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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTER ENDED MARCH 31, 1999
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 March 31, 1999, 145,045,159 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 MARCH 31, 1999
This document contains the Quarterly Reports on Form 10-Q for the quarter ended
March 31, 1999 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
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Definitions....................................................................................................3
Quarterly Report on Form 10-Q for DTE Energy Company:
Part I - Financial Information..........................................................................4
Item 1 - Financial Statements................................................................4
Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations................................................20
Quarterly Report on Form 10-Q for The Detroit Edison Company:
Part I - Financial Information.........................................................................25
Item 1 - Financial Statements...............................................................25
Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations................................................25
Part II - Other Information.............................................................................25
Item 1 - Legal Proceedings...................................................................25
Item 5 - Other Information...................................................................26
Quarterly Reports on Form 10-Q for DTE Energy Company and The Detroit Edison
Company:
Item 6 - Exhibits and Reports on Form 8-K...................................................27
Signature Page to DTE Energy Company Quarterly Report on Form 10-Q............................................35
Signature Page to The Detroit Edison Company Quarterly Report on Form 10-Q....................................36
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DEFINITIONS
ABATE............................Association of Businesses Advocating Tariff Equity
Annual Report....................1998 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 45 through 72
and 76 through 79 of the 1998 Annual Report to the Securities and Exchange
Commission on Form 10-K for DTE Energy Company and The Detroit Edison Company,
as the case may be
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)
EPA..............................United States Environmental Protection Agency
FERC.............................Federal Energy Regulatory Commission
kWh..............................Kilowatthour
MPSC.............................Michigan Public Service Commission
MW...............................Megawatt
MWh..............................Megawatthour
Note(s)..........................Note(s) to Condensed Consolidated Financial Statements (Unaudited) appearing herein
PSCR.............................Power Supply Cost Recovery
Registrant.......................Company or Detroit Edison, as the case may be
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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).
The following condensed consolidated financial statements (unaudited) are
included herein.
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DTE Energy Company:
Condensed Consolidated Statement of Income...................................5
Condensed Consolidated Balance Sheet.........................................6
Condensed Consolidated Statement of Cash Flows...............................8
Condensed Consolidated Statement of Changes in Shareholders' Equity..........9
The Detroit Edison Company:
Condensed Consolidated Statement of Income..................................11
Condensed Consolidated Balance Sheet........................................12
Condensed Consolidated Statement of Cash Flows..............................14
Condensed Consolidated Statement of Changes in Shareholder's Equity.........15
Notes to Condensed Consolidated Financial Statements (Unaudited)..............16
Independent Accountants' Report...............................................19
Note: Detroit Edison's Condensed Consolidated Financial Statements are
presented here for ease of reference and are not considered to be
part of Item I of the Company's report.
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DTE ENERGY COMPANY
CONDENSED CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)
(Millions, Except Per Share Amounts)
Three Months Ended
March 31
-----------------------------
1999 1998
------------ -----------
OPERATING REVENUES $1,024 $ 945
------ ------
OPERATING EXPENSES
Fuel and purchased power 231 208
Operation and maintenance 325 268
Depreciation and amortization 182 165
Taxes other than income 71 71
------ ------
Total Operating Expenses 809 712
------ ------
OPERATING INCOME 215 233
------ ------
INTEREST EXPENSE AND OTHER
Interest expense 83 74
Preferred stock dividends of subsidiary - 3
Other - net 3 -
------ ------
Total Interest Expense and Other 86 77
------ ------
INCOME BEFORE INCOME TAXES 129 156
INCOME TAXES 14 52
------ ------
NET INCOME $ 115 $ 104
====== ======
AVERAGE COMMON SHARES OUTSTANDING 145 145
------ ------
EARNINGS PER COMMON SHARE - BASIC AND DILUTED $ 0.79 $ 0.72
------ ------
See Notes to Condensed Consolidated Financial Statements (Unaudited).
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DTE ENERGY COMPANY
CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED)
(Millions, Except Per Share Amounts and Shares)
March 31 December 31
1999 1998
--------------- ---------------
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 41 $ 130
Restricted cash 132 121
Accounts receivable
Customer (less allowance for doubtful accounts of $20) 322 316
Accrued unbilled revenues 143 153
Other 117 135
Inventories (at average cost)
Fuel 161 171
Materials and supplies 152 167
Other 136 39
------- -------
1,204 1,232
------- -------
INVESTMENTS
Nuclear decommissioning trust funds 327 309
Other 247 261
------- -------
574 570
------- -------
PROPERTY
Property, plant and equipment 11,224 11,121
Property under capital leases 241 242
Nuclear fuel under capital lease 662 659
Construction work in progress 198 156
------- -------
12,325 12,178
------- -------
Less accumulated depreciation and amortization 5,336 5,235
------- -------
6,989 6,943
------- -------
REGULATORY ASSETS 3,022 3,091
------- -------
OTHER ASSETS 264 252
------- -------
TOTAL ASSETS $12,053 $12,088
======= =======
See Notes to Condensed Consolidated Financial Statements (Unaudited).
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March 31 December 31
1999 1998
--------------- --------------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 187 $ 239
Accrued interest 54 57
Dividends payable 75 75
Accrued payroll 87 101
Short-term borrowings 280 231
Deferred income taxes 100 60
Current portion long-term debt 481 294
Current portion capital leases 109 118
Other 151 217
------- -------
1,524 1,392
------- -------
OTHER LIABILITIES
Deferred income taxes 1,846 1,888
Capital leases 124 126
Regulatory Liabilities 322 294
Other 517 493
------- -------
2,809 2,801
------- -------
LONG-TERM DEBT 3,984 4,197
------- -------
SHAREHOLDERS' EQUITY
Common stock, without par value, 400,000,000 shares
authorized, 145,045,159 and 145,071,317 issued
and outstanding, respectively 1,950 1,951
Retained earnings 1,786 1,747
------- -------
3,736 3,698
------- -------
CONTINGENCIES (NOTE 5)
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $12,053 $12,088
======= =======
See Notes to Condensed Consolidated Financial Statements (Unaudited).
