DTE Energy Company

Hello and thank you for standing by. My name is Lacey and I will be your conference operator today. At this time, I would like to welcome everyone to the DTE Energy Second Quarter 2026 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one again. Thank you. I would now like to turn the call over to Matt Kropinski, Director of Investor Relations. Please go ahead.

Thank you and good morning, everyone. Before we get started, I'd like to remind you to read the safe harbor statement on page two of the presentation, including the reference to forward-looking statements. Our presentation also includes references to operating earnings, which is a non-GAAP financial measure. Please refer to the reconciliation of GAAP earnings to operating earnings provided in the appendix. With us this morning are Joi Harris, President and CEO, and Dave Ruud, CFO. And now I'll turn it over to Joi to start our call this morning.

Thanks, Matt, and good morning, everyone, and thank you for joining us. I'm happy to be with you today. As we move through the year, our team continues to execute at a high level, delivering strong results for our customers, communities, and investors. Our performance reflects a highly engaged organization with a clear focus on operational excellence and doing what's right for our customers. I'm extremely proud that our team was recognized by the Gallup organization for the 14th consecutive year with a great workplace award and our employee engagement ranks in the 94th percentile globally among thousands of organizations. We are continuing to advance our customer focused capital plan with targeted investments that are strengthening the grid and improving reliability. Importantly, We remain disciplined in how we deploy capital, ensuring that these investments deliver the greatest benefit while maintaining affordability for our customers. I'm sure you are aware, at the start of July, a severe, fast-moving storm impacted nearly 400,000 customers. Despite extensive storm forecasting and preparedness efforts, weather models did not anticipate the storm's severity, and it developed rapidly with little advance warning. causing significant and widespread damage across the service territory, including more than 600 broken poles and substantial damage driven by trees outside of the utility maintained right of way. With storms impacting much of the Midwest, we brought in crews from as far as Oklahoma and Texas to support restoration efforts. And I'd like to take a moment to express my immense gratitude to those crews, the contractors, and our employees across DTE who stepped up and worked long hours away from their families over the holiday weekend. Given the storm's unexpected severity and widespread damage across the Midwest, our restoration times extended beyond what we would typically target. However, our crews adjusted quickly and executed our restoration plan to support customers as safely and as quickly as possible. Importantly, areas where we have completed substantial reliability investments performed significantly better, reinforcing the value of continued grid investment and operational excellence. While our investments are delivering measurable results, we recognize there is more work to do. After every major storm, we review our performance to identify lessons learned and strengthen preparedness and restoration capabilities and customer communication. to ensure we continue to build a stronger, more resilient grid for our customers. Turning to data centers, momentum remains strong as we continue to execute across our development pipeline. The 1.4 gigawatt Oracle data center remains on track, fully approved and under construction. As we highlighted last quarter, we executed an agreement with Google to serve a one gigawatt data center. which provides upside to our current long-term plan. The contract has been submitted to the NPSC and is progressing through the approval process. Beyond these two projects, our pipeline continues to advance with ongoing discussions that position us well for future growth. As these projects move forward, they will deliver meaningful affordability benefits for our existing customers, absorbing a significant portion of fixed system costs. Our regulatory strategy is focused on delivering value while providing clear visibility for customers. We have several filings underway or plans. In addition to the Google data center contract pending approval, we are advancing both electric and gas rate cases to support critical customer focused investments. We filed our distribution system plan in April, outlining our five year roadmap to reliability and grid modernization. We also plan to file our next IRP later this quarter, which will provide a clear path to meet long-term generation and capacity needs. Our year-to-date earnings performance keeps us on track to reach the high end of our operating EPS guidance this year, and we are confident in our long-term operating EPS growth rate target of 6% to 8% through 2030. We continue to see a clear path to achieving the high end of our guidance range each year, driven by R&D tax credits and the flexibility they provide. As we have mentioned, the Google Data Center project and other data center opportunities provide upside to this plan. Let me move to slide five to highlight our continued commitment to improve reliability for our customers. We remain highly committed to our efforts to improve reliability for our customers. As I mentioned, the July storm highlighted both the value of our reliability investments and the work that remains. During the event, we found that upgraded portions of the system proved more resilient, reinforcing the importance of continued investment and identifying opportunities to further strengthen our response. Let me move through how we're approaching reliability improvement across the system. As you can see from this slide, our strategy is grounded in four core pillars, each focused on reducing outage frequency and duration, as well as improving overall performance. First on technology and innovation, we're continuing to expand automation across the system. In 2025, we installed over 700 automated devices, which was about 20% over plan. and we are planning to deploy more than 500 additional devices in 2026. This work is foundational to fully automating the distribution system by the end of the decade. Second is infrastructure resilience and hardening. We're strengthening the physical system to make it more resilient to everyday wear and increasingly extreme weather. In 2025, we completed over 200 miles of targeted hardening work along with nearly 1,000 miles of pull-top maintenance. We're ramping up this effort with plans to reach roughly 1,700 miles of maintenance work in 2026. Third is infrastructure redesign and modernization, where we're upgrading legacy portions of the grid to improve overall system performance. In 2025, we converted over 70 miles of 4.8 kV circuits to higher voltage and rebuilt more than 20 miles of sub-transmission infrastructure. We expect 2026 to represent our highest level of conversion activity yet. The fourth focus is tree trimming. We've completed our surge effort and are now focused on sustaining that progress. We're also piloting enhancements to our approach, including expanded clearing practices and new program options to further reduce outage risk. Supporting all of these efforts, we plan to invest approximately $11 billion over the next five