QUOTE AND NEWS
Forbes  Oct 22  Comment 
Wall Street is expecting lower profit for DTE Energy when the company reports its third quarter results on Friday, October 24, 2014. Analysts are expecting earnings per share of $1.11 after the company booked a profit of $1.13 a share a year...
Market Intelligence Center  Oct 3  Comment 
DTE Energy Co (DTE) traded between $76.06 and $76.95 before closing at $76.27 Thursday and presents some attractive trading opportunities today. MarketIntelligenceCenter.com’s patented algorithms selected a Jan. '15 $75.00 covered call for a net...
DailyFinance  Sep 30  Comment 
Itron, Inc. (NASDAQ: ITRI), a world-leading technology and services company, announced today that it is collaborating with DTE Energy, one of the nation’s largest diversified energy companies, on a smart cities demonstration...
Market Intelligence Center  Sep 15  Comment 
MarketIntelligenceCenter.com's option-trade picking algorithms have identified an attractive covered-call trade on DTE Energy Co (DTE). Look at the Apr. '15 $75.00 covered call for a net debit in the $73.52 area. This trade has a duration of 214...
Forbes  Sep 9  Comment 
Looking at the universe of stocks we cover at Dividend Channel, on 9/11/14, DTE Energy Co. (NYSE: DTE), Northeast Utilities (NYSE: NU), and New Jersey Resources Corp (NYSE: NJR) will all trade ex-dividend for their respective upcoming dividends....
Forbes  Sep 8  Comment 
At Holdings Channel, we have reviewed 3,740 13F filings for the 06/30/2014 reporting period, and looked at the various S&P 500 components held by each of these reporting hedge funds and other 13F filers. For each component, we totaled the number...
Forbes  Aug 28  Comment 
In afternoon trading on Thursday, Utilities stocks are the best performing sector, up 0.6%. Within that group, Wisconsin Energy (NYSE: WEC) and DTE Energy (NYSE: DTE) are two of the day's stand-outs, showing a gain of 1.1% and 1.1%, respectively....
DailyFinance  Aug 22  Comment 
CRYSTAL SPRINGS, FL--(Marketwired - August 22, 2014) - CES Synergies, Inc. (OTCQB: CESX) announces that its subsidiary, Cross Environmental Services, Inc. (CES), has received a contract and has begun to mobilize for its work to provide remediation...
Market Intelligence Center  Aug 15  Comment 
MarketIntelligenceCenter.com's option-trade picking algorithms have identified an attractive covered-call trade on DTE Energy Co (DTE). Look at the Jan. '15 $75.00 covered call for a net debit in the $73.52 area. This trade has a duration of 155...
newratings.com  Aug 14  Comment 
DEARBORN (dpa-AFX) - Ford Motor Co. (F) Thursday said it is teaming with DTE Energy (DTE) to build Michigan's largest solar array at Ford World Headquarters. The project, funded by DTE Energy, will provide employees with 360 covered parking...




 

DTE Energy sells electricity and natural gas through two primary subsidiaries, Detroit Edison and MichCon. Both of these subsidiaries are utilities whose rates are government-regulated, guaranteeing profitability but limiting the amount the utility can charge customers.

DTE also has a number of business segments that are atypical for a utility; most notably, their coal transportation business is one of the three largest in the country by volume, and is becoming increasingly important thanks to a growing demand for coal. These unregulated businesses diversify DTE's income stream, though the company's complicated business model diverts resources from the company's core utilities business. But both DTE's utilities are located in areas of Michigan with stagnant population growth, so diversifying the business is the only way for DTE to grow revenues. [1] Utilities infrastructure is expensive to install, so DTE has a monopoly within its service regions; comparable utilities include AEP and FirstEnergy.

Business Overview

Business & Financial Metrics[2]

In 2009, DTE generated a net income of $532 million on revenues of $8.01 billion. This represents a 2.6% decrease in net income and a 14.1% decrease in total revenues from 2008, when the company earned $546 million on $9.33 billion in revenues.

Business Segments[3]

DTE operates through a number of utility and non-utility business segments.

  • Electric Utility (58.8% of total revenue): This segment consists of Detriot Edison, DTE's subsidiary which generates, purchases, distributes, and sells electricity to aobut 2.1 million customers in southeastern Michigan.[4]
  • Gas Utility (22.3% of total revenue): This segment consists of DTE's subsidiaries MichCon and Citizens.[5]
  • Gas Storage and Pipelines (1.0% of total revenue): This segment consists of non-utility gas pipeline operations and storage businesses.[6]
  • Unconventional Gas Production (0.4% of total revenue): This segment produces and sells gas in addition to developing gas-related projects.[7]
  • Power and Industrial Projects (8.2% of total revenue): This segment works with coke batteries, pulverized coal, and steel industry fuel-related projects.[7]
  • Energy Trading (10.0% of total revenue): This segment markets DTE's energy in addition to participating in energy trading.[7]

IMAGE:DTE-Segments2009.jpg[3]

Trends/Forces

DTE is primarily affected by the cost of fuel to produce electricity and the regulatory rate cases that determine their rates. However, additional factors such as the company's size and market position also contribute to its prospects for future growth.

