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Executives

David Meador – CFO

Peter Oleksiak – Controller

Nick Khouri – VP & Treasurer

Analysts

Dan Eggers – Credit Suisse

Brian Chin – Citigroup

Greg Gordon – Morgan Stanley

Paul Ridzon – KeyBanc Capital Markets

Yiktat Fung – Zimmer Lucas Partners

Jonathan Arnold – Deutsche Bank

Danielle Seitz – Dudad Research

Mark Segal – Canaccord Adams

Jeff Buckley [ph]

DTE Energy Company (DTE) Q1 2010 Earnings Call Transcript April 28, 2010 9:00 AM ET

Operator

Good day and welcome to the DTE Energy first quarter 2010 earnings conference call. Today’s conference is being recorded. At this time I would like to turn the conference over to Mr. David Meador. Please go ahead, sir.

David Meador

Thank you and good morning and welcome to our first quarter conference call. Before we get started, I encourage you to read the Safe Harbor statement on page 2 including the reference to forward-looking statements.

With me this morning are Peter Oleksiak, our controller; Nick Khouri, our treasurer and Lisa Muschong our Director of Investor Relations. I also have members of the management team in the room that I might call on during the Q&A session.

Let me start with an overview on page 5. We believe that DTE is a very attractive investment. It is grounded in a robust plan for 5% to 6% long-term growth, and when you put that together with our dividend $2.12 a share, this provides a very attractive total shareholder return. We have a strong utility growth plan, and it is driven by federal and state mandated investments, and we are not dependent on electric load or natural gas usage growth.

At Detroit Edison this growth is driven by four areas of investments. The first is renewable energy, where we will spend $300 million to $400 million between now and 2012; energy efficiency, where we will spend $100 million over that period; environmental expenditures, at our major coal plants, where we will spend $500 million to $600 million, and base infrastructure investments of $2.1 billion to $2.3 billion.

In MichCon over that time frame we will invest about $400 million to $500 million on base infrastructure and growth projects. Growth of the two utilities is underpinned by a very constructive regulatory structure. This will help provide a predictable earnings stream going forward. This also allows us to continue to make investments and contribute to the MichCon’s economic recovery.

We have been able to successfully execute our regulatory proceedings under the new laws. We get some cycles of rate cases behind us. We received a very constructive rate case order at Detroit Edison in January, and we expect the same at MichCon by early June of this year.

While we have a constructive regulatory environment, we also fully understand our role in being a customer centric organization. We have developed a strong continuous improvement culture that has delivered significant decreases in O&M, while improving operational metrics. We have also initiated a comprehensive customer satisfaction initiative that when combined with our continuous improvement muscle will help keep rates affordable for our customers.

In our non-utility businesses, we will be focused on growth. First in our gas midstream business, which is well situated to take advantage of the Marcellus Shale gas flows, and our power and industrial projects, where we will see near-term growth, predominantly in the areas of renewable energy with acquisitions of small coal plants that are being converted to biomass, and qualify for renewable energy credits.

Now if you can turn to page 6, we are very pleased with the strong results in the quarter, which has given us the confidence to raise our operating earnings guidance. Our operating earnings came in at $1.38 per share, a 25% improvement over the first quarter of last year. This was driven first by the two utilities where we saw rate increases and we also have ongoing cost control driven by our continuous improvement work.

The local economy continues to show signs of improvement. Temperature normalized loads is up 2%, led by the industrial sector, where we saw a 12% improvement on load. The industrial sector is driven by recovery in the automotive and steel industries. There continues to be signs of economic recovery, including automotive sales and the profitability of the auto companies even at lower volumes due to the restructuring that happened last year.

And as Michigan's economy restructures, automotive is less critical as only 3% of jobs in Michigan are auto or auto parts manufacturing related. We understand there will be a tail on the economic recovery, but we are seeing a lot of positive signs throughout the state. We also had strong results this quarter in our non-utility businesses driven by the power and industrial group in energy trading.

Our cash flow and balance sheet metrics were strong and right where we want to be where we generated $600 million in free cash flow for the quarter, and we are on track for funding needs this year.

