Good day everyone. And welcome to the DTE Energy Third Quarter Earnings Call. Today's conference is being recorded. For opening remarks, I'll turn the call over to Barbara Tuckfield. Barbara, please go ahead.

Thank you, Debby, and good morning, everyone. Before we get started, I would like to remind everyone 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 net income to operating earnings provided in the appendix of today's presentation. With us this morning is Peter Oleksiak, Senior Vice President and CFO. We also have members of the management team to call on during the Q&A. And now, I'll turn it over to Peter.

Thanks, Barbara, and good morning to everyone and thank you for joining us today. First note DTE earnings call would be complete without an update on my Detroit Tigers and Lions football here today I am going to start with that. I'm disappointed to say that for the second straight year, the Tigers did not make the post season and traded away most of the veteran players. And actually Justin Verlander is pitching tonight in the World Series. So I wish him luck. The good news is that for the Tigers, we do get the number one pick for 2018 season, so every ending has a new beginning. And as always, I look forward to a greater season next year. Now, onto to the update on DTE. Like last year, we’re keeping today's call focused on the quarter, and our attention on the current year. The longer term strategy and growth related questions will be deferred to the EEI Conference, which is only a couple of weeks away. And at EEI, Gerry Anderson will providing our detailed business update. This update will include our 2018 early outlook, our long term growth plans as well as details about each of our business segments. Now, I would like to start on slide three. Given our continued strong year-to-date results, we’re increasing the guidance mid-point by $0.12 to a range of $5.38 to $5.69 from a range of $5.26 to $5.57. The guidance increase is driven by our gas storage and pipeline and power industrial segments, which I'll discuss in more details in a few minutes. Before I get into financials, I want to shift to another area where we are seeing great results, which is residential customer satisfaction. I'm particularly pleased to announce that we ranked second in the residential customer satisfaction…

Thank you, sir. [Operator Instructions] We will go first today to Michael Weinstein with Credit Suisse.

Maybe you could talk a little bit more about how far you are on track to P&I replacement of one-third of the expected $40 million for new projects that you have targeted for 2021?

Yes, we have announced three projects this year. And this quarter, we announced the details that we’ve been talking about this Industrial Energy services project with the Ford complex. So this is real visible sign that we are right now one third of the way there in terms of backfill. We are targeting at this point $40 million to backfill for 2020, which is a good portion, a portion of the REF of earnings, REF on short duration contracts. So we have asked Power and Industrial segment to backfill a portion of that with long term contracted earnings. And we have also have a great pipeline of additional opportunities that we’re looking at. And at EEI we’re actually going to go into little more detail in the nature of these types of opportunities.

And for NEXUS are we, at this point, when do you expect to start construction and is there any remaining FERC rate issues than need to be dealt with?

I have Dave Slater here, the President of that business unit. I'll have them answer question.

Michael, we actually commence construction on the 16th of October, so we’re underway. And it's primarily right away work that we’re commencing. And we have a plan to do a number of HDDs working on the compressor stations, and that will play out over the course of the winter with mainline pipeline construction commencing in the spring.

We will go next to Craig Gordon with Evercore ISI.

I'll table the questions on Power and Industrial’s future outlook for EEI, since you requested that. So when we look at the quarter, the underlying growth trends that you’re seeing in terms of economic outlook at DTE Electric, I know the weather has been pretty big swing in earnings over the last few quarters. We’re seeing really strong economic activity across the board here. My Chief Economist this morning just pointed out how strong the data looks, both in the U.S. and globally. Are you seeing, from the auto industry or any of the other big industrial segments in your service territory, signs of accelerating growth and how would that impact your outlook?

We are seeing for us the best indication of the underlying economic growth as we take a look at customer accounts within the region. So we are seeing a steady increase. We have seen a steady increase by last five or six years of about 0.5%. And I would say, overall, the Michigan economy has been diversifying over the years, and I think it's a very solid and we continue to see solid performance. And for the automotives, the automotives, right now, they are at a pretty high level of 18 million units, now they are talking about 16 million units, which still is a good level for them to make some profitability. I’d say, I’d put it more characterized it as solid economic from Michigan.

