The operator introduces the DTE Energy Fourth Quarter 2023 Earnings Conference Call and turns it over to Barbara Tuckfield, Director of Investor Relations. CEO Jerry Norcia and CFO Dave Ruud provide a recap of the company's accomplishments in 2023 and discuss how they are well-positioned for 2024 and beyond. Despite facing significant headwinds from weather and storm activity, the company was able to achieve operating earnings per share of $5.73, overcoming $300 million of the $400 million of challenges they faced.

In summary, the appendix of the article includes a summary of the challenges faced in 2023 and the actions taken to overcome them. The engaged team at DTE was recognized with multiple awards and the company remains committed to delivering for all stakeholders. Investment in utilities is a top priority, with a focus on rebuilding infrastructure and transitioning to cleaner energy. Progress has been made in improving reliability, with a 33% decrease in outages in circuits where upgrades were completed. The company also received a positive electric rate case order and plans to file another in the first half of the year to support continued investments.

In 2023, DTE Electric invested $3.1 billion in reliability and clean energy generation, while DTE Gas invested $750 million in infrastructure improvements. The passing of new clean energy legislation in Michigan will support the development of additional solar, wind, and storage assets. DTE has a history of maintaining affordability for customers, with an average annual growth of just over 1% in residential electric bills since 2020. DTE was also named to the Civic 50 for the sixth consecutive year.

The company is proud to have received an award from Points of Light for their community-minded approach in decision-making. They have a robust investment agenda of $25 billion over the next five years, with a focus on clean energy initiatives and meeting customers' needs. Their operating EPS growth is projected to be 7% in 2024 and they will continue to grow dividends in line with this. They also have a strong balance sheet and investment-grade credit ratings to support their customer-focused capital investment plan. At DTE Electric, they are focused on building the grid of the future and have a recently filed distribution grid plan that includes the transition to a smart grid and investing $9 billion in distribution infrastructure for improved reliability.

During 2023, DTE Electric will focus on improving reliability by trimming trees, installing reclosers, maintaining infrastructure, and upgrading equipment. They will also accelerate their tree trimming and preventative maintenance programs, rebuild their 4.8 KV system, and pursue undergrounding. Despite a large storm in January, they achieved a fast restoration. They will invest $2 billion in cleaner generation and have the largest green tariff program in the country. At DTE Gas, they plan to invest $3.7 billion over the next five years to upgrade infrastructure, renewing over 1,700 main miles and growing their natural gas balance program.

The DTE Vantage program offers customers ways to manage their carbon footprint through carbon offsets and renewable natural gas. The company plans to invest between $1 billion to $1.5 billion in the next five years for custom energy solutions, RNG, and carbon capture and sequestration projects. One project highlighted is the expansion of a long-term agreement with Ford Motor Company. The company's development pipeline advantage remains strong, and the IRA improves decarbonization opportunities. The financial update for 2023 shows operating earnings of $1.2 billion and operating earnings per share of $5.73, despite facing additional challenges due to warm weather in December.

In the appendix, you can find a detailed breakdown of EPS by segment, starting with our utilities. DTE Electric earned $791 million in 2023, lower than 2022 due to warmer weather, higher storm expenses, and other factors. DTE Gas saw a $22 million increase in earnings, driven by one-time cost reductions and IRM revenue. DT Vantage had operating earnings of $153 million, a $60 million increase from 2022 due to new RNG projects and steel-related earnings. Energy Trading earned $105 million, with continued favorability expected in 2024. Corporate and Other had an unfavorable variance of $15 million. Overall, DTE earned $5.73 per share in 2023. The 2024 operating EPS guidance midpoint is $6.69 per share, representing 7% growth over 2023.

DTE is confident in achieving 6% to 8% long-term growth, driven by investments in grid reliability, cleaner generation, and customer-focused improvements. Their strong balance sheet and cash flow allow for heavy investments in utilities, with minimal equity issuances planned. They are focused on maintaining their investment-grade credit rating and have extended their revolving credit facility. They have a targeted FFO to debt ratio of 15% to 16%.

The speaker concludes the presentation by reiterating their commitment to delivering for all stakeholders and highlighting their strong capital plan, projected earnings growth, and dividend growth. They also mention potential future opportunities for funding incremental spending and the possibility of an RNG sale. The line is then opened for questions.

The company has strong cash flow and flexibility to handle any potential downgrades and new equity needs. They have $2 billion in new capital and are always looking for opportunities to optimize their portfolio. They plan to file for an electric rate case in late first quarter or early second quarter, which will focus on capital investments for a cleaner energy grid.

Nick Campanella asks Gerardo Norcia about the use of proceeds from potential portfolio optimization and their philosophy on owning assets versus doing PPAs in light of the Michigan legislation. Norcia responds that the cash proceeds would go towards offsetting debt and potentially repurchasing equity, but there are no immediate plans for optimization. They prefer to own assets as it is more accretive for customers and investors, and they have agreed to a mix of ownership and PPAs in the IRP settlement. The legislation did not mention ownership, but provided a compensation mechanism for PPAs that will give them upside.