years, driving continued reliability improvements while maintaining a strong focus on customer affordability. Importantly, we're already seeing meaningful results from this strategy. While the challenging circumstances of the July storm impacted our restoration time, we have seen significant improvement in recent years. From 2023 to 2025, our outage duration improved by 90%, and we achieved our best all-weather safety performance in nearly two decades. Across the prior five storms preceding July, we restored an average of 97% of customers within 24 hours. and nearly 100% within 48 hours. The progress we're seeing is the result of sustained targeted investment combined with improved processes and strong execution by our team. As a result, we are experiencing fewer outages and faster restoration for customers on average, which reinforces that when we invest, it works. I'll move to slide six to provide an update on data center development. We continue to execute on opportunities that support both customer affordability and long-term growth. We have 2.4 gigawatts of executed agreements supported by contracts that are designed to protect existing customers while driving significant growth. The 1.4 gigawatt Oracle agreement is approved and included in our plan and construction is underway. The one gigawatt Google agreement is also advancing through the NPSC approval process and represents upside to our current long-term plan. These first two projects demonstrate our ability to successfully attract and serve large customers while structuring agreements in a way that protects existing customers. Importantly, these agreements are expected to provide meaningful affordability benefits for our existing customers and with a constructive outcome in the current rate case could support a potential rate case stay out until at least 2028. Beyond Oracle and Google, our pipeline remains strong and continues to advance. We currently see five to six gigawatts of additional opportunities, including roughly two gigawatts in advanced discussions with a target of reaching an additional agreement by the end of 2026. We also have another three to four gigawatts of pipeline opportunities that could develop over time. The large load tariff we filed earlier this year is moving through the approval process which is another important step in ensuring future large load growth is managed in a disciplined way. It includes appropriate protections for existing customers that are similar to those in the Oracle and Google contracts. These opportunities provide a clear path for additional growth while reinforcing our focus on affordability, reliability, and customer protection. As the pipeline advances, we see potential upside to our long-term operating EPS growth target and additional affordability benefits for our existing customers. Let me move to slide seven to describe the benefits that data centers provide and discuss our continued commitment to customer affordability. These data center projects bring large steady load onto the system. These very large load customers absorb a significant portion of the fixed costs, which creates meaningful affordability benefits for existing customers. Once fully ramped, Oracle is expected to provide about $300 million of annual benefits for existing customers, while the Google Data Center is expected to generate roughly $1.7 billion of benefits over the life of the contract. These benefits strengthen our overall affordability position and build on our strong continuous improvement mindset we've developed across the company. Continuous improvement remains an important part of how we operate every day. It supports our ability to deliver better reliability, improve efficiency, and manage customer bills as we continue investing in the system. We continue to execute our investment plan with discipline while staying highly focused on affordability for our customers. As the chart shows, our average annual bill increases over the past five years have remained well below both the national average and the Great Lakes region. Technology continues to be one of the most important tools we have to create customer value. We're using advanced analytics to drive efficiencies across the business, including lowering costs, improving maintenance planning, and strengthening storm response. Delivering customer-focused efficiency through technology remains a priority and is helping us offset cost pressures while improving service for our customers. At the same time, our generation transition continues to support affordability. Moving from coal to natural gas and renewables is helping reduce O&M costs over time. In addition, tax credits available under the Inflation Reduction Act are helping make clean energy investments more affordable for customers while supporting our broader clean energy transition. This focus and commitment to customer affordability continues to be reflected in our customer bills. The typical Michigan residential electric bill represents less than 2% of the median household income, and our residential bills are 17% below the national average. We also continue to support our most vulnerable customers through expanded energy assistance, including millions of dollars of direct assistance and continued support of nonprofit organizations across Michigan. Overall, we remain well positioned to continue our track record of managing affordability while making the investments needed to improve reliability, support growth, and serve our customers over the long term. Let's turn to the next slide and walk through our regulatory strategy and the benefits we are delivering to our customers. Our electric rate case supports targeted investments in reliability and grid modernization while maintaining a strong focus on affordability. The filing is primarily driven by our distribution plan aligned with the 2024 audit and focused on reducing outage frequency by 30% and cutting duration in half by 2029. We're requesting nearly $800 million of capital to be included in the IRM by 2030, supporting our most consistent infrastructure spend and reducing the need for more frequent rate gates. As I said earlier, our data center agreements are structured to enhance affordability and protect customers. As these projects ramp, they create an opportunity to extend timing before filing our next rate case while continuing to invest in reliability. Should the Oracle load ramp faster than we have included in the electric rate case, we have proposed a regulatory mechanism to capture any excess margin and flow that benefit back to customers. Provided this regulatory mechanism is approved and filed, we would not expect to file another electric rate case until at least 2028. Looking ahead, our IRP is expected to be filed in the third quarter this year. It will provide clear visibility into how we plan to serve growing demand, including data centers, in a transparent and cost-effective manner. Altogether, we are managing a disciplined approach to growth, combining regulatory strategy, structured large load agreements, and long-term planning to deliver reliability, affordability, and visibility for our customers. So to wrap up, we continue to execute on our plan, making critical infrastructure investments staying focused on affordability for our customers, delivering high quality service to the communities we serve, and driving continued strong financial performance for our investors. With that, I'll hand it over to Dave. Dave, over to you.