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DTE ENERGY COMPANY
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
(Millions)
Three Months Ended
March 31
------------------------
1999 1998
------------------------
OPERATING ACTIVITIES
Net Income $ 115 $ 104
Adjustments to reconcile net income to net cash from operating activities:
Depreciation and amortization 182 165
Other 48 3
Changes in current assets and liabilities:
Restricted cash (11) (16)
Accounts receivable 22 47
Inventories 25 12
Payables (50) 5
Other (175) (97)
- ------------------------------------------------------------------------------------------------------
Net cash from operating activities 156 223
- ------------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES
Plant and equipment expenditures (162) (125)
Investment in coke oven battery businesses - (200)
Nuclear decommissioning trust funds (18) (29)
Other (2) 6
- ------------------------------------------------------------------------------------------------------
Net cash used for investing activities (182) (348)
- ------------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES
Increase in short-term borrowings 49 377
Redemption of long-term debt (37) (169)
Dividends on common stock (75) (75)
- ------------------------------------------------------------------------------------------------------
Net cash (used for) from financing activities (63) 133
- ------------------------------------------------------------------------------------------------------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (89) 8
CASH AND CASH EQUIVALENTS AT BEGINNING OF THE PERIOD 130 45
- ------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT END OF THE PERIOD $ 41 $ 53
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SUPPLEMENTARY CASH FLOW INFORMATION
Interest paid (excluding interest capitalized) $ 84 $ 85
Income taxes paid 29 20
New capital lease obligations 9 17
See Notes to the Condensed Consolidated Financial Statements (Unaudited).
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DTE ENERGY COMPANY
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY (UNAUDITED)
(Millions, Except Per Share Amounts; Shares in Thousands)
1999
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Shares Amount
--------------------------------
COMMON STOCK
Balance at beginning of year 145,071 $ 1,951
Repurchase and retirement of common stock (26) (1)
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Balance at March 31, 1999 145,045 $ 1,950
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RETAINED EARNINGS
Balance at beginning of year $ 1,747
Net income 115
Dividends declared on common stock ($0.515 per share) (75)
Repurchase and retirement of common stock (1)
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Balance at March 31, 1999 $ 1,786
- --------------------------------------------------------------------------------------------------------------
TOTAL SHAREHOLDERS' EQUITY $ 3,736
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See Notes to Condensed Consolidated Financial Statements (Unaudited).
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THE DETROIT EDISON COMPANY
CONDENSED CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)
(Millions)
Three Months Ended
March 31
-----------------------------------
1999 1998
--------------- ---------------
OPERATING REVENUES $911 $901
---- ----
OPERATING EXPENSES
Fuel and purchased power 206 208
Operation and maintenance 237 223
Depreciation and amortization 173 163
Taxes other than income 71 70
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Total Operating Expenses 687 664
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OPERATING INCOME 224 237
---- ----
INTEREST EXPENSE AND OTHER
Interest expense 68 68
Other - net 3 5
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Total Interest Expense and Other 71 73
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INCOME BEFORE INCOME TAXES 153 164
INCOME TAXES 49 66
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NET INCOME 104 98
PREFERRED STOCK DIVIDENDS - 3
---- ----
NET INCOME AVAILABLE FOR COMMON STOCK $104 $ 95
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See Notes to Condensed Consolidated Financial Statements (Unaudited).
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THE DETROIT EDISON COMPANY
CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED)
(Millions, Except Per Share Amounts and Shares)
March 31 December 31
1999 1998
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ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 3 $ 5
Accounts receivable
Customer (less allowance for doubtful
accounts of $20) 302 307
Accrued unbilled revenues 143 153
Other 73 90
Inventories (at average cost)
Fuel 161 171
Materials and supplies 139 138
Other 115 21
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936 885
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INVESTMENTS
Nuclear decommissioning trust funds 327 309
Other 42 74
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369 383
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PROPERTY
Property, plant and equipment 10,694 10,610
Property under capital leases 240 242
Nuclear fuel under capital lease 662 659
Construction work in progress 143 118
------- -------
11,739 11,629
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Less accumulated depreciation and amortization 5,293 5,201
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6,446 6,428
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REGULATORY ASSETS 3,022 3,091
------- -------
OTHER ASSETS 212 200
------- -------
TOTAL ASSETS $10,985 $10,987
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See Notes to Condensed Consolidated Financial Statements (Unaudited).
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March 31 December 31
1999 1998
------------- --------------
LIABILITIES AND SHAREHOLDER'S EQUITY
CURRENT LIABILITIES
Accounts payable $ 172 $ 211
Accrued interest 45 54
Dividends payable 80 80
Accrued payroll 85 86
Short-term borrowings 280 231
Deferred income taxes 100 60
Current portion long-term debt 394 219
Current portion capital leases 109 118
Other 120 203
-------- --------
1,385 1,262
-------- --------
OTHER LIABILITIES
Deferred income taxes 1,800 1,846
Capital leases 124 126
Regulatory liabilities 322 294
Other 549 484
-------- --------
2,795 2,750
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LONG-TERM DEBT 3,268 3,462
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SHAREHOLDER'S EQUITY
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 1,586 1,562
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3,537 3,513
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CONTINGENCIES (NOTE 5)
TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY $ 10,985 $ 10,987
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See Notes to Condensed Consolidated Financial Statements (Unaudited).
