Good day and welcome to the DTE Energy Year End 2017 Earnings Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Barbara Tuckfield. Please go ahead, ma'am.

Thank you, Alicia, 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. 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 of today's presentation. With us are Gerry Anderson, Chairman and CEO; Jerry Norcia, President and COO; and Peter Oleksiak, Senior Vice President and CFO. We also have members of the management team to call on during the Q&A. Now I'll turn the call over to Gerry.

All right. Well thank you, Barb, and good morning everyone. Thanks for joining us. So this morning, I am going to give you a quick recap of our performance in 2017, as well as an updated preview of our performance in 2018, updated versus EEI last year. I will also describe how tax reform impacts DTE and our customers, and then I will turn it over to Peter, who will review our financial highlights and provide a bit more detail on the impact of tax reform on our 2018 guidance, and then finally, Jerry Norcia will provide an update on our long term growth plan, and he will wrap things up before Q&A. So we have a lot to be proud of, as we look back on 2017, not only financially, but on many other fronts as well; and as I think will become clear to you, my confidence is high that we are very well positioned for success in 2018. So I will start with a quick recap of our accomplishments in 2017, beginning on slide 5. I think that those of you who have talked with me over the years, know that I strongly believe that the company's success is ultimately determined by the strength of its culture. Well, the culture at DTE is very healthy, and that bodes well for the future. In 2017, our employee engagement was in the top 4% of Gallup's worldwide database, and that's the highest employee engagement score we have ever achieved in our 20 years of tracking engagement here at the company through Gallup. Early in 2017 we earned our fifth consecutive Gallup Great Workplace Award. We remain the only utility ever to receive it, and we hope we are positioned to receive our sixth consecutive award, early this year. We…

Thanks Gerry. Just looking at the financials, just one comment on my Detroit Tigers. Never really an off season in baseball, even though there is snow on the ground here in Detroit, spring training is in full motion, down in Florida, and there is -- hope springs eternal for the Tigers to beat the odds in 2018. With the financials, I will start on slide 11; as Gerry mentioned, 2017 came in strong, with earnings of $1 billion or $5.59 per share. For reference, our reported earnings were $1.1 billion or $6.32 per share, and you can find the detailed breakdown of the earnings by segment, including a reconciliation to GAAP reported earnings in the appendix. Overall, our growth segment's operating earnings were $981 million or $5.48 per share. Now let me touch on each segments in detail, starting at the top with our Electric utility. DTE Electric operating earnings for the year were $617 million or $5 million lower than 2016, primarily driven by the cooler weather and higher storm expenses offset by the implementation of new rates. For more detailed year-over-year earnings variance for our DTE Electric segment, you can find that in our appendix. DTE Gas operating earnings were $149 million or $11 million higher than 2016. Now this increase was driven primarily by new rate implementation, offset by higher depreciation expenses and property taxes related to capital. For our Gas, Storage and Pipeline business, operating earnings were $160 million or $2 million to $3 million higher than 2016. This increase was due to a full year of Link earnings pipeline and gathering growth. Operating earnings for the Power and Industrial businesses were $124 million or $29 million higher than 2016. This is primarily due to both incremental REF sites and volumes and higher steel related earnings…

Thank you, Peter. Those of you who have listened to our calls in the past, heard us talk about the transformation of our utility assets over time. A transformation that aims to produce excellent customer outcomes, while also achieving substantially higher productivity levels. This will occur over the next 10 years and will be driven by significant investments and infrastructure for our customers. We are defining customer operational productivity goals to guide this transformation, and as Gerry mentioned earlier, we filed a Certificate of Necessity with the MPSC to build an 1,100 megawatt natural Gas fired Power plant. That plant along with renewable investments will backfill the retirement of the three coals in the early 2020s. The nearly $1 billion project is scheduled to break ground in 2019 and will create hundreds of Michigan jobs during construction. Natural Gas fired plans will be an important complement to our renewable Power investments in the decades ahead, as natural Gas offers an affordable, abundant, low carbon, domestic fuel source, and is a reliable 24 by 7 Power source for our Electric customers. We are also planning to construct up to 4,000 megawatts of additional renewable energy capacity over time. The next major renewable investment for both wind farms will occur in 2018 and 2020. In fact, we have just finalized our plans for a $260 million wind investment this year. Our Electric company will also continue to invest heavily in grid hardening and grid automation. As the infrastructure ages, there is an ongoing need to invest in modernizing the system. As we invest in the distribution system, we will be very focused on ensuring affordability for our customers, and we will do this through substantial productivity increases over the next decade. At DTE Gas, we continue to focus on accelerating the replacement…

[Operator Instructions]. We will go first to Julien Dumoulin-Smith of Bank of America Merrill Lynch.

