Warm temperatures boost DTE Energy's earnings per share guidance

Breana Noble
The Detroit News
DTE Energy logo

Detroit — DTE Energy Co. Wednesday increased its yearly earnings-per-share guidance for the second time in 2018, after warm temperatures caused Michigan residents to crank up their air conditioning.

The Detroit-based utility reported third-quarter earnings for 2018 of $334 million, up 24 percent from the same quarter last year, as the company broke ground on its nearly $1 billion Blue Water Energy Center natural gas plant in St. Clair County and puts its NEXUS gas pipeline into service. That represents a 22 percent increase in earnings per diluted share to $1.84.

"After the second quarter, I said we were having an exceptional year," CEO Gerry Anderson said during a call with analysts. "We're not three-quarters of the way into the year, and that description is still on the mark."

DTE's electricity business grew 37 percent year over year to $304 million, causing it to bump up its operating earnings-per-share guidance from $5.94-$6.32 to $6.12-$6.48 for 2018. The $6.30 midpoint would be a 17 cent rise.

"We've had one of the warmest, if not the warmest, summers on record," Anderson said, "which is clearly good for our electrical business and energy trading business."

The company said it would use the earnings to reinvest into system reliability during the fourth quarter. Anderson also said in the company's latest rate review submitted to state regulators, DTE is requesting to spend about $1 billion in capital expenditures for multi-year infrastructure upgrades and electric vehicles infrastructure development, which could increase customer's rates, subject to state approval. The request also asks to change the state's annual rate review process to every couple years.

As for the natural gas division, it more than doubled its loss year over year to $28 million due to operations and maintenance costs. A rate hike of $8.9 million for natural gas went into effect this month, which will accelerate the company's gas distribution system replacement.

The state utility regulator on Wednesday, however, approved a reduction for DTE gas bills by nearly $25 million between January and June 2019 following federal tax cuts. Average customers that use 10,000 cubic feet of natural gas per month will see their bills drop $2.21.

As for its non-utility businesses, DTE saw a 78 percent increase to $64 million for gas storage and pipelines, benefited by lower tax rates and its new 255-mile NEXUS pipeline starting service. About 350 million cubic meters of gas is traveling through the pipe per day with that number expected to increase to 840 million next month.

Its power and industrial projects division increased earnings by 43 percent to $63 million. This quarter, the company announced a project with Wisconsin-based Pagel’s Ponderosa Dairy to create renewable natural gas from dairy cow waste to fuel vehicles.

Strong performance across its portfolio increased DTE's energy trading from a loss of $10 million to earnings of $15 million.

The utility company also provided an early outlook for its 2019 operating earnings-per-share guidance of $5.97-$6.33. The $6.15 midpoint represents a 6 percent compound annual growth rate over five years, though it is lower than this year's increased guidance due to better-than-expected earnings in the company's electrical and nonutility divisions this year.

DTE's shares are up about 1 percent over the past year. Its stock was up 3.6 percent Wednesday morning to $115.94.