Detroit-based DTE Energy is spinning off DTE Midstream, the company’s nonutility natural gas pipeline, storage, and gathering business.
The transaction would transform DTE into a predominantly pure-play regulated electric and natural gas utility. Midstream would become an independent, publicly traded company. DTE expects to complete the offshoot by the middle of 2021.
“Separating Midstream from DTE Energy sharpens both companies’ focus on their respective strategic priorities and stakeholder needs,” says Jerry Norcia, president and CEO of DTE. “We believe DTE Energy and Midstream will be even better positioned to grow, thrive and deliver superior returns with this transaction.”
Norcia says Midstream has assets in premium basins connected to major demand markets, and the spinoff will align the companies’ respective business mixes with investor preferences and overall market trends, according to DTE.
He says the spinoff is also expected to generate a combined dividend that is expected to be higher than DTE’s current pre-transaction dividend. Under the plan, DTE shareholders will retain their current shares of DTE stock and receive a pro-rata dividend of shares of the new Midstream company stock in a transaction that is expected to be tax-free to DTE Energy and its shareholders for U.S. federal income tax purposes. The number of Midstream shares to be distributed to DTE shareholders will be determined prior to closing.
The company is targeting a long-term operating earnings per share growth rate of 5-7 percent off its 2020 original guidance. This includes 7-8 percent long-term operating earnings growth for its regulated electric business and about 9 percent for its regulated natural gas business.
The growth is supported by $17 billion of planned utility capital investments over the next five years — a $2 billion, or 13 percent, increase over DTE’s prior plan. The investments will back the company’s commitment to cleaner, safe, reliable, and affordable energy.
DTE will continue to be led by Norcia and its current management team. Gerry Anderson will continue to serve as executive chairman, and Ruth Shaw will continue to serve as the company’s lead independent director. David Slater, current president and COO of DTE Midstream, will become president and CEO.
Midstream serves producers, gas and electric utilities, marketers, power plants, and large industrial customers. It owns 900 miles of gas transmission lines and 1,450 miles of gathering lines. The company’s 2020 adjusted earnings before interest, taxes, depreciation, and amortization is estimated to be about $700 million. The business has generated more than $3 billion of cash since 2008.
DTE also reported third quarter 2020 earnings of $467 million, compared with $319 million in 2019.
Operating earnings for the third quarter 2020 were $504 million, up from the previous year’s $351 million.
The DTE board declared a $1.085 per share dividend on common stock, a 7 percent increase from the previous quarterly dividend of $1.0125 per share.
“In addition to strong financial performance, we made solid strides in our clean energy journey,” says Norcia. “Our focus on serving our four key stakeholders – employees, customers, communities, and investors – is unwavering.”
The company was ranked first in overall customer satisfaction at DTE Gas for residential customers in the Midwest in J.D. Power’s 2020 study, created new assistance programs and pledged $13 million to help struggling customers during the COVID-19 pandemic, invested more than $1.7 billion with Michigan-based companies this year, filed updated MIGreenPower voluntary renewables plan with the Michigan Public Service Commission and gained more subscribers, pledged to build a Midwest electric vehicle charging network, and was named a Top Female Employer nationally by Forbes.