Good morning everyone. It's Josephine here. How are you all?

Good.

Just a few questions here this morning. First on the utilities side. As you were thinking about the upcoming IRP and the five year distribution plan, are there any additional CapEx opportunities that could develop from that? And then secondly on either any regulatory mechanisms that you are looking for, under that plan, to ensure more concurrent recovery of the spend?

So I will start with the distribution plan. We are working very closely with the Public Service Commission staff right now. In fact, we are ramping up a process, where we have been laying out the distribution system needs over the next five years. It has been a really healthy open process, and I think what that is going to do, is essentially lay the logic for the capital expenditures that we have in the plan that we have laid out for you. And then on the IRP front, I think the IRP is consistent with what we have said before, that we are going to retire -- if you look over the next five years or so, retire those two coal plants. We need this Gas plant to backfill those. We will continue to add renewables, both up through 2021, when the state target is 15%, but really beyond that as well. I fully expect that we will continue to add additional renewables, as the price on those continues to go down, and something our customers want us to do. So as far as additional CapEx, to be honest, I think the plan we have laid out is one, it has got a healthy amount of work to renew our utility infrastructure, and that's what we are focused on executing.

This is Peter, Josephine, I think you are also asking about the recovery mechanism. This definitely will lay the potential groundwork for that, and that we are in early discussions with the staff and the commission on that.

Great. And then, on the P&I side, curious if you could just give a little bit more color on the guidance increase? Is that just tax reform, or does that also include volumetric and efficiency improvements?

That is just tax reforms.

Just tax reforms? Okay. Awesome. And then just one last question for GSP; as you are earning AFUDC on Nexus right now, and then the project moves into service, how are you thinking about the return profile on the project? Is there going to be any shift there in the earnings from Nexus?

The AFUDC is earned over time, as you are doing your capital spend. So when you look at it year-over-year, there is not going to be material change between the two. And as we put it in service, it gets them to the negotiated rates we have and it's a healthy targeted cost of capital we have on the project right now. But if anything, it really lays the ground work for additional expansions and investments around that platform.

Awesome. That's all on my end. Thank you very much.

We will go next to Michael Weinstein of Credit Suisse.

Hi, good morning.

Good morning Michael.

Hey, could you just remind us, the extra equity, the $300 million of incremental equity in addition to the $500 million at EEI, what's the method for that? Is it a secondary, or is it ATM?

So we expect that this year, that it will be internal mechanisms. We have capacity for about $300 million in internal mechanisms. That varies year-by-year due to pension contributions and other things. But I think for the foreseeable future, we expect the vast majority would play out that way.

Even the incremental amount?

Yes.

Okay, got you. And on the P&I side, I think you said that it'd be two thirds by the end of this year, towards the goal?

That's what we are expecting.

How long do you think it will be, before you actually finish completely?

Well our forecast is to originate the $45 million by 2022. So I would say we are well in progress, with having two thirds completed this year in. We will have to revisit our target at the end of this year to see if there is any potential upside to that.

Yeah, we have gotten a fast start on it. So we said last year, $45 million incremental needed. But we really think at the end of this year, it will be about $30 million into the $45 million, two years into the five years. And we will just keep evaluating, if the market keeps offering us opportunities at that pace as Jerry said, there could be some upside to what we talked about.

Okay. And maybe you could just remind everybody like what your thoughts are on M&A these day? There is a lot of activity going on in your region, lot of speculation. I am just wondering, what your thoughts are on M&A and the industry as a whole right now, based on -- especially now and with rates starting to rise, and the valuation of the Group as a whole, how do you view things?

I view it pretty much the same way we always have. So we, with a high bar out there, for something that we think would actually be added to what we think is a good strong plan that we have. And so, we look -- but I think, the characteristics you need are something that actually genuinely brings efficiency and cost reduction, and maybe a handful that could do that. But as you know, you can't pay some of these really high premiums for that or all of that is given away and more. So if we ever found one that was great for our customers through efficiency and could be done at low premium, maybe. But just say, we put a high bar out there for it, and don't see it at the forefront of our strategy right now.

Okay. Thank you very much.