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THE DETROIT EDISON COMPANY
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
(Millions)
Three Months Ended
March 31
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1999 1998
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OPERATING ACTIVITIES
Net Income $ 104 $ 98
Adjustments to reconcile net income to net cash from operating activities:
Depreciation and amortization 173 163
Other 65 (1)
Changes in current assets and liabilities:
Accounts receivable 33 54
Inventories 16 2
Payables (43) 22
Other (178) (108)
- ----------------------------------------------------------------------------------------------------------------
Net cash from operating activities 170 230
- ----------------------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES
Plant and equipment expenditures (125) (118)
Nuclear decommissioning trust funds (18) (29)
Other 21 (3)
- ----------------------------------------------------------------------------------------------------------------
Net cash used for investing activities (122) (150)
- ----------------------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES
Increase in short-term borrowings 49 164
Redemption of long-term debt (19) (169)
Dividends on common stock and preferred stock (80) (83)
- ----------------------------------------------------------------------------------------------------------------
Net cash used for financing activities (50) (88)
- ----------------------------------------------------------------------------------------------------------------
NET DECREASE IN CASH AND CASH EQUIVALENTS (2) (8)
CASH AND CASH EQUIVALENTS AT BEGINNING OF THE PERIOD 5 15
- ----------------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT END OF THE PERIOD $ 3 $ 7
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SUPPLEMENTARY CASH FLOW INFORMATION
Interest paid (excluding interest capitalized) $ 78 $ 79
Income taxes paid 26 26
New capital lease obligations 9 17
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)
(Millions, Except Per Share Amounts; Shares in Thousands)
1999
----------------------------------
Shares Amount
----------------------------------
COMMON STOCK
Balance at beginning of year 145,120 $ 1,451
------- --------------
Balance at March 31, 1999 145,120 $ 1,451
- ------------------------------------------------------------------------------------------------------------------
PREMIUM ON COMMON STOCK
Balance at beginning of year $ 548
--------------
Balance at March 31, 1999 $ 548
- ------------------------------------------------------------------------------------------------------------------
COMMON STOCK EXPENSE
Balance at beginning of year $ (48)
--------------
Balance at March 31, 1999 $ (48)
- ------------------------------------------------------------------------------------------------------------------
RETAINED EARNINGS
Balance at beginning of year $ 1,562
Net income 104
Dividends declared on common stock ($0.55 per share) (80)
--------------
Balance at March 31, 1999 $ 1,586
- ------------------------------------------------------------------------------------------------------------------
TOTAL SHAREHOLDER'S EQUITY $ 3,537
==================================================================================================================
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. 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 - REGULATORY MATTERS
On March 8, 1999 the MPSC issued orders clarifying several issues related to
Direct Access. Among other things, the MPSC ruled that:
- - Detroit Edison must reduce rates effective January 1, 2000 by $14.8 million
to reflect the expiration of the 2-year extraordinary storm damage
surcharge.
- - Detroit Edison will be required to use its "best efforts" to provide
standby service to Direct Access customers. Best efforts means that Detroit
Edison must make the service available to Direct Access customers who
request it, but Detroit Edison does not have to build or purchase new
capacity or interrupt firm customers to provide the service.
- - Standby service is to be priced at Detroit Edison's top incremental cost
plus 1 cent. The service must be contracted for and scheduled in advance.
There are no reservation charges or monthly fees.
- - Detroit Edison should move expeditiously on the 90 MW of Direct Access
pilot program, but the larger 675 MW block of Direct Access power should
not become effective until the third quarter of 1999.
- - DTE Energy affiliates may not participate in Direct Access until Detroit
Edison files a code of conduct with the MPSC. On April 12, 1999, Detroit
Edison filed a code of conduct with the MPSC.
Several parties have filed petitions for rehearing or clarification of some of
the March 8, 1999 orders; the MPSC has not ruled on these petitions. ABATE and
the Michigan Attorney General have also filed for leave to appeal the MPSC's
decision authorizing accelerated
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amortization of Detroit Edison's Fermi 2 assets, to the Michigan Court of
Appeals. Detroit Edison is unable to determine the timing or outcome of these
proceedings.
NOTE 3 - SHORT-TERM CREDIT ARRANGEMENTS AND BORROWINGS
At March 31, 1999, Detroit Edison had total short-term credit arrangements of
approximately $690 million under which $280 million of commercial paper was
outstanding.
At March 31, 1999, DTE Capital had short-term credit arrangements of $400
million, backed by a Support Agreement from the Company, under which no amounts
were outstanding.
In February 1999, the Company entered into a $40 million Support Agreement with
DTE Capital for the purpose of DTE Capital's credit enhancing activities on
behalf of DTE Energy affiliates.
NOTE 4 - SEGMENT AND RELATED INFORMATION
Effective December 31, 1998, the Company adopted Statement of Financial
Accounting Standards No. 131, "Disclosure about Segments of an Enterprise and
Related Information." The Company's reportable business segment is its electric
utility, Detroit Edison, which is engaged in the generation, purchase,
transmission, distribution and sale of electric energy in a 7,600 square mile
area in Southeastern Michigan. All other includes non-regulated energy-related
businesses and services, which develop and manage electricity and other
energy-related projects, and engage in domestic energy trading and marketing.
Inter-segment revenues are not material. Financial data for business segments
are as follows:
- -----------------------------------------------------------------------------------------------------------------
Reconciliations
Electric All and
Utility Other Eliminations Consolidated
- -----------------------------------------------------------------------------------------------------------------
Three Months Ended March 31, 1999 (Millions)
Operating revenues $ 911 $ 113 $ - $ 1,024
Net income 104 14 (3) 115
- -----------------------------------------------------------------------------------------------------------------
Three Months Ended March 31, 1998 (Millions)
Operating revenues $ 901 $ 44 $ - $ 945
Net income 95 9 - 104
- -----------------------------------------------------------------------------------------------------------------
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
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Edison, Circuit Court for Wayne County, Michigan; and Frazier v. Detroit Edison,
United States District Court, Eastern District of Michigan), are preparing for
binding arbitration to settle these matters. A July 1998 Consent Judgement has
received preliminary Court approval. A Fairness Hearing with respect to the
terms of the settlement was held in August 1998, and no objections to the
settlement were raised. A second Fairness Hearing is contemplated following the
results of the arbitration. The settlement 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. Detroit Edison
has accrued an amount considered to be probable.
