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DTE Energy-Infrastructure Overview

DTE Energy-Infrastructure Overview. Presented to the SEMCOG Infrastructure Task Force November 13, 2009. DTE Overview. DTE Energy is a diversified energy company involved in the development and management of energy related businesses and services nationwide DTE Energy LLC

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DTE Energy-Infrastructure Overview

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  1. DTE Energy-Infrastructure Overview Presented to the SEMCOG Infrastructure Task Force November 13, 2009

  2. DTE Overview • DTE Energy is a diversified energy company involved in the development and • management of energy related businesses and services nationwide • DTE Energy LLC • Detroit Edison Company • Michigan Consolidated Gas Company (MichCon) • Multiple non utility subsidiaries • Gas and/or Electric service are provided to over 3 Million customers statewide • Electric service is limited to SE Michigan and the Thumb • Gas service and storage capacity are provided across the state

  3. Current level of investment • Over the next 5 years, Detroit Edison and MichCon are expecting a period of increasing capital spend • Utility capital spend is projected to average $1.5 billion annually (approximately 50% above the average for the past 5 years) • Non-utility capital spend is projected to average between $250 and $300 million annually • Key components of Capital spending include: • Base infrastructure investment ($4.5 billion over 5 years) • Renewable Portfolio Standard investments ($860 million over 5 years) • Energy Optimization ($120 million) • Environmental compliance assets ($1.4 billion over 5 years) • Power and Industrial and Gas Midstream expansion projects (1.35 billion over 5 years) • Smart Grid and Advanced Metering Infrastructure ($450 million over 5 years)

  4. Structure of Financing • DTE Energy has 4 primary sources of funding for its capital spending agenda • Operating cash flows (estimated at $9.7 billion over the next 5 years) • Issuing new debt (borrowing, estimated at $500 million over the next 5 years) • Issuing new shares (equity, estimated at $900 million over the next 5 years) • Monetization of assets (selling, not viable given current market conditions) • DTE Energy is a regulated utility, and as such, the costs associated with the funding mechanisms outlined above can have a significant impact on the cost of service to its customers • Many if not most of DTE Energy’s capital projects are mandated by the MPSC, or critical to maintaining the viability of its statewide operations and infrastructure • As population and demand decline, the cost of maintaining the infrastructure gets spread over a much narrower base

  5. Needs • DTE Energy would prefer to optimize its capital investments in a way that not only supports its ongoing operations, but also supports an economic turn around in the Southeast Michigan economy. • DTE Energy is very concerned about the impact that the economy is having on its customers - many of whom are unable to pay their bills for the first time. • DTE Energy would like to be a part of a unified plan that a) prioritizes infrastructure spend as a part of a collaborative regional plan and b) provides reasonable mitigation for any short term negative consequences • DTE Energy would like to participate in a unified effort to support issues that are critical to our customers and communities • State funding and support for community and educational programs • A collaborative and focused Economic Development agenda • A regional infrastructure development plan that incorporates the needs of all the stakeholders that are impacted

  6. Needs (cont.) • DTE Energy would like strong support from it’s key stakeholders and community leaders on • issues that could ultimately have a devastating impact on Michigan’s already fragile economy • Climate Change • Environmental mandates • Energy Theft legislation • Interest in leveraging EO opportunities for SE Michigan

  7. Trends DTE Energy has seen a steady decline in both residential and commercial sales volumes Excess infrastructure in areas of declining demand There has been a rapid increase in theft and uncollectables as a result of unemployment and the economy Increasing market pressures on credit availability and borrowing Increased uncertainty driven by growing environmental concerns Increased sensitivity to methods of energy production Increased concern and uncertainty over approaches to reduce carbon emissions Regional impacts of the State of Michigan's revenue shortfalls, i.e. unemployment rates (up15 percent +), reduced median income (down 3 percent +), reduced home values (down 22 percent +), and the upcoming 2010 statewide elections 7

  8. Game-changers Climate Change Legislation Requires strong cost containment measures Requires a cost collar Modifications to existing comprehensive energy legislation State mandates or changes in priorities arising from a new administration Environmental mandates that drive extreme consequences for generating assets Consolidation of services and infrastructure 8

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