161 165 324 330
Other (36) (7) (37) 45
Changes in current assets and liabilities:
Accounts receivable (84) (1) (30) (16)
Inventories (36) (17) (34) (14)
Payables 27 (81) 49 (48)
Other 50 36 (58) (35)
- -----------------------------------------------------------------------------------------------------------------------------------
Net cash from operating activities 177 181 407 422
- -----------------------------------------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES
Plant and equipment expenditures (102) (123) (220) (209)
Nuclear decommissioning trust funds (12) (27) (41) (37)
Other (1) 5 (4) 7
- -----------------------------------------------------------------------------------------------------------------------------------
Net cash used for investing activities (115) (145) (265) (239)
- -----------------------------------------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES
Issuance of long-term debt 100 - 100 -
Increase in short-term borrowings 23 182 187 176
Redemption of long-term debt - (139) (169) (185)
Redemption of preferred stock (100) - (100) -
Dividends on common and preferred stock (83) (83) (165) (165)
Other 4 - 3 -
- -----------------------------------------------------------------------------------------------------------------------------------
Net cash used for financing activities (56) (40) (144) (174)
- -----------------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS 6 (4) (2) 9
CASH AND CASH EQUIVALENTS AT
BEGINNING OF THE PERIOD 7 15 15 2
- -----------------------------------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT END OF THE PERIOD $ 13 $ 11 $ 13 $ 11
===================================================================================================================================
SUPPLEMENTARY CASH FLOW INFORMATION
Interest paid (excluding interest capitalized) $ 58 $ 60 $ 137 $ 137
Income taxes paid 53 131 111 132
New capital lease obligations 17 - 31 33
See notes to condensed consolidated financial statements (unaudited).
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THE DETROIT EDISON COMPANY
CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED)
(In Millions, Except Per Share Amounts and Shares)
June 30 December 31
1998 1997
--------------- ----------------
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 13 $ 15
Accounts receivable
Customer (less allowance for doubtful
accounts of $20) 294 300
Accrued unbilled revenues 167 137
Other 69 63
Inventories (at average cost)
Fuel 164 130
Materials and supplies 154 150
Other 51 11
--------------- ----------------
912 806
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INVESTMENTS
Nuclear decommissioning trust funds 280 239
Other 43 38
--------------- ----------------
323 277
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PROPERTY
Property, plant and equipment 14,387 14,204
Property under capital leases 256 256
Nuclear fuel under capital lease 655 607
Construction work in progress 9 12
--------------- ----------------
15,307 15,079
--------------- ----------------
Less accumulated depreciation and amortization 6,712 6,431
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8,595 8,648
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OTHER ASSETS
Regulatory assets 747 856
Other 182 158
--------------- ----------------
929 1,014
--------------- ----------------
TOTAL ASSETS $ 10,759 $ 10,745
=============== ================
See notes to condensed consolidated financial statements (unaudited).
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June 30 December 31
1998 1997
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LIABILITIES AND SHAREHOLDER'S EQUITY
CURRENT LIABILITIES
Accounts payable $ 175 $ 150
Accrued interest 54 56
Dividends payable 80 83
Accrued payroll 84 80
Short-term borrowings 187 -
Accumulated deferred income taxes 85 64
Current portion long-term debt 119 169
Current portion capital leases 131 110
Other 227 218
--------------- ----------------
1,142 930
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OTHER LIABILITIES
Accumulated deferred income taxes 1,906 1,973
Accumulated deferred investment tax credits 294 301
Capital leases 132 137
Other 272 300
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2,604 2,711
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LONG-TERM DEBT 3,512 3,531
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SHAREHOLDER'S EQUITY
Cumulative preferred stock, $100 par value, 6,747,484 shares authorized,
5,207,657 issued, 500,000 and 1,501,223 shares outstanding,
respectively 48 144
Common stock, $10 par value, 400,000,000 shares
authorized, 145,119,875 issued and outstanding 1,451 1,451
Premium on common stock 548 548
Common stock expense (48) (48)
Retained earnings 1,502 1,478
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TOTAL SHAREHOLDER'S EQUITY 3,501 3,573
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CONTINGENCIES (NOTE 5)
TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY $ 10,759 $ 10,745
============== ===============
See notes to condensed consolidated financial statements (unaudited).
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THE DETROIT EDISON COMPANY
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDER'S EQUITY
(UNAUDITED)
(In Millions, Except Per Share Amounts; Shares in Thousands)
1998
----------------------------------
Shares Amount
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CUMULATIVE PREFERRED STOCK
Balance at beginning of year $ 1,501 $ 144
Redemption of cumulative preferred stock (1,001) (100)
Preferred stock expense 4
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Balance at June 30, 1998 500 $ 48
- ------------------------------------------------------------------------------------------------------------------
COMMON STOCK
Balance at beginning of year 145,120 $ 1,451
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Balance at June 30, 1998 145,120 $ 1,451
- ------------------------------------------------------------------------------------------------------------------
PREMIUM ON COMMON STOCK
Balance at beginning of year $ 548
--------------
Balance at June 30, 1998 $ 548
- ------------------------------------------------------------------------------------------------------------------
COMMON STOCK EXPENSE
Balance at beginning of year $ (48)
--------------
Balance at June 30, 1998 $ (48)
- ------------------------------------------------------------------------------------------------------------------
RETAINED EARNINGS
Balance at beginning of year $ 1,478
Net income 193
Dividends declared
Common stock ($0.55 per share) (160)
Cumulative preferred stock* (5)
Preferred stock expense (4)
---------------
Balance at June 30, 1998 $ 1,502
- ------------------------------------------------------------------------------------------------------------------
TOTAL SHAREHOLDER'S EQUITY $ 3,501
==================================================================================================================
* At established rate for each series.
See notes to condensed consolidated financial statements (unaudited).
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (UNAUDITED)
DTE ENERGY COMPANY AND THE DETROIT EDISON COMPANY
NOTE 1 - 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.
The preparation of the financial statements in conformity with generally
accepted accounting principles 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.
NOTE 2 - ACCOUNTING FOR RISK MANAGEMENT ACTIVITIES
DTE Energy Trading, Inc. (DTE ET) is an indirect wholly owned subsidiary of the
Company and began operations in the first quarter of 1998. The new subsidiary
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 sale commitments.
