Natural gas, industrials raise DTE's 2018 estimates

Breana Noble
The Detroit News

Strong performances from DTE Energy Co.'s non-utility businesses led the company to increase its guidance for the year.

For the second quarter of 2018, DTE reported Wednesday earnings of $234 million, up 32 percent from the same quarter in 2017, as the Detroit-based company looks to invest in clean energy and build a natural-gas plant in St. Clair County.

The company's non-utility business had a 40 percent year-over-year increase from lower taxes and increased volumes. As a result, DTE increased its operating earnings per-share guidance for 2018 from $5.57-$5.99 to $5.94-$6.32. The $6.13 midpoint would be a 10 percent increase from 2017.

"Last quarter, I felt good about our financial performance," DTE Energy Chairman and CEO Gerry Anderson said in a call with analysts. "Halfway through the year, I feel even better. To be honest, we are crushing it this year."

DTE reported $1.29 earnings per diluted share for the second quarter, up 30.3 percent for the same quarter in 2017. Operating earnings rose 29 percent to $247 million and 27 percent per diluted share to $1.36. DTE's stock was up 1 percent to 107.82 in early-afternoon trading.

Anderson said DTE's utility businesses are on track for the year. With changes in rates and high temperatures in May and June causing consumers to crank up their air conditioning, DTE Electric's net income grew 18 percent from last year to $163 million. Now the utility is in conversations with large customers to participate in a voluntary renewable program. DTE has a goal of producing 50 percent clean energy by 2030.

Record-low temperatures in April helped DTE Gas increase its profit from $1 million to $14 million, prompting the company to evaluate accelerating gas main replacement from 25 years to 15 years.

Although DTE's energy trading lost $5 million in the second quarter, its other non-utility segments, Anderson said, showed exceptional results. DTE's gas and storage pipelines business grew 50 percent to $60 million, as demand rises for cheap natural gas. The company increased its guidance for the sector from $185-$195 million to $225-$235 million because of larger gathering and transport volumes.

DTE's power and industrial projects business rose 43 percent to $43 million from increased reduced emissions fuel volumes and earnings from renewable energy use. Additionally, the company predicts more earnings in the future from steel, as market prices rise from U.S. tariffs on the imported alloy. It shifted up its guidance for the year from $115-$135 million to $155-$170 million.

The company also said it is evaluating acquisitions for its pipelines business. Jerry Norcia, president and chief operating officer, said the acquisition would likely be similar in scope to its Link Lateral and Gathering system, which the company purchased in 2016 for $1.3 billion. The system has 175 miles of gathering pipelines, a 145-mile high-pressure header system and 30 miles of field gathering.

Additionally, several construction projects are expected to begin or go into service by the end of the year. The 255-mile NEXUS pipeline it is building with Enbridge is 80 percent complete and on schedule to be available for service in the late third-quarter. The company also will break ground in August for a $1 billion natural-gas plant to go in service in 2022, when DTE plans to begin retiring three coal plants.

DTE's power and industrial segment also began construction on a new Ford Motor Co. central energy plant and a new renewable natural gas project in Wisconsin. DTE is evaluating 10 other projects and expects to close one or two by the end of the year.

With these investments, DTE said it predicts 5 percent to 7 percent annual growth over the next five years.

"Our financial performance this quarter was strong across all businesses," Anderson said in a statement. "In the first half of the year we laid the foundation for exciting investments and initiatives ahead of us that will transform both our company and our communities."