The conference call for DTE Energy's second quarter 2024 earnings began with an introduction from the operator, followed by a reminder to read the Safe Harbor statement and a reference to operating earnings. The CEO, Jerry Norcia, discussed the company's progress and achievements in the first half of the year, with an emphasis on meeting targets and delivering for stakeholders. President and CEO Joi Harris provided an update on capital investments and improving reliability, while maintaining customer affordability. CFO Dave Ruud gave a financial update before the Q&A session. Overall, DTE Energy had a strong first half of the year and is on track to meet its goals.

The success of the company is attributed to the dedication of its employees, as shown by their 12-year streak of receiving the Gallup Great Workplace Award and the Best Employers award for health and well-being. The company is committed to delivering for its customers and communities, as evidenced by their efforts to support customers during storms and extreme heat, distributing fans and water to those in need. Improving storm restoration processes is a key focus for the company in the future.

The DTE foundation partnered with United Way to provide rides and wellness checks to customers during intense heat, and the company was named to the Civic 50 for their community service. The Energy Efficiency Academy was expanded to support workforce development in Detroit and Grand Rapids, and the company is financially strong and committed to delivering shareholder returns while investing in reliability and clean energy.

The company's ability to invest above their cash flows is dependent on positive regulatory outcomes. The company is on track to achieve their full year guidance and is positioning themselves for continued growth in the long term. They have made progress in achieving constructive rate case outcomes for both their electric and gas divisions, which will allow for customer-focused investments and a transition to cleaner generation while maintaining affordability. The company is also making significant strides in their reliability efforts, particularly in automating their electric system.

DTE has installed reclosers which have saved over 250,000 customer minutes of outages this year. They have also broken ground on a 220 megawatt battery energy storage system, which will be the largest in the Great Lakes region and support their net zero carbon reduction goals. The MIGreenPower program has nearly 2500 mw subscribed and DTE Gas is modernizing their gas transmission system. DTE Vantage is advancing custom energy solutions and has a project with Ford Motor Company and a RNG project under construction. The company is well positioned for growth in Southeastern Michigan, which continues to attract large companies for economic development.

The partnership between General Motors, Henry Ford Health, and the University of Michigan is bringing significant economic growth and job opportunities to the service territory. DTE is also collaborating with other companies to target key business segments, such as battery manufacturing, hydrogen, and data centers, to drive further economic growth. DTE is well positioned to serve data centers and is currently in discussions with potential customers for development opportunities. Pending legislation in Michigan could lower the cost of operating data centers, and the governor is willing to sign these bills. The speaker is excited about the company's start in 2024 and its ability to continue delivering for customers, communities, and investors. The next speaker will discuss the company's investment agenda and reliability improvements, which are making a difference for customers and helping the company transition to cleaner generation.

DTE is making significant investments in their utilities, with a focus on modernizing the grid and transitioning to cleaner energy sources. These investments are made with customer affordability in mind and are supported by the IRA. DTE is also working on improving reliability through four major areas, including transitioning to a smarter grid and automating the entire system by 2029.

The company is using devices such as automated reclosers to pinpoint and isolate issues during outages and reroute power to restore customers quickly. They are also aggressively updating their existing infrastructure, including poles, cross arms, and transformers, and have seen an 80% improvement in reliability in areas that have undergone hardening. They are also completely rebuilding the oldest portions of their grid, with two substations and 300 miles of infrastructure being replaced on Detroit's East Side. The company is also conducting an undergrounding pilot in Detroit to improve processes and reduce costs, and has similar projects outside of Detroit. This work is having a significant impact on improving the reliability of their grid.

The company has seen a 90% increase in reliability for customers after executing rebuilding work and remaining focused on tree trimming efforts. Tree trimming has proven to be an effective method in improving reliability, with half of customer power outages being caused by trees. The company has trimmed nearly 40,000 miles of trees since 2015 and plans to have the entire system on a five-year trim cycle by the end of next year. The company's second quarter financial results showed operating earnings of $296 million, with DTE Electric earnings at $279 million and DTE Gas earnings $12 million lower than the previous year due to warmer weather and higher rate base costs. DTE Vantage operating earnings were $14 million for the second quarter of 2024.

DTE reported a decrease in earnings for 2023 due to timing and one-time items, but remains confident in their full year guidance. Earnings in the second half of 2024 are expected to be higher, driven by projects in their energy solutions and RNG portfolios. Energy trading also saw a decrease in earnings, but the company is maintaining conservative guidance. Corporate and other segment was favorable due to timing of taxes. Overall, DTE earned $1.43 per share in the second quarter and is well positioned to achieve their targets in 2024 and beyond. The company also has a strong balance sheet and credit profile as they continue to invest in their utilities for improved reliability and cleaner generation.

The company's customer-focused investment plan is supported by strong cash flows and minimal equity issuances. They have a long-term financial plan that includes debt refinancing and new issuances, and they have eliminated interest rate risk through active hedging. The company is committed to delivering for all stakeholders and is well positioned for growth and to provide premium shareholder returns. They have a strong balance sheet and are targeting a 6-8% long-term operating EPS growth. The call is now open for questions.

