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EXHIBIT 99.G2
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTER ENDED SEPTEMBER 30, 1999
REGISTRANTS; STATE OF
COMMISSION INCORPORATION; ADDRESS; AND I.R.S. EMPLOYER
FILE NUMBER TELEPHONE NUMBER IDENTIFICATION NO.
----------- --------------------------- ------------------
1-11607 DTE Energy Company 00-0000000
(a Michigan corporation)
0000 0xx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000-0000
000-000-0000
1-2198 The Detroit Edison Company 00-0000000
(a Michigan corporation)
0000 0xx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000-0000
000-000-0000
Indicate by check mark whether the registrants (1) have filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrants were required to file such reports), and (2) have been subject to
such filing requirements for the past 90 days.
YES X NO __
At October 29, 1999, 145,045,159 shares of DTE Energy's Common Stock,
substantially all held by non-affiliates, were outstanding.
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2
DTE ENERGY COMPANY
AND
THE DETROIT EDISON COMPANY
FORM 10-Q
FOR THE QUARTER ENDED SEPTEMBER 30, 1999
This document contains the Quarterly Reports on Form 10-Q for the quarter
ended September 30, 1999 for each of DTE Energy Company and The Detroit Edison
Company. Information contained herein relating to an individual registrant is
filed by such registrant on its own behalf. Accordingly, except for its
subsidiaries, The Detroit Edison Company makes no representation as to
information relating to any other companies affiliated with DTE Energy Company.
TABLE OF CONTENTS
PAGE
----
Definitions................................................. 3
Quarterly Report on Form 10-Q for DTE Energy Company:
Part I -- Financial Information........................... 4
Item 1 -- Financial Statements......................... 4
Item 2 -- Management's Discussion and Analysis of
Financial Condition and Results of Operations......... 20
Part II -- Other Information.............................. 28
Item 5 -- Other Information............................ 28
Quarterly Report on Form 10-Q for The Detroit Edison
Company:
Part I -- Financial Information........................... 29
Item 1 -- Financial Statements......................... 29
Item 2 -- Management's Discussion and Analysis of
Financial Condition and Results of Operations......... 29
Part II -- Other Information.............................. 29
Item 1 -- Legal Proceedings............................ 29
Quarterly Reports on Form 10-Q for DTE Energy Company and
The Detroit Edison Company:
Item 6 -- Exhibits and Reports on Form 8-K............. 30
Signature Page to DTE Energy Company Quarterly Report on
Form 10-Q................................................. 38
Signature Page to The Detroit Edison Company Quarterly
Report on Form 10-Q....................................... 39
3
DEFINITIONS
Annual Report 1998 Annual Report to the Securities and Exchange Commission
on Form 10-K for DTE Energy Company or The Detroit Edison
Company, as the case may be
Annual Report Notes Notes to Consolidated Financial Statements appearing on
pages 45 through 72 and 76 through 79 of the 1998 Annual
Report to the Securities and Exchange Commission on Form
10-K for DTE Energy Company and The Detroit Edison Company,
as the case may be
Company DTE Energy Company and Subsidiary Companies
Detroit Edison The Detroit Edison Company (a wholly owned subsidiary of DTE
Energy Company) and Subsidiary Companies
DTE Capital DTE Capital Corporation (a wholly owned subsidiary of DTE
Energy Company)
Electric Choice Gives all retail customers equal opportunity to utilize the
transmission system which results in access to competitive
generation resources
EPA United States Environmental Protection Agency
FERC Federal Energy Regulatory Commission
kWh Kilowatthour
MCN MCN Energy Group Inc.
