DTE Energy Company (DTE) — Q4 2015 Earnings Call Transcript

Thank you, 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. 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. I feel we're well-positioned for a similarly strong year in 2016, and we are off to a good start just one month into things. 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. I will provide the recap of 2015 within the context of our system of priorities that's laid out on Slide 5. For those of you who have followed us for a number of years, know that we consistently work the system of priorities for the last half-dozen years. For those of you less familiar, I'll just give you quick grounding and then I'll move on to the summary. The system 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. We put a lot of time and focus on engagement and the energy of our employees. We believe that if we get that right, 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. If we do those three things right, if we serve our customers well, manage our costs well, and grow while connecting that growth to the economic development of our communities, then the prospects for constructive political and regulatory treatment are higher. With constructive regulation and healthy growth, we produce great outcomes. For us, that means consistent predictable 5% to 6% earnings growth, combined with an attractive dividend and dividend growth, founded on a strong balance sheet. Page six begins a recap of our accomplishments against that system of priorities this past year. I will start with the employees and say that for the third consecutive year, we earned Gallup's Great Workplace Award, which is given to a handful of companies worldwide each year, and we are the only utility company to ever receive it. We were again in the top 15% of their worldwide database, which was very encouraging. We also achieved the best safety result in our company's history; the lowest OSHA rate we've ever had. We're now approaching the safest-in-industry level, which is our explicit goal. In fact, we had the safest January in our company's history by a wide margin recently as well. The National Safety Council has us ranked in the top 3% of their 670 participating companies, meaning we are in the top 20 of their nearly 700 companies. Moving on to continuous improvement, I was glad to see our customer outage minutes drop sharply this past year by 65%. That's been a key focus for us. We got help from the weather, but we also had really strong underlying change in our performance which is a good thing. Our fossil fleet was top-quartile in its reliability for the fourth consecutive year. We're nearing top-decile in our gas leak and leak repair program, which is also an area we're very focused on. Importantly for you, our utility O&M costs were down year-over-year and we remain below 2008 levels, and near the very front of the industry in terms of O&M cost management. On the customer front, our Electric Company was top-quartile for both residential and business. In fact, our residential was number two in our peer group. DTE Gas ranked number one in 2015 on business customer satisfaction and number two in residential customer satisfaction. The overall set of customer satisfaction metrics shows we had a strong year in 2015. Moving on to Slide 7, on the political and regulatory front, we had a constructive outcome on our electric rate case that went final late last year. We also filed late last year our first gas rate case in four years. We're entering the final stages of discussions on Michigan energy policy, and I'll talk more about that later. We have reached the point where our spent with Michigan suppliers has doubled since we started the program back in 2011, nearly $1 billion spent with Michigan suppliers, up from $475 million back in 2011. That's an important program for us. On the growth and value front, we invested $2.4 billion, of which $2.1 billion was in our utilities, focused on infrastructure, reliability, and continued investment in renewables. We also made significant investments in our gas storage and pipeline business around our Bluestone assets. Significant progress was made on both the NEXUS Pipeline and expansions of the Millennium pipeline, thus supporting future growth. Finally, on the financial front, operating EPS at $4.82, which compares to our guidance of $4.60 at the beginning of the year, was our eighth consecutive year of delivering EPS at or above the top end of our original guidance. In addition, we increased our dividend by nearly 6%, to $2.92 a share. Based on that recap of 2015, I hope you can see why I said at the outset that we had a very successful year not only financially, but on many fronts. I know it's natural for you to focus most heavily on our financial results, in the end those financial results are closely tied to fairness and the quality of our regulation. The quality of our regulation is contingent on how well we control our costs via continuous improvement, how well we serve our customers, and how we invest in our communities. Staying focused on the full spectrum of our priorities is key to our long-term performance. Moving on to Slide 8, I'll briefly update you on energy policy discussions in Michigan. Those are summarized at high level on Slide 9. Michigan's been considering updates to its energy laws since last year, with the move to update the current legislation tied to the need to remake Michigan's power generation fleet. The legislation focuses on reforming its retail open access provisions, defining an integrated resource planning process to choose our future generation mix, and clarifying the role of renewables and energy efficiency in the future. Late in 2015, a package of bills moved out of the House Energy Policy Committee, and early this year, the focus shifted