Good day ladies and gentlemen, and welcome to the DTE Energy 2015 Year Ending Earnings Call. Today's conference is being recorded. And at this time, I would like to turn the conference over to Anastasia Minor. Please go ahead, Ms. Minor.

Thank you, Shavan [ph], and good morning everyone. Welcome to our 2015 year end earnings call. Before we get started, I'd like to remind you to read the Safe Harbor statement on Page 2 of the presentation, including the reference to forward-looking statements. Our presentation also includes reference to operating earnings, which is the non-GAAP financial measure. Please refer to the reconciliation of GAAP net income to operating earnings provided in the appendix of today's presentation. And starting last quarter, we are now including additional sales data in the appendix of our presentation, which has historically been provided in a separate supplemental document. With us this morning are Gerry Anderson, our Chairman and CEO; Peter Oleksiak, our Senior Vice President and CFO; and Jerry Norcia, President and COO of DTE Electric and Gas Storage and Pipelines. We also have members of our management team with us to call on during the Q&A session. And now I would like to turn it over to Gerry to start our call this morning.

Well, thanks Anastasia. Good morning everybody. Thanks for joining us. I'm going to use my time this morning to recap our performance in 2015 and to preview 2016, but in a nutshell, I am glad to be in a position to say that we had a very successful year in 2015, not only financially, but on many other fronts. And I feel we're well-positioned for a similarly strong year in 2016, and we are off to a good start on that one month into things. So moving on to Slide 4, I'm going to start by recapping our accomplishments in 2015. Then I'll give you a quick energy policy update, and then move on to long-term growth. Then I'll turn things over to Peter Oleksiak to give you a bit more detail on our financials, and then we'll wrap up. So I'm going to provide the 2015 recap within the context of our system of priorities that's laid out on Slide 5. And those of you who followed us for a number of years know that we consistently work the system of priorities for the last half-dozen years. And for those of you less familiar, I'll just give you a quick grounding and then I'll move on to the summary. But system really starts on Slide 5, with employees, and a belief that it's hard to be an excellent or great company when you've got employees who have mediocre energy. So we put a lot of time and focus on engagement in the energy and focus of our employees. Believing that if we get that right, that we can focus those employees on top-decile customer satisfaction, doing a great job for our customers, on continuous improvement that we focus on intensely, and on growing the company. And if we do…

Thanks, Gerry, and good morning everyone. As most of you know, I like to take advantage of having the microphone on this earnings call giving update on my Detroit Tigers. Now with the Super Bowl over, all the focus is going to be on the upcoming baseball season. Speed training will be starting soon. I have high hopes for my hometown team. If the Tigers were ranked by number one by MLD.com for the improved team after all the off season moves; won't be making any predictions this year. Let's just say I am hoping for a playoff run. Enough about the Tigers, like to give you financial update and review of the 2015 earnings before we get to your questions, starting on Slide 24. And as Gerry mentioned, the DTE Energy operating earnings came in strong at $4.82 per share. For DTE, a detailed breakdown of the EPS by segments including a reconciliation to GAAP reported earnings, please refer to Slide 43 of the appendix. Slide 24 shows year-over-year operating earnings by segment; first going to focus on the middle column which shows 2015 results. Let me start first with the total earnings for the growth segments. Earnings for our growth segments were 848 million or $4.73 per share. This is an increase of 52 million or $0.25 per share over 2014. Our largest subsidiary DTE Electric earned 562 million. It was up 34 million driven by implementation of new rates and return of a more normal weather in 2015. I will be going over the DTE Electrics earning results in more detail on the next slide, but let me continue on this page. DTE Gas 2015 earnings of 132 million were 8 million below 2014 earnings as we returned to a more normal weather in 2015 after one…

Thank you, Mr. Oleksiak. [Operator Instructions] And we will now take our first question from Dan Eggers of Credit Suisse.

Hi, good morning guys. Gerry, I think a lot of the legislation discussion has been in part addressing the energy policy but in part kind of trying to get ahead of the CPP a little bit. With the legislation having taken a lot longer than anybody would have expected, do you see this as a reason or a cause for legislation to slow down again or a reevaluation of kind of some of these priorities would seem to be focused on addressing CPP issues?