MPSC Michigan Public Service Commission
MW Megawatt
MWh Megawatthour
Note(s) Note(s) to Condensed Consolidated Financial Statements
(Unaudited) appearing herein
PSCR Power Supply Cost Recovery
Quarterly Report Quarterly Report to the Securities and Exchange Commission
on Form 10-Q for DTE Energy Company or The Detroit Edison
Company, as the case may be, for the quarters ended March
31, 1999 and June 30, 1999
Quarterly Report Notes Notes to Condensed Consolidated Financial Statements
(Unaudited) appearing on pages 16 through 18 of the
Quarterly Report to the Securities and Exchange Commission
on Form 10-Q for the quarters ended March 31, 1999 and June
30, 1999 for DTE Energy Company and The Detroit Edison
Company, as the case may be
Registrant Company or Detroit Edison, as the case may be
3
4
QUARTERLY REPORT ON FORM 10-Q FOR DTE ENERGY COMPANY
PART I -- FINANCIAL INFORMATION
ITEM 1 -- CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED).
The following condensed consolidated financial statements (unaudited) are
included herein.
PAGE
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DTE Energy Company:
Condensed Consolidated Statement of Income 5
Condensed Consolidated Balance Sheet 6
Condensed Consolidated Statement of Cash Flows 8
Condensed Consolidated Statement of Changes in
Shareholders' Equity 9
The Detroit Edison Company:
Condensed Consolidated Statement of Income 11
Condensed Consolidated Balance Sheet 12
Condensed Consolidated Statement of Cash Flows 14
Condensed Consolidated Statement of Changes in
Shareholder's Equity 15
Notes to Condensed Consolidated Financial Statements
(Unaudited) 16
Independent Accountants' Report 19
Note: Detroit Xxxxxx's Condensed Consolidated Financial Statements are presented
here for ease of reference and are not considered to be part of Item I of
the Company's report.
4
5
DTE ENERGY COMPANY
CONDENSED CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)
(MILLIONS, EXCEPT PER SHARE AMOUNTS)
THREE MONTHS NINE MONTHS
ENDED ENDED
SEPTEMBER 30 SEPTEMBER 30
---------------- ----------------
1999 1998 1999 1998
---- ---- ---- ----
OPERATING REVENUES.......................................... $1,440 $1,199 $3,614 $3,208
------ ------ ------ ------
OPERATING EXPENSES
Fuel and purchased power............................... 510 359 1,063 852
Operation and maintenance.............................. 397 338 1,086 906
Depreciation and amortization.......................... 183 169 547 496
Taxes other than income................................ 69 67 211 207
------ ------ ------ ------
Total Operating Expenses.......................... 1,159 933 2,907 2,461
------ ------ ------ ------
OPERATING INCOME............................................ 281 266 707 747
------ ------ ------ ------
INTEREST EXPENSE AND OTHER
Interest expense....................................... 95 83 260 236
Preferred stock dividends of subsidiary................ -- 1 -- 6
Other -- net........................................... 4 4 13 9
------ ------ ------ ------
Total Interest Expense and Other.................. 99 88 273 251
------ ------ ------ ------
INCOME BEFORE INCOME TAXES.................................. 182 178 434 496
INCOME TAXES................................................ 21 46 48 159
------ ------ ------ ------
NET INCOME.................................................. $ 161 $ 132 $ 386 $ 337
====== ====== ====== ======
AVERAGE COMMON SHARES OUTSTANDING........................... 145 145 145 145
------ ------ ------ ------
EARNINGS PER COMMON SHARE --
BASIC AND DILUTED......................................... $ 1.11 $ 0.91 $ 2.66 $ 2.32
------ ------ ------ ------
See Notes to Condensed Consolidated Financial Statements (Unaudited).
5
6
DTE ENERGY COMPANY
CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED)
(MILLIONS, EXCEPT PER SHARE AMOUNTS AND SHARES)
SEPTEMBER 30 DECEMBER 31
1999 1998
------------ -----------
ASSETS
CURRENT ASSETS
Cash and cash equivalents................................. $ 54 $ 130
Restricted cash........................................... 317 121
Accounts receivable
Customer (less allowance for doubtful accounts of $21
and $20, respectively)................................ 437 316
Accrued unbilled revenues.............................. 154 153
Other.................................................. 97 135
Inventories (at average cost)
Fuel................................................... 148 171
Materials and supplies................................. 160 167
Other..................................................... 87 39
------- -------
1,454 1,232
------- -------
INVESTMENTS
Nuclear decommissioning trust funds....................... 337 309
Other..................................................... 229 261
------- -------
566 570
------- -------
PROPERTY
Property, plant and equipment............................. 11,580 11,121
Property under capital leases............................. 222 242
Nuclear fuel under capital lease.......................... 662 659
Construction work in progress............................. 108 156
------- -------
12,572 12,178
------- -------
Less accumulated depreciation and amortization.............. 5,507 5,235
------- -------
7,065 6,943
------- -------
REGULATORY ASSETS........................................... 2,972 3,091
------- -------
OTHER ASSETS................................................ 259 252
------- -------
TOTAL ASSETS...................................... $12,316 $12,088
======= =======
See Notes to Condensed Consolidated Financial Statements (Unaudited).