to the Senate. Senator Mike Nofs, the chair of the Senate Energy and Technology Committee, is leading the effort to define consensus legislation that will be supported by a strong coalition. Nofs is well-suited for this role; he was a principal author of our state’s 2008 energy legislation and is knowledgeable in this area. We continue to work closely with Senator Nofs to define and pass this legislation in the first half of the year, which we believe is achievable. As I said earlier, the legislation's goal is to enable the transition depicted on Slide 10, between 2015 and 2030, driven by the aging of our power plants and the Clean Power plan. Our generation fleet will transition from one dominated by coal-fired generation to one with a much heavier mix of gas and renewables. We began detailed planning for this transition, and our early investments will play out this year. This will add 50 more megawatts of wind to our wind production here in Michigan. We will invest in our first large scale solar facility, a 50-megawatt installation north of Detroit. Regarding the Clean Power Plan, I was surprised that the Supreme Court stayed its implementation recently. It's unusual to stay a regulation prior to litigation in the lower courts. While people speculated about the possibility, I don't know that many considered it likely; it was somewhat of a surprise. We'll need to see how the legal challenges continue to evolve. My quick reaction to this is that, at least in the first half of the 15-year Clean Power Plan implementation period, I am not sure much will change for us. We're dealing during this period with a replacement of very old, smaller, and marginally economical plants, especially given current gas prices. But in the latter half of the plan, we will start to take on some larger facilities. If the Clean Power Plan changes in some way, those years could indeed be impacted. There's still a lot of uncertainties surrounding this issue. Moving on to Slide 11, I will now provide an update on our long-term growth and its drivers. Starting with a recap of our 2015 results and our 2016 guidance, as laid out on Slide 12. We finished with strong results in 2015 as you can see at the top left. Our initial guidance for last year was $4.60. We revised that guidance upward twice over the year, ultimately to $4.78 at our fall analyst day, and we delivered $4.82. As I mentioned earlier, that marks the eighth consecutive year in which we've met or exceeded the top end of our guidance. While we talk about 5% to 6% earnings per share growth, you can see that our actual growth in recent years has been 6.5%. This growth has been driven by our portfolio businesses that have worked well together with steady growth from our two utilities and some growth upside from our non-utility businesses. For 2016, the midpoint of our guidance is $4.93, and I feel very good about our ability to deliver that result or exceed it. As we always do, we entered 2016 with a specific plan to address potential risks or uncertainties in our budget. Although I had worries about Super El Nino weather, January was pretty close to normal. At this point in February, it's cold and snowing outside, so the month is currently not exceeding my initial concerns. In the bottom of the slide, we increased our dividend in 2015 by 5.8%. I have mentioned consistently that we intend to grow the dividend as we grow earnings, and that pattern has been evident in recent years, and I expect it to continue in 2016. Next, we shift to focus on our longer-term growth and investments as I begin this discussion on Slide 13. As you can see, our investment profile over the next five years is projected to increase approximately 30% compared to the last five years. This increased investment is being reflected in nearly all of our business units, particularly in our electric and gas utilities, addressing aging infrastructure and reliability issues, as well as initiating the generation fleet renewal. Recently, we've seen significant investments in our gas storage and pipelines business to capitalize on opportunities to move Marcellus and Utica gas, which contain the highest quality reserves in the country, to nearby markets via our Millennium, Bluestone, and NEXUS assets. Moving to Slide 14; in our electric utility, investing in distribution assets to address aging infrastructure and improve reliability has emerged as a key focus for us. We project to invest $18 billion in our electric utility over the next decade, more than a third, or $6.5 billion in our base case, is aimed at upgrading our distribution infrastructure. The underlying need is even greater. This focus comes from listening to our customers. We are approaching the top end of J.D. Power's Midwest customer satisfaction rankings. The largest gap regarding performance is distribution reliability. Moving on to Slide 15, we are making significant investments in distribution infrastructure resilience to improve reliability. We are replacing aging infrastructure and addressing circuits with the lowest reliability. We are identifying the need to redesign our distribution infrastructure to accommodate growth in some areas. Many of our substations are now overloaded and need upgrades or replacements. For example, we're undertaking projects to support a new $600 million Red Wings arena and multi-entertainment facility in downtown Detroit. This project is projected to generate over a billion dollars of growth, necessitating substantial electric infrastructure investments. We have a similar project for a new multibillion dollar bridge between Detroit and Canada requiring significant infrastructure investment as well. As we pursue this investment agenda, we are closely monitoring affordability. Our customers are requesting improved reliability, and while we need to renew our aging