DTE Energy Holding Company Earnings Call Nuggets: Impact on Coal, Decoupling at the Gas Utility

On Friday, DTE Energy Holding Company (NYSE:DTE) reported its first quarter earnings and discussed the following topics in its earnings conference call. Take a look.

Impact on Coal

Paul Ridzon – KeyBanc Capital Markets: A lot of your unregulated businesses are kind of tied to coal, and obviously, that market has softened up. What are you seeing – how is that impacting your businesses, and then, are you seeing any impact on the appetites of the REF program as you seek out partners? Then just lastly with gas prices down here how is that impacting the Barnett process?

David E. Meador – EVP and CFO: Let me take this one at a time and I might get some help from Peter and Nick as we go through this. So, if you look at what’s going on with low gas prices and then the impact on coal and think about DTE, actually one of things that we’ve enjoyed over the years is our portfolio of businesses do have different drivers and it’s because of the way we’re contracted and so on it’s really worked out well for us. So, you take the midstream business as an example where we have long-term contracts with tenures of seven to eight years on the pipes and storage and there’s not only no impact, there we’re actually seeing an opportunity near-term on the short-term storage deals. If you went over to the Power and Industrial business, there is there’s really no impact related to coal prices at Power and Industrial and actually, what we’re seeing is some opportunity to sell some of our coke battery output that was not contracted for. Longer-term, these gas price environment actually is an opportunity for that businessmen and I think you’ll hear Jerry talk more about that at AGA. But a low gas price environment would give that group an opportunity to look at some new growth opportunities down the road. Then when you go over to Barnett, I think we have to stop thinking about this as gas play. If right now we are drilling specifically for oil and the marble falls and 80% of the revenue is coming from oil and natural gas liquids. So, we are exiting that business but we’re exiting on oil and NGLs not on gas.

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Paul Ridzon – KeyBanc Capital Markets: Looking at your income statement and cash flow statement, it looks like there were some gains and charges. Can you kind of give some more color as to what those were?

Peter Oleksiak – VP, Controller and Investor Relations: There was an impact last year in the first quarter. If you recall, we did talk about, it was with – we had an original unit down at our Fermi site that we took a charge really the retirement accounting that we took there.

Paul Ridzon – KeyBanc Capital Markets: Was there something more specifically that you were looking for?

David E. Meador – EVP and CFO: I don’t have it right in front of me. I’ll follow-up with you offline.

Peter Oleksiak – VP, Controller and Investor Relations: When I looked at that’s one that’s kind of popped out on the income statement, the debt retirement charge last year.

Decoupling at the Gas Utility

Leslie Rich – JPMorgan: I wondered if you could help me understand decoupling at the gas utility. I was under the impression that you had decoupling there, so I guess I’m a bit surprised that the mild weather had such a big impact on net income.

Peter Oleksiak – VP, Controller and Investor Relations: The decoupling that was implemented at the gas utility was really a usage base. Decoupling – actually weather did flow through that decoupling mechanism, so it really is kind of working as designed, the weather does flow through.

David E. Meador – EVP and CFO: Leslie, we were not protect – that has never included weather protection at the gas utility.

Leslie Rich – JPMorgan: Then on the electric because of the Court decision, you won’t collect or accrue for any decoupling there going forward?

David E. Meador – EVP and CFO: Correct. Basically what the Court said was that the 2008 law was very specific about authorizing gas decoupling but was silent on electric and so the judge concluded that the MPSC didn’t have the authority. So that I think the way we have to think about it is, there is no decoupler right now, and again walked away for the MPSC to take a position. Whatever happens will be a prospective issue anyway, unless for example if the MPSC decided to appeal and the Supreme Court overruled the judge, then this could still be in place, but we don’t know exactly what the MPSC will do. If they did appeal, it’s uncertain whether the Court would hear it and if they did hear it ultimately what the outcome would be.

Leslie Rich – JPMorgan: Then just finally with low gas prices and dark spreads being compressed, are there any thoughts in terms of your CapEx program on scrubbers or your overall generation mix overtime?

David E. Meador – EVP and CFO: No, not at this time. As you know, we’ve laid out our environmental program. At AGA, I think Gerry will be talking a little bit more about the ongoing testing we’re doing with DSI, but right now when we look out going forward our environmental program as we see it is not going to change.