6
7
SEPTEMBER 30 DECEMBER 31
1999 1998
------------ -----------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable.......................................... $ 215 $ 239
Accrued interest.......................................... 53 57
Dividends payable......................................... 75 75
Accrued payroll........................................... 86 101
Short-term borrowings..................................... 296 231
Income taxes.............................................. 73 69
Current portion long-term debt............................ 566 294
Current portion capital leases............................ 87 118
Other..................................................... 240 208
------- -------
1,691 1,392
------- -------
OTHER LIABILITIES
Deferred income taxes..................................... 1,902 1,888
Capital leases............................................ 118 126
Regulatory liabilities.................................... 230 294
Other..................................................... 532 493
------- -------
2,782 2,801
------- -------
LONG-TERM DEBT.............................................. 3,985 4,197
------- -------
SHAREHOLDERS' EQUITY
Common stock, without par value, 400,000,000 shares
authorized, 145,045,159 and 145,071,317 issued and
outstanding, respectively.............................. 1,950 1,951
Retained earnings......................................... 1,908 1,747
------- -------
3,858 3,698
------- -------
CONTINGENCIES (NOTE 5)
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY........ $12,316 $12,088
======= =======
See Notes to Condensed Consolidated Financial Statements (Unaudited).
7
8
DTE ENERGY COMPANY
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
(MILLIONS)
NINE MONTHS
ENDED
SEPTEMBER 30
--------------
1999 1998
---- ----
OPERATING ACTIVITIES
Net Income................................................ $ 386 $ 337
Adjustments to reconcile net income to net cash from
operating activities:
Depreciation and amortization.......................... 518 474
Other.................................................. (43) (57)
Changes in current assets and liabilities:
Restricted cash...................................... (11) (70)
Accounts receivable.................................. (84) (89)
Inventories.......................................... 30 (36)
Payables............................................. (43) 51
Other................................................ (16) 44
----- -----
Net cash from operating activities..................... 737 654
----- -----
INVESTING ACTIVITIES
Plant and equipment expenditures.......................... (530) (655)
Investment in coke oven battery businesses................ -- (195)
----- -----
Net cash used for investing activities................. (530) (850)
----- -----
FINANCING ACTIVITIES
Issuance of long-term debt................................ 265 363
Increase in short-term borrowings......................... 65 356
Increase in restricted cash for debt redemptions.......... (185) --
Redemption of long-term debt.............................. (204) (187)
Redemption of preferred stock............................. -- (100)
Dividends on common stock................................. (224) (224)
Other..................................................... -- 3
----- -----
Net cash (used for) from financing activities.......... (283) 211
----- -----
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS........ (76) 15
----- -----
CASH AND CASH EQUIVALENTS AT BEGINNING OF THE PERIOD........ 130 45
----- -----
CASH AND CASH EQUIVALENTS AT END OF THE PERIOD.............. $ 54 $ 60
===== =====
SUPPLEMENTARY CASH FLOW INFORMATION
Interest paid (excluding interest capitalized)............ $ 263 $ 244
Income taxes paid......................................... 102 115
New capital lease obligations............................. 3 52
See Notes to Condensed Consolidated Financial Statements (Unaudited).