Now let us turn to slide seven, and let me take you through the increases in our guidance, where we are revising guidance in four areas. We are increasing our guidance to $3.45 to $3.80 per share after a great start to the year. The midpoint increases $0.08 a share to $3.63, and is something that we are confident in.

While our long-term growth rate is 5% to 6%, this lift in guidance means 10% year-over-year increase in earnings per share at midpoint. And let me go through the detail, at Detroit Edison we are pulling up the bottom end of guidance $5 million [ph] to $410 million based on first-quarter results, which were driven by the rate case and ongoing continuous improvement effort.

We are holding MichCon’s guidance at $95 million to $105 million, and expect the final order in the rate case to come out in early June, and that should support the level of earnings, again coupled with ongoing cost controls. The non-utilities are off to a great start with another year of consistent earnings in our gas storage and pipeline business, and a rebound in the steel sector, which in addition to new projects is driving the power and industrial business, where here we are also pulling up the lower end of guidance by $5 million.

Energy trading had another strong first-quarter similar to last year. We are raising the upper end of guidance to $60 million. However, we are not changing our long-term outlook of this business, where we still account on them for $45 million to $55 million in earnings. And then last we are improving the holding company guidance to $80 million in expenses due to tax benefits that flowed through the holding company in the quarter.

So the total for the new guidance is $578 million to $643 million, which at midpoint is 13% higher than last year, and earnings per share which at midpoint is 10% higher than last year.

So now let me turn it over to Peter, who will take you through the quarter.

Peter Oleksiak

Thanks David, and good morning to everyone. I will start with slide nine and the first-quarter earnings results. For the quarter, DTE’s operating earnings per share is $1.38. I would like to remind everyone that a reconciliation to GAAP reported earnings is contained in the appendix.

Detroit Edison contributed $0.55 and MichCon – which typically has a strong first-quarter came in at $0.48. The non-utility segments combined to earn $0.40. The primary drivers of the non-utility quarter results were energy trading at $0.23, power and industrial projects at $0.11, gas storage and pipeline at $0.08, an unconventional gas production at $0.02. Finally corporate and other had a loss of $0.05 in the quarter.

Let us move now to slide 10, and a summary of the quarter-over-quarter performance by segment. Operating earnings for the consolidated DTE Energy are up $50 million for the quarter. Both Detroit Edison and MichCon had higher earnings than prior year. In a few moments, I will provide additional detail on the two utility companies.

Our non-utility segments were up $11 million, led by power and industrial projects which had a $14 million increase in earnings as a result of the rebound in the steel sector and new projects coming on line. Energy trading, which turned another strong quarter was $38 million of income, is down only slightly from last year. As Dave discussed in his guidance update we have taken the upper end of trading’s guidance to reflect this strong start to the year. There is still a lot of time left in the year, so we have not changed the lower end for this segment.

Gas storage and pipeline earnings were flat year-over-year, and the loss from unconventional gas production is in line with prior year. As Dave mentioned earlier, the strong performance at our non-utility companies helped support the increase in our earnings guidance for 2010. Corporate another was $8 million better than last year due primarily to lower taxes.

Now I would like to go through some quarterly details of the utility companies beginning with Detroit Edison on slide 11. Operating earnings for Detroit Edison was $91 million, up $13 million from the prior year. Total margin for the quarter was up $15 million, driven primarily by the final rate order we received in January of this year. Part of the margin increase is due to our new decoupling mechanism, which provided a few million of additional margin in the quarter. We provided a decoupling example in the appendix to show how this mechanism and the mechanics works here in Michigan.

Overall electric load in the territory was up close to 2% in the quarter, and we are now estimating full-year load growth at 2%, up from the 1% we previously disclosed. We have seen positive signs of the economic improvement in Michigan since the beginning of the year, and it is translated to increased load.