I don't think Mike Nofs will see any reason to slow down. I think he understands that we've got a lot to take care of on the energy front over the next 10 to 15 years, and that things come and go in terms of regulation, legislation, and policy. As I said, I'm not here to speak for consumers, but they've got a bunch of plans retiring in the near-term. We do also. We've been pretty visible with the older plants that are going to be coming offline. So both companies and the state will need to backfill those with investments, and this legislation is -- really recognizes that we're headed into that period. So I -- there may be people who really don't like the Clean Power plan, who say, slow down, stop, but Mike Nofs won't be one of them, nor will we.

Okay. And I guess just on the NEXUS front, with two-thirds contracted at this point in time, what is your feeling for when you guys might fill in more of that to get to a fully comfortable position on the pipe? And can you just remind us how much of that is maybe percentage-wise covered by utilities rather than producers?

About half of that is utilities, and half is producers, and so I'd say a couple of things. And then I'll have Jerry Norcia, who's here, and President of the Group to add his thoughts to mine. But I mentioned during my comments that we have very active discussions with other parties interested in the pipe. So we're hopeful that those will play out this year. The other thing I'd say is, we and Spectra, both continue to evaluate this pipe and the fundamentals of it are just so strong. When you look at the fact that it's arguably runs into the very best dry gas region in North America, and then connects that to the largest storage of -- market storage hub in the Midwest-Northeast, and supplies into Ontario, Michigan, and the Chicago markets via the pipeline networks, that, we really are strong believers in the fundaments. To get back to the original question, we would think that we'll bring additional demand on this year from some of the discussions we have underway. And then that 1.4 Bcf of interconnection across Northern Ohio, we think will add demand over time beyond that. Jerry, any thoughts you'd add in addition to this?

Gerry, you said it extremely well. So, again, I just, really to summarize. A pipeline with great market access to Ontario, Michigan, and really supported by LDCs. And I think that really distinguishes this pipe from other pipes. I mean, I think you're seeing that other pipes are somewhat struggling with routing issues out of this basin, as well as market issues. And I think the fact that we've got a strong LDC base distinguished this pipe when we first proposed it, and now it's even a greater distinguishing factor. So we're still very supportive moving forward. Everything is on schedule from a FERC perspective. The feedback we're getting from FERC is that we've submitted a high quality product. We've got a great partner in Spectra, who is very experienced in executing these type of projects. So we're feeling really good about where we're at right now with our market, as well as our supply.

Got it, very good. Thank you, guys.

And we will take our next question now from Neel Mitra from Tudor, Pickering.

Hi, good morning.

Good morning, Neel.

I had a follow-up question on NEXUS. It seems like on the demand side it's really strong. How are you -- generally, how are you viewing the discussions with the producers right now on the upstream side? Obviously a lot of guys are feeling pain. Is there any discussion on delaying on the pipe or do you feel strongly from that perspective?

You know, that's a really good question. And sometimes when you're in some of these developments, and there's stress in the sector, you have people approaching you, trying to restructure or retime things. And we are just not getting that. And I think it's because of the quality of the assets in the region. So we continue to get strong support, and no waiver from the participants in the projects, either producer, and obviously not utility. That answer the question?

Yes, that's great. Thank you. And then on the power and industrial segment, in your analyst day you brought up the steel customer. Could you just talk about the general appetite from industrial customers, given that there's some concern over an industrial recession coming up, and specifically how that relates to you, and in your conversations?

So the projects in that industrial portfolio are contracted, but they do roll over. So I think our average duration is seven years or so. But that means every seven years some of your assets, on average, are going to roll. But in between they don't have volume or commodity price sensitivity. So we're not worried about the balance of the portfolio. This one was a coke battery, it rolled at a time when pricing was down, and so we had to roll with the market when we re-contracted. And so that took some earnings out of that segment. But we had growth elsewhere, and we're able to -- the segment is not growing this year, but we're able to hold performance. So those are the dynamics. We don't have any other important contracts that have exposure to industrial weakness here.

Okay, great. Thank you very much.

Welcome.

And our next question is from Julien Dumoulin-Smith from UBS. Thank you.