8
9
DTE ENERGY COMPANY
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY (UNAUDITED)
(MILLIONS, EXCEPT PER SHARE AMOUNTS; SHARES IN THOUSANDS)
1999
-----------------
SHARES AMOUNT
------ ------
COMMON STOCK
Balance at beginning of year.............................. 145,071 $1,951
Repurchase and retirement of common stock................. (26) (1)
------- ------
Balance at September 30, 1999............................. 145,045 $1,950
------- ------
RETAINED EARNINGS
Balance at beginning of year.............................. $1,747
Net income................................................ 386
Dividends declared on common stock ($1.545 per share)..... (224)
Repurchase and retirement of common stock................. (1)
------
Balance at September 30, 1999............................. $1,908
------
TOTAL SHAREHOLDERS' EQUITY........................ $3,858
======
See Notes to Condensed Consolidated Financial Statements (Unaudited).
9
10
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THE DETROIT EDISON COMPANY
CONDENSED CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)
(MILLIONS)
THREE MONTHS NINE MONTHS
ENDED ENDED
SEPTEMBER 30 SEPTEMBER 30
---------------- ----------------
1999 1998 1999 1998
---- ---- ---- ----
OPERATING REVENUES.......................................... $1,211 $1,105 $3,128 $2,998
------ ------ ------ ------
OPERATING EXPENSES
Fuel and purchased power.................................. 405 344 888 818
Operation and maintenance................................. 275 249 773 719
Depreciation and amortization............................. 176 162 522 486
Taxes other than income................................... 69 66 210 206
------ ------ ------ ------
Total Operating Expenses.......................... 925 821 2,393 2,229
------ ------ ------ ------
OPERATING INCOME............................................ 286 284 735 769
------ ------ ------ ------
INTEREST EXPENSE AND OTHER
Interest expense.......................................... 82 72 219 208
Other -- net.............................................. 1 3 3 13
------ ------ ------ ------
Total Interest Expense and Other.................. 83 75 222 221
------ ------ ------ ------
INCOME BEFORE INCOME TAXES.................................. 203 209 513 548
INCOME TAXES................................................ 65 84 164 230
------ ------ ------ ------
NET INCOME.................................................. 138 125 349 318
PREFERRED STOCK DIVIDENDS................................... -- 1 -- 6
------ ------ ------ ------
NET INCOME AVAILABLE FOR COMMON STOCK....................... $ 138 $ 124 $ 349 $ 312
====== ====== ====== ======
See Notes to Condensed Consolidated Financial Statements (Unaudited).
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THE DETROIT EDISON COMPANY
CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED)
(MILLIONS, EXCEPT PER SHARE AMOUNTS AND SHARES)
SEPTEMBER 30 DECEMBER 31
1999 1998
------------ -----------
ASSETS
CURRENT ASSETS
Cash and cash equivalents................................. $ 26 $ 5
Restricted cash........................................... 185 --
Accounts receivable
Customer (less allowance for doubtful accounts of
$20).................................................. 378 307
Accrued unbilled revenues.............................. 154 153
Other.................................................. 64 90
Inventories (at average cost)
Fuel................................................... 148 171
Materials and supplies................................. 135 138
Other..................................................... 64 21
------- -------
1,154 885
------- -------
INVESTMENTS
Nuclear decommissioning trust funds....................... 337 309
Other..................................................... 39 74
------- -------
376 383
------- -------
PROPERTY
Property, plant and equipment............................. 11,029 10,610
Property under capital leases............................. 222 242
Nuclear fuel under capital lease.......................... 662 659
Construction work in progress............................. 9 118
------- -------
11,922 11,629
------- -------
Less accumulated depreciation and amortization.............. 5,446 5,201
------- -------
6,476 6,428
------- -------
REGULATORY ASSETS........................................... 2,972 3,091
------- -------
OTHER ASSETS................................................ 213 200
------- -------
TOTAL ASSETS...................................... $11,191 $10,987
======= =======
See Notes to Condensed Consolidated Financial Statements (Unaudited).