Choice load is up considerably from 3% of sales last year to the cap of 10% this year, and that is reflected in our bundled sales decline year-over-year. But we have a Choice record that offsets most of the corresponding margin loss. On the expense side, O&M was lower as a result of the roll-out of new continuous improvement initiatives, and other cost reduction actions, which were partially offset by an increase in benefit related costs. As Dave mentioned earlier, with this solid start we have tightened guidance this year for Edison by raising the lower end by $5 million.

Moving on to page 12 and a review of MichCon performance. As mentioned earlier, the first quarter is typically the strongest in the seasonal gas utility business. Operating earnings for MichCon for $79 million, up $18 million from the prior year. This was primarily due to the implementation of higher rates in January of this year, and is part of the June 2009 rate filing, partially offset by unfavorable weather, increased customer conservation and lower midstream revenue. O&M expenses were lower than prior year as a result of continuous improvement related cost reductions similar to what occurred at Detroit Edison this quarter.

That concludes an update on the earnings for the quarter, and I will now turn the discussion over to Nick Khouri, who will cover cash flow and capital expenditures.

Nick Khouri

Thank you Peter. As always, improved cash flow and balance sheet strength remains a key priority for management and the board of directors. Through the first three months of this year, our cash and balance sheet metrics are on track. In fact, about equal to the historically strong year we saw in 2009. Page 14 summarizes our progress.

In the first quarter, we were pleased that both S&P and Fitch removed their negative outlooks reflecting an improvement in both our financial metrics and risk profile. We also made significant progress in the first quarter towards completing our 2010 financing plan. We issued approximately $130 million of DTE stock to fund both our pension plan, and our employees’ compensation DRIP programs. We expect to issue an additional $70 million of stock this year to fund the remaining DRIP requirements.

In addition, using a combination of DTE stock and cash, we contributed $200 million to our pension plan meeting our 2010 funding targets. On the debt side, we accessed the debt markets at Detroit Edison at rates comparable to pre-crisis levels.

Page 15 details cash flow and capital for the first quarter of 2010. Cash from operations totaled $800 million, in line with last year's first quarter, while free cash flow before dividends was slightly above the prior year at $600 million. As a result, outstanding net debt was reduced by approximately $400 million in the first three months of 2010. But given the quarterly cycle of cash flows, we expect that pay down to reverse in remaining quarters.

Capital expenditure detail is shown on page 16. DTE capital spending totaled $242 million in the first quarter, down about $90 million from the prior year. Most of the year-over-year decline was at Detroit Edison due entirely to the timing of projects this year compared to 2009. MichCon year-over-year capital decline is due to the completion last year on a major expansion project on the west side of the state.

On the non-utility side, capital is about flat on a year-to-year basis. For the full year, DTE capital is still targeted to reach above $1.4 billion, a 30% increase from 2009. In summary, DTE’s cash and balance sheet targets are on track with year-to-date actuals equaling the historically strong year we saw in 2009.

Now let me turn it back over to Dave to wrap up.

David Meador

Thanks Nick. Let me wrap up on slide 18, our original guidance demonstrated healthy growth over 2009, and we're pleased to be in a position to increase guidance this early in the year. Our revised guidance reflects our confidence in being able to deliver earnings at the two utilities as they return to full earnings power, and a strong start to the year in our non-utility businesses.

The utility growth continues to be set in a very constructive regulatory environment, and we remain focused on operational excellence and customer satisfaction, and we continue to see attractive investment opportunities at both our gas midstream business and the power and industrial business.

When you put this all together, we have a robust plan for investments and cost control that will provide long-term growth of 5% to 6%, and when coupled with our dividend policy provides a very attractive total shareholder return.

And now we would be happy to take your questions. Cynthia [ph], if you could turn that over to questions.

Question-and-Answer Session

Operator

(Operator instructions) And we are going to take our first question today from Dan Eggers with Credit Suisse.

Dan Eggers – Credit Suisse

Hi, good morning. Dave I was wondering if you could start off and just give a little more color may be on what you are seeing in the P&I business, and now there is an expectation there is going to be a sustained opportunity for recovery relative to your guidance. Where do you think you are in that recovery cycle for the assets you have, and what business opportunities are you guys seeing on the market today with a better business environment?