Activities for trading purposes of DTE ET are accounted for using the
mark-to-market method of accounting. Under such method, DTE ET's electric power
trading contracts, including both transactions for physical delivery and
financial instruments, are recorded at market value. The resulting unrealized
gains and losses from changes in market value of open positions are recorded as
"Assets or Liabilities from risk management activities" on the Consolidated
Balance Sheet. Current period changes in the "Assets or Liabilities from risk
management activities" are recognized as net gains or losses in "Operating
Revenues" on the Consolidated Statement of Income. The market prices used to
value these transactions reflect management's best estimate considering various
factors including closing exchange and over-the-counter quotations, time value
and volatility factors underlying the commitments.
Detroit Edison continues to account for its forward purchase and sale
commitments and over-the-counter options on a settlement basis.
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NOTE 3 - SHORT-TERM CREDIT ARRANGEMENTS AND BORROWINGS
At June 30, 1998, Detroit Edison had total short-term credit arrangements of
approximately $634 million under which $187 million was outstanding. The amounts
outstanding at June 30, 1998 consisted of $87 million of commercial paper and
$100 million secured by its customer accounts receivable and unbilled revenues
portfolio.
At June 30, 1998, DTE Capital had $117 million of commercial paper outstanding,
backed by a Support Agreement from the Company.
NOTE 4 - LONG-TERM DEBT
In May 1998, Detroit Edison issued $100 million of 7.54% QUIDS. The proceeds
were used to redeem all of the outstanding 7.75% Series Cumulative Preferred
Stock totaling approximately $100 million.
In June 1998, DTE Capital issued $100 million of Remarketed Notes, Series A due
2038. The notes pay interest at 6.17% through 2003. DTE Capital's obligations
have the benefit of a Support Agreement from the Company.
The Company had $62 million in cash and cash equivalents restricted by debt
covenants at June 30, 1998.
NOTE 5 - CONTINGENCIES
LEGAL PROCEEDINGS
Detroit Edison and plaintiffs in a class action pending in the Circuit Court for
Wayne County, Michigan (Gilford, et al v. Detroit Edison), as well as plaintiffs
in two other pending actions which make class claims (Sanchez, et al v. Detroit
Edison, Circuit Court for Wayne County, Michigan; and Frazier v. Detroit Edison,
United States District Court, Eastern District of Michigan), have continued
negotiations following a February 1998 agreement to settle the matters through
binding arbitration. In July 1998, Detroit Edison and the plaintiffs reached
agreement on the terms of a Consent Judgement, which is subject to approval by
the Court. A Fairness Hearing with respect to the terms of the settlement is
scheduled for August 1998. The agreement provides that Detroit Edison's monetary
liability is to be no less than $17.5 million and no greater than $65 million
after the conclusion of all related proceedings. An amount related to this
proceeding was accrued in 1997.
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NOTE 6 - FINANCIAL INSTRUMENTS
TRADING ACTIVITIES
NOTIONAL AMOUNTS AND TERMS
The notional amounts and terms of DTE ET's outstanding energy trading financial
instruments at June 30, 1998 were:
Fixed Price Fixed Price Maximum
Payor Receiver Terms in Years
(Thousands of MWh)
Electricity Commodities 523 1,063 1.5 years
--- -----
At June 30, 1998, DTE ET also had sales and purchase commitments for physical
delivery associated with contracts based on fixed prices totaling 2,692,394 MWh
with terms extending up to 1.5 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 VALUE
At June 30, 1998, the fair values of DTE ET's energy commodity derivative
instruments were :
Current Current
Assets Liabilities
(Dollars in Millions)
Average Fair Value for the
Three Months Ended June 30, 1998 $ 49 $ 54
======= ======
Fair Value as of June 30, 1998 $ 129 $ 135
======= ======
The weighted average term of DTE ET's energy commodity derivative instruments
as of June 30, 1998 was less than three months.
MARKET RISK
DTE ET manages, on a portfolio basis, the market risks inherent in its
activities subject to parameters established by the Company's Risk Management
Committee (RMC), which is
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authorized by its Board of Directors. Market risks are monitored
by the RMC to ensure compliance with the Company's stated risk management
policies. DTE ET marks its portfolio to market and measures its risk on a daily
basis in accordance with Value-at-Risk (VaR) and other risk methodologies. The
quantification of market risk using VaR provides a consistent measure of risk
across diverse energy markets and products.
CREDIT RISK
DTE ET is exposed to credit risk in the event of nonperformance by customers or
counterparties of its contractual obligations. The concentration of customers
and/or counterparties may impact overall exposure to credit risk, either
positively or negatively, in that the counterparties may be similarly affected
by changes in economic, regulatory or other conditions. However, DTE ET
maintains credit policies with regard to its customers' and counterparties' that
management believes significantly minimize overall credit risk. These policies
include an evaluation of potential customers and counterparties financial
condition and credit rating, collateral requirements or other credit
enhancements such as letters of credit or guarantees, and the use of
standardized agreements which allow for the netting or offsetting of positive
and negative exposures associated with a single counterparty. Based on these
policies, the Company does not anticipate a materially adverse effect on
financial position or results of operations as a result of customer or
counterparty nonperformance. Those futures and option contracts which are traded
on the New York Mercantile Exchange are financially guaranteed by the Exchange
and have nominal credit risk.
-----------------------------------
This Quarterly Report on Form 10-Q, including the report of Deloitte & Touche
LLP (on page 19) will automatically be incorporated by reference in the
Prospectuses constituting part of the Registration Statements on Form S-3
(Registration Nos. 33-53207 and 33-64296) of The Detroit Edison Company and Form
S-8 (Registration Nos. 333-00023 and 333-47247) and Form S-3 (Registration No.
33-57545) 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 Boards 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 The Detroit Edison Company and subsidiaries
as of June 30, 1998, and the related condensed consolidated statements of income
and of cash flows for the three-month and six-month periods ended June 30, 1998
and 1997, and the condensed consolidated statements of changes in shareholders'
equity for the six-month period ended June 30, 1998. These financial
statements are the responsibility of DTE Energy Company's management and 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 primarily of applying analytical procedures to
financial data and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted in
accordance with generally accepted auditing standards, 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 generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheets of DTE Energy Company and
subsidiaries and The Detroit Edison Company and subsidiaries as of December 31,
1997, 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, 1998, 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, 1997 is fairly stated, in all material respects, in relation
to the consolidated balance sheets from which they have been derived.