Thank you.

We will go next to Shahriar Pourreza of Guggenheim Partners.

Good morning Shahriar.

Good morning guys. How are you doing? So you guys have never been capital constrained? Rates have always sort of been the governor. 3% reduction in rates from tax reform is somewhat material. So does this sort of provide an opportunity for you guys to accelerate some spending opportunities, or asked differently, many utilities seem to be submitting plans, to give back the tax savings through time and seem to be getting some preliminary support from the various commissioners, so why not retain some more of the savings and redeploy into sort of infrastructure needs, since you sort of have the opportunity to do so.

When you say retain some of the savings, what do you mean Shahriar? Just so I am clear on the question you are asking?

Well, sort of subsidized additional opportunities to accelerate some of the infrastructure needs that you have?

I guess our reaction to this is that, we are actually very happy to have this reduction go back to customers, and to have it go back quickly. Because as you said, the thing that we worry most about, as we go through this, having infrastructure renewal cycle, is keeping it affordable. I think the one thing that differentiates, and actually if you look back over time, companies that do well, as you go through a heavy investment cycle versus those that don't, is how they manage it for the customers, whether their customers and regulators remain supportive. And a lot of that is tied to how affordable it remains. And so when we saw this, our reaction was good, it helps us achieve our targets for rates and rate levels. Now I think what in the end that's going to do, is make feasible in a way that works for everybody, the capital plan that we have laid out here over the next five years, which is we have been saying, that's some very heavy infrastructure investments embedded in it. So that's the way we are thinking about it, and when we generally get asked, about upside as a result of this, we are trying to retain some of the tax savings for upside. That's not the way we are thinking about it, we are really thinking that it's a really helpful aid to the plan we have laid out, in terms of keeping things affordable.

Got it. So supportive of the plan, but not anyway to accelerate the plan. Got it. And then just on Nexus, Gerry, appreciate the sensitivity of the discussions. But on sort of the conversations you are having on the demand pull and supply push sides. Can you at least sort of disclose if these opportunities are enough to finally fully subscribe the pipe?

They certainly are. The size of the volumes that we are discussing would fill the pipe.

Oversubscribe the pipe or just fill the pipe?

We will start with fill at first.

Okay, great. Thanks guys.

Thank you.

We will go next to Jonathan Arnold of Deutsche Bank.

Good morning Jonathan.

Good morning guys. You just answered my first question, so moving to some of the P&I tax uplifts. Could you just unpack the mechanics behind that a little bit, given the proportion of the earnings come out of REFs, just how we get -- where the uplift is coming from?

Yes, Jonathan, this is Peter. A portion of our facilities we have there, we essentially have sold down from a partnership perspective. So we have current cash and earnings related to that, that's where the uplift is coming from. Now we mentioned, the $0.10 accretion here will go to $0.13 to essentially, that managed utility, and that REF will be replaced by utility accretion at the back end of the plan.

So it is effectively the incremental coming, because you have to make up once the REF piece steps down?

There is some tax benefit from REF, just because -- with those facilities that we have partners with.

Okay. But that's what's driving the uplift in 2018, it's in the accounting in the partnership?

One way to think about it, by 2022, that is gone, but that will be replaced and then some by utilities.

Right. That is being $0.03 incremental, it's actually more than that.

So just to add there, obviously on the partnership positions, there is some tax savings. We also have other projects that aren't already up, where there's obviously tax benefits as well on current contracts. And then the point Peter is making is, you go through the transition Jerry Norcia was describing, is we had R&D projects and Industrial projects and so forth. And current projects of that type, we have benefit on future projects. I expect it will be a shared benefit, where some of that goes through the customer and some of that comes to us.

Okay, great. Thank you. And then just another tax detail, I think you mentioned that you have assumed, it's $190 million upfront for the reduced tax charge, and then an assumption at $70 million a year on deferred excess flowing back. Can you just unpack that between protected and unprotected, and then what sort of timeframe you have assumed on each?

Maybe I will give you the broad context; there is going to be three different proceedings, one is going to be on the current, which is the $190 million you mentioned. So that'd be proceedings in terms of how do we give that back to customers. So maybe a little bit different for each of our utilities, because of where they are at in terms of the rate case cycles. There will also be a portion on that current, that will catch up from January 1, and then on the deferred, as you are talking about, there is going to be a separate proceeding for the second half of the year. There is -- a good majority of it is to protect the depreciation. Probably two-thirds of it, some of it isn't. But we have history and precedents around all of that being normalized. We expect all of that could play it out in the proceeding in the back half of this year.