David Meador

Well, you know, first of all I would start with the coke batteries that as you know, last year as we talked about the steel industry nearly shutting down and the coke batteries pulling back really hard towards the end of last year. That reversed as the steel industry shifted dramatically and we went back to full production. So, for this year we are fully sold out in coke production. Some of that we were able to select at opportunistic prices, and then we are fully contracted for 2011 at slightly reduced prices.

Now at the same time we have new projects that are coming online. We have talked about these small coal plants that we have converted to wood burning plants that qualify for renewable energy credits. We have got a plant in Wisconsin. We have got another plant in California. A third one, we are negotiating in California right now. So our sense when you put this all together is that these earnings levels are sustainable and that over time you will see ongoing growth in that segment of the business.

Dan Eggers – Credit Suisse

Okay. So, we should – this is – we’ve gotten the recovery in your mind as far as the bulk of the existing businesses, and then the growth from here is going to be a function of investment and I guess expansion opportunities?

David Meador

Yes, that is right.

Dan Eggers – Credit Suisse

Okay. If I were looking at the guidance for this year and the increases you had, you talked about the midpoint now being up 10% year-on-year relative to the 5% to 6% growth rate. Should we think that this is the new baseline, and is 5% to 6% off of this year or you know just kind of given the market conditions you got a little bit ahead in a couple of the businesses in 2010 such that you know, maybe some of that growth is being carved out of ’11.

David Meador

No, it is the former. I believe that you know, what you are seeing first of all in this jump up as you know, the utilities had underperformed for a couple of years for different reasons, and now you are seeing the utilities return to full economic health, and you saw – we just talked about the power and industrial business coming back to its true baseline. So, my view is that this – the new baseline that you will see 5% to 6% growth off of, and it is not a pull ahead of 2011.

Dan Eggers – Credit Suisse

Okay, and I guess just one last question, can you just share a little bit of what you guys saw in the trading business in the first quarter that kind of game you some – got you quite a ways ahead on the year. Anything in particular from volatility or market perspective we should be aware of?

David Meador

Peter, you want to take that?

Peter Oleksiak

No, included in the appendix is kind of the economic income versus the (inaudible) some time. This is off to a strong start, actually a bit stronger than last year, and with $38 million of accounting income and with the guidance we had of 45 to 55, we thought it was prudent to take the upper end up.

David Meador

So, I think that they have seen opportunities evolve at the electric power side of the business and the gas side. The economic profit is slightly better. We have a little bit of a roll on of prior year economic profits, but I wouldn't describe this volatility related, because this is not necessarily how our business has originated. I would also just caution that people shouldn't take this quarter times four.

I mean sometimes we ran into that last year and we do see a bit of seasonality in this business, where if you looked in 2009 they had very strong quarters in the first quarter and the third quarter, and so questions come up about, tell me about the total year, but we are just taking the upper end up slightly here and as I mentioned in my comments, we don't count on this part of the business for growth, and still long-term see it in the $45 million to $55 million range.

Dan Eggers – Credit Suisse

Got it. Thank you guys.

David Meador

Thank you.

Operator

And we will take our next question from Brian Chin with Citigroup.

Brian Chin – Citigroup

Hi, just a quick question on the Choice and industrial data points that just came up in the CMS [ph] call a few days ago, but if I compare slides 22, and then the supplemental information pack you have got industrial sales in slide 22 going up 12%, but in the supplement pack you have got industrial going down. And so the way I should be thinking about that is since you are allocating Choice back into residential, commercial and industrial on slide 22, or you are saying is that a lot more industrial customers chose the Choice program, but if we are trying to assess like core fundamentals on industrial demand, slide 22 is the better metric to look at. Is that right?

David Meador

Slide 22 is the better metric. As I mentioned, there was a Choice increase if you are seeing a decline in bundle sales, and understand the overall economy is really the temperature in our normalized service territory.