infrastructure, we must remain affordable and competitive. The next slides illustrate that we've done well on that front in recent years. On Slide 16, we see residential bills for both gas and electric customers have decreased in recent years. The decline in electric bills is primarily due to continuous improvement efforts and rate reductions. Even after our recent rate case finalized in December, our bills remain lower than 2012 levels. We filed our next electric rate case recently, but even after that case concludes, we expect bills to be flat relative to five years earlier. In our gas utility, bills are down significantly from 2012, driven primarily by falling gas prices. We also have an ongoing gas rate case filed last year; however, we project bills will remain 10% lower than five years prior following that case's conclusion in December. Slide 17 indicates that our industrial customer rates are below both the U.S. average and the Great Lakes average. Five years ago, this was not the case, but we've made good progress. Importantly, our industrial rates have declined by 22% since 2013, enhancing the competitiveness and economics of this customer group. Next, I'll provide an update on our gas storage and pipelines business. On Slide 18, you'll see an overview of this business. I will focus on two portions of our footprint today: the Millennium pipeline in Marcellus Shale and the adjacent Bluestone assets, which have been a core source of consistent growth recently and are undergoing expansion opportunities. Additionally, I want to highlight the NEXUS Pipeline, positioned to play a similar role in Utica Shale moving forward. On Slide 19, I will start with an update on the NEXUS Pipeline. NEXUS is positioned to access some of the best gas reserves geology in North America. The region adjacent to our NEXUS Pipeline contains exceptionally high-quality dry gas well reserves. When industry observers rank Shale plays, this region of the Utica always emerges at the top of the industry cost curve, making it highly competitive. As the gas industry rationalizes supply across basins, we believe the Utica will be a successful player that attracts investment. Development of the NEXUS projects is continuing on schedule. We completed our FERC filing late last year, and approximately two-thirds of the pipeline is currently contracted. A significant portion of that volume is with utilities, including the Ontario operations of Spectra and Enbridge. In late last year, the Ontario Energy Board approved their off-take positions. Additionally, we are in advanced discussions with other counterparties interested in securing positions on the pipeline. Moreover, we have signed interconnect agreements in Northern Ohio, which represents a total of 1.4 Bcf per day with gas LDCs, power plants, and industrials, creating additional demand for NEXUS over time. We're closely monitoring developments in the E&P sector. Still, our confidence in the fundamentals supporting this pipeline remains steadfast. In terms of the Millennium Pipeline, we continue to see significant interest in expansions. We are currently pursuing a 200 million cubic per day expansion, having filed our FERC pre-approval a couple of weeks ago. The projected in-service date for this expansion is 2018. This expansion aims to access higher prices in northeast markets rather than lower-priced southern markets. Additionally, we are building a lateral off of Millennium, the 8-mile Valley Lateral, which is scheduled to enter service next year. In addition, we are witnessing strong interest in expanding Millennium from northeast utilities, and I believe our discussions with them could lead to further expansions down the road. Regarding earnings in the gas storage and pipeline business, the highlights are laid out on Slide 20. Last year marked a significant year for earnings growth, with earnings growing by 30% year-over-year to $107 million in 2015. This growth was driven by our activities in the Marcellus tied to our Millennium Pipeline and the Bluestone assets. The midpoint of our guidance for this year is $110 million based on slower growth than last year due to reduced activity levels among E&P players. We are also watching for investment or acquisition opportunities that stress in the E&P and MLP sectors might present to us. Long-term, we target $170 million in earnings by 2020. While the current dynamics in the E&P sector may result in a pause in drilling investments this year, we foresee little to no long-term impact. The country will require increasing gas supplies, and production from existing wells declines by 15% each year. We will need to resume drilling before too long, and our pipelines are strategically located to benefit when that happens. Moving to the wrap-up of my remarks regarding our power and industrial business on Slide 21. This business operates contracted assets at 66 sites across the country in three segments: industrial energy services, renewable energy, and reduced emissions fuels or REF for short. As shown on Slide 22, this business generated earnings of $95 million in 2015. The midpoint of guidance for this year is also $95 million, indicating flat earnings from 2015 to 2016. Two dynamics impacted our guidance: One of our assets servicing the steel industry rolled over its contract last year, and as you may know, the steel industry is currently in a cyclical downturn, causing a decline in earnings from that asset. However, we expect our REF earnings to grow, leading to guidance of $95 million for this year. Long term, we aim for $105 million in earnings from this segment by 2020, intending to backfill with investments in co-generation and opportunities for asset acquisition as our REF project sunsets in early 2020. With that, Peter, I will turn the call over to you for our financial update.