DELOITTE & TOUCHE LLP
Detroit, Michigan
July 27, 1998
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20
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
DTE ENERGY COMPANY AND THE DETROIT EDISON COMPANY
This analysis for the three and six months ended June 30, 1998, as compared to
the same periods in 1997, 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 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
During the second quarter of 1998, the Company invested in DTE Energy
Solutions Inc., an indirect subsidiary of the Company, which provides high
quality and innovative utility products and services, specifically in the area
of system distribution and customer service for utilities, municipals and
cooperatives. DTE Energy Solutions Inc. and Probyn & Co. of Toronto have formed
a joint venture to market utility and energy related services to municipal
electric utilities in Canada. The new company, DTE/Probyn Energy Solutions
Inc., will combine the energy expertise of the Company with Probyn, a provider
of financial and energy advisory services, and the owner-operator of five
generating stations in four Canadian provinces. DTE Energy Solutions Inc. also
formed a partnership with National Pole Recycling Inc. to develop a sawmill
operation to recycle, manufacture and market products from retired utility
poles supplied by Detroit Edison.
DTE Energy Services, Inc. a wholly owned subsidiary of the Company, purchased
a coke oven battery from Bethlehem Steel Corp. in the third quarter of 1998.
The coke battery will serve the Bethlehem Burns Harbor, Indiania a Steelmaking
plant.
Non-regulated operations are projected to increase over the five year period
ending 2002, which could result in earnings of as much as $150 million annually
from those operations.
A new record electrical demand of 10,701 MW was set in June 1998. Detroit Edison
was able to meet the record demand through careful planning and implementation
of a summer electricity supply plan.
See Detroit Edison's Part II, "Item 5 - Other Information" for a discussion of
proceedings related to Detroit Edison's Conners Creek Power Plant.
ELECTRIC INDUSTRY DEREGULATION
Federal and state legislators and regulators are working to introduce
competition and customer choice into the generation segment of the electric
public utility industry, believing that competition will lead to reduced
electric rates and stimulate economic growth. Traditional utility services are
being unbundled, with many of such services becoming competitive; and a demand
is being created for new energy-related services.
As discussed in the Annual Report and the Quarterly Report, there are ongoing
Michigan legislative, judicial and administrative proceedings, which address
among other things, deregulation of the generation segment of the Michigan
electric public
20
21
utility industry. Federal legislation relating to deregulation has also been
proposed. Although the Company and Detroit Edison expect a favorable outcome,
neither the Company nor Detroit Edison are able to predict the outcome or timing
of these proceedings.
The Financial Accountings Standards Board (FASB) and the Securities and Exchange
Commission (SEC) have been considering various accounting issues as a result of
the transition to competition.
Regulatory Accounting Issues
As discussed in Note 1 of the Annual Report, Detroit Edison is subject to
regulation by the MPSC and the Federal Energy Regulatory Commission (FERC).
Detroit Edison meets the criteria of Statement of Financial Accounting Standards
(SFAS) No. 71, "Accounting for the Effects of Certain Types of Regulation." This
accounting standard recognizes the cost based ratemaking process which results
in differences in the application of generally accepted accounting principles
between regulated and non-regulated businesses. SFAS No. 71 permits the
recording of regulatory assets and liabilities that would have been treated as
revenue and expense in non-regulated businesses. The deferred amounts are being
amortized to revenue and expense as they are included in rates. Continued
applicability of SFAS No. 71 requires that rates be designed to recover specific
costs of providing regulated services and products, including regulatory assets,
and that it be reasonable to assume that rates are set at levels that will
recover a utility's costs and can be charged to and collected from customers.
In guidance issued in 1997, the Emerging Issues Task Force (EITF) of the FASB
concluded that the application of SFAS No. 71 to a separable portion of a
business which is subject to a deregulation plan should cease when legislation
is passed and/or a rate order is issued that contains sufficient detail on a
transition plan. Various MPSC Orders and proposed Michigan legislation would
alter the regulatory process in Michigan and provide a plan for transition to
competition for the generation segment of Detroit Edison's business. However,
Detroit Edison has appealed the MPSC Orders that require the implementation of
a Direct Access program in Michigan. Detroit Edison believes that it continues
to qualify under the accounting model prescribed by SFAS No. 7l. The continued
applicability of SFAS No. 71 will depend on the outcome of legal and legislative
proceedings discussed herein.
During the second quarter of 1998, the SEC issued guidance regarding the
accounting treatment for the recovery of stranded costs during the transition to
competition. The SEC concluded that when an entity ceases to apply SFAS No. 71,
any impaired portion of plant assets, identified for recovery in
legislation/rate order by means of a regulated cash flow, should be treated as a
regulatory asset in the separable portion of the enterprise from which the
regulated cash flows are derived. The plant impairment analysis, performed at
the lowest level of identifiable cash flows based on the facts and
circumstances, should be exclusive of the regulated cash flows.
The EITF 1997 guidance also concluded that regulatory assets and liabilities
originating in the separable portion of the business which is no longer under
SFAS No. 71 should not
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22
be written off if they are recoverable from a separable portion of business
which still meets the criteria of SFAS No. 71. Detroit Edison's ability to
recover regulatory assets and investment in generation plant in the transition
to competition will depend on the outcome of regulatory and/or legislative
action which provides for and permits recovery of such assets. Detroit Edison
has $383 million of net regulatory assets and $4.9 billion of net investment in
generation plant recorded in Property, Plant and Equipment at June 30, 1998. At
the present time Detroit Edison believes that a satisfactory mechanism to
recover regulatory assets and the investment in generation plant will be adopted
by its regulators and/or legislators, although there can be no assurances that
this will occur.
Michigan Public Service Commission
In July 1998, Detroit Edison filed an application with the MPSC for accounting
authority to accelerate amortization of the Fermi 2 plant and its related
regulatory assets by $164.2 million annually beginning January 1, 1999. Detroit
Edison believes approval of its request will allow a reasonable opportunity,
consistent with SFAS No. 71 and EITF guidance, to recover its stranded assets by
the MPSC imposed deadline for recovery, December 31, 2007. An expedited hearing
schedule has been requested.
