DTE Energy Holding Company Earnings Call NUGGETS: REF Business, Weather Working in Their Favor

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

REF Business

Kevin Cole – Credit Suisse: First on Detroit Edison, can you help me think through how significant the storms were in July and if the July favorable weather was sufficient to offset it?

A Closer Look: DTE Energy Holding Earnings Cheat Sheet>>

David E. Meador – EVP and CFO: We don’t want to necessarily give you July numbers or third quarter numbers, but if you look at what played out in July in the statistics that Peter reported we had pretty solid load and I would just say that right now we haven’t closed the books but it looks like about half of it might’ve been offset with storm costs. So there still will be – net of storm there will be some positive margin playing through.

Kevin Cole – Credit Suisse: And then Dave in your scripted remarks, how long did you indicate that you might be able to stay out from filing a rate case (under what you said)?

David E. Meador – EVP and CFO: As you know, the way we’ve been working our rate proceedings is to stay out as long as possible using continuous improvement and then when we do file, file for as little as we possibly can, because we’re very sensitive to customer rate increases. So right now we are looking to see if it’s possible to stay out as far as 2015 and we’re working our way through that. And one of the reasons we’re doing that is there’s the Fermi securitization charge that rolls off in that timeframe, and we’re seeing if we could bridge our way all the way through that. I don’t know if we can, but it’s a goal that we’re looking at right now.

Kevin Cole – Credit Suisse: And then, sorry, last question on the REF business. (Indiscernible) now since you’re significantly down the path, are you still targeting roughly $55 million or are you still seeing a potential for it to migrate up towards the $75 million level?

David E. Meador – EVP and CFO: Still too early. As we’ve indicated, it really depends where the machines get sited and I know where the seven are and we’re working on the last two, and as you would expect, we’re trying to drive these machines to not only plants that consume a lot of coal. I’d rather be at a 8 million ton per year plant versus a 2 million ton per year plant and also plants that are going to run over the lifetime of the credit. And so now we’re working with a handful of house utilities and I can’t tell you where this is going at, but certainly by the time we get to EEI we’ll know by then. We will have line of sight of where the nine machines are going to be. Then just to remind you we are relocating the four right now, but down the road there is still the possibility of one of these Detroit Edison machines to get moved again and take us even to a higher ton per year plan, so that’s something still down the road, but EEI I think will be good line in the sand to give you an update on where it leads. We know the nine will be starting in 2013.

Kevin Cole – Credit Suisse: Were any of the existing plants or target plants impacted by the, I guess the follow-on utilization rates for coal plans earlier this year?

David E. Meador – EVP and CFO: No.

Weather Working in Their Favor

Jonathan Arnold – Deutsche Bank: Sorry to revisit your comments on guidance, but just to make sure I understand fully, are you – I think you said that you would – you’d need the favorable weather to continue in order to push you above the midpoint. Does that – do you mean by that – continue to have above average whether for the rest of the summer or just not see what you’ve already had flow back?

David E. Meador – EVP and CFO: Kind of the context as I think about this is we had warm winter which was almost third standard deviation warm winter, warmest winter on our record. We’re now having the warmest summer on weather and it’s brought some storm. So, we’re just signaling that things look really positive right now but also just reminding all of us that we’ve got a lot of year ahead of us that could bring either great weather results or not. So, things look pretty positive right, and we’ll be able to get a better sense of this as we get through the summer months.

Jonathan Arnold – Deutsche Bank: But if you had normal say from now through the rest of the summer, is that – would you still be tracking ahead of the midpoint. I guess that’s my question.

Peter Oleksiak – VP, Controller and IR: I think John and as I mentioned the dynamics is both weather and the storms. So, normal weather and normal storms actually would provide an uplift for us in the third quarter, going forward.

Jonathan Arnold – Deutsche Bank: So you above midpoint statement would be correct even if we were normal from here?

Peter Oleksiak – VP, Controller and IR: Yes.

Jonathan Arnold – Deutsche Bank: Then on the Power and Industrial with this acquisition that you’re doing (indiscernible). I think you said it was going to more or less double the size of the business. How should we think of that in terms of the target? Is this kind of with this acquisition, you’re going to achieve most of what you’re trying to achieve in that business. So, is that kind of incremental stuff you’re working on potentially you would take that range off as you close on this and then maybe do whatever else you’re working on?

David E. Meador – EVP and CFO: If you recall, we showed charts of some of our road show packages that would indicate that Power and Industrial started to turn $55 million this year and our goal is to get it to a $125 million, and we had a stair step up to say here is how much that growth will come from REF, here is how much of that growth would come from the wood-fired plants, and then there were still some whitespace, and I would look at this – describe it as it’s filling in about half of that whitespace between now and 2016. Also just to clarify and doubling the size of the business, it’s doubling basically our on-site energy business line within the Power and Industrial group.

Jonathan Arnold – Deutsche Bank: Okay. It’s a piece of the puzzle basically?

Peter Oleksiak – VP, Controller and IR: Yes.

David E. Meador – EVP and CFO: Yeah, it’s piece. And it just fills in some of that whitespace.