Q3 2023 Earnings Summary
- DTE's long-term growth opportunities remain strong, with significant investments planned in grid modernization and clean energy transition, ensuring the fundamentals of the business remain robust.
- The company is confident in receiving strong regulatory support for its investment plans, noting that their requested rate increase of approximately 1.6% per year is well below the national inflation rate, and has strong backing from customers, the governor, legislators, and mayors who are clamoring for these investments.
- DTE expects to maintain a strong balance sheet and credit metrics, with FFO to debt improving in 2023, and has good headroom to downgrade thresholds at rating agencies.
- Uncertainty in future earnings guidance and growth outlook due to pending rate case decision, with 2024 guidance and long-term growth rate updates delayed until after the decision in December.
- Increasing storm activity leading to higher costs, with storm expenses impacting approximately 10% of earnings in 2023, and the company possibly underestimating future storm costs in their budgeting and not pursuing mechanisms like trackers or deferrals to mitigate this risk.
- Cost reductions implemented in 2023 are one-time in nature, with deferred maintenance needing to resume, suggesting that expenses will increase in future periods and may pressure earnings.
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2024 Guidance and Long-Term Growth
Q: When will you provide 2024 guidance and long-term growth outlook?
A: We plan to roll out our 2024 guidance, long-term growth rate, and capital investment profile shortly after receiving the commission order in early December. -
Growth Base Post-2023 Anomalies
Q: Will 2024 be the base for long-term growth after 2023 anomalies?
A: Typically, we return to our original 2023 guidance and grow from there, since this year's challenges were anomalous and one-time in nature. -
Rate Case Outcome Impact
Q: How will the rate case decision affect growth and guidance?
A: The upcoming commission order is a significant data point in our plan; we await it before finalizing our 2024 guidance and long-term plan. -
Cost Cuts and 2024 Impact
Q: Will the $270 million cost cuts affect 2024 spending?
A: Much of the cost will flow back in 2024; we will return to normal maintenance levels, but some savings may stick. -
Storm Impacts and Future Planning
Q: How are storms affecting your future earnings and planning?
A: This year's storms were exceptionally severe, with twice the number of catastrophic storms and a 1-in-50-year probability; we're revisiting our budgeting and considering mechanisms like storm trackers to manage future volatility. -
Settlement Challenges in Rate Case
Q: Why couldn't you settle the rate case with intervenors?
A: While key parties were moving toward settlement, many intervenors chose not to engage; in the future, we might explore contested rate settlements. -
Vantage and Trading Earnings Outlook
Q: Are strong Vantage and Trading results sustainable?
A: While 2023 benefited from three new RNG projects and one-time factors, we see great growth opportunities but will provide full updates on 2024 guidance in December. -
Parent Debt Refinancing
Q: How are you managing refinancing risk amid rising rates?
A: We have hedged over 25% of the parent debt due in 2024 and are monitoring the market to manage interest expense increases. -
Residential Sales Forecast
Q: Do you expect residential sales to decline further?
A: Residential sales have come in as expected, with slight declines due to return to work; we forecast them to remain flat going forward.