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13
SEPTEMBER 30 DECEMBER 31
1999 1998
------------ -----------
LIABILITIES AND SHAREHOLDER'S EQUITY
CURRENT LIABILITIES
Accounts payable.......................................... $ 167 $ 211
Accrued interest.......................................... 43 54
Dividends payable......................................... 80 80
Accrued payroll........................................... 80 86
Short-term borrowings..................................... 296 231
Income taxes.............................................. 104 60
Current portion long-term debt............................ 479 219
Current portion capital leases............................ 87 118
Other..................................................... 192 203
------- -------
1,528 1,262
------- -------
OTHER LIABILITIES
Deferred income taxes..................................... 1,867 1,846
Capital leases............................................ 118 126
Regulatory liabilities.................................... 230 294
Other..................................................... 517 484
------- -------
2,732 2,750
------- -------
LONG-TERM DEBT.............................................. 3,308 3,462
------- -------
SHAREHOLDER'S EQUITY
Common stock, $10 par value, 400,000,000 shares
authorized, 145,119,875 issued and outstanding......... 1,451 1,451
Premium on common stock................................... 548 548
Common stock expense...................................... (48) (48)
Retained earnings......................................... 1,672 1,562
------- -------
3,623 3,513
------- -------
CONTINGENCIES (NOTE 5)
TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY........ $11,191 $10,987
======= =======
See Notes to Condensed Consolidated Financial Statements (Unaudited).
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THE DETROIT EDISON COMPANY
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
(MILLIONS)
NINE MONTHS
ENDED
SEPTEMBER 30
--------------
1999 1998
---- ----
OPERATING ACTIVITIES
Net Income................................................ $ 349 $ 318
Adjustments to reconcile net income to net cash from
operating activities:
Depreciation and amortization.......................... 493 463
Other.................................................. (5) (168)
Changes in current assets and liabilities:
Accounts receivable.................................. (46) (64)
Inventories.......................................... 26 (32)
Payables............................................. (61) 103
Other................................................ (53) (48)
----- -----
Net cash from operating activities..................... 703 572
----- -----
INVESTING ACTIVITIES
Plant and equipment expenditures.......................... (429) (365)
----- -----
Net cash used for investing activities................. (429) (365)
----- -----
FINANCING ACTIVITIES
Issuance of long-term debt................................ 265 100
Increase in short-term borrowings......................... 65 205
Increase in restricted cash for debt redemptions.......... (185) --
Redemption of long-term debt.............................. (159) (169)
Redemption of preferred stock............................. -- (100)
Dividends on common and preferred stock................... (239) (245)
Other..................................................... -- 3
----- -----
Net cash used for financing activities................. (253) (206)
----- -----
NET INCREASE IN CASH AND CASH EQUIVALENTS................... 21 1
----- -----
CASH AND CASH EQUIVALENTS AT BEGINNING OF THE PERIOD........ 5 15
----- -----
CASH AND CASH EQUIVALENTS AT END OF THE PERIOD.............. $ 26 $ 16
===== =====
SUPPLEMENTARY CASH FLOW INFORMATION
Interest paid (excluding interest capitalized)............ $ 229 $ 219
Income taxes paid......................................... 186 195
New capital lease obligations............................. 3 52
See Notes to Condensed Consolidated Financial Statements (Unaudited).
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15
THE DETROIT EDISON COMPANY
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDER'S EQUITY (UNAUDITED)
(MILLIONS, EXCEPT PER SHARE AMOUNTS; SHARES IN THOUSANDS)
1999
-----------------
SHARES AMOUNT
------ ------
COMMON STOCK
Balance at beginning of year.............................. 145,120 $1,451
------- ------
Balance at September 30, 1999............................. 145,120 $1,451
------- ------
PREMIUM ON COMMON STOCK
Balance at beginning of year.............................. $ 548
------
Balance at September 30, 1999............................. $ 548
------
COMMON STOCK EXPENSE
Balance at beginning of year.............................. $ (48)
------
Balance at September 30, 1999............................. $ (48)
------
RETAINED EARNINGS
Balance at beginning of year.............................. $1,562
Net income................................................ 349
Dividends declared on common stock ($1.65 per share)...... (239)
------
Balance at September 30, 1999............................. $1,672
------
TOTAL SHAREHOLDER'S EQUITY.................................. $3,623
======
See Notes to Condensed Consolidated Financial Statements (Unaudited).