Brian Chin – Citigroup

Okay, great. And then you also indicated at the bottom of that supplemental page, weather improving to 3 days for Detroit Edison was basically a nonevent, and that – I'm thinking about that right in the total sales on that slide if 11,987 for Detroit Edison pretty much matches up closely with 12092 right. So, normal sales in relatively a normal weather quarter in terms of…

David Meador

Fairly. You know, we kind of get the electric heating, and actually we had a slight weather impact for the electric utility. So actually the temperature normalized sales was a bit higher.

Brian Chin – Citigroup

Okay, great. I appreciate that. Thank you.

David Meador

Okay.

Operator

And we will take our next question from Greg Gordon with Morgan Stanley.

Greg Gordon – Morgan Stanley

Thanks. Most of my questions have been answered, but I did want to ask another question on the industrial recovery you are seeing, and obviously doesn’t impact your outlook as much with decoupling now, but you guys are kind of at the center of the spider web in terms of the national economy. A Southern [ph] company just reported and they said they saw a high single-digit moving down in the industrial sales as well.

You know, when you look at your coke battery project and the orders you are seeing when you look at what your electricity customers are doing in terms of manufacturing, what do you think the knock-on effects are going to be sort of outside your service territories as you go through the year, the EIA forecast for growth in electricity demand for this year was 0.8%. I find it kind of hard to believe where the economy is ramping that that is not a low number at this point?

David Meador

Yes, into issue [ph] it feels like a low number, where we are now forecasting load up 2%, and industrial load up 13% for the year. And you know you have seen this rebound as you have seen in all prior recessions, when we went back and looked at prior recessions, you get a spike back at some point in time, and for us as you see the factories reopen, and then add second shifts and third shifts, and I think this is going to continue around the country. I had read an auto report two days ago, where they are talking about the auto industry having to hire 88,000 people around the country now, albeit at probably lower wages than the people they are replacing. But there is just signals all around that you know the manufacturing sector in the United States is starting to breathe life again, and we certainly see it here.

Greg Gordon – Morgan Stanley

Thank you.

Operator

And we will take our next question from Paul Ridzon with KeyBanc.

Paul Ridzon – KeyBanc Capital Markets

When did you get your 10% ROA?

David Meador

You are referring to the Choice?

Paul Ridzon – KeyBanc Capital Markets

Yes, sorry.

David Meador

That was end of last year.

Peter Oleksiak

Actually, we hiked it at the year [ph].

Paul Ridzon – KeyBanc Capital Markets

At 10%?

Peter Oleksiak

At our cap.

Paul Ridzon – KeyBanc Capital Markets

At the end of ’09?

David Meador

Yes. And if you look at the first quarter, it is essentially at the 10%, if you look at both Choice sales versus the total sales.

Paul Ridzon – KeyBanc Capital Markets

Could you give more detail on the tax benefit at corporate, what was that related to?

David Meador

It was a one-time item related to Michigan taxes, where we had booked a reserve, and there was the matter resolved actually by another company through the courts, and it allowed us to release that reserve.

Paul Ridzon – KeyBanc Capital Markets

I'm sorry. How big was that?

David Meador

It was $5 million, okay.

Paul Ridzon – KeyBanc Capital Markets

And what you call unrealized at trading, is that mark-to-market?

David Meador

Yes, it is mark-to-market.

Paul Ridzon – KeyBanc Capital Markets

And your full year forecast assume that mark-to-market washes to zero at year-end?

Peter Oleksiak

At every year, we are going to have some element of mark-to-market still in the numbers, and the duration is fairly short though on the realized earnings.

Paul Ridzon – KeyBanc Capital Markets

But your guidance for trading assumes, is there any mark-to-market implied in that?

David Meador

Well, our guidance is not accounting that economic profit. So, you get the roll on effect of prior year transactions with short tenure, but to the extent that I'm always doing new transactions, there is going to be some element of mark-to-market always in our numbers.

Paul Ridzon – KeyBanc Capital Markets

But you don't know if it is negative or positive or…

Peter Oleksiak

We assume that current marks relatively stay the same. Maybe there are going to be new deals which are still going on and those new deals will have some element of our mark-to-market earnings.