So you’re not seeing any change to the upside?

We’re still projecting relatively flat loads, probably underlying growth around 1%, but we continue to see energy efficiency happening and we have a really robust energy efficiency program that’s paying dividends for us, but it's relatively flat that we're planning for on a financial basis.

We’ll go next to Julien Dumoulin-Smith with Bank of America Merrill Lynch.

So, a quick question on the P&I side real quickly. Does the additional projects, is it shifted all the roll off and the timing of those credits at all by any meaningful amount? Or is that still the expectation that you laid out before?

The expectation is -- there’ll be a roll up in 2020 and then 2022. These projects, this has been a great business line for us, as you know, a lot of earnings, a lot of cash. So these additional projects will, actually more than anything give us additional cash, we have a significant investment program ahead of us. But we are targeting, right now, and you will hear at EEI, we’re really targeting and end state non-REF, post REF for each of the business lines and we’ll give an update at EEI.

And then you can you talk a little bit about the change in the non-utility CapEx? Obviously, there is some moves in NEXUS, et cetera. But anything else there just to make sure we're not missing anything.

No, it's really NEXUS, primarily NEXUS related.

And then turning back to the utility real quickly, some of your peers are talking about green tariffs and offering those as another growth avenue at the electric utility side in Michigan. Any opportunity there on your side that you guys are looking at?

You have a green tariff and obviously we’ll continue to work, that’s definitely an area of focus for us in our commission and our customer, but we do have a program similar to that.

We’ll go next to Shahriar Pourreza with Guggenheim Partners.

Let me just, I know you're going to discuss this a little bit more at EEI. But it sounds like from your prepared comments, you’ve done a very good job of filling any gaps as the earnings stepped down from rest. And it doesn’t appear or that there is a concern that the fact that you're adding additional incremental sites that you're just essentially -- the earnings cliff is growing. So is there a concern there or do you talk about EEI, how you’re going to account for that? Is that tenure of the contract?

That is a good question. The REF units do provide over and above what we originally had, but it's really cash, at the end of the day for us that really going to help us the near term. But we are targeting right now post REF, basically planned, I guess, 5% to 7% growth. But I wouldn’t think about that this is additional earnings, but actually it’s good news, good additional cash. We’re going to continue to optimize this business unit, actually probably over the next year or so to continue to deliver value and cash.

Okay, great. That’s helpful. And I guess we’ll get more color right now on EEI. And then just on NEXUS, do you plan on providing any update as far as any updates to affirm commitments and to connection agreements at EEI?

At EEI, we definitely will provide a more thorough update around NEXUS, how we’re seeing about that. We’ll also probably give you a sense around where we are in terms of looking at the potential opportunities out there in terms of contracts and new contracts.

We’ll go next to Paul Ridzon with KeyBanc.

You mentioned filing a rate case, but was that the end of this year?

At the end of this year for our gas utility, that is the plan.

Just to clarify, I think with Julian's question, these new sites at REF don’t change the timing of the wind-down but just are more cash producing.

Yes, that is the way to think about it.

And then just, NEXUS has slipped from late '17 to 3Q '18. Can you kind of -- is it still negligible impact on earnings power in '18?

Yes, the way to think about it is, is that and we do get the AFUDC accounting, we have talked about that. So it is pretty minor for '18 impact.

We’ll go next to Jonathan Arnold with Deutsche Bank.

Can I just ask, so on the guidance increase of this year, on the P&I segment. Is that old REF or is there anything else going on behind the scenes?

It is all REF and we’ve had two guidance changes. The first one was related to REF as well, which was really more volume and capacity really good planned performance at existing sites. And this is related to new incremental units that we have.

So the rest of P&I is just unchanged, or has that actually -- could not have shrunk and REF is growing more? Or what's the dynamics between the two?

The way to think about this, from a normalized basis, is to go back to your original guidance for that segment, that’s a best way at this point…

And then all of the doubt is REF?

Yes.

Pretty much, okay. And then just one question, is there any -- has there been any talk of these tax credits, potentially getting extended, given the administrations focus on call and doing things that might not have been done in the past?