Hi, Julien.

Hi, good morning.

Good morning.

So, perhaps to follow-up on the legislative question, I just wanted to make sure I am hearing you right. Are you feeling comfortable about the outlook for earnings growth sort of even if the legislation is delayed beyond this year or if it just simply doesn't happen? I just wanted to get a sense of the puts and takes in your budget and your comfort within it. Obviously you work with a certain amount of, quote, whitespace. How are you feeling about it?

I guess I would say, I don't think implementation of the legislation, if you were to try to draw a direct link between that an earnings, there really isn't one. The legislation was targeted at two things, one is, if we're going to remake our generation infrastructure we should have a good planning process for doing that. So the legislation focuses on an IRP process. And having a process where variety parties can get their oar in the water, to talk about what the mix of generation should be. And I still think we need to do that. The second what was really focused on, fairness, which was around retail open access. If we're going to be investing in generation, everybody should participate economically in those investments. So that's a fairness question. But if you try to move from those two things, a good planning process and fairness, to our earnings, there really isn't a link between the two. We think the legislation is important to have a really well-defined and fair process for moving forward. But we're going to move on with the distribution investments, and the power plant retirements, and so forth either way. We really have to. Some of these power plants are just old. I'll give you an example. We got one I can see from where we're doing the call here that just had a major component failure. That unit is not going to run. And we think it's highly likely. And the reason is it's just old enough and marginal enough that we've got to move on. And so we've got numerous assets in that sort of position, where we really are evaluating just how much longer it makes sense to invest versus move on. And some of the plants that are from the '50s and '60s, it's time to move on. So what I said earlier, that I don't see the early years of the clear power plant, maybe the first half of it being affected much, that's why. Now when you move out into the later years, closer to 2027, 2030, then you start to get into some of our larger, somewhat newer assets. They could be affected. But I'll tell you, there's a lot to happen between now and then. So there's continued action on NOx, and mercury, and other fronts, water, that will be thrown into the mix in terms of how we evaluate those plants and their life. So I think it's really early to talk too much about what this stay might mean for our -- both our earnings, and really for the Clean Power plan, because it's very possible that they'll send it down to have a couple of specific issues reconsidered or reconfigured. The EPA will address those, and then things move on. Or it could be more fundamental than that. And we really don't know right now. So hopefully I gave you some help in the way we're thinking about it.

And just to follow-up on the whitespace question, I'd be curious, in the slide deck, it seems as if you haven't included the whitespace CapEx again. Is there anything to read between the lines on that? How are you feeling about, particularly the midstream side of the equation, when it comes to the ability to execute to the upside here? Is there something we should be reading from the slides here?

You're talking specifically GSP or were you talking in the utilities?

Well, I was thinking -- well, I mean, you tell me on the white space, either way with the Michigan legislation and/or what's going on in midstream, if that has kind of come in on you. But I suppose the question was more specific to the midstream side. And I'm thinking more on the gathering potentially, but more broadly, either ability still to execute on the upside case.

[Technical difficulty] I'll address both. So I think we previously have talked, and I mentioned earlier that it, particularly in the distribution side of the electric utility, there's a lot of demand for investment there. So we've got the 6.5 billion in our base plan. I said that if you look at the fundamentals of the aging of that infrastructure, and the reliability needs, the constraining factor is not how much demand there is for investment. There's a lot of investment needed. So we're really metering that tide to customer affordability. And that has not changed since we talked about it at the analyst day in the fall, it's very much the same picture. On the mid stream side nothing has changed in terms of -- if you look out over the five-year period, what we think is going to happen in the Marcellus and Utica regions, and the amount of activity there. I mentioned, the gas sector is very, very different from the power sector. Put gas wells in the ground, and a year later the average decline is 15%. So you've just got to continually drill in order to meet the growing demand for natural gas. And in doing that, I think one of the message we've seen out of the stress in the E&P sector, is that it needs to rationalize, and people are going to rationalize it to the very best drilling locations. And I'm not blowing smoke when I say that the Susquehanna County, and the Marcellus, and the area of the Utica that NEXUS serves are the very best dry gas geology in the country. And so through simple common sense you come back to say and that these are going to be very high activity areas over the next five years. And so our continued sense that NEXUS is a good project, and that there'll be more development and expansion of Millennium are tied to those factors. Now in the very near-term, this year, does the E&P sector need to work some things out, obviously. We're watching that closely, we're managing it. But I think long-term fundamentals you get down the road the number of years, this will be in the rearview mirror.