The operator introduces Jeremy Tonet from JPMorgan and he asks about updates on negotiations with hyperscale companies and the timeline for these negotiations, given the recent Michigan sales and use tax legislation. Gerardo Norcia responds by saying that conversations with hyperscalers are ongoing and there is still strong interest from multiple parties, but progress has been delayed due to budget deliberations. He expects traction to pick up once the legislation is passed in the fall. Tonet then asks about the impact of taxes on the quarter's results, to which David Ruud responds that it is a timing issue and will reverse in future quarters.

The company saw a favorable impact of $0.10 in the quarter, but this will change throughout the year. There was no tax advantage in the second quarter, but there will be in the second half of the year. The company is confident in their full year guidance. Energy trading has had a strong start, driven by power and gas portfolios, and the company expects this to continue through the end of the year. They are on track with their guidance for the year, but will reassess after the summer.

The company had a good first half of the year in energy trading and expects to continue benefiting from high margin contracts in the future. The next question from an analyst was about the ongoing rate case filing and the possibility of a settlement. The company hopes to reach a settlement, but if not, they are confident in their ability to receive a favorable outcome. The rate design proposals in the case have not caused much contention among intervenors.

The company is focused on two main opportunities - Greenfield RNG and custom energy solutions. Carbon capture and storage is an emerging opportunity, but the company is primarily focused on the first two business lines. The company is committed to a 90/10 mix between utility and non-utility and may consider asset optimization and rotation if the business grows beyond 10% or if equity needs arise. Currently, there is no need for asset optimization.

Durgesh Chopra from Evercore ISI asks about the company's expectations for 2024 and how weather impacts have affected their performance so far. Gerardo Norcia explains that they are confident they can meet their targets for the rest of the year and potentially invest more for customers in 2024. Durgesh also asks about the progress of the liberty consulting review and Joi Harris explains that it is wrapping up and they have received positive feedback so far. The report is expected in September.

The company's initial feedback on their plans is in line with their agenda, and there may be slight changes in programming. They are not expecting any surprises in September. They are working on finalizing metrics and targets for the Performance Based Rates with the staff and commission. The data center demand in Michigan is strong, and the lack of natural disasters makes it an attractive location.

The trading business is performing better than expected, but the company is being conservative for now. The other segments are also doing well, with some challenges in weather at the utilities and gas due to a cool winter. However, overall the company is in a good place.

The company is feeling good about their businesses and the opportunity to invest for their customers in 2024. They plan to pull forward some expenses and do additional maintenance on their projects for the benefit of their customers and creating success in 2025. They also had a gain on the sale of one of their landfill gas projects during the quarter. The company saw value in exiting the partnership and took advantage of it.

The speaker was asked about the potential impact of the upcoming election on their future planning, specifically in regards to resource planning and tax credits. The speaker stated that any federal changes in politics would not affect their mandated clean energy and RP's standards. They also mentioned that it would require an act of Congress to change the IRA, and that there is strong support for solar developments at a local level. The speaker believes that the state mandates will drive investment and that any changes to the IRA are a low probability event.

Joi Harris, an official from the utility company, discusses their goal to have a five year tree trimming cycle by the end of 2025. They are currently at 80% completion and expect to reach their goal easily, with some areas needing to be revisited. The company has the financial resources to complete the surge in tree trimming and will continue to fine tune it as needed. All of these efforts and related spending are included in their five year CapEx plan.

Joi Harris and Andrew discuss the $25 billion 5-year plan and how achieving some of the goals may require additional spending. This spending is contingent on the outcome of the rate case, which will be determined by staff position and the audit. Julien Dumoulin-Smith asks about the balance between PPA and self build in light of affordability concerns and the energy law. Gerardo Norcia explains that self build is more competitive and affordable for customers, while PPA's with financial compensation can make the product more expensive. From an investor perspective, self build is more compelling than PPA's with an adder.

The speaker discusses the value of owning assets for investors, which is 2-3 times greater than owning through PPA. They also mention that their balance sheet can handle the capital investments and that self-building remains a priority. They mention good opportunities in the custom energy solutions business and solid performance in the steel related business. The next question is directed towards Dave, who had previously expressed a desire for more questions.

Analyst Travis Miller asks DTE CEO Gerardo Norcia about the company's spending levels and credit cushion. Norcia explains that they target a 15-16% FFO to debt ratio, which gives them good headroom for potential downgrades. He also mentions meeting with credit agencies and feeling confident about their balance sheet metrics. Miller then asks about long-term sales growth, to which Norcia responds that it is consistent with their current forecast, with potential growth from data centers and EV load.

There are new intervenors in the gas and electric rate cases, which could lead to a contested settlement. The increase in interveners is due to legislation that has provided more funding. The discussion about reliability is seen as both a positive and a negative, as everyone wants to improve the grid, but there is debate over the best way to do so.

In paragraph 26, the speaker discusses the purpose of the audit and how it will help align and build consensus on improving reliability. The speaker also expects the audit to endorse continued heavy investment in reliability, driven by the age of the system. The results of the audit may influence the buckets of investment in the current rate case, but it will not be formally included in the record. The speaker ends by expressing positivity about the future and wishing everyone a good morning.

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