Paul Ridzon – KeyBanc Capital Markets

Okay, thank you.

Operator

And we will take our next question from Yiktat Fung at Zimmer Lucas Partners.

Yiktat Fung – Zimmer Lucas Partners

Good morning. Congratulations on your continued strong performance?

David Meador

Thank you.

Yiktat Fung – Zimmer Lucas Partners

I just have a question on the corporate and other segment, you were saying before that there was a $5 million reserve that was released due to some tax position. So that would bring your corporate and other earnings in the first quarter to about negative $13 million, is that correct?

David Meador

Yes, that is roughly right.

Peter Oleksiak

And there is another…

Yiktat Fung – Zimmer Lucas Partners

But then your full year guidance is $80 million of drag at the parent, does that imply that for the other quarters, the drag should be still about $9 million higher than in the first quarter, and why is I guess the first quarter corporate drag still a bit lower than normalized level for you?

David Meador

There is an effective tax rate with some ability that equals zero by the end of the year.

Yiktat Fung – Zimmer Lucas Partners

I see. I understand. And my last question, what is the company's pension funding needs for the next several years, and how does the company plan to meet those?

David Meador

Roughly, I think the way to think about it is that we will contribute about $200 million a year. It is kind of in our planning horizon as we march towards 2016 fully funded status, which is you know, what most companies are tracking to and we've already made our contribution this year, though we did $100 million in stock and $100 million in cash and we're done for the year.

Yiktat Fung – Zimmer Lucas Partners

Okay. Thank you very much.

David Meador

Okay.

Operator

We’ll take our next question from Jonathan Arnold at Deutsche Bank.

Jonathan Arnold – Deutsche Bank

Good morning guys.

David Meador

Good morning.

Jonathan Arnold – Deutsche Bank

Just – could I ask you to give us a little more granularity on where you are on cost savings. Have you – I think the release [ph] you have done some things beyond what you know, the original plan was and how we should think about, whether these are one-time, how much of it repeats, et cetera?

David Meador

I would suggest that we are always looking for, you know, cost savings and if someone gave me a one-time savings versus ongoing you know, we’ll take it as long as we're not affecting you know, operations or customer satisfaction, but our planning this year embedded in our net numbers in O&M was we’re targeting $60 million in sustainable cost savings and that's offsetting most of the inflation, you know, last year we're in a zero inflation environment, and this year you know, we have wage increases and other inflation that's creeping through, and we're trying to offset most of that with cost reductions that are sustainable, and we’ll continue to do that going forward. We're not, by no means done with continuous improvement and cost reductions.

Jonathan Arnold – Deutsche Bank

And among the $60 million target is that – how much of that showed up in Q1?

David Meador

About $15 million to $20 million roughly, but, you know, they – we spend less time tracking action savings versus, you know, we've got targets for everybody in the company that have their savings embedded. So I don't have necessarily a detailed tracking system because we found that people are getting really good at this, and I don't have to do that, but you know, I would look at just overall O&M, and just know that you know, what we're planning on for the years about $60 million cost reduction target.

Nick Khouri

And the first quarter was in line with our internal plans, actually slightly better.

Jonathan Arnold – Deutsche Bank

Okay, thanks. If I may on another topic, we noticed in one of your recent investor slide presentations, slightly different language on the dividend, you know, rather than talking about potential increases, you are talking about expecting to increase the business for us, because obviously the payouts are tracking towards the low end of the range. What sort of timeframe do you think that dividend might be revisited?

David Meador

You know, just to circle back on our policy, our payout policy is to target 60% to 70% payouts. You know, last year we were you know, our final earnings were about 64% payout. With this revised guidance we are going to be below the 60% at midpoint and, you know, we annually sit down and talk to our board about this, and it’s something you know, as we get into the fall timeframe you know, we take this under you know, serious consideration and we'll be talking to the board about it later this year.

Jonathan Arnold – Deutsche Bank

In the fall is the would be the timeframe, did I hear that right?