Detroit Edison filed an application with the MPSC in June 1998 requesting
approval of its Customer Choice Plan and accounting authority to defer costs
that would be incurred to implement Direct Access. In its filing, Detroit Edison
estimated that the cost to implement Direct Access would be approximately $100
million. Deferral of $19.9 million has been specifically requested in 1998.
Detroit Edison also indicated in its filings with the MPSC that recovery of
Fermi 2 assets and other stranded assets must be reasonably assured before
implementation of any Direct Access program begins. Under current accounting
rules, to the extent that Detroit Edison cannot be assured recovery prior to
implementation of a Direct Access program, it would be required to write off
such assets; however, the Company and Detroit Edison do not anticipate a write
off at this time.
The MPSC staff's Market Power Report was issued in June 1998. The MPSC staff
concluded that Detroit Edison and Consumers Energy Company will both possess
Market Power in a Michigan electricity market unless implementation of a
proactive regulatory strategy to counterbalance utility Market Power is
undertaken. The report notes, "The current Michigan market is so highly
concentrated and the advantages of incumbent utility companies are so pervasive
that proactive measures are imperative." Divestiture of generation, while
discussed as an effective and popular option in other states, is not recommended
by the MPSC staff at this time. However, the MPSC staff believes if measures
undertaken to mitigate Market Power are not successful, divestiture could be
revisited.
Detroit Edison has withdrawn its March 1998 request to suspend the PSCR clause,
but continues to pursue the suspension through its ongoing 1998 PSCR case.
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23
LIQUIDITY AND CAPITAL RESOURCES
CASH PROVIDED BY OPERATING ACTIVITIES
Net cash from operating activities was higher in the three and six month periods
due to decreases in accounts payable partially offset by increases in accounts
receivable.
CASH USED FOR INVESTING ACTIVITIES
Net cash used for investing was lower for the three month period due to lower
plant and equipment expenditures and lower contributions to the nuclear
decommissioning trust funds.
Net cash used for investing was higher for the six month period due to higher
investment in non-regulated investments, partially offset by lower plant and
equipment expenditures.
Cash requirements for non-regulated investments are estimated to be
approximately $488 million in 1998, of which $221 million had been expended as
of June 30, 1998.
DTE Energy Services Inc., a wholly owned subsidiary of the Company,
purchased a coke battery from Bethlehem Steel Corp. for approximately $227
million in the third quarter of 1998.
Detroit Edison's 1998 cash requirements for its capital expenditure program are
estimated at $512 million, of which $220 million had been expended as of June
30, 1998.
CASH (USED FOR) FROM FINANCING ACTIVITIES
Net cash used for financing was higher in the three month period due primarily
to the repayment of short-term borrowings and redemption of preferred stock.
Net cash from financing was lower in the six month period due primarily to the
redemption of preferred stock partially offset by higher short-term borrowings.
Detroit Edison will redeem tax exempt obligations Series A-1989 of
$100 million and A-1989 B of $18.4 million in December 1999 utilizing the
proceeds of a forward refinancing, with the issuance of refunding bonds planned
for September 1999, subject to the satisfactory completion of all
documentation.
Detroit Edison is also considering refinancing approximately $157 million of
tax exempt obligations (Series I-1989, I-1989 B, CC, I-1990) issued on its
behalf by Monroe County, MI.
RESULTS OF OPERATIONS
For the three months ended June 30, 1998, the Company's net income was $101
million or $0.69 per common share as compared to $85 million or $0.59 per common
share earned in the three months ended June 30, 1997. For the six months ended
June 30, 1998 net income was $205 million or $1.41 per common share compared to
$156 million or $1.07 per common share earned in the six months ended June 30,
1997.
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24
The 1998 three month and six month earnings were higher than 1997 due to higher
sales and increased earnings from non-regulated subsidiary operations, partially
offset by higher operating expenses.
On July 21, 1998, the Detroit Edison service territory experienced a severe
thunderstorm. High winds and lightning strikes caused approximately $28 million
of damage to its distribution system. Approximately $24 million will be a charge
to earnings in the third quarter of 1998.
OPERATING REVENUES
Increases in operating revenues were due primarily to higher non-regulated
subsidiary revenues, higher system sales and sales between utilities.
Detroit Edison kWh sales increased as compared to the prior year as follows:
Three Six
Months Months
-------- --------
Residential 9.8 % 4.9 %
Commercial 8.4 5.7
Industrial 4.9 3.1
Other (primarily sales for resale) 20.7 35.0
Total System 8.1 5.8
Sales between utilities 157.3 194.3
Total 14.6 13.2
The increase in residential sales resulted from growth in the customer base,
increased usage and increased cooling related sales in the second quarter due to
unusually warm weather. Commercial sales increased, reflecting a
continuation of favorable economic conditions. The increase in industrial sales
reflects increased demand in the construction and automotive sectors in spite of
the General Motors strike. Sales to other customers increased reflecting
increased demand from sales for resale customers. Sales between utilities
increased due to greater demand for energy and increased availability of energy
for sale.
OPERATING EXPENSES
FUEL AND PURCHASED POWER
Net system output and average fuel and purchased power unit costs for Detroit
Edison were as follows:
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Three Months Six Months
---------------- ------------------
1998 1997 1998 1997
---- ---- ---- ----
(Thousands of MWh)
Power plant generation
Fossil 10,353 10,032 21,397 20,398
Nuclear 2,305 1,260 4,288 1,247
Purchased power 1,817 1,368 2,783 3,572
-------- --------- --------- --------
Net system output 14,475 12,660 28,468 25,217
======== ========= ========= ========
Average unit cost ($/MWh) $ 17.69 $ 14.26 $ 15.65 $ 14.59
======== ========= ========= ========
Fuel and purchased power expense increased in the three month period due to
higher average unit costs because of higher purchased power unit costs as
a result of increased market demand for power during periods of hot
weather and higher net output.
For the six month period, fuel and purchased power expense increased due to
higher net system output, higher average unit costs because of higher purchased
power unit costs as a result of increased market demand for power during periods
of hot weather and the prior-period receipt of Fermi 2 business insurance
proceeds.