All right, great. Well, thank you very much.

Thank you. Appreciate it.

And our next question comes from Greg Gordon from Evercore ISI.

Hi, Greg.

Thanks. Good morning guys.

Good morning.

So, it looks to me like you guys just tried to sort of evolve your slide deck a little bit, but one of the other -- and I apologize if you've answered this already -- Slide 14, you no longer have the upside case of -- for potential spend in the utilities. I'm not assuming that you're signaling that that's off the table? You just kind of modified your slide a little bit? Is that fair?

Yes, that -- and now I guess the last question is this, there was no change in plan or need. We've just got the base case shown here. But I think it was in the analyst day, we showed that if you talk about what's in our plan, at 6.5, you talk about what we look at as fundamental demand for renewed infrastructure, it's more like 10.5. And how we walk between those two really has to do with demands of customers for reliability versus affordability. And what we've got in the base plan, the 6.5, we think is a good walk between the two. The makes sense or answers the question, I think it gets at where you were asking.

Yes, 100%. Second question, you've always talked about your internal planning is for sort of 7% to 8% overall operating earnings growth. And then after share issuance and contingency, you seek to be in or at the high-end or above your 5% to 6% earnings growth targets. Your share issuance number, now over the next several years, is obviously going to be a lower number because of bonus appreciation. But should we assume that if you were to theoretically update that slide, the operating earnings growth rate would be slightly lower, but the share issuance would be slightly lower and you'd be in the same place -- to get the bonus?

Yes, Peter, you might want to just take the topic of bonus, and the way it impacts us as a company. Because it's a little different from the way it may impact some other companies. I'll let Peter answer that, and see if it gets at your question. If it doesn't we'll pick it up from there.

Hi, Greg.

Thank you.

Let me first -- I'll first start with the bonus. And of course, I was happy to see a five-year plan. Every year we went in guessing what would happen with bonus the following year. So I was actually happy to see that. And we have looked at it and we're going to be maximizing the bonus benefits, great for customers in terms of affordability and for us as a great cash benefit. And we're in an equity-issuance mode. So actually the EPS impact is minimal on a go-forward basis. So we are down from the 800 million, to 200 million to 300 million of equity issuance. So that's how we're thinking about bonus. Also, if you compare us to other companies, we are less than others. We're already in an AMT position, and we have tax credit, some tax planning that puts us there. So our 20%, versus 35% rate gives us a little of a lower-end benefit. And also from a tax planning, we are in a position of tax NOL so the near-term benefit is also pushed out because of that.

That answer it?

Got you. Yes, yes. So if I were to summarize, if you were -- if I go to page 12 of your December business update, you give a bar that says we aspire to grow operating earnings 7% to 8%, and then after share issuance and contingency, we're at 5% to 6%. Theoretically, 7% to 8% is slightly lower, but the share issuance is also lower. And you -- net-net, you're still in that 5% to 6% range. Is that fair?

That's a fair way, and if you look at the remix of the guidance from the early outlook, we did temper down the electric segment a bit because of the rate case. And the ROE, we did temper down a little bit as we refined the impact of the contracts in the power industrial segment. So that was offset by the reduced share issuance to hold us at the mid-point of the early outlook.

And then I think more broadly your take is right, that given our combination of our tax position and equity issuance, when your bonus does affect growth in the utility some because it's effectively zero return cost to capital. But it's very minimal impact on EPS, given the dilution offset we have. So it doesn't turn out for us to be a material factor.

Okay, thanks, guys.

Thank you.

And our next question comes from Jonathan Arnold from Deutsche Bank.

Hi, good morning guys.

Good morning.

Hi, Jonathan.

Gerry, one comment you made was that you see opportunities in the face of market dislocation in the pipeline space. Can you be a little more specific about what kinds of things you might be alluding to? How significant they could potentially be? And how close you are -- we are, you think, to a point where something might actually materialize? And how do you manage the sort of quality bias in the portfolio through something like that?