--------------------------
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, 33-64296 and 333-65765) of The Detroit Edison
Company and Form S-8 (Registration No. 333-00023) 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 Board of Directors and Shareholders of DTE Energy Company and
The Detroit Edison Company
We have reviewed the accompanying condensed consolidated balance sheets of DTE
Energy Company and subsidiaries and of The Detroit Edison Company and
subsidiaries as of March 31, 1999, and the related condensed consolidated
statements of income and cash flows for the three-month periods ended March 31,
1999 and 1998, and the condensed consolidated statements of changes in
shareholders' equity for the three-month period ended March 31, 1999. These
financial statements are the responsibility of DTE Energy Company's management
and of The Detroit Edison Company's management.
We conducted our reviews in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data and of making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted in
accordance with 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 of The Detroit Edison Company and subsidiaries as of December
31, 1998, 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 27, 1999, 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, 1998 is fairly stated, in all material respects, in relation
to the consolidated balance sheets from which it has been derived.
DELOITTE & TOUCHE LLP
Detroit, Michigan
April 28, 1999
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ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
This analysis for the three months ended March 31, 1999, as compared to the same
period in 1998, should be read in conjunction with the condensed consolidated
financial statements (unaudited), the accompanying Notes, and the Annual Report
Notes.
Detroit Edison is the principal operating subsidiary of the Company and, as
such, unless otherwise identified, this discussion explains material changes in
results of operations of both the Company and Detroit Edison and identifies
recent trends and events affecting both the Company and Detroit Edison.
ELECTRIC INDUSTRY RESTRUCTURING
MICHIGAN PUBLIC SERVICE COMMISSION
On March 8, 1999, the MPSC initiated new dockets to 1) evaluate the need to
expedite the supplier licensing program as an alternative for suppliers to
obtain local franchises and Certificates of Public Convenience and Necessity
from the MPSC, and 2) to establish guidelines for transactions between
affiliates. The MPSC also set for hearing the ABATE complaint that had been
filed in August 1997 alleging that Detroit Edison's earnings are excessive. A
procedural schedule was set whereby an order could be issued in the first
quarter of 2000.
On March 31, 1999, Detroit Edison filed an application with the MPSC for true-up
of its stranded costs, including Direct Access implementation costs. Detroit
Edison requested that the proceedings be conducted in two phases. The first
phase should involve only a prudency review of incurred implementation costs,
approval of forecasted spending and allocation of implementation costs among
customers and the timing of cost recovery. The second phase should be structured
to address the remaining true-up issues; including the appropriate stranded cost
balances, the appropriate level of the transition charge, the establishment of
the mechanics of the true-up and stranded cost recovery processes, and to
address policy issues such as Detroit Edison's billing and metering rights and
obligations in a restructured electric utility industry. Expedited proceedings
were requested for both phases, and a procedural schedule will be determined in
May 1999.
FEDERAL ENERGY REGULATORY COMMISSION
On February 15, 1999, Detroit Edison submitted a request to the FERC for
authorization to use certain plant accounts to recognize the impairment loss of
Detroit Edison's Fermi 2 plant and associated assets in accordance with
generally accepted accounting principles. On March 26, 1999, the Michigan
Attorney General filed a protest with the FERC and requested that the FERC set
the issue for hearing. On April 12, 1999, Detroit Edison filed its response with
the FERC, requesting that the FERC reject the Michigan Attorney General's
protest as an improper collateral attack on MPSC orders. The FERC has not made a
ruling on these matters.
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LIQUIDITY AND CAPITAL RESOURCES
CASH FROM OPERATING ACTIVITIES
Net cash from operating activities decreased in 1999 due primarily to decreases
in accounts payable and changes in other current assets and liabilities.
CASH USED FOR INVESTING ACTIVITIES
Net cash used for investing was lower due primarily to decreased non-regulated
investments and contributions to the nuclear decommissioning trust funds.
CASH (USED FOR) FROM FINANCING ACTIVITIES
Net cash used for financing was $63 million for the three months ended March 31,
1999 compared to net cash from financing of $133 million for the same period
during 1998. This fluctuation was primarily due to decreased DTE Capital
short-term borrowings, partially offset by redemptions of long-term debt.
YEAR 2000
The Company and Detroit Edison have been involved in an enterprise-wide program
to address Year 2000 issues. A program office was established in mid-1997 to
implement a rigorous plan to address the impact of Year 2000 on hardware and
software systems, embedded systems (which include microprocessors used in the
production and control of electric power), and critical service providers. The
emphasis has been on mission critical systems that support core business
activities or processes. Core business activities/processes include safety,
environmental and regulatory compliance, product production and delivery,
revenue collection, employee and supplier payment and financial asset
management.
The plan for addressing Year 2000 is divided into several phases including
raising general awareness of Year 2000 throughout the Company and Detroit
Edison; maintaining an inventory of systems and devices; performing an
assessment of inventoried systems and devices; performing compliance testing of
suspect systems and devices; remediation of non-compliant systems and devices
through replacement, repair, retirement, or identifying an acceptable work
around; testing and remediation of systems and devices in an integrated
environment and preparing business continuity plans.
Inventory, assessment and compliance testing phases have been completed for
known systems and devices. The remediation phase is approximately 91% complete
and is expected to be fully complete by August 1999 for mission critical assets
and supporting assets. Integration planning, including the mapping of critical
business processes, is near completion for Detroit Edison. Integration testing
and contingency planning is approximately 18% complete and is expected to be
fully complete by October 1999.
