Morningstar | DTE Posts Strong 1Q Results and Accelerates Coal Plant Retirements
We are reaffirming our $112 fair value estimate after DTE Energy reported strong first-quarter operating earnings, reiterated 2019 earnings guidance, expanded its voluntary renewable energy program, and accelerated its plan to exit coal-fired generation. DTE also reaffirmed its 5%-7% annual EPS growth target through 2023, and our earnings estimates remain in line with management’s target.Operating earnings were $2.05 per share for the recently ended quarter versus $1.91 in the same period last year. DTE’s electric and gas utilities had strong performance, contributing $0.25 per share more than last year. The strong results were driven by 2018 rate cases and colder weather versus last year.
As expected, DTE’s unregulated businesses contributed $0.16 per share less than the same period last year. The transition of the Nexus pipeline from AFUDC earnings while under construction to commercial operation and the REF tax equity transaction in late 2018 were included in our estimate and guidance. Strong energy trading and the timing of income taxes, partially offset by higher average shares outstanding, were a $0.05 positive variance versus last year.
DTE Electric submitted its integrated resource plan to the Michigan Public Service Commission on March 29 detailing its future generation sources. The IRP includes acceleration of previously announced coal plant retirements and $2 billion of renewable energy investment over the next five years.
DTE recently announced partnerships with Ford, General Motors, and the University of Michigan for voluntary renewable energy programs and is expanding the program from 600 megawatts to 1,400 MW by 2030. It would not surprise us if it goes even higher. DTE announced it would eliminate all electricity generation from coal by 2040.
DTE Energy is a holding company. The company is engaged in the generation, purchase, distribution and sale of electricity to customers in southeastern Michigan through its DTE Electric Company subsidiary, as well as in the purchase, storage, transportation, distribution and sale of natural gas throughout Michigan and the sale of storage and transportation capacity through its DTE Gas Company subsidiary. The company's non-utility operations are: gas storage and pipelines, which consists of natural gas pipeline, gathering, transportation, and storage businesses; power and industrial projects; and energy trading, which consists of energy marketing and trading operations.
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