And then, in your $70 million, what do you assume about the one-third that's not protected?

It will be normalized. Despite the $70 million, we have $1.4 billion roughly Electric company, $300 million at the Gas, so combined $1.7 billion that we are going to need to give back to customers over time, that includes both protected and unprotected.

A third of which is unprotected and for the time being, you are assuming that that has also normalized. Am I getting that right?

Yes. And there is precedents around that back in 1986, when we did this with the Commission.

Great. Okay. Thanks guys.

Thank you.

We will go next to Paul Ridzon of KeyBanc.

Good morning Paul.

Good morning. I think you just answered my question, but the $0.13 is inclusive of the $0.10 at unreg, is that correct?

Correct.

Okay.

Yeah, that's correct. Should we get an immediate $0.10 and then a slow build to $0.13, as we play through the five years.

Slow build from $0.10 to $0.13?

Correct.

And then, looking forward, when you report first quarter earnings, there is no resolution of tax issues at the commission. How should we think about you know, just -- at the utilities, just strip that out like kind of reserved revenues?

That is correct. It's a regulatory liability, from an accounting perspective. So we will be putting that on the balance sheet to get back to our customers through these various proceedings that I described earlier.

Congratulations on a solid year and rating guidance, and that's all I have. Thanks.

Thank you.

We will go next to Steve Fleishman of Wolfe Research.

Hey Steve.

Hey Gerry, everyone, good morning. So first question, just in clarifying the growth rate guidance. The 5% to 7% off of the 5.78% in 2018, so that number obviously includes trading. So I assume you are kind of giving -- when you are giving that, you are including trading kind of throughout the period. And if you want to exclude that, we just take that out and quote 5% to 7%.

But we do include. So we are growing up the total number, trading for a couple of percent of our total.

Okay. So I guess, it's a small thing, but in theory, it's in fact -- you are probably not assuming that growth and the businesses ex-trading are probably growing a little quicker?

Could be, we might see a little growth in trading. I mean, when do you do the math, it's a few million dollars, so it just doesn't swing much in the growth.

Okay.

So we are looking for them -- what they have done. It's $25 million to $30 million of cash a year that we can use to reduce equity, that's their role.

Okay. And then just to clarify, the bullet in the slide on tax on the improvement in the economics, future non-utility projects may be shared with customers. Is this mainly in the P&I segment?

I think it's both. If you think logically about it, every project has lots of variables that come into determining your return on capitals. But one of them is competitive dynamics, and how many opportunities -- they are competing for the opportunity. So if there is low competition presumably, and you really are the one best suited to serve the need, you might have a higher share. At high competition, the share might be lower, and I think in a lot of cases that we play out in, will see a split at that value. So we try to be conservative and not play a lot of that future tax value on future projects into our projections. But I think we will see it, and will help us in our achievement.

But you are not talking to an impact on kind of current non-utility projects, where you'd share some?

The ones that are already existing and are in hand with negotiated contracts in place, will obviously get the benefit of that.

Okay. And then, can you just talk a little bit to the ALJ in your Electric case, and I think they came out with like a 9/6 ROE, which was not only down a decent amount from where you have been, but also lower than CMS. What is the explanation for that, and how are you feeling about the outcome?

We are in an active case, Steve, so I am probably going to leave most of our commentary for that venue. But that said, if you have watched our ROE proceedings and our rate proceedings over the year, it's not unusual to see positions out there that are lower than what we have or what we have filed for. But when you set back from all of that, I feel we are going to get a constructive set of outcomes in our Electric and Gas cases, and constructive on the ROE front that will support the plan we put out for the year.

Okay. And then last question, just in the Midstream business, just high level, maybe you could talk to trends that you are seeing? Obviously we have a lot more Gas production, we have demand increasing, but bottlenecks starting to slowly get resolved. Just what are you thinking strategically next to the business? Are you worried about pricing and too much supply, or do you still see like a lot of opportunity to grow the business?