We do not anticipate that at this point in time.

And then just more general, I know you’re going to talk more about the strategy further out. But I just want to be clear that what you are announcing today, this Ford deal is the large CHP deal that you’ve been talking about really since the beginning of the year. And then…

That is correct, Jonathan. It's really going to giving you the details of this exciting new projects that we’re…

And the other two of the Landfill Gas transactions that you announced I think two quarters ago now?

That is correct. And we’ll give more update around the nature of these new opportunities and how we’re looking for at the segment.

I just had a sense that you view, earlier in the year, you would have been anticipating having more of this to talk to announce by now. So I'm just curious, how if you can comment on this momentum currently, and for in this gas as opposed to maybe the plan?

We actually internally, we do track that we are on target right now with the backfill. I think that we have a few years for the backfill to occur. This segment overall is 70 projects. So we knew this is going to be a handful of projects replacing the portion of REF that we’re access P&I L segment to replace. So on a pro rata basis, actually they are doing really good right now with the projects that we executed as well as those that are in the pipeline.

So 70, the universal things you're looking at?

The 70 that number is actually the current number of projects that we have, but I gave that just to give you a prospective that we have a lot of projects. So the replacing of REF will not happen with maybe one or two, it will be a handful by half of dozen on projects will replace the amount of REF that we’ve asked these business units to replace.

And I think the last time you talked on this. The idea was it would be pretty more skewed towards the smaller Landfill Gas deals and additional forward type deals. Is that still the thinking?

All these opportunities that we kind of [indiscernible], those are the two areas right now that we're looking at. It’s hard to say which ones will come from one segment or the other at the end of the day, but both of them. And this is one area in particular that we’ll talk about a little more detail at EEI to give you the sense of the nature of these types of opportunities.

We’ll go next to Charles Fishman with Morningstar.

Peter, the Ford project, you have an ongoing relationship with Ford. Is this just a one off or this -- should we anticipate that may be Gerry talks about what's downstream with Ford additional CHP projects?

This is really -- they are going through like allow the automotives, and then Ford particular has gone through how do they set themselves up for the future. So they are redesigning and then upgrading their campus, this research engineering center was one in particular. And they wanted to have renewable on green power there and they partnered with us. So it is a special one type of project, but we do have a great relationship with Ford, as you mentioned.

You have assembly plans, but you provide a similar service to or not, I don’t recall?

Yes, onsite energy, we provide the onsite power chilled water utility type of services at the assembly plans. But this one would be in a newly constructed on their campus, really and their engineering center.

We’ll go next to Paul Patterson with Glenrock Associates.

So to go with REF thing, but I'm not completely clear. I just think you guys are doing better in that business, et cetera. But you also mentioned the impact of -- what sound like was partners. And I was just wondering if you could describe a little bit more in detail. This was missing in terms of what that impact was, or what -- if you could just clarify that again.

Yes, definitely we’ll clarify it. These projects generate tax credit, that’s really where the value of these tax credits. Those tax credits are needed for us and we can utilize that in the future for tax cash out of it. When we look at our cash position right now in terms of our taxes, it makes sense for us for some of these projects to enter into partnerships where we essentially sell a pro rata piece of that partnership and the credits. That’s really, for us, is the timing of this and we are in the process now of looking for some partners for these units. So in the meantime, we’re enjoying some really good earnings around these projects. But we will be entering some partnerships. So it’s really an earnings full cash trade. So you’ll see this in this segment probably over the next say year or two if there’s additional relocations we may do, you may see a temporary bump in earnings related to tax credits. But as we maximize cash and value down a bit on those up.

So this is a temporary benefit because of the increased REF tax credits, but that will be decreasing, I guess, in the next few years as you’re monetizing it with these partners. Is that the way to think about it?

Right, as we determine out the cash now, and we have a significant investment portfolio ahead of us, so this is definitely is the cash is needed now to help fund that.

And what is the -- how much we think about that REF earnings projection going. As we go forward in this, how should we think about that earnings associated with REF? Could you quantify that a little bit?