To support the program phases, the program office has been working with major
utility industry associations and organizations, customers and vendors to gather
and share
21
22
information on Year 2000 issues. The program office has contacted vendors
critical to Company operations to determine their progress on Year 2000.
To further assist in identifying potential problems, tests of generating
facilities have been conducted by advancing control systems dates to the Year
2000. Results of these tests have shown that the generating facilities operated
successfully in this induced "millennium mode." Exercises were conducted on
December 31, 1998 and January 1, 1999 to assess the ability to reach employees
and the regional security centers of the East Central Area Reliability Group
through various communication channels. The exercised communication channels
operated properly. The business continuity program will provide opportunities to
conduct similar exercises on other systems in advance of the Year 2000. Similar
analysis has not been completed for other affiliates.
In the event that an unknown Year 2000 condition adversely affects service to
customers or an internal business process, contingency and business continuity
plans and procedures are being developed to provide rapid restoration to normal
conditions. The Company and Detroit Edison have always maintained a
comprehensive operational emergency response plan. The business continuity
function of the Year 2000 program will supplement the existing emergency plan to
include Year 2000 specific events. A Year 2000 emergency response office will be
fully operational by November 1999 to manage and coordinate operations,
including mobilization of all employees as necessary, during the transition to
the new millennium.
The Company and Detroit Edison believe that with all Year 2000 modifications,
business continuity and emergency management plans in place, the Year 2000 will
not have a material effect on their financial position, liquidity and results of
operations. Despite all efforts, there can be no assurances that Year 2000
issues can be totally eliminated. Results of modifications and testing done
during the fourth quarter of 1998 have demonstrated that Detroit Edison should
be able to maintain normal operating conditions into the Year 2000, although
there may be isolated electric service interruptions. Detroit Edison's internal
business systems may be affected by a Year 2000 related failure that could
temporarily interrupt the ability to communicate with customers, collect
revenue, or complete cash transactions. In addition, no assurances can be given
that the systems of vendors, interconnected utilities and customers will not
result in Year 2000 problems.
The Company estimates that Year 2000 costs will approximate $80 million
with $57 million expended through March 31, 1999. Operating cash flow is
expected to be sufficient to pay Year 2000 modification costs with no material
impact on operating results or cash flows.
RESULTS OF OPERATIONS
For the three months ended March 31, 1999, the Company's net income was $115
million, or $0.79 per common share as compared to $104 million, or $0.72 per
common share earned in the three months ended March 31, 1998.
22
23
The 1999 three-month earnings were higher than 1998 due to increased earnings
resulting from increased utilization of tax credits generated by non-regulated
businesses and increased electric system sales due to higher demand resulting
from colder weather.
OPERATING REVENUES
Increases in operating revenues were due primarily to higher non-regulated
subsidiary revenues, higher system and interconnection sales due to increased
heating load and usage, partially offset by decreases in total system revenues
driven mainly by lower rates.
Detroit Edison kWh sales increased (decreased) as compared to the prior year as
follows:
Three
Months
------
Residential 5.2 %
Commercial 3.8
Industrial 0.4
Other (includes primarily sales for resale) 11.2
Total System 3.6
Sales between utilities (21.5)
Total 0.9
The increase in residential sales resulted from more heating related demand and
growth in the customer base. Commercial sales increased for the three-month
period, reflecting more heating related demand and a continuation
of favorable economic conditions. Sales to other customers increased reflecting
increased demand from sales for resale customers. Sales between utilities
decreased due to less power available for sale.
OPERATING EXPENSES
FUEL AND PURCHASED POWER
Net system output and average fuel and purchased power unit costs were as
follows:
Three Months
-----------------------
1999 1998
---- ----
(Thousands of MWh)
Power plant generation
Fossil 10,474 11,043
Nuclear 2,399 1,983
Purchased power 1,331 966
--------- ---------
Net system output 14,024 13,992
========= =========
Average unit cost ($/MWh) $ 13.49 $ 13.54
========= =========
23
24
Fuel and purchased power expense increased for the Company due primarily to new
non-regulated subsidiary expenses. Detroit Edison fuel and purchased power
expense decreased due to an 18.3% reduction in steam heating sales and lower
average unit costs resulting from a decrease in the cost of nuclear fuel,
partially offset by higher net system output and increased purchases of higher
cost power to replace lower cost system generation as a result of plant outages.
OPERATION AND MAINTENANCE
Operation and maintenance expense for the Company increased due primarily to new
non-regulated subsidiary operation expense ($44 million), higher expenses
related to the timing of the periodic plant outages ($8.3 million), higher
expenses for Year 2000 testing and remediation ($7.9 million), higher expenses
for information systems ($2.4 million), partially offset by lower nuclear
generation expenses ($5.9 million).
INCOME TAXES
Income tax expense for the Company decreased in 1999 due primarily to increased
utilization of alternate fuels credits generated from non-regulated businesses.
Alternate fuels credits phase out beginning in 2003 through 2007.
FORWARD-LOOKING STATEMENTS
Certain information presented herein is based on the expectations of the Company
and Detroit Edison, and, as such, is forward-looking. The Private Securities
Litigation Reform Act of 1995 encourages reporting companies to provide analyses
and estimates of future prospects and also permits reporting companies to point
out that actual results may differ from those anticipated.
Actual results for the Company and Detroit Edison may differ from those expected
due to a number of variables including, but not limited to, weather, actual
sales, the effects of competition and the phased-in implementation of Direct
Access, the implementation of utility restructuring in Michigan (which involves
pending regulatory proceedings, possible legislative activity, and the recovery
of stranded costs), environmental (including proposed regulations to limit
nitrogen oxide emissions) and nuclear requirements, the impact of FERC
proceedings and regulations, the success of non-regulated lines of business and
the timely completion of Year 2000 modifications. 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. This discussion contains a Year 2000 readiness disclosure.