OPERATION AND MAINTENANCE
Operation and maintenance expense increased for the three month period due
primarily to new non-regulated subsidiary operation expense ($39 million), the
Conners Creek restart ($7.3 million), storm expense ($5.2 million) and Year 2000
expenses ($3.5 million).
Operation and maintenance expense increased for the six month period due
primarily to non-regulated subsidiary operation expense ($78 million), prior
year storm amoritization ($7.5 million), the Conners Creek restart ($7.3
million) and Year 2000 expense ($4.5 million), partially offset by lower storm
expense ($14.2 million).
Storm damage costs of $30 million incurred during the first three quarters of
1997 were deferred in the fourth quarter of 1997 and are being amortized to
expense over a 24 month period beginning in January 1998.
INCOME TAXES
Although income before income taxes was higher in 1998 than 1997, income tax
expense for the Company did not increase due primarily to increased alternate
fuels credits in 1998, partially offset by an increase relating to prior years
income taxes of Detroit Edison.
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26
NEW ACCOUNTING STANDARD
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities". This Statement requires companies to record
derivatives on the balance sheet as assets and liabilities, measured at fair
value. Gains or losses resulting from changes in the values of those derivatives
would be accounted for depending on the use of the derivative and whether it
qualifies for hedge accounting. The Company has not yet determined the impact of
this Statement on the consolidated financial statements. This Statement is
effective for fiscal years beginning after June 15, 1999, with earlier adoption
encouraged. The Company will adopt this accounting standard as required by
January 1, 2000.
FORWARD-LOOKING STATEMENTS
Certain information presented in this Quarterly Report on Form 10-Q is based
upon 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, actual sales, the
effects of competition, the implementation of utility restructuring in Michigan
(which involves pending regulatory proceedings, pending and proposed statutory
changes and the recovery of stranded costs), environmental and nuclear
requirements, the impact of newly-required FERC tariffs and the success of
non-regulated lines of business. 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.
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ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
DTE ENERGY COMPANY AND THE DETROIT EDISON COMPANY
The Company measures the risk inherent in DTE ET's portfolio utilizing VaR
analysis and other methodologies, which simulate forward price curves in
electric power markets to quantify estimates of the magnitude and probability
of potential future losses related to open contract positions. DTE ET's VaR
expresses the potential loss 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 VaR as a
percentage of its earnings, based on a 95% confidence interval, utilizing 10
day holding periods. At of June 30, 1998, DTE ET's VaR from its power
marketing and trading activities was less than 1% of the Company's
consolidated "Income Before Income Taxes" for the six month period ended June
30, 1998. 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 these
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. For further information, see the Company's and Detroit Edison's
Note 2 - Accounting for Risk Management Activities and Note 6 - Financial
Instruments.
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28
DTE ENERGY COMPANY
PART II - OTHER INFORMATION
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
(a) The annual meeting of the holders of Common Stock of the Company was held
on April 27, 1998. Proxies for the meeting were solicited pursuant to
Regulation 14(a).
(b) The following four directors were elected to serve until the annual
meeting in the year 2001 with the votes shown:
Total Vote
Total Vote For Withheld From
Each Director Each Director
--------------- --------------
Terence E. Adderley 111,704,821 3,736,422
Anthony F. Earley, Jr. 111,714,268 3,725,697
Allan D. Gilmour 111,715,170 3,725,221
Theodore S. Leipprandt 111,684,996 3,754,969
The terms of the previously elected nine directors listed
below continue until the annual meeting dates shown after each
name:
Lillian Bauder April 28, 1999
David Bing April 28, 1999
Larry G. Garberding April 28, 1999
Alan E. Schwartz April 28, 1999
William Wegner April 28, 1999
William C. Brooks April 26, 2000
John E. Lobbia April 26, 2000
Eugene A. Miller April 26, 2000
Dean E. Richardson April 26, 2000
(c) (i) Shareholders ratified the apointment of Deloitte & Touche LLP as the
Company's independent auditors for the year 1998 with the votes shown:
For Against Abstain
--- ------- -------
114,070,736 561,936 807,730
(ii) Shareholders also voted on the item below:
A shareholder proposal regarding the impact of deregulation, including
its impact on the operation of Fermi 2.
For Against Abstain
--- ------- -------
6,027,145 88,875,815 7,312,687
(d) Not applicable.
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29
DTE ENERGY COMPANY
PART II - OTHER INFORMATION
ITEM 5 - OTHER INFORMATION.
Effective August 1, 1998, Mr. Anthony F. Earley, Jr., currently President and
Chief Operating Officer of the Company and Detroit Edison, assumed the
positions of Chairman of the Board, Chief Executive Officer, President, and
member of a newly created Office of the President of the Company and Detroit
Edison. In addition to Mr. Earley, members of the Office of the President are
Gerard M. Anderson, currently Executive Vice President, who will also assume the
position of President and Chief Operating Officer, DTE Energy Resources and
Robert J. Buckler, currently Executive Vice President, who will assume the
position of President and Chief Operating Officer, DTE Energy Distribution. DTE
Energy Resources encompasses Detroit Edison's non-nuclear power generation and
fuel supply activities and the Company's non-regulated operating units. DTE
Energy Distribution includes Detroit Edison's electric transmission and
distribution activities and the Company's non-regulated retail product and
service activities.
Also effective August 1, 1998, Mr. John E. Lobbia retired from his duties as
Chairman of the Board and Chief Executive Officer of the Company and Detroit
Edison. He will continue as a director of both companies.
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30
QUARTERLY REPORT ON FORM 10-Q FOR
THE DETROIT EDISON COMPANY
PART I - FINANCIAL INFORMATION
ITEM 1 - CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED).
See pages 10 through 18.
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.
PART II - OTHER INFORMATION
ITEM 5 - OTHER INFORMATION.
In March 1998, Detroit Edison filed its 1997 PSCR Reconciliation Case with the
MPSC. PSCR costs for 1997 which were under-recovered by $2.7 million, when
combined with Fermi 2 performance standards, would result in a refund to
customers of approximately $21 million. The Company has accrued for the refund.
In an April 24, 1998 informational filing with the MPSC, Detroit Edison proposed
customer options that will assist in meeting customer demand this summer.