Price of Coal

DTE generates 79% of its electricity from coal. [8] Rising coal prices, due to increased energy demand from emerging economies, have raised the cost of electricity production for DTE. [9] It has also become more expensive to obtain mining permits and recover coal deposits. Since DTE is a regulated utility, it will eventually recover all of these costs through a rate mechanism which lets the utilities price in the cost of fuel. However, these costs are subject to a government review before DTE's rates jump; additionally these rate mechanisms typically measure the cost of fuel over a long time span, such as a year, which makes utilities especially vulnerable in the short-term. These rate adjustments are not permanent; a rate case must be filed to change rates for the long term in a costly and time-consuming process. So even though DTE recoups the cost of fuel in the long-term, in the short-term rising input prices hurt its earnings.

Nuclear Generation and Economies of Scale

DTE currently has only one nuclear generation facility, Fermi 2. It's a Boiling Water Reactor (BWR) with 1,098 MW of output, and it is located 25 miles northeast of Toledo, OH. [10] DTE is not a major nuclear operator, but they have expressed interest in building a second reactor at this site. [11] This would be the first new reactor built in the US in nearly 20 years, though many other utilities are considering the possibility. These large plants are expensive initially but have low operating costs. They have also become more economically viable due to aggressive incentives from the Department of Energy (DOE) included in a bill called EPACT2005. The bill provides production tax credits for the first 6000MW of new nuclear built in the U.S. (most new plants would be around 2,000MW each, so the bill covers approximately 3 plants). The DOE has also included loan guarantees which would help the company finance up to 80% of the project's cost. The catch to all of this is that no one has built a reactor in the U.S. for decades. Although all of the designs for new plants are thought to be efficient, powerful, and safe, no one is certain exactly (within a few billion) what it will cost to build one. DTE currently only has one nuclear plant; most of the US's nuclear power stations are operated by a few large companies, such as FPL Group (FPL) , Exelon (EXC) , Entergy (ETR), and Dominion Resources. Since DTE only operates one facility, it is slightly disadvantaged in an industry where cost savings are generated through economies of scale.

Population Trends in Detroit

DTE is located in Michigan and serves only Michigan customers. This area of the country has seen population growth that lags the national average.[12] Detroit, the largest city in Michigan, once had a booming economy that provided thousands of jobs because of the auto industry. However, what was once a major asset to the city has turned sour as the industry's decline has left has left Detroit with job cuts and stagnant population growth. [13] Thus, DTE's customer base is shrinking while the population in other parts of the country expands, leaving the company to rely on regulators to increase its utilities revenues.

Operations in only one service territory

DTE sells electricity and gas in Michigan only. Since both of these products have prices that are determined by regulators, a large portion of their gross income is determined by the rate cases and the local (statewide) Public Service Commission (PSC) that set these prices. The PSCs for each state have reputations for the rates they approve relative to similar companies regulated by other commissions. Michigan's PSC is rated as average by SNL, an industry information company.[14] This means that this specific public service commission does not place DTE in a poor position, but the fact that they are dealing with only a regulatory authority means that having a positive or negative relationship with the regulator can factor into the rate increase the commission authorizes.

DTE's Business Diversity

Unlike most of its utility peers, DTE makes a significant portion of its net income from unregulated businesses. This allows the company to earn revenue that is not capped by regulators but simultaneously continue earning the steady income from the regulated utilities. One trend affecting DTE's unregulated businesses is the rising demand for coal, illustrated by the in the coal pricing section. Rising demand also means rising demand for coal transportation.[15]

Competition

DTE energy technically competes for customers with other utilities, but since the industry is heavily regulated and there are high infrastructure costs that pose barriers to entry, customers rarely have a choice in their power supplier. Utilities are at least partially regulated in most parts of the country because the infrastructure required to run a utility creates a barrier which prevents other companies from competing on price. Since this puts the utility in position to abuse its monopoly powers and over-charge customers, the utilities are regulated by state governments. Michigan implemented a deregulation plan in the late 1990's , but the failure of the plan has led to a consistent trend of re-regulation. DTE's main regional competitors are American Electric Power Company (AEP), FirstEnergy (FE), and CMS Energy (CMS). DTE is different from these companies as a utility because it operates in only one region. Even with limited geographic scope, the company has a diverse set of business segments that separate it from its peers. By having distinct revenue streams, the company can offset poor revenues from one business segment with revenues from other segments. Most of DTE's unregulated business segments operate outside the boundaries of the state, freeing them from the fluctuations of the local economy.

References

  1. http://www.prb.org/Datafinder/Topic/List.aspx?category=3
  2. DTE 2009 10-K pg. 30  
  3. 3.0 3.1 DTE 2008 10-K pg. 137  
  4. DTE 2009 10-K pg. 6  
  5. DTE 2009 10-K pg. 40  
  6. DTE 2009 10-K pg. 41  
  7. 7.0 7.1 7.2 DTE 2009 10-K pg. 7  
  8. | DTE 10k, 12/31/2007
  9. "Coal can't fill World's Burning Appetite" Washington Post, March 2008
  10. |Nuclear Regulatory Commission
  11. http://www.detnews.com/apps/pbcs.dll/article?AID=/20070213/BIZ/702130338/1001
  12. http://www.prb.org/Datafinder/Topic/List.aspx?category=3
  13. http://www.americanchronicle.com/articles/11242
  14. Michigan Public Service Commission, SNL Public Service Commission rankings
  15. | DTE 10k, 12/31/2007
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