Couple of comments, so we -- you've been watching the sector and there are obviously company stress. Now companies tend to first hold on and then try to push out assets that they really don't want. They really don't want them. We don't either, generally speaking. We've had some people approach us with assets of interest. I wouldn't say we're close on those. But I think we got to watch across the balance of the year as companies continue to deal with pressures. And I think there will be asset sales that result from that. Our cost to capital is much better positioned than it was year ago to look at those. So, we don't have anything built into our plan right now tied to this. We're simply signaling that the environment is pretty different than it was a year ago. We think that there are going to be assets to change hands and we're open to that if the right one comes along. That said, we're not going to do things that aren't strategic or that we don't feel good about. No sense buying things that really don't have much upside or strategic value to you. So, we are going to wait through it and we will see what comes.

Could you talk a little more about what you would see as being particularly strategically interesting? Is it more pipe? Is it storage? Is it…?

It would be pipe and potentially gathering. But I would let Jerry Norcia to comment on that as president of the union.

Yes, so we have got a handful of conversations underway what we are looking at I would say primarily assets that are tied to gathering and transmission to main lines. I think as we see producers on under a lot of stress, they are looking to monetize assets. And I think as Gerry said, we are being very selective. Some of the first opportunities that we've seen are perhaps not as strategic as we would like. But like I said, we continue with a handful of conversations that we're hopeful would yield some value for us here.

Okay, great. Thank you. Just on one other -- on another topic, we were slightly surprised that you filed your electric case so soon after the last one. We thought you were kind of trying to leave a little bit more time. But any comments about what drove the timing there? Something we should -- some context we could put around it?

Well, I think a couple of things, one it has been a very long time since our prior rate case. So there was a lot that we were addressing in the rate case directly proceeding. And that if you simply look at the pace of capital expenditure last year and projected this year and the forward test year, it's a significant spend that we have underway and we need a rate case to deal with that. So I think historically, we've tried to spread our rate cases out and have been pretty successful in doing that. Our prior case had been four years since the proceeding case. That won't be the case in the future given where things stand. We are investing in both distribution and generation at a healthy enough pace that we're going to need to be in a year, year and half.

I think just to add on that to give you a perspective, the case we just filed is a billion dollar rate based increase in the final order we just received. This gives you the sense of pace of capital spend that we have over and above depreciation.

So that comment you just made every year to 18 months is kind of the new expectation?

Yes, I think it is.

Yes, probably in every calendar year at some point in the year we will be filing.

Okay, great. Thank you, guys.

Thank you.

And out next question is from Mr. Paul Ridzon of KeyBanc.

Good morning.

Good morning, Paul.

Did you talk about the earnings impact of bonus depreciation?

We did. As generally said, that given the share issuance effect the combination of two makes it a very modest impact for us. So, it's not a significant player in our plan. We are -- pulls our share issuance is down fundamentally; does have some impact in utility earnings, but the two heavily offset each other.

Did you -- can you quantify the impact before the dilution offset?

Yes. We did revise down our electric segment a bit. Just to reiterate what Gerry said there was minimal impact. I will say it's relatively small in terms of the earnings growth. But there is a bit of -- the utility growth has taken off just because of the bonus depreciation being used versus equity. But there is an offset corporately on the earnings per share. It's pretty minimal.

That lower utility earnings is all bonus depreciation?

There is bonus depreciation. And for the electric segment, there was a fine tuning of the ROE that came up [technical difficulty].

Okay. Can you -- I was surprised to see gas segment earnings up in the fourth quarter. Can you give a little more finer detail around what drove that?

Which gas segment are you talking? Utility or…

I am sorry. DTE Gas, the LDC.

Yes. The combination of that we knew going into the fourth quarter that some of the weather impact. So we did go in a bit of a lean mode in that fourth quarter so that helped the earnings out and there was also some timing taxes that played up in between years.

But we did not have new rates, is that correct?

That's correct. And the other as I mentioned in my speaker notes 2014 we had a really strong weather year, so we had a reinvestment plan. Lot of it took place in the fourth quarter of 2014. So you are seeing investment that occurred in 2014. And then a lean that offset, went the other way in 2015.