Thanks, Gerry, and good morning everyone. As most of you know, I like to take advantage of having the microphone on this earnings call to provide an update regarding my Detroit Tigers. With the Super Bowl over, all focus will shift to the upcoming baseball season, and speed training will be starting soon. I have high hopes for my hometown team. The Tigers were ranked number one by MLB.com for most improved after all the offseason moves; I won’t make predictions this year, but let's just say I am hoping for a playoff run. Enough about the Tigers — now let's get to the financial update and review of the 2015 earnings. Starting on Slide 24, as Gerry mentioned, DTE Energy’s 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, can be found on Slide 43 in the appendix. On Slide 24, you can see year-over-year operating earnings by segment; I will begin with the middle column which shows 2015 results. For context, total 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 compared to 2014. Our largest subsidiary, DTE Electric, earned $562 million, which was up $34 million driven by the implementation of new rates and return of more normal weather in 2015. I will discuss DTE Electric's earnings results in more detail on the next slide; let me continue on this page for now. DTE Gas earnings of $132 million were $8 million below 2014 earnings as we returned to more normal weather in 2015 after one of the coldest winters on record in 2014. The weather impact was partially offset by reinvestments in distribution and transmission assets in 2014 that we did not repeat in 2015. Moving down the page, our gas storage and pipeline segment had an excellent year as Gerry indicated, with operating earnings at $107 million, a $25 million increase from 2014. This equates to a 30% increase in earnings, driven by higher volumes in our Bluestone lateral and gathering assets. Earnings from power and industrial projects were $95 million, up $5 million from 2014, attributable to strong performance in our renewable business and REF, offset partially by lower earnings in the steel sector. Corporate and other earnings were negative $48 million in 2015, down $4 million from 2014, driven by higher interest expense. Total operating earnings for our growth segments were $848 million, or $4.73 per share, reflecting a 5.6% increase over the 2014 total growth segment EPS. To round out our operating earnings, we also conclude results of our Energy Trading business. Energy Trading’s earnings for 2015 were $50 million, down $50 million from 2014, driven by lower realized performance on our gas portfolio. That said, our trading company had a stellar economic year, and the contribution for 2015 was $54 million, doubling our targeted annual level of $20 to $25 million. As a reminder, Slide 42 in the appendix contains our standard Energy Trading reconciliation showing both economic and accounting performance. Let's turn to Slide 25 for a deeper dive into electric utility performance. DTE Electric’s 2015 earnings were $562 million, a $34 million increase over 2014. Three significant drivers influenced this variance: First, a return to more normal weather in 2015, as you may recall, the summer of 2014 was much colder than average, whereas this summer was near normal. Second, we implemented new rates midyear to support capital spent on improving distribution and generation infrastructure, which received approval from the MPSC in December. Although these rates were approved, their implementation incurred costs like depreciation, property taxes, and interest. Lastly, we experienced a decrease in storm activity in 2015, which is a significant reduction compared to 2014 when we encountered multiple storms, including one in September 2014 that affected over 400,000 customers, or about 20% of our electric customers. This lower summer expense was partially offset by lean initiatives from 2014 that were not repeated in 2015. I also want to touch on year-over-year sales volume, which was down by $6 million. We provided more details on sales volumes by customer class on Page 41 of the appendix. Overall, the economic indicators in our service territory in Michigan are solid. Customer accounts have increased in both our residential and commercial classes. The reduction in sales volume year-over-year was