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DTE ENERGY COMPANY AND THE DETROIT EDISON COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1 -- ANNUAL REPORT NOTES
These condensed consolidated financial statements (unaudited) should be
read in conjunction with the Annual Report Notes and the Quarterly Report Notes.
The Notes contained herein update and supplement matters discussed in the Annual
Report Notes and the Quarterly Report Notes.
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
The condensed consolidated financial statements are unaudited, but in the
opinion of the Company and Detroit Edison, with respect to its own financial
statements, include all adjustments necessary for a fair statement of the
results for the interim periods. Financial results for this interim period are
not necessarily indicative of results that may be expected for any other interim
period or for the fiscal year.
Certain prior year balances have been reclassified to conform to the
current year's presentation.
NOTE 2 -- MERGER AGREEMENT
On October 4, 1999 the Company entered into a definitive merger agreement
with MCN. MCN, a Michigan corporation, is primarily involved in natural gas
production, gathering, processing, transmission, storage and distribution,
electric power generation and energy marketing. MCN's largest subsidiary is
Michigan Consolidated Gas Company, a natural gas utility serving 1.2 million
customers in more than 500 communities throughout Michigan. The merger, which is
subject to a number of regulatory approvals, is expected to be completed in six
to nine months. The merger agreement provides that the Company will acquire all
outstanding shares of MCN for $28.50 per share in cash or 0.775 shares of
Company common stock for each share of MCN common stock, subject to certain
allocation procedures requiring that the aggregate number of shares of MCN
common stock that will be converted into cash and the Company's common stock
will be equal to 55% and 45%, respectively, of the total number of shares of MCN
common stock outstanding immediately prior to the merger. The transaction was
preliminarily valued at $4.6 billion, which includes the assumption of
approximately $2 billion of MCN's debt.
The merger agreement provides for termination under certain circumstances;
in such event, (1) the Company may be required to pay MCN a termination fee of
$85 million plus expense reimbursement of up to $15 million or (2) MCN may be
required to pay the Company a termination fee of $55 million plus expense
reimbursement of up to $15 million.
16
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NOTE 3 -- REGULATORY MATTERS
As discussed in Note 2 of the Annual Report, proceedings were pending
regarding Detroit Xxxxxx's recovery of certain extraordinary storm costs over a
24-month period commencing January 1998. On June 11, 1999, in an unpublished
opinion, the Michigan Court of Appeals remanded back to the MPSC for hearing a
November 1997 order that permitted Detroit Edison to amortize extraordinary
storm damage expenses incurred in 1997 over the following two years. The MPSC
had approved Detroit Xxxxxx's request to offset the storm damage expense against
a $53 million revenue requirement reduction from the 1988 Fermi settlement on an
ex-parte basis. The Attorney General appealed the MPSC ruling. Detroit Edison
filed a motion for rehearing with the Michigan Court of Appeals on July 1, 1999.
Detroit Edison is unable to determine the timing or the outcome of these
proceedings.
NOTE 4 -- SHORT-TERM CREDIT ARRANGEMENTS AND BORROWINGS
At September 30, 1999, Detroit Edison had total short-term credit
arrangements of approximately $505 million under which $96 million of commercial
paper was outstanding. Additionally, Detroit Edison had a $200 million trade
receivables sales agreement under which $200 million was outstanding at
September 30, 1999.
At September 30, 1999, DTE Capital had short-term credit arrangements of
$400 million, backed by a Support Agreement from the Company, under which no
amounts were outstanding.
In addition, the Company has entered into a total of $550 million of
Support Agreements with DTE Capital for the purpose of DTE Capital's credit
enhancing activities on behalf of DTE Energy affiliates.