24
25
QUARTERLY REPORT ON FORM 10-Q FOR
THE DETROIT EDISON COMPANY
PART I - FINANCIAL INFORMATION
ITEM 1 - CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED).
See pages 11 through 15.
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
See the Company's and Detroit Edison's "Item 2 - Management's Discussion and
Analysis of Financial Condition and Results of Operations," which is
incorporated herein by this reference.
PART II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS.
In a lawsuit filed in January 1999 in the Circuit Court for Wayne County
Michigan (Cook, et al v. Detroit Edison), a number of individual plaintiffs have
claimed employment-related sex, gender and race discrimination, as well as
harassment. The suit seeks certification as a class action. Detroit Edison
believes the claims are without merit.
As discussed in "Part I, Item 1 - Business" in the Company's Annual Report, in
1998 Detroit Edison attempted to restart the Conners Creek Power Plant (in
reserve status from 1988 to 1998) to meet expected high summer demand for
electricity. Although Detroit Edison believed that the plant complied with all
applicable environmental requirements, several regulatory agencies contended
that Detroit Edison was required to obtain a series of new permits prior to
plant operation and issued notices of violation. In August 1998, Detroit Edison
filed suit seeking a review of the agencies' determinations. On January 11,
1999, the Department of Justice (DOJ) on behalf of the EPA sent Detroit Edison a
Demand Letter requiring the payment of $2.3 million in civil penalties and an
unconditional commitment to abandon the use of the facility as a coal plant.
Detroit Edison rejected the demand and on January 15, 1999 the DOJ/EPA filed
suit in United States District Court for the Eastern District of Michigan. An
interim order issued on March 11, 1999 required Detroit Edison to convert the
plant from a coal to a natural gas fired facility. The ruling is the preliminary
outcome of the lawsuit filed by Detroit Edison seeking resolution of the
regulatory issues challenging any use of the plant. The operation of the plant
by early summer 1999 was found to be necessary to protect the health, safety and
welfare of the people of the Detroit metropolitan area. Resolution of the
remaining issues is proceeding. The cost of the conversion is estimated at $11
million. It is impossible to predict what impact, if any, the final outcome of
this will have upon Detroit Edison.
25
26
ITEM 5 - OTHER INFORMATION.
On March 31, 1999, Detroit Edison filed for reconciliation of its MPSC
jurisdictional 1998 PSCR revenues and expenses. Detroit Edison indicated that an
under recovery of $45.5 million, including interest, existed, and when offset by
a Fermi 2 performance standard credit of $33.7 million, a net amount of $11.8
million remains to be collected from PSCR customers.
26
27
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
------
3-11 Bylaws of DTE Energy Company, as amended through
April 28,1999.
3-12 Bylaws of The Detroit Edison Company, as amended through
April 28, 1999.
4-202 $40,000,000 Support Agreement dated as of
February 24, 1999 between DTE Energy Company and DTE Capital
Corporation.
*10-32 1999 Shareholder Value Improvement Plan-A Measures.
*10-33 1999 Executive Incentive Plan Measures.
11-15 - DTE Energy Company Basic and Diluted Earnings Per Share of
Common Stock.
12-16 - DTE Energy Company Computation of Ratio of Earnings to Fixed
Charges.
12-17 - The Detroit Edison Company Computation of Ratio of Earnings
to Fixed Charges.
15-10 - Awareness Letter of Deloitte & Touche LLP regarding their
report dated April 28, 1999.
27-27 - Financial Data Schedule for the period ended March 31, 1999
for DTE Energy Company.
27-28 - Financial Data Schedule for the period ended March 31, 1999
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)
27
28
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 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 23,
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
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
November 30, 1987 Exhibit 4-139 to Form 10-K for
year ended December 31, 1992
July 15, 1989 Exhibit 4-171 to Form 10-K for
year ended December 31, 1994
28
29
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 to Form 10-Q for quarter
ended March 31, 1998
July 15, 1992 Exhibit 4-189 to Form 10-Q for quarter
ended March 31, 1998
July 31, 1992 Exhibit 4-190 to Form 10-Q 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
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
29
30
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) - Sixth Supplemental Note Indenture, dated as of May 1,
1998, between Detroit Edison and Bankers Trust Company, as
Trustee, creating the 7.54% Quarterly Income Debt
Securities ("QUIDS"), including form of QUIDS. (Exhibit
4-193 to form 10-Q for quarter ended June 30, 1998.)
4(k - Seventh Supplemental Note Indenture, dated as of October
15, 1998, between Detroit Edison and Bankers Trust
Company, as Trustee, creating the 7.375% QUIDS, including
form of QUIDS. (Exhibit 4-198 to Form 10-K for year ended
December 31, 1998.)
4(l) - Standby Note Purchase Credit Facility, dated as of
August 17, 1994, among The Detroit Edison Company,
Barclays Bank PLC, as Bank and Administrative Agent, Bank
of America, The Bank of New York, The Fuji Bank Limited,
The Long-Term Credit Bank of Japan, LTD, Union Bank and
Citicorp Securities, Inc. and First Chicago Capital
Markets, Inc. as
30
31
Remarketing Agents (Exhibit 99-18 to Form
10-Q for quarter ended September 30, 1994).
4-(m) - $60,000,000 Support Agreement dated as of January
21, 1998 between DTE Energy Company and DTE Capital
Corporation. (Exhibit 4-183 to Form 10-K for year ended
December 31, 1997.)
4-(n) - $100,000,000 Support Agreement, dated as of June 16,
1998, between DTE Energy Company and DTE Capital
Corporation. (Exhibit 4-194 to Form 10-Q for quarter ended
June 30, 1998.)
4-(o) - $300,000,000 Support Agreement, dated as of November 18,
1998, between DTE Energy and DTE Capital Corporation.