So put differently we started talking about El Nino in July. And we knew it was a distinct possibility. So, we had plans lined up for our gas utility that if it reared its head, we would implement lean late in the fourth quarter, and we did. And it turned out -- we are glad we did. It turned out to be an incredibly warm December. We had the opposite, the flip a year before, coming off that really cold winter we invested ahead. But we invested ahead in 2014 to enable something like we ran into in 2015. And that's kind of the way we do things that we invest in stronger years to give you the flexibility to do the opposite in years when you need to. And you can do that without affecting the quality of your assets as long as you keep that even handed.

Thank you. And then lastly, at gas storage and pipes, as you look at your counterparties or potential counterparties, are there any parties out there that are causing you a little bit of credit concern?

Well, I think if you look at the whole sector, there's quite a few that share prices have come down fundamentally and are sub investment grade. So, we're watching those. But as I said earlier, we don't -- so they are sub investment grade, but we aren't picking up in our counterparties kind of the scramble to rework timing or rework commitments. In fact on one of our pipe positions, we had credit requirements that caused them post collateral and they went ahead and did it because the position is important to them and they want to continue on. So we would be selling that to be watching our counterparties carefully. But we haven't seen any yet that have tilted into the mode where we think there's something near term.

Okay, thank you very much.

Thank you.

Thanks.

And our next question comes from Andrew Weisel of Macquarie Capital.

Hey, good morning everybody.

Good morning, Andrew.

Just one quick one here, as I look at the past few years of EPS growth versus DPS growth, your earnings have been growing by about almost 100 basis points faster. Obviously, that's going to be putting downward pressure on the payout ratio. Any thoughts on potentially increasing the growth rate going forward? Obviously, you are still planning 5% to 6% earnings growth, as you talked about, but in order to catch up the payout ratio, any thoughts on maybe accelerating the dividend growth?

We have been working the payout ratio. So we have a stated payout ratio. And what we've generally done is push it up into the middle of the payout range and it falls back to the front-end. Then we push it back up to the middle. So, that pattern is probably what you can expect in the future. You're right. We have grown earnings a bit faster than we have dividend. So, we'll keep an eye on what you suggested.

Okay. Thank you. That's all I had.

Thank you.

Thanks.

And our final question comes from Paul Patterson of Glenrock Associates.

Good morning.

Good morning.

Good morning, Paul.

Just very quickly, I think you've answered all of my -- most of my questions, but -- so, basically if I'm to understand it, there's -- you see turmoil. You are monitoring it in the E&P and other energy sector or commodity sectors. But you really see no potential or significant potential at least in the near-term of anybody not being able to meet their commitments as a counterparty or as a partner or anything like that, correct?

Right, we don't see any evidence of that. And we have the chance to deal with counterparties across a lot of fronts including our utility. So generally you know when somebody is in that position, they start to dance on commitment and we are just not seeing that.

Okay, great. And then just finally on the legislation, how should we think about the delays and stuff? I mean what are the sticking points, if there are any? Is there any particular issue that seems to be sort of holding it up or causing more of a problem in terms of sort of nailing it down?

Well, I think there was - there were -- predictably there are some parties down the retail open access side who would prefer to thing simply stay the way they are. So, there was some noise about that. I think the key to that and we are putting together I mentioned the coalition. Senator Knox is working on a coalition. I think the key is to get a business coalition that comes together and says actually these are right things to do. It's the right future direction for the state and it's fair. And I think we'll be able to put that business coalition together. So, you can probably imagine who it was saying that retail open access is fine just the way it is. It was some alternative providers and a few people that they were backing. But I do think we will be able to deal with that issue. Beyond that, there are - I would say there is some back and forth on exactly what they IRP process should look like, but I don't think that will be a holdup.

Okay, great. Thanks a lot.

Okay. Thank you.

As there are no further questions in the queue I would like to turn the call back to our speakers and presenters today for any additional or closing remarks. Thank you.

Well, we don't really have any additional information for you. I would just say that we appreciate you being with us this morning and your support, and look forward to any follow-up questions that you have. Thanks very much for joining us. We look forward to a good 2016.