01—Abstract
Summary
Summary of the 10-K filed February 18, 2011. Cited figures are marked; the original filing is the authoritative source.
DTE Energy's 2010 10-K shows a utility-led year with improving earnings.
Net income attributable to DTE Energy rose to $630 milliona ($3.74 diluted EPS) from $532 million ($3.24) in 2009. Electric Utility (Detroit Edison) net income climbed to $441 million and Gas Utility (MichCon) to $127 million, driven by rate orders, revenue decoupling mechanisms, and tracking surcharges. Operating revenues were $8.56 billion, up from $8.01 billion, while Energy Trading earnings fell sharply to $6 million from $75 million on weaker market conditions and lower volatility.
The company's outlook centers on a large capital program of $4.5 to $5.3 billionb over 2011 to 2013, with roughly 75% concentrated at Detroit Edison, largely for environmental compliance and renewable energy. Management expects cash from operations of about $1.9 billion in 2011 and has about $1.7 billion of available liquidity. Total long-term debt including current maturities was about $8.0 billion, and the company upgraded its S&P corporate rating to BBB+ in December 2010.
Pension and retiree obligations remain significant, with plans underfunded by roughly $872 millionc (pension) and $1.3 billion (postretirement). Key risks include an EPA enforcement action and a pending DOJ civil suit over Monroe Unit 2 (liability trial scheduled May 2011), potential costs of carbon and coal ash regulation, Michigan Customer Choice migration (capped at 10%), and the expiration of a below-market rail contract that will reduce transportation revenue by about $130 million in 2011. The Energy Trading and Unconventional Gas segments were weak, with the Barnett shale business posting an $11 million loss.
02—Key points
Key Highlights
- Net income attributable to DTE Energy rose 18% to $630 million; diluted EPS of $3.74 vs. $3.24 in 2009.
- Electric Utility net income up 17% to $441 million, and Gas Utility net income up 59% to $127 million, supported by 2010 rate orders and decoupling and tracking mechanisms.
- Energy Trading earnings collapsed to $6 million from $75 million due to lower volatility and commodity prices.
- Planned 2011-2013 capital investments of $4.5-5.3 billion, mostly at Detroit Edison for environmental and renewable projects.
- S&P upgraded DTE's corporate credit rating to BBB+ in December 2010; Fitch revised Detroit Edison outlook to positive in January 2011.
- Significant regulatory and environmental exposure, including EPA NOV/FOV and DOJ civil suit over Monroe Unit 2 with trial set for May 2011.
- Pension plans underfunded by $872 million and postretirement plans by $1.3 billion at year-end 2010.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2010filed February 18, 2011Financial Statements
FY2010 against FY2009
| Line item | FY2010FY2009 | Change |
|---|---|---|
| Revenue | $8.53B— | — |
| Operating Expenses | $7.05B$6.76B | +4.3% |
| Operating Income | $1.47B$1.25B | +17.7% |
| Interest Expense | $543.00M$545.00M | −0.4% |
| Net Income | $630.00M$532.00M | +18.4% |
| EPS (Basic) | $3.75$3.24 | +15.7% |
| EPS (Diluted) | $3.74$3.24 | +15.4% |
| Shares Outstanding (Basic) | 168.00M164.00M | +2.4% |
| Shares Outstanding (Diluted) | 169.00M164.00M | +3.0% |
05—Questions
Frequently Asked Questions
What drove the increase in DTE's 2010 earnings?
Higher earnings came mainly from the Electric and Gas Utilities, aided by the January 2010 Detroit Edison rate order, the June 2010 MichCon rate order, and new revenue decoupling and tracking mechanisms. Power and Industrial Projects also improved, though Energy Trading declined sharply.
How large is DTE's capital spending plan and how will it be funded?
The company plans $4.5-5.3 billion of capital investment over 2011-2013, with Detroit Edison at $3.4-3.8 billion. Management expects operating cash flow of about $1.9 billion in 2011 and has about $1.7 billion of available liquidity under credit facilities, supplemented by debt issuance and regulatory rate base recovery.
What is the biggest legal or regulatory risk?
The EPA and DOJ allege Clean Air Act violations related to Monroe Unit 2 and several other Detroit Edison plants. Remedies could include installing control technology, early plant retirements, or fines. The company cannot predict the financial impact or timing, and the liability trial is scheduled for May 2011.
Is DTE's debt and credit profile under pressure?
Total funded debt to capitalization was 0.49 to 1 at DTE Energy, within its 0.65 covenant limit. Long-term debt including current maturities was about $8.0 billion. Credit ratings improved in late 2010, although a downgrade below investment grade would raise borrowing costs and collateral requirements for trading and power businesses.
06—Continue