David Meador

You know, normally that's usually when we do this. We have you know, the strategic planning session in the fall, and we're usually talking to the board about you know, forward years and things like dividends, and there would be the timeframe that we would, you know, take this under consideration looking at what our needs are for the next several years.

Jonathan Arnold – Deutsche Bank

Thank you Dave.

David Meador

Okay.

Operator

We’ll take our next question from Danielle Seitz at Dudad Research.

Danielle Seitz – Dudad Research

Thank you. I just was wondering given the strength of the investor recovery in your region. Would you think that this trend would continue into 2011 or is it too early to tell?

David Meador

Yes, my intuition is that this is going to continue. If you look at just take automotive as an example, you know, last year the automotive industry you know, went below 10 million units. You know, this year it's tracking you know, in the 11 million plus range and you know, I am now seeing projections in the 14 million unit range for next year. If those projections are right, you'll continue to see the manufacturing sectors that feed the auto and other industries continue to grow from the low point of 2009.

Danielle Seitz – Dudad Research

And as well as your industry [ph] region as well I guess.

David Meador

Yes, you know, at the same time, you know, Michigan is working hard on diversifying its economy. So, you know, there's a lot of work going on that will take time but again we're seeing positive signals. One example would be General Electric opening up an R&D center in our service territory that they are going to invest $100 million in, and then it's going to employ a thousand people. You know, that would be an example of things that we are starting to see in Michigan as you know, they are working really hard to attract new businesses and diversify the economy.

Danielle Seitz – Dudad Research

Thank you.

David Meador

Thank you.

Operator

Our next question comes from Mark Segal with Canaccord.

Mark Segal – Canaccord Adams

Hi, good morning. Given the recent finalization of the DOE Smart Grid stimulus award yesterday, can you talk about your expectations from a timing perspective of automating the service territory beyond the 600,000 endpoint commitment through 2011?

David Meador

We, right now, you know, in terms of our project, we are taking in some stages. We had a pilot plant, the next stage is to do the 600,000 meters and you know, as we work our way through that we'll be making decision timing but this is, it's going to be a multiple year project for us. I think our planning is 5 to 8 years to roll this out. So, you know, we're not – this is – we're going to do the next stage of 600,000 meters, and we’ll evaluate after that, you know, the pace and level of investments, you know, also considering the other investments that we have to make in environmental and win another capital that's going to go into the utility.

Mark Segal – Canaccord Adams

Okay, that's helpful. Thanks very much.

Operator

We take our next question today from Jeff Buckley [ph].

Jeff Buckley

Hi, I just got on to the call and thank you very much for the presentation. One question I want to ask is I was looking at the year end, and I'm thinking about how you guys are managing the refinancing. I see there's a long time debt due of 661, and the equities [ph] that mature in 2010. Can you throw more color as to how you are managing this risk?

David Meador

I caught part of the question, let me see if I can pull a response. There is a Detroit Edison maturity of $500 million in October, and as we say in the presentation, we’ve already refinanced $300 million of that. So we think the refinancing risk for Detroit Edison this year is very low, and there is no Detroit Edison maturity, significant maturity next year. There is a DTE Energy maturity next year of $600 million in 2011, but given our current plans we think we will pay off most of that debt and not refinance it. That's on the debt side. On the credit side, on the bank revolver we do have just short of a $1 billion revolver coming due in October. The market has improved dramatically over the last few months and over the next 4 to 5 months we’ll remarket that revolver.

Jeff Buckley

Okay, all right. Thank you.

David Meador

Thank you.

Operator

And it appears we have no further questions at this time. I'd like to turn the conference back over to Mr. Meador for any additional or closing remarks.

David Meador

Thank you and thanks for joining the call this morning. The next event that we will be at with most of you will be at AGA on May 17th and 18th. We have Gerry Anderson traveling there with Jerry Norcia, who runs our gas midstream business, as well as MichCon and we look forward to seeing you there. Thanks again.

Operator

That does conclude today’s conference. Thank you for your participation.

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Source: DTE Energy Company Q1 2010 Earnings Call Transcript
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