primarily driven by lower volumes in our industrial segment due to weakness in the steel sector. This impact was partially offset by an increase in commercial sales, with residential sales remaining relatively flat due to economic growth and energy efficiency efforts. We continue to see the benefits of our energy efficiency program, helping our customers reduce their usage while keeping average bills affordable. Now I will review 2016 earnings on Slide 26. As Gerry noted at the outset, our guidance range for 2016 is between $4.80 and $5.05 per share, offering a mid-point of $4.93. The total earnings per share guidance remains unchanged from our early outlook presented at our investor day in September 2015. The earnings ranges for each segment have been refined, as has our equity issuance target, which has now been reduced to $100 million, resulting in lower total shares outstanding. Compared to 2015 actuals, utility earnings are projected to increase due to new rates supporting our customer-related investments, further strengthening our pipeline and gathering platforms, and continuing growth in gas storage and pipelines, including a full year contribution from the gathering bill that occurred in 2015. Our power and industrial earnings for 2016 remain strong, as increased REF earnings will help offset the near-term reductions associated with our steel industry assets. In total, our growth segments are anticipated to achieve earnings per share of $4.93, reflecting a year-over-year growth of 4.2%. When considering the initial guidance from 2015 to 2016, growth is projected at 7%. Moving forward to Slide 27, let's touch on how the bonus depreciation extension has impacted our plan. We expect the extension to provide $300 million to $400 million in favorable cash flow throughout the five-year period. Due to the change and other adjustments to our plan, we are now targeting equity issuance in the range of $200 million to $300 million for the 2016 to 2018 period, a reduction from our previous disclosure of $800 million as noted on the chart. As mentioned on our guidance page, we anticipate issuing around $100 million in 2016. Maintaining a strong balance sheet is a priority for us. By turning to Slide 28, you'll find key balance sheet metrics that we target and monitor, such as FFO to debt leverage, showing projected levels for each metric, demonstrating we are within the targeted metrics for the next three years. In 2015, we issued a modest amount of equity, needing less than 10% of our capital expenditures financed through new equity. The strength of our balance sheet positions us well as we enter a period of historical high capital spend. Let me wrap it up with a summary on Slide 30, and then we can move into Q&A. 2015 proved to be a very good year, positioning us for a successful 2016. DTE has historically delivered on its growth targets, frequently exceeding them in recent history. We provided 6.5% annual EPS growth over the last five years. Looking ahead, we continue to target operating EPS growth of 5% to 6% for our growth segments. A significant part of our shareholder value equation involves continuing to grow our dividends in alignment with these earnings. We have substantial investments in our non-utilities, driving continued growth in those segments, along with significant utility investments to modernize reliability and generation, ensuring affordable, clean, and reliable services for our customers. The constructive regulatory environment in Michigan, paired with our focus on operational excellence and delivering high customer satisfaction, creates a favorable foundation as we move into an era of replacing and upgrading our aging utility infrastructure. Before I turn the call over for questions, I want to recognize Anastasia Minor. This will be Anastasia’s last call, and I want to give a shout-out to her. I'm sure I’ll hear from you when I'm on the road. But let me clarify that Anastasia is not leaving the company; she is a key member of our management team, transitioning to a different role. We are leaving the job in good hands as Barb Tuckfield steps into the role, coming off her recent assignment as gas utility controller. With that, I want to thank everyone for joining us this morning. Shavan, we can now open the lines for questions.