Certainly, with our current slate of assets tied to the Marcellus and the Utica, we kind of see a world class resource connected to very proximal markets on the East Coast as well as Midwest, and markets in Midwest, which is what our Nexus pipeline is pointed to, you are going to see a fundamental shift from coal use to natural Gas use over time, as these plants age out, as you can see from our sort of plants for generation. So I see very strong supply growth as well as strong demand growth in the regions that we are going to serve with Nexus. And I think that will bode well for additional bolt-on projects for Nexus, as well as our Link asset, which is already connected to the Nexus. So I see a really strong story in our future. I think also, the evolution of the export market in the natural Gas industry, I think will be an outlet for what continues to be a growing supply of natural Gas in North America. So overall, I feel our Midstream business, with its suite of influence if you will, in the Great Lakes region, is well positioned to capture that growth, both supply and demand.

Steve, just to add on to that; you go there, our position in Pennsylvania, Bluestone and Millennium, we hit a record production level last year, and as we mentioned, we got pulled for more there, down on our Link assets. We just had a producer there double their position with us. And if you come up to Nexus, one of the interesting things there is to, I think in a region where output is growing rapidly, the producers are definitely scaling up operations there. Nexus is, for the next couple of years, likely to be the only path out with any capacity. We are working to make sure that capacity doesn't exist for very long, as we fill up the pipe. But we are in option, out of the region, or out of that zone right now, as it scales up production.

Okay. Thank you.

Thank you.

We will go next to Angie Storozynski of Macquarie.

Thank you. I actually wanted to follow-up on Nexus. So I heard your explanations, thank you. Now the contracts with Industrial customers are for the facility existing capacity or for expansions of Nexus?

They will be both.

And can you give me a sense what type of industry this is, that would be willing to sign contracts -- from [indiscernible] Gas?

Angie, once we execute the agreements, I'd be happy to disclose that. But at this moment, we can't.

Okay. And separately for the drillers' demand for capacity on your pipe. It seems like Rover is still not fully subscribed, and again, it seems like Rover's pricing is a little bit lower than yours. So what would be the advantage for a driller to choose your pipe versus Rover?

Well let me be clear, Rover's rates are not lower than ours. And I think you and I have had this conversation before that, our rates are very competitive with Rover. So we are happy with our position in the market that way. And in addition to that, we have got much greater significant -- or much more significant market access along the pipeline. We have got 13 interconnects that we are building immediately, and all of those interconnects, with large demand centers, are already starting to play into some of the discussions that we are having with counterparties. So we feel very good about filling this pipe.

Okay. And then lastly, when you show us the net income range for 2018 for the GSP segment, does it account for the incremental long term contract, or is basically the delta year-over-year largely filled by short term contracts?

Are you asking about long term contracts on Nexus or other pipes?

I mean, other pipes as well. I mean, will they materialize between now and the end of the year, and to contribute to 2018 net income?

Nexus not materially, since it goes into service so late in the year. So it's really not relevant for 2018. And the other pipes do have growing positions. For example, we mentioned Link in a growing position there. Now that will take a little time to come into, but could contribute some, are going to be growing over Bluestone. So the projections we have for both 2018 and future years, are taking that sort of growth and those sorts of contracts into account. But the contracts on Nexus, just isn't enough time in 2018 for those to really be material.

Okay. Thank you.

We will go next to Charles Fishman of Morningstar.

Good morning. I am assuming that, since I didn't hear any comments towards this, the timing of the REF phase-outs has not changed with tax reform?

It has not.

Okay, that is what I was assuming. And then second question on the P&I, getting to two thirds of the way to your goal by the end of the year, did you say that's an expansion of the forward agreement or is that a new project you intend to announce?

Well these are -- the one project that we are looking to finalize agreement with -- very close to finalize agreements with an R&D project currently, and we are looking at other Industrial energy projects in the region.

We have a number of cogen projects for example, and one of the discussions with an Industrial counterparty, is -- I guess we'd just say very late stage development. So I think that's like -- the likelihood of them going forward is high. I mean, we were a year ago went forward at this point, it's the way that project [indiscernible]. So we have got one of those, we have got an RNG that we think about finalized. And then more of each of those behind those new projects.

So there is a project in the mix, and there are still these projects coming out that are similar to Ford, where you build a co-generation facility for a big Industrial complex?

That's correct.

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

Thank you.

That is all the time we have for questions. At this time, I would like to turn the call back over to our speakers for any additional or closing comments.

Well look, thanks very much for joining us this morning. Hope you feel that the way we wrapped up 2017 was positive, and as I said at the outset, I feel great about our position at 2018. I think we are lined up for another really good year this year, and we look forward to describing all of that to you in future discussions. Thanks for joining us.

That does conclude our conference for today. We thank you for your participation.