Detroit Edison also proposed an experimental program permitting certain
industrial customers with interruptible service to secure their own backup power
during summer peak periods in 1998 and 1999. The filing also suggested that
large customers may be permitted to negotiate for reduced usage under a capacity
release program. Detroit Edison declined to implement the 90 MW retail
wheeling experiment for the reason that it would not contribute to meeting the
capacity need. In June 1998, the MPSC approved customer capacity options
conditioned on customer backup power being obtained from sources not available
to Detroit Edison.
In July 1998, Detroit Edison filed a required review of its current depreciation
expense with the MPSC. The application requests a change in the current
non-nuclear depreciation accrual rate from 3.35% to 4.01%, in effect increasing
annual depreciation expenses by 20%, or $68 million. An adjustment in electric
rates is not being sought at this time.
As discussed in Detroit Edison's Part II, "Item 5 - Other Information" of the
Quarterly Report, on April 14, 1998 the MPSC issued an order granting Detroit
Edison's March 31, 1998 request to waive competitive bidding for Conners Creek
and restart the plant. Although Detroit Edison believes that the plant complies
with all applicable environmental requirements, the Michigan Department of
Environmental Quality and
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31
the Wayne County Michigan Air Quality Management Division have issued notices of
violation contending that Detroit Edison is required to obtain a series of new
licenses prior to plant operation. Detroit Edison is contesting these notices of
violation.
Effective May 26, 1998, Lynne Halpin was elected Vice President and Chief
Information Officer. Since 1996 she was Vice President of Business Applications
at Netscape Communications Corp. From 1993 to 1996, she was Director of Business
Systems Development and Acting Vice President of Global Systems Development at
Xerox Corp.
Effective August 1, 1998, Ron A. May, currently Assistant Vice President, Energy
Delivery, was elected Vice President, Energy Delivery and Service.
See the Company's Part II, "Item 5 - Other Information" which is incorporated
herein by reference.
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32
QUARTERLY REPORTS ON FORM 10-Q FOR DTE ENERGY COMPANY
AND THE DETROIT EDISON COMPANY
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
(i) Exhibits filed herewith.
Exhibit
Number
--------
4-193 - 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.
4-194 - $100,000,000 Support Agreement,
dated as of June 16, 1998, between DTE
Energy Company and DTE Capital
Corporation.
4-196 - Indenture, dated as of June 15,
1998, between DTE Capital Corporation
and The Bank of New York, as Trustee.
4-197 - First Supplemental Indenture, dated as
of June 15, 1998, between DTE Capital
Corporation and The Bank of New York,
as Trustee, creating the $100,000,000
Remarketed Notes, Series A due 2038,
including form of Note.
10-26* - Employment Agreement, dated April
16, 1998, between Detroit Edison and
Lynn Halpin.
11-12 - DTE Energy Company Basic and Diluted
Earnings Per Share.
12-12 - The Detroit Edison Company
Computation of Ratio of Earnings to
Fixed Charges and Preferred Stock
Dividends.
15-8 - Awareness Letter of Deloitte &
Touche LLP regarding their report
dated July 27, 1998.
27-21 - Financial Data Schedule for the
period ended June 30, 1998 for DTE
Energy Company.
27-22 - Financial Data Schedule for the
period ended June 30, 1998 for The
Detroit Edison Company.
(ii) Exhibits incorporated herein by reference.
3(a) - Amended and Restated Articles of
Incorporation of DTE Energy Company,
dated December 13, 1995. (Exhibit 3-5
to Form 10-Q for quarter ended
September 30, 1997).
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33
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 4-117
to Form 10-Q for quarter ended March
31, 1993).
3(d) - Certificate containing resolution of
the Detroit Edison Board of Directors
establishing the Cumulative Preferred
Stock, 7.75% Series as filed February
22, 1993 with the State of Michigan,
Department of Commerce - Corporation
and Securities Bureau (Exhibit 4-134
to Form 10-Q for quarter ended March
31, 1993).
3(e) - Certificate containing resolution of
the Detroit Edison Board of Directors
establishing the Cumulative Preferred
Stock, 7.74% Series, as filed April
21, 1993 with the State of Michigan,
Department of Commerce - Corporation
and Securities Bureau (Exhibit 4-140
to Form 10-Q for quarter ended March
31, 1993).
3(f) - 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 22,
1997).
3(g) - Agreement and Plan of Exchange
(Exhibit 1(2) to DTE Energy Form 8-B
filed January 2, 1996, File No.
1-11607).
4(a) - Mortgage and Deed of Trust, dated as
of October 1, 1924, between Detroit
Edison (File No. 1-2198) and Bankers
Trust Company 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
October 1, 1968 Exhibit 2-B-33 to Registration
No. 2-30096
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
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34
August 15, 1982 Exhibit 4-32 to Registration
No. 2-79674
October 15, 1985 Exhibit 4-170 to Form 10-K for year
ended December 31, 1994
July 15, 1989 Exhibit 4-171 to Form 10-K for year
ended December 31, 1994
December 1, 1989 Exhibit 4-172 to Form 10-K for year
ended December 31, 1994
February 15, 1990 Exhibit 4-173 to Form 10-K for year
ended December 31, 1994
April 1, 1991 Exhibit 4-15 to Form 10-K for year
ended December 31, 1996
May 1, 1991 Exhibit 4-178 to Form 10-K for year
ended December 31, 1996
May 15, 1991 Exhibit 4-179 to Form 10-K for year
ended December 31, 1996
September 1, 1991 Exhibit 4-180 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 for quarter ended
March 31, 1998
July 15, 1992 Exhibit 4-189 for quarter ended
March 31, 1998
July 31, 1992 Exhibit 4-190 for quarter
ended March 31, 1998
November 30, 1992 Exhibit 4-130 to Registration
No. 33-56496
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
March 15, 1993 Exhibit 4-192 to Form 10-Q for
quarter ended March 31, 1998
April 1, 1993 Exhibit 4-143 to Form 10-Q for
quarter ended March 31, 1993
April 26, 1993 Exhibit 4-144 to Form 10-Q for
quarter ended March 31, 1993
May 31, 1993 Exhibit 4-148 to Registration
No. 33-64296
June 30, 1993 Exhibit 4-149 to Form 10-Q for
quarter ended June 30, 1993 (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 4-158 to Form 10-Q for
quarter ended September 30, 1993
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35
March 1, 1994 Exhibit 4-163 to Registration
No. 33-53207
June 15, 1994 Exhibit 4-166 to Form 10-Q for
quarter ended June 30, 1994
August 15, 1994 Exhibit 4-168 to Form 10-Q for
quarter ended September 30, 1994
December 1, 1994 Exhibit 4-169 to Form 10-K for
year ended December 31, 1994
August 1, 1995 Exhibit 4-174 to Form 10-Q for
quarter ended September 30, 1995
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) - Second Supplemental Note Indenture,
dated as of September 15, 1993
(Exhibit 4-159 to Form 10-Q for
quarter ended September 30, 1993).