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

I don't think Mike Nofs will see any reason to slow down. He understands we've got a lot to deal with on the energy front over the next 10 to 15 years. Regulations, legislation, and policies will come and go. Both our plant retirements and those of consumers are imminent. Both companies and the state will need to replace those with investments, and this legislation recognizes we are entering that period. There may be people who don't like the Clean Power plan and call for a slowdown, but Mike Nofs won't be one of them, nor will we.

Okay. On the NEXUS front, with two-thirds contracted, when do you anticipate filling in more of that to reach full capacity? Also, could you remind us how much of that is contracted by utilities?

About half of that is utilities and half is producers. To address your question, we have very active discussions with other parties interested in the pipe, so we are hopeful that they will materialize this year. Our NEXUS project continues to be evaluated and we believe strongly in its fundamentals. It runs through the very best dry gas region in North America, connecting to the Midwest-Northeast market, and supplying Ontario, Michigan, and the Chicago markets, making it a viable project. We expect additional demand to materialize this year based on our ongoing discussions. Additionally, that interconnection across Northern Ohio providing 1.4 Bcf per day with gas LDCs and power plants will create future demand for NEXUS.

Gerry articulated that well. This pipeline has strong market access and is supported by LDCs. It sets it apart from others that face routing challenges and market issues. We're confident about this pipeline's development, and 2016 will be significant for its progress.

Got it, very good. Thank you, guys.

Hi, good morning.

Good morning, Neel.

A follow-up on NEXUS. On the demand side, it appears strong. What's your view on discussions with producers given the current environment? Are there delays being discussed on the pipeline or do you feel confident?

That's a very good question. In these developments, when there's stress in the sector, you sometimes encounter discussions to rework commitments; however, we're not seeing that. It could be due to the quality of the assets in this region. We continue to receive robust support from both producers and utilities involved in the project.

Okay, that's great. Thank you.

Thank you.

Good morning, Julien.

I wanted to follow up on the legislative question. Are you comfortable about the outlook for earnings growth even if the legislation is delayed or doesn't happen? What does your budget look like?

There's no direct link between the legislation and earnings. The legislation was directed at ensuring we have a planning process and advocating for fairness in the market. Even if the legislation is delayed, we will continue moving forward with distribution investments and retirements of power plants. We have aging plants requiring action regardless of regulatory adjustments. Some power plants, dating back to the 1950s, are simply too old. While there may be some long-term impacts regarding large assets if the Clean Power Plan were to change, there's a significant amount of time between now and then. We need to be cautious and vigilant as future developments unfold.

Thank you. Just to follow up, the whitespace CapEx seems to be absent from your slides. Can we read anything into that?

In our discussions regarding investments, we're focusing on base cases. We've mentioned previously that we expect $6.5 billion in investments based on current demand for renewed infrastructure. The fundamental need exceeds that bias for customers seeking reliability. Our capital investment program remains robust.

Thank you. Good morning, guys.

Good morning.

Regarding your slide deck evolution, there is no longer an upside case for potential spend in utilities. Does that imply that this is off the table?

There's no indication of change or need behind that; we've simply opted to showcase the base case. However, previously at the analyst day, we indicated that the total demand for renewed infrastructure could be closer to $10.5 billion. Navigating these demands involves considerations about affordability and reliability.

Understood. The last question, you've discussed internal planning for 7% to 8% operating earnings growth. If share issuance is reduced, should we assume that earnings growth is marginally lower?

That's a valid observation, Greg. With reduced share issuance, we should see diluted impacts. However, our EPS growth remains on track to match our targets, particularly since maintaining a strong balance sheet is critical to us in this approach.

Good morning, guys.

Good morning.

In your comments regarding market dislocation in the pipeline space, could you provide some specifics on what you're referencing and the potential significance?

There is stress in certain companies in this sector, which often leads to attempts to restructure commitments. However, we’ve seen requests to divest assets, and our position is that we have had conversations regarding opportunities. We are observing the market more closely and will remain opportunistic as potential assets may change hands, but it will depend on finding the right strategic fit.

Thanks for that clarification.

Good morning.

Good morning, Paul.

Regarding the bonus depreciation, could you quantify its earnings impact?

The bonus depreciation's impact does affect utility growth, but it is offset by the reduction in share issuance at the corporate level, leading to a minimal overall impact in our earnings outlook.

Thank you. I was surprised to see gas segment earnings up in the fourth quarter. Can you provide detail around that?

The DTE Gas 2015 earnings were impacted by favorable weather and a lean approach we took in the fourth quarter. These adjusted costs helped us manage and recover earnings effectively.

We had a strong balance of investments in place throughout the prior year, and responses to shifts in weather and demand allowed us to maintain favorable earnings.

Thank you very much.

Good morning, everyone.

Good morning.

Just one quick question regarding EPS growth versus DPS growth. Your earnings have been growing almost 100 basis points faster than dividends. Would you consider increasing the growth rate to catch up the payout ratio?

We have aimed to work the payout ratio. While we've grown earnings faster than dividends, we will consider your suggestion to enhance dividend growth aiming to keep our earnings and payouts aligned.

Good morning.

Good morning.

You observed turmoil in the E&P sector. Are you monitoring potential counterparty risks in this space?

We're currently not seeing evidence of significant counterparty concerns; we regularly evaluate exposures across our operations and have not seen indications causing worry.

Thanks very much.

We appreciate you being with us this morning and your support, and we look forward to any follow-up questions you may have. Thank you very much for joining us. We look forward to a good 2016.