NOTE 5 -- CONTINGENCIES
LEGAL PROCEEDINGS
Detroit Edison and plaintiffs in a class action pending in the Circuit
Court for Xxxxx County, Michigan (Gilford, et al v. Detroit Edison), as well as
plaintiffs in two other pending actions which make class claims (Xxxxxxx, et xx
x. Detroit Edison, Circuit Court for Xxxxx County, Michigan; and Frazier v.
Detroit Edison, United States District Court, Eastern District of Michigan),
agreed to binding arbitration to settle these matters. The settlement agreement
provides that Detroit Edison's monetary liability would be no less than $17.5
million and no greater than $65 million after the conclusion of all related
proceedings. In July 1998, the Consent Judgement received preliminary Court
approval. The Fairness Hearing with respect to the terms of the settlement was
held in August 1998, and no objections to the settlement were raised. On October
28, 1999, a panel of arbitrators awarded the plaintiffs $45.15 million. As a
result of the arbitration award, Detroit Edison must deposit $40.15 million in
an escrow fund for the plaintiffs by November 27, 1999. Due to sufficient prior
accruals and insurance coverage, Detroit Edison does not anticipate a material
1999 earnings impact due to this award.
17
18
NOTE 6 -- SEGMENT AND RELATED INFORMATION
Effective December 31, 1998, the Company adopted Statement of Financial
Accounting Standards No. 131, "Disclosure about Segments of an Enterprise and
Related Information." The Company's reportable business segment is its electric
utility, Detroit Edison, which is engaged in the generation, purchase,
transmission, distribution and sale of electric energy in a 7,600 square mile
area in Southeastern Michigan. All other includes non-regulated energy-related
businesses and services, which develop and manage electricity and other
energy-related projects, and engage in domestic energy trading and marketing.
Inter-segment revenues are not material. Financial data for business segments
are as follows:
ELECTRIC ALL RECONCILIATIONS
UTILITY OTHER AND ELIMINATIONS CONSOLIDATED
-------- ----- ---------------- ------------
(MILLIONS)
Three Months Ended September 30, 1999
Operating revenues................................ $1,211 $229 $ -- $1,440
Net income........................................ 138 23 -- 161
Nine Months Ended September 30, 1999
Operating revenues................................ $3,128 $486 $ -- $3,614
Net income........................................ 349 47 (10) 386
Three Months Ended September 30, 1998
Operating revenues................................ $1,105 $ 94 $ -- $1,199
Net income........................................ 124 10 (2) 132
Nine Months Ended September 30, 1998
Operating revenues................................ $2,998 $210 $ -- $3,208
Net income........................................ 312 29 (4) 337
------------------------
This Quarterly Report on Form 10-Q, including the report of Deloitte &
Touche LLP (on page 19) will automatically be incorporated by reference in the
Prospectuses constituting part of the Registration Statements on Form S-3
(Registration Nos. 33-53207, 33-64296 and 333-65765) of The Detroit Edison
Company and Form S-8 (Registration No. 333-00023), Form S-4 (Registration No.
333-89175) and Form S-3 (Registration No. 33-57545) of DTE Energy Company, filed
under the Securities Act of 1933. Such report of Deloitte & Touche LLP, however,
is not a "report" or "part of the Registration Statement" within the meaning of
Sections 7 and 11 of the Securities Act of 1933 and the liability provisions of
Section 11(a) of such Act do not apply.
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19
INDEPENDENT ACCOUNTANTS' REPORT
To the Board of Directors and Shareholders of DTE Energy Company and
The Detroit Edison Company
We have reviewed the accompanying condensed consolidated balance sheets of
DTE Energy Company and subsidiaries and of The Detroit Edison Company and
subsidiaries as of September 30, 1999, and the related condensed consolidated
statements of income for the three-month and nine-month periods ended September
30, 1999 and 1998, the condensed consolidated statements of cash flows for the
nine-month periods ended September 30, 1999 and 1998, and the condensed
consolidated statement of changes in shareholders' equity for the nine-month
period ended September 30, 1999. These financial statements are the
responsibility of DTE Energy Company's management and of The Detroit Edison
Company's management.