4(e) - 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(f) - Third Supplemental Note Indenture,
dated as of August 15, 1994 (Exhibit
4-169 to Form 10-Q for quarter ended
September 30, 1994).
4(g) - 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(h) - Fourth Supplemental Note Indenture,
dated as of August 15, 1995 (Exhibit
4-175 to Detroit Edison Form 10-Q for
quarter ended September 30, 1995).
4(i) - Fifth Supplemental Note Indenture,
dated as of February 1, 1996 (Exhibit
4-14 to Form 10-K for year ended
December 31, 1996).
4(j) - 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).
35
36
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).
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, 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
36
37
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) - $200,000,000 Three-Year Credit
Agreement, dated September 1, 1993,
among Detroit Edison, Renaissance and
Barclays Bank, PLC, New York Branch,
as Agent (Exhibit 99-13 to
Registration No. 33-50325).
99(m) - First Amendment, dated as of
September 1, 1994, to $200,000,000
Three-Year Credit Agreement, dated as
of September 1, 1993, among Detroit
Edison, Renaissance, the Banks party
thereto and Barclays Bank, PLC, New
York Branch, as Agent (Exhibit 99-20
to Form 10-Q for quarter ended
September 30, 1994).
99(n) - 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(o) - 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(p) - 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(q) - 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).
99(r) - 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).
37
38
99(s) - Second Amendment, dated as of
September 1, 1993, to 1988 Amended and
Restated Nuclear Fuel Heat Purchase
Contract between Detroit Edison and
Renaissance (Exhibit 99-11 to
Registration No. 33-50325).
99(t) - Third Amendment, dated as of August
31, 1994, to 1988 Amended and Restated
Nuclear Fuel Heat Purchase Contract,
dated October 4, 1988, between Detroit
Edison and Renaissance (Exhibit 99-21
to Form 10-Q for quarter ended
September 30, 1994).
99(u) - Fourth Amendment, dated as of March
8, 1996, to 1988 Amended and Restated
Nuclear Fuel Heat Purchase Contract
Agreement, dated as of October 4,
1988, between Detroit Edison and
Renaissance (Exhibit 99-10 to Form
10-Q for quarter ended March 31,
1996).
99(v) - Sixth Amendment, dated as of August
28, 1997, to 1988 Amended and Restated
Nuclear Fuel Heat Purchase Contract
between Detroit Edison and
Renaissance. (Exhibit 99-23 to Form
10-Q for quarter ended September 30,
1997).
99(w) - Standby Note Purchase Credit
Facility, dated as of September 12,
1997, among Detroit Edison 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 999-26 to Form 10-Q
for quarter ended September 30, 1997).
99(x) - Amended and Restated Credit Agreement,
Dated as of January 21, 1998 among DTE
Capital Corporation, the Initial
Lenders, Citibank, N.A., as Agent, and
Barclays Bank PLC, New York Branch and
The First National Bnak of Chicago, as
Co-Agents, and Citicorp Securities,
Inc., as Arranger.
99(y) - $60,000,000 Support Agreement, dated
as of January 21, 1998, between DTE
Energy Company and DTE Capital
Corporation.
99(z) - $400,000,000 Support Agreement, dated
as of January 21, 1998, between DTE
Energy Company and DTE Capital
Corporation.
(b) Registrants did not file any reports on Form 8-K during second
quarter 1998.
(c) *Denotes management contract or compensatory plan or arrangement.
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39
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.
DTE ENERGY COMPANY
---------------------------------------------
(Registrant)
Date August 13, 1998 /s/ SUSAN M. BEALE
--------------------- ---------------------------------------------
Susan M. Beale
Vice President and Corporate Secretary
Date August 13, 1998 /s/ DAVID E. MEADOR
--------------------- ---------------------------------------------
David E. Meador
Vice President and Controller
39
40
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.
THE DETROIT EDISON COMPANY
---------------------------------------------
(Registrant)
Date August 13, 1998 /s/ SUSAN M. BEALE
--------------------- ---------------------------------------------
Susan M. Beale
Vice President and Corporate Secretary
Date August 13, 1998 /s/ DAVID E. MEADOR
--------------------- ---------------------------------------------
David E. Meador
Vice President and Controller
40
41
QUARTERLY REPORTS ON FORM
10-Q FOR THE QUARTER
ENDED JUNE 30, 1998
DTE ENERGY COMPANY FILE NO. 1-11607
DETROIT EDISON COMPANY FILE NO. 1-2198
EXHIBIT INDEX
Exhibits filed herewith.
Exhibit
Number
4-193 - 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.
4-194 - $100,000,000 Support Agreement,
dated as of June 16, 1998 between
DTE Energy Company and DTE Capital
Corporation.
4-196 - Indenture, dated as of June 15,
1998, between DTE Capital Corporation
and The Bank of New York, as Trustee.
4-197 - First Supplemental Indenture, dated as
of June 15, 1998, between DTE Capital
Corporation and The Bank of New York,
as Trustee, creating the $100,000,000
Remarketed Notes, Series A due 2038,
including form of Note.
10-26* - Employment Agreement, dated April
16, 1998, between Detroit Edison and
Lynn Halpin.
11-12 - DTE Energy Company and Diluted
Earnings Per Share.
12-12 - The Detroit Edison Company
Computation of Ratio of Earnings to
Fixed Charges and Preferred Stock
Dividends.
15-8 - Awareness Letter of Deloitte &
Touche LLP regarding their report
dated July , 1998.
41
42
27-21 - Financial Data Schedule for the
period ended June 30. 1998 for DTE
Energy Company.
27-22 - Financial Data Schedule for the
period ended June 30, 1998 for The
Detroit Edison Company and Subsidiary
Companies.