Gerardo Norcia thanks Jeremy Tonet for his question and explains that the $2 billion increase in cleaner generation at DTE Electric is a result of updates and events such as the IRP settlement and new legislation. He also mentions that the capital program for the nonregulated side, Vantage, is expected to be around $1 billion to $1.5 billion over the next five years, but it can be variable depending on projects that come in.

The project mentioned by Jerry in the prepared remarks will require more capital in 2024 and may be lumpy. Gerardo Norcia discusses the progress of carbon capture and storage projects, stating that they are well advanced on three projects and there is a good chance they will start executing capital soon. These projects are small and have short pipelines, making them a good synergy with the electric utility business. Norcia also mentions the potential for future utility investments in this area. The speaker asks about refinancing new bonds and Norcia states that they have hedged some of the open rate exposure, but does not provide specific details.

David Ruud and Gerardo Norcia discuss the company's upcoming refinancing of $2 billion, with the majority being hedged at favorable rates. They also mention their overall debt portfolio, investment-grade credit rating, and FFO to debt ratio. In response to a question, they mention that the company has increased their storm expense in their planning process and carries one standard deviation for weather variations. They feel confident in their plan.

The speaker discusses the company's progress and budget for storm expenses, mentioning that they are working to replenish the budget for the upcoming summer season. They also mention a renewable energy plan filing coming later in the year, which could potentially lead to an increase in renewable energy targets. The current plan already includes opportunities from legislation, such as energy efficiency and the FCM, with an additional 1,800 megawatts coming in as part of the IRP and five-year plan.

The $300 million reduction in 2023 is due to the recovery of over-collection in 2022 and 2023, and there is still a small under-recovery for this year. The gas business is in a good position and fully recovered. The non-utility CapEx will be assessed as they file a new IRP that takes into account recent legislation.

The speaker asks the company to explain the significant increase in their capital expenditures for 2024 compared to the previous year. The company's CEO attributes the increase to development projects and a larger deal with Ford. The speaker also asks about the company's successful trading business and whether the projected range for 2024 is conservative or if it could continue beyond that.

David Ruud and Michael Sullivan discuss the favorable performance of the company in 2023, attributing it to the premiums received on the structured physical power portfolio. They expect some of this favorability to continue into 2024, but not to the same extent. Going forward, they will not be guiding to higher levels of contracts, but will maintain the same risk profile. They also mention the PBR proceeding at the Michigan PSC, stating that it is moving in the right direction and they expect it to conclude sometime between the middle of the year and early next year. They feel confident that it will be a well-balanced and productive process.

In this paragraph, Sophie Karp asks about the relative strength of the Energy Trading business and what market conditions are contributing to it. David Ruud explains that the business is successful due to bidding into utilities and securing contracts with premiums, as well as having a successful trading group and structured physical and hedge positions. He also mentions that they have visibility for about a year and that their capital plan already includes opportunities presented by the new energy law in Michigan.

The speaker confirms that the incremental opportunities from the legislation will be limited in the first five years, but there may be further acceleration beyond that. The IRP and legislation are reflected in the five-year plan and will be updated annually. The PPA ownership and financial compensation mechanism are included in the plan, but the exact value will depend on the price of the PPAs.

During a Q&A session, the CEO and CFO of the company discussed the inclusion of the FCM in their plans, with the possibility of updates in the future. They also mentioned their non-committal stance on the subject of RNG and the potential for opportunistic investments. They noted that the IRA has actually been beneficial for their renewable fuel business and they are monitoring the situation, but not overly concerned.

The company does not believe that the current situation with RNG is in line with the original intention of Congress. They are monitoring the situation but are not overly concerned. In 2023, the company saw positive contributions from RNG and the steel business. The returns in the RNG business are still strong, with unlevered after-tax returns in the teens.

Anthony Crowdell asks about the potential for expanding the undergrounding program in the upcoming rate filing. Gerardo Norcia explains that they plan to continue expanding the program, but it will take some time to ramp up and they need to prove the concept to themselves and the commission. They are currently in the early stages and it will take a few years before they can fully implement it. They are pleased with the success of the first five miles and there will be more updates in the future.

Anthony Crowdell asks about the company's credit metrics and when they will hit their target range. David Ruud explains that they ended 2023 at 15% and will stay within that range throughout the five-year plan. Gerardo Norcia adds that they prefer to own assets rather than convert them to PPAs, as it is more affordable for customers and provides greater EPS growth opportunities for investors. Dave reiterates that they are the leading renewable developer in the state and will continue to develop projects at the lowest price for customers.

The speaker discusses the benefits of investing capital for shareholders and mentions their pursuit of building dedicated pipelines for carbon capture and storage. They also mention their progress in finalizing arrangements with carbon dioxide producers. The speaker ends by expressing confidence in their future plans and wishing everyone a healthy and safe day.

This summary was generated with AI and may contain some inaccuracies.