(Exhibit 4-199 to Form 10-K for year ended December 31,
1998.)
4-(p) - $400,000,000 Support Agreement, dated as of January 19,
1999, between DTE Energy Company and DTE Capital
Corporation. (Exhibit 4-201 to form 10-K for year ended
December 31, 1998.)
4-(q) - Indenture, dated as of June 15, 1998, between DTE
Capital Corporation and The Bank of New York, as Trustee.
(Exhibit 4-196 to Form 10-Q for quarter ended June 30,
1998.)
4-(r) - 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. (Exhibit 4-197
to Form 10-Q for quarter ended June 30, 1998.)
4-(s) - Second Supplemental Indenture, dated as of November 1,
1998, between DTE Capital Corporation and The Bank of New
York, as Trustee, creating the $300,000,000 Remarketed
Notes, 1998 Series B, including form of Note. (Exhibit
4-200 to Form 10-K for year ended December 31, 1998.)
4(t) - Second Amended and Restated Credit Agreement, Dated as
of January 19, 1999 among DTE Capital Corporation, the
Initial Lenders, Citibank, N.A., as Agent, and ABN AMRO
Bank N.V., Barclays Bank PLC, Bayerische Landesbank
Giruzertrale, Cayman Islands Branch, Comerica Bank, Den
Daske Bank Aktieselskab and The First National Bank of
Chicago, as Co-Agents, and Salomon Smith Barney Inc., as
Arranger. (Exhibit 99-28 to Form 10-K for year ended
December 31, 1998.)
*10-(a) The Detroit Edison Company Executive Incentive Plan (October
1997). (Exhibit 10-13* to Form 10-K for the year ended
December 31, 1997.)
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32
10-(b) Detroit Edison Company Shareholder Value Improvement Plan-A
(October 1997). (Exhibit 10 15* to Form 10-K for year ended
December 31, 1997.)
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 Energy
Company, the Banks party thereto and Barclays Bank, PLC,
New York Branch, as Agent (Exhibit 99-19 to Form 10-Q for
quarter ended September 30, 1994).
99(i)- Third Amendment, dated as of March 8, 1996, to
$200,000,000 364-Day Credit Agreement, dated September 1,
1993, as amended, among Detroit Edison, Renaissance, the
Banks party thereto and Barclays Bank, PLC, New York
Branch, as Agent (Exhibit 99-11 to Form 10-Q for quarter
ended March 31, 1996).
32
33
99(j)- Fourth Amendment, dated as of August 29, 1996, to
$200,000,000 364-Day Credit Agreement as of September 1,
1990, as amended, among Detroit Edison, Renaissance, the
Banks party thereto and Barclays Bank, PLC, New York
Branch, as Agent (Exhibit 99-13 to Form 10-Q for quarter
ended September 30, 1996).
99(k)- Fifth Amendment, dated as of September 1, 1997, to $200,000,000
Multi-Year Credit Agreement, dated as of September 1, 1993, as
amended, among Detroit Edison, Renaissance, the Banks Party
thereto and Barclays Bank PLC, New York Branch, as Agent.
(Exhibit 99-24 to Form 10-Q for quarter ended September 30,
1997.)
99(l)- $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 The Detroit Edison Company,
Renaissance Energy Company, 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)- Sixth Amendment, dated as of August 27, 1998, to
$200,000,000 364-Day Credit Agreement dated as of
September 1, 1990, as amended, among Detroit Edison,
Renaissance, the Banks party thereto and Barclays Bank
PLC, New York Branch, as agent. (Exhibit 99-32 to
Registration No. 333-65765.)
33
34
99(r)- 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(s)- First Amendment to 1988 Amended and Restated Nuclear
Fuel Heat Purchase Contract, dated as of February 1, 1990,
between Detroit Edison and Renaissance (Exhibit 99-10 to
Registration No. 33-50325).
99(t)- 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(u)- Third Amendment, dated as of August 31, 1994, to 1988
Amended and Restated Nuclear Fuel Heat Purchase Contract,
dated October 4, 1988, between The Detroit Edison Company
and Renaissance Energy Company (Exhibit 99-21 to Form 10-Q
for quarter ended September 30, 1994).
99(v)- 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(w)- 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(x) - Standby Note Purchase Credit Facility, dated as of
September 12, 1997, among The Detroit Edison Company and
the Bank's Signatory thereto and The Chase Manhattan Bank,
as Administrative Agent, and Citicorp Securities, Inc.,
Lehman Brokers, Inc., as Remarketing Agents and Chase
Securities, Inc. as Arranger. (Exhibit 999-26 to Form 10-Q
for quarter ended September 30, 1997.)
(b) Registrants filed a report on Form 8-K, dated January 22, 1999,
discussing a series of MPSC Orders issued December 28, 1998.
*Denotes management contract or compensatory plan or arrangement.
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35
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 April 28, 1999 /s/ SUSAN M. BEALE
------------------------------ --------------------------------------
Susan M. Beale
Vice President and Corporate Secretary
Date April 28, 1999 /s/ DAVID E. MEADOR
------------------------------ --------------------------------------
David E. Meador
Vice President and Controller
35
36
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 April 28, 1999 /s/ SUSAN M. BEALE
------------------------------ --------------------------------------
Susan M. Beale
Vice President and Corporate Secretary
Date April 28, 1999 /s/ DAVID E. MEADOR
------------------------------ --------------------------------------
David E. Meador
Vice President and Controller
36
37
QUARTERLY REPORTS ON FORM
10-Q FOR THE QUARTER ENDED
MARCH 31, 1999
DTE ENERGY COMPANY FILE NO. 1-11607
DETROIT EDISON COMPANY FILE NO. 1-2198
EXHIBIT INDEX
Exhibits filed herewith.