Exhibits incorporated herein by reference. See Page Nos.___ through
___ for location of exhibits
incorporated by reference
3(a) - Amended and Restated Articles of
Incorporation of DTE Energy Company,
dated December 13, 1995.
3(b) - Certificate of Designation of Series
A Junior Participating Preferred Stock
of DTE Energy Company.
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.
3(d) - Certificate containing resolution of
the Detroit Edison Board of Directors
establishing the Cumulative Preferred
Stock, 7.75% Series as filed February
22, 1993 with the State of Michigan,
Department of Commerce Corporation and
Securities Bureau.
3(e) - Certificate containing resolution of
the Detroit Edison Board of Directors
establishing the Cumulative Preferred
Stock, 7.74% Series, as filed April
21, 1993 with the State of Michigan,
Department of Commerce - Corporation
and Securities Bureau.
3(f) - Rights Agreement, dated as of
September 23, 1997, by and between DTE
Energy Company and The Detroit Edison
Company, as Rights Agent.
3(g) - Agreement and Plan of Exchange.
4(a) - Mortgage and Deed of Trust, dated as
of October 1, 1924, between Detroit
Edison and Bankers Trust Company as
Trustee and indentures supplemental
thereto, dated as of dates indicated
below:
September 1, 1947
October 1, 1968
November 15, 1971
January 15, 1973
42
43
February 29, 1992
April 5, 1992
July 15, 1992
July 31, 1992
June 1, 1978
June 30, 1982
August 15, 1982
October 15, 1985
July 15, 1989
December 1, 1989
February 15, 1990
April 1, 1991
May 1, 1991
May 15, 1991
September 1, 1991
November 1, 1991
January 15, 1992
November 30, 1992
January 1, 1993
April 1, 1993
April 26, 1993
May 31, 1993
June 30, 1993
June 30, 1993
September 15, 1993
March 1, 1994
June 15, 1994
August 15, 1994
December 1 1994
August 1, 1995
4(b) - Collateral Trust Indenture (notes),
dated as of June 30, 1993.
4(c) - First Supplemental Note Indenture,
dated as of June 30, 1993.
4(d) - Second Supplemental Note Indenture,
dated as of September 15, 1993.
4(e) - First Amendment, dated as of August
15, 1996, to Second Supplemental Note
Indenture.
4(f) - Third Supplemental Note Indenture,
dated as of August 15, 1994.
4(g) - First Amendment, dated as of
December 12, 1995, to Third
Supplemental Note Indenture, dated as
of August 15, 1994.
43
44
4(h) - Fourth Supplemental Note Indenture,
dated as of August 15, 1995.
4(i) - Fifth Supplemental Note Indenture,
dated as of February 1, 1996.
4(j) - 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.
99(a) - Belle River Participation Agreement
between Detroit Edison and Michigan
Public Power Agency, dated as of
December 1, 1982.
99(b) - Belle River Transmission Ownership
and Operating Agreement between
Detroit Edison and Michigan Public
Power Agency, dated as of December 1,
1982 .
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.
99(d) - First Amendment to 1988 Amended and
Restated Loan Agreement, dated as of
February 1, 1990, between Detroit
Edison and Renaissance.
99(e) - Second Amendment to 1988 Amended and
Restated Loan Agreement, dated as of
September 1, 1993, between Detroit
Edison and Renaissance.
99(f) - Third Amendment, dated as of August
28, 1997, to 1988 Amended and Restated
Loan Agreement between Detroit Edison
and Renaissance.
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.
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,
44
45
Renaissance, the Banks party
thereto and Barclays Bank, PLC, New
York Branch, as Agent.
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.
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.
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.
99(l) - $200,000,000 Three-Year Credit
Agreement, dated September 1, 1993,
among Detroit Edison, Renaissance and
Barclays Bank, PLC, New York Branch,
as Agent.
99(m) - First Amendment, dated as of
September 1, 1994, to $200,000,000
Three-Year Credit Agreement, dated as
of September 1, 1993, among Detroit
Edison, Renaissance, the Banks party
thereto and Barclays Bank, PLC, New
York Branch, as Agent.
99(n) - 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.
99(o) - 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.
99(p) - 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,
45
46
Renaissance, the Banks
Party thereto and Barclays Bank PLC,
New York Branch, as Agent.
99(q) - 1988 Amended and Restated Nuclear
Fuel Heat Purchase Contract, dated
October 4, 1988, between Detroit
Edison and Renaissance.
99(r) - First Amendment to 1988 Amended and
Restated Nuclear Fuel Heat Purchase
Contract, dated as of February 1,
1990, between Detroit Edison and
Renaissance.
99(s) - Second Amendment, dated as of
September 1, 1993, to 1988 Amended and
Restated Nuclear Fuel Heat Purchase
Contract between Detroit Edison and
Renaissance.
99(t) - Third Amendment, dated as of
August 31, 1994, to 1988 Amended and
Restated Nuclear Fuel Heat Purchase
Contract, dated October 4, 1988,
between Detroit Edison and Renaissance.
99(u) - Fourth Amendment, dated as of March 8,
1996, to 1988 Amended and Restated
Nuclear Fuel Heat Purchase Contract
Agreement, dated as of October 4,
1988, between Detroit Edison and
Renaissance.
99(v) - Sixth Amendment, dated as of August
28, 1997, to 1988 Amended and Restated
Nuclear Fuel Heat Purchase Contract
between Detroit Edison and Renaissance.
99(w) - Standby Note Purchase Credit
Facility, dated as of September 12,
1997, among Detroit Edison 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.
99(x) - Amended and Restated Credit Agreement,
Dated as of January 21, 1998 among DTE
Capital Corporation, the Initial
Lenders, Citibank, N.A., as Agent, and
Barclays Bank PLC, New York Branch and
The First National Bnak of Chicago, as
Co-Agents, and Citicorp Securities,
Inc., as Arranger.
99(y) - $60,000,000 Support Agreement dated
as of January 21, 1998 between DTE
Energy Company and DTE Capital
Corporation.
46
47
99(z) - $400,000,000 Support Agreement, dated
as of January 21, 1998, between DTE
Energy Company and DTE Capital
Corporation.
*Denotes management contract or compensatory plan or arrangement
required to be entered as an exhibit to this report.
47