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July 28, 2020, 11:00 a.m. EDT

10-Q: DTE ELECTRIC CO

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(EDGAR Online via COMTEX) -- Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations The following combined discussion is separately filed by DTE Energy and DTE Electric. However, DTE Electric does not make any representations as to information related solely to DTE Energy or the subsidiaries of DTE Energy other than itself. EXECUTIVE OVERVIEW DTE Energy is a diversified energy company and is the parent company of DTE Electric and DTE Gas, regulated electric and natural gas utilities engaged primarily in the business of providing electricity and natural gas sales, distribution, and storage services throughout Michigan. DTE Energy also operates three energy-related non-utility segments with operations throughout the United States. The following table summarizes DTE Energy's financial results: Six Months Ended June Three Months Ended June 30, 30, 2020 2019 2020 2019 (In millions, except per share amounts) Net Income Attributable to DTE Energy Company $ 277 $ 182 $ 617 $ 583 Diluted Earnings per Common Share $ 1.44 $ 0.99 $ 3.20 $ 3.18

The increase in Net Income for the three months ended June 30, 2020 was primarily due to higher earnings in the Electric, Gas Storage and Pipelines, and Corporate and Other segments, partially offset by lower earnings in the Gas segment. The increase in Net Income for the six months ended June 30, 2020 was primarily due to higher earnings in the Gas Storage and Pipelines and Corporate and Other segments, partially offset by lower earnings in the Gas segment. During the first quarter 2020, the COVID-19 pandemic began impacting Michigan and the other service territories throughout the United States in which the Registrants operate. DTE Energy took certain safety precautions including directing employees to work remotely whenever possible and pausing all non-critical business activities. The spread of COVID-19 and efforts to contain the virus resulted in closures and reduced operations of businesses, governmental agencies, and other institutions.

STRATEGY

ENVIRONMENTAL MATTERS







        OUTLOOK
        The next few years will be a period of rapid change for DTE Energy and for the
        energy industry. DTE Energy's strong utility base, combined with its integrated
        non-utility operations, position it well for long-term growth.
        Looking forward, DTE Energy will focus on several areas that are expected to
        improve future performance:
         electric and gas customer satisfaction;
         electric distribution system reliability;
         new electric generation;
         gas distribution system renewal;
         rate competitiveness and affordability;
         regulatory stability and investment recovery for the electric and gas
        utilities;
         employee safety and engagement;
         cost structure optimization across all business segments;
         cash, capital, and liquidity to maintain or improve financial strength; and
         investments that integrate assets and leverage skills and expertise.
        DTE Energy will continue to pursue opportunities to grow its businesses in a
        disciplined manner if it can secure opportunities that meet its strategic,
        financial, and risk criteria.
        In the near term, DTE Energy will continue to monitor the impact of the COVID-19
        pandemic on supply chains, markets, counterparties, and customers, and any
        related impacts on the operating costs, customer demand, and recoverability of
        assets in our business segments that could materially impact the Registrants'
        financial results.
        DTE Energy expects the reduction in electric demand from commercial and
        industrial customers and increased demand from residential customers to continue
        in the near term. Operation and maintenance expenses will also continue to be
        impacted by the need for personal protective equipment and other safety-related
        costs.
        DTE Energy will continue to review the allowance for doubtful accounts for any
        additional risk related to COVID-19 and will monitor any ongoing challenges to
        production and demand in the Power and Industrial Projects segment. DTE Energy
        will also continue to monitor and evaluate the impact of any regulatory and
        legislative activities related to the COVID-19 pandemic. Refer to Note 6 to the
        Consolidated Financial Statements, "Regulatory Matters," for further information
        on current regulatory issues.
        


The Registrants cannot predict the ultimate impact of these factors to our Consolidated Financial Statements as future developments involving COVID-19 and related impacts on economic and operating conditions are highly uncertain.