Exhibit
Number
--------
3-11 Bylaws of DTE Energy Company, as amended through April
28,1999.
3-12 Bylaws of The Detroit Edison Company, as amended
through April 28, 1999.
4-202 $40,000,000 Support Agreement dated as of February 24,
1999 between DTE Energy Company and DTE Capital
Corporation.
*10-32 1999 Shareholder Value Improvement Plan-A Measures.
*10-33 1999 Executive Incentive Plan Measures.
11-15- DTE Energy Company Basic and Diluted Earnings Per
Share of Common Stock.
12-16- DTE Energy Company Computation of Ratio of Earnings
to Fixed Charges.
12-17- The Detroit Edison Company Computation of Ratio of
Earnings to Fixed Charges.
15-10- Awareness Letter of Deloitte & Touche LLP regarding
their report dated April 28, 1999.
27-27- Financial Data Schedule for the period ended March
31, 1999 for DTE Energy Company.
27-28- Financial Data Schedule for the period ended March
31, 1999 for The Detroit Edison Company.
38
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 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, and filed as exhibits to
the filings as set forth below:
September 1, 1947
October 1, 1968
November 15, 1971
January 15, 1973
June 1, 1978
June 30, 1982
August 15, 1982
October 15, 1985
November 30, 1987
July 15, 1989
December 1, 1989
February 15, 1990
April 1, 1991
May 1, 1991
39
September 1, 1991
November 1, 1991
January 15, 1992
February 29, 1992
April 15, 1992
July 15, 1992
July 31, 1992
November 30, 1992
January 1, 1993
March 1, 1993
March 15, 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.
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) - 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(k) - Seventh Supplemental Note Indenture, dated as of
October 15, 1998, between Detroit Edison and Bankers
Trust Company, as Trustee, creating the 7.375% QUIDS,
including form of QUIDS.
40
4(l) - Standby Note Purchase Credit Facility, dated as of
August 17, 1994, among The Detroit Edison Company,
Barclays Bank PLC, as Bank and Administrative Agent,
Bank of America, The Bank of New York, The Fuji Bank
Limited, The Long-Term Credit Bank of Japan, LTD,
Union Bank and Citicorp Securities, Inc. and First
Chicago Capital Markets, Inc. as Remarketing Agents.
4-(m) - $60,000,000 Support Agreement dated as of January
21, 1998 between DTE Energy Company and DTE Capital
Corporation.
4-(n) - $100,000,000 Support Agreement, dated as of June 16,
1998, between DTE Energy Company and DTE Capital
Corporation.
4-(o) - $300,000,000 Support Agreement, dated as of November
18, 1998, between DTE Energy and DTE Capital
Corporation.
4-(p) - $400,000,000 Support Agreement, dated as of January
19, 1999, between DTE Energy Company and DTE Capital
Corporation.
4-(q) - Indenture, dated as of June 15, 1998, between DTE
Capital Corporation and The Bank of New York, as
Trustee.
4-(r) - 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.
4-(s) - Second Supplemental Indenture, dated as of November
1, 1998, between DTE Capital Corporation and The Bank
of New York, as Trustee, creating the $300,000,000
Remarketed Notes, 1998 Series B, including form of
Note.
4(t) - Second Amended and Restated Credit Agreement, Dated
as of January 19, 1999 among DTE Capital Corporation,
the Initial Lenders, Citibank, N.A., as Agent, and ABN
AMRO Bank N.V., Barclays Bank PLC, Bayerische
Landesbank Giruzertrale, Cayman Islands Branch,
Comerica Bank, Den Daske Bank Aktieselskab and The
First National Bank of Chicago, as Co-Agents, and
Salomon Smith Barney Inc., as Arranger.
*10-(a) The Detroit Edison Company Executive Incentive Plan
(October 1997).
*10-(b) Detroit Edison Company Shareholder Value Improvement
Plan-A (October 1997).
99-(a)- Belle River Participation Agreement between Detroit
Edison and Michigan Public Power Agency, dated as of
December 1, 1982.
41
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, Renaissance
Energy Company, 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.
42
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 The Detroit Edison Company,
Renaissance Energy Company, 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,
Renaissance, the Banks Party thereto and Barclays Bank
PLC, New York Branch, as Agent.
99(q) - Sixth Amendment, dated as of August 27, 1998, to
$200,000,000 364-Day Credit Agreement dated as of
September 1, 1990, as amended, among Detroit Edison,
Renaissance, the Banks party thereto and Barclays Bank
PLC, New York Branch, as agent.
99(r) - 1988 Amended and Restated Nuclear Fuel Heat Purchase
Contract, dated October 4, 1988, between Detroit
Edison and Renaissance.
99(s) - First Amendment to 1988 Amended and Restated Nuclear
Fuel Heat Purchase Contract, dated as of February 1,
1990, between Detroit Edison and Renaissance.
99(t) - Second Amendment, dated as of September 1, 1993, to
1988 Amended and Restated Nuclear Fuel Heat Purchase
Contract between Detroit Edison and Renaissance.
99(u) - Third Amendment, dated as of August 31, 1994, to
1988 Amended and Restated Nuclear Fuel Heat Purchase
Contract, dated October 4, 1988, between The Detroit
Edison Company and Renaissance Energy Company.
99(v) - 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.
43
99(w) - Sixth Amendment, dated as of August 28, 1997, to 1988
Amended and Restated Nuclear Fuel Heat Purchase
Contract between Detroit Edison and Renaissance.
99(x) - Standby Note Purchase Credit Facility, dated as of
September 12, 1997, among The Detroit Edison Company
and the Bank's Signatory thereto and The Chase
Manhattan Bank, as Administrative Agent, and Citicorp
Securities, Inc., Lehman Brokers, Inc., as Remarketing
Agents and Chase Securities, Inc. as Arranger.
*Denotes management contract or compensatory plan or arrangement.