The way to think about this segment, overall, as you look back at the original guidance of segment, which was roughly about $95 million. So once we get through a lot of this, the partnership monetization in getting the cash out will get back to a normalized REF. These units are going to be throwing up addition cash and some remains for us over the next few years. But you can think about it by looking back at the original guidance, that’s a best way to do it.

And then just in terms of the Ford deal, how much of that that you’re going to be -- how much CapEx is associated with that?

We haven’t disclosed that amount at this point in time. But once again, it is a great investment for us and part of that overall backfill strategy for our REF units.

We’ll go next to Andy Levi with Avon Capital Advisors.

Actually, all my questions are asked. Just one follow-up just on the Ford announcement. So that’s a one off, there’s no extension opportunities there on that one particular project.

It’s a significant onsite projects for us with the new engineering. We have additional opportunities with similar type of financial projects with other type of customers. But this one really is a standalone type of project, and once again we’re very excited to be working with Ford on this one.

And then at EEI, will we get numbers around that project just to figure out what the opportunity is longer term on other similar projects? Or is that all just be part of the overall guidance that you gave?

We will give a description of this area a little bit more and the nature of potential opportunities, additional opportunities in this area that we’ll provide that at EEI.

And we’ll go next to Kevin Fallon with Citadel.

Just a question on the monetizing the REF credits going forward. Do you have like a deferred balance right now that you would monetize, or is it just basically selling their earnings stream to somebody else going forward?

It's really selling at the earnings stream. We do, right now, do have deferred balance on our balance sheet and that’s reasonable on why as we periodically we take a look at this and see what's the cash value to us in the future and tax benefits versus monetizing and getting into a partnership.

And how many REF projects you currently have?

Currently, right now, we have 11 projects.

And the original guidance, if we go back to early look from EEI last year, I think the P&I segment was $90 million to $100 million, which I think is the base you're pointing back to. What's the REF percentage or REF amount in there?

We really don’t give that type of disclosure. But I can tell you that this segment overall supported by 70 projects. This segment for last 20 years it is a series of a lot of different projects they basically come and go. Currently, at the moment, a good majority of the earnings right now is related to the REF projects, and that’s one of the reasons why we have a backfill strategy. So we’ve asked -- we get these real short-term duration earnings, a portion of that we’re going to have with P&I segment to at the backfill. But my short answer is the majority of the earnings at this point in time is that REF and we’re very excited in terms of the new projects and really terming out those short-term earnings in terms of long-term contracted earnings.

So there were seven projects in the original guidance from EEI last year that’s what you said, and you’re up to 11 now?

Overall, we have 11 currently.

But in the original guidance?

The original guidance, we did have the 11 and this is either really related. So we had two incremental essentially projects come online. One of them was relocation and we potentially, may continue to do that over the near-term. The other one was an acquisition. So they both were in, what this is related to the timing of getting into these partnerships. So we're recognizing now and benefiting from the tax credit earnings. And when we get into partnerships, we’ll be benefiting from the near-term cash flow stream.

And just last thing, the 5 to 7 earnings growth is off the original guidance, and that’s what we should be using as a base to project through the out years?

Yes, I would say for now, that would be the best approach.

And what is the original guidance?

It was a midpoint of 5.31?

A midpoint of 5.31, that’s should we grow 5% to 7%...

And we just -- I know we have -- I don’t think we have it in our current presentation. But if you go back to the original guidance that’s the project, it really normalizes for weather at both of our utilities as well as for the REF. We’ll be giving you an update here at EEI in terms of our growth rate projection and how to think about that going forward. But for now, the best way to think about is our original guidance.

Ladies and gentleman, that concludes our question and answer session for today. Peter, I’ll turn it back to you for closing remarks.

Thank you everybody for joining us this morning. And I definitely look forward to seeing a number of you here at EEI in couple of weeks. And once again, I think we have a really good message to tell and we’ll give you the updates, as I mentioned earlier. Until then, have a good rest of the day.

Ladies and gentlemen, thank you for your participation. This concludes today's conference. You may now disconnect.