RESULTS OF OPERATIONS







                                                        Three Months Ended June 30,                             Six Months Ended June 30,
                                                          2020                 2019              2020                  2019
                                                                                     (In millions)
        Net Income (Loss) Attributable to DTE
        Energy by Segment
        Electric                                    $        183            $    133          $    277          $        280
        Gas                                                    1                   8               122                   159
        Gas Storage and Pipelines                             70                  50               142                    98
        Power and Industrial Projects                         25                  29                55                    55
        Energy Trading                                        (1)                 (6)               33                    26
        Corporate and Other                                   (1)                (32)              (12)                  (35)
        Net Income Attributable to DTE Energy
        Company                                     $        277            $    182          $    617          $        583
        








        ELECTRIC
        The Results of Operations discussion for DTE Electric is presented in a reduced
        disclosure format in accordance with General Instruction H(2) of Form 10-Q.
        The Electric segment consists principally of DTE Electric. Electric results are
        discussed below:
                                                                                                                 Six Months Ended June
                                                        Three Months Ended June 30,                                       30,
                                                          2020                 2019              2020                 2019
                                                                                    (In millions)
        Operating Revenues - Utility operations     $       1,309           $  1,190          $  2,521          $     2,425
        Fuel and purchased power - utility                    340                322               634                  668
        Utility Margin                                        969                868             1,887                1,757
        Operating Revenues - Non-utility operations             3                  -                 7                    -
        Operation and maintenance                             349                330               705                  682
        Depreciation and amortization                         256                229               517                  450
        Taxes other than income                                58                 69               141                  153
        Asset (gains) losses and impairments, net              41                 13                41                   13
        Operating Income                                      268                227               490                  459
        Other (Income) and Deductions                          60                 69               175                  125
        Income Tax Expense                                     25                 25                38                   54
        Net Income Attributable to DTE Energy
        Company                                     $         183           $    133          $    277          $       280
        


See DTE Electric's Consolidated Statements of Operations for a complete view of its results. Differences between the Electric segment and DTE Electric's Consolidated Statements of Operations are primarily due to non-utility operations at DTE Sustainable Generation and the classification of certain benefit costs. Refer to Note 14 to the Consolidated Financial Statements, "Retirement Benefits and Trusteed Assets" for additional information. Utility Margin increased $101 million and $130 million in the three and six months ended June 30, 2020, respectively. Revenues associated with certain mechanisms and surcharges are offset by related expenses elsewhere in the Registrants' Consolidated Statements of Operations.







                                                   Three Months      Six Months
                                                          (In millions)
        Implementation of new rates               $       53        $     121
        Weather                                           44               11
        Base sales                                        15               10
        Regulatory mechanism - TRM                        (2)             (15)
        Other regulatory mechanisms and other             (9)               3
        Increase in Utility Margin                $      101        $     130
        








                                                                                                                               Six Months Ended June
                                                             Three Months Ended June 30,                                                30,
                                                             2020                   2019                    2020                    2019
                                                                                        (In thousands of MWh)
        DTE Electric Sales
        Residential                                            3,922                   3,209                   7,492                   6,897
        Commercial                                             3,520                   4,068                   7,429                   8,145
        Industrial                                             1,582                   2,498                   3,884                   4,958
        Other                                                     48                      48                     108                     111
                                                               9,072                   9,823                  18,913                  20,111
        Interconnection sales(a)                                 120                     711                     528                   1,741
        Total DTE Electric Sales                               9,192                  10,534                  19,441                  21,852
        DTE Electric Deliveries
        Retail and wholesale                                   9,072                   9,823                  18,913                  20,111
        Electric retail access, including
        self-generators(b)                                       792                   1,114                   1,835                   2,234
        Total DTE Electric Sales and Deliveries                9,864                  10,937                  20,748                  22,345
        ______________________________
        


Other (Income) and Deductions decreased $9 million and increased $50 million in the three and six months ended June 30, 2020, respectively. The decrease in the second quarter was primarily due to an increase in investment earnings (gain of $22 million in 2020 compared to a gain of $7 million in 2019), partially offset by $9 million of higher interest expense. The increase in the six-month period was primarily due to a change in investment earnings (loss of $9 million in 2020 compared to a gain of $24 million in 2019) and $15 million of higher interest expense.

Jul 28, 2020

COMTEX_368545931/2041/2020-07-28T10:59:33

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