We conducted our reviews in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data and of making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted in
accordance with generally accepted auditing standards, the objective of which is
the expression of an opinion regarding the financial statements taken as a
whole. Accordingly, we do not express such an opinion.
Based on our reviews, we are not aware of any material modifications that
should be made to such condensed consolidated financial statements for them to
be in conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheets of DTE Energy Company and
subsidiaries and of The Detroit Edison Company and subsidiaries as of December
31, 1998, and the related consolidated statements of income, changes in
shareholders' equity, and cash flows for the year then ended (not presented
herein); and in our report dated January 27, 1999, we expressed an unqualified
opinion on those consolidated financial statements. In our opinion, the
information set forth in the accompanying condensed consolidated balance sheets
as of December 31, 1998 is fairly stated, in all material respects, in relation
to the consolidated balance sheets from which it has been derived.
DELOITTE & TOUCHE LLP
Detroit, Michigan
November 8, 1999
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ITEM 2 -- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
This analysis for the three and nine months ended September 30, 1999, as
compared to the same periods in 1998, should be read in conjunction with the
condensed consolidated financial statements (unaudited), the accompanying Notes,
the Quarterly Report Notes and the Annual Report Notes.
Detroit Edison is the principal operating subsidiary of the Company and, as
such, unless otherwise identified, this discussion explains material changes in
results of operations of both the Company and Detroit Edison and identifies
recent trends and events affecting both the Company and Detroit Edison.
GROWTH
As discussed in the Annual Report, in order to sustain earnings growth with
an objective of 6% growth annually, the Company and Detroit Edison have
developed a business strategy focused on core competencies, consisting of
expertise in developing, managing and operating energy assets, including coal
sourcing, blending and transportation skills. As part of this strategy it was
expected that one new line of business would be developed in 1999 through
acquisition or start-up.
As discussed in Note 2, the Company and MCN have entered into a merger
agreement. Subject to the receipt of all regulatory approvals, as well as the
approval of the shareholders of each company, scheduled for December 20, 1999,
the merger is expected to be completed in six to nine months. The Company
expects that completion of the merger will result in the issuance of
approximately 30 million additional shares of its common stock and approximately
$1.4 billion in additional external financing.
The merger of the Company and MCN is expected to create a fully integrated
electric and natural gas company that would be able to achieve an average of $60
million in (after-tax) cost savings per year over the first ten years of the
merger. This business combination is also expected to be accretive to the
Company's earnings per share by 2001 and is expected to strongly support the
Company's commitment to a long-term earnings growth rate of 6%.
The merger agreement also provides for a Company affiliate to purchase all
of MCN's membership interest in several limited liability companies that own and
operate synthetic fuel manufacturing facilities (coal fines plants).
The successful completion and implementation of the merger is subject to a
number of risks, including the satisfactory receipt of all necessary regulatory
approvals, as well as the approval of the shareholders of each company. While
the Company expects that the combined entity will provide for operating cost
reductions, there can be no assurances that such reductions will occur. The
merger is expected to create fully integrated electric and gas operations which
will permit the Company to continue to successfully compete in the energy
markets as competition is fully introduced and implemented; however, there can
be no assurances that the new company will be successfully responsive to
competitive pressures. The external financing needs of the
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merger may create a sensitivity to interest rate changes; and the Company will
need to successfully integrate the two operations in order to be able to service
the expected debt requirements and achieve aggregate operating cost reductions.
The merger is anticipated to strategically place the Company in the energy
markets, but there can be no assurances that the combination will be successful.
ELECTRIC INDUSTRY RESTRUCTURING
Various bills have been introduced and proposed for introduction at the
Federal level and in the Michigan Legislature addressing competition in the
electric markets. The Company and Detroit Edison are reviewing these bills; and
the impact, which may include generation divestiture, of the adoption and
implementation of one or more of these legislative proposals is unknown. Detroit
Edison is voluntarily proceeding with the implementation of Electric Choice as
provided for in MPSC Orders.
MICHIGAN PUBLIC SERVICE COMMISSION
In March 1999, the MPSC approved an interim code of conduct filed by
Detroit Edison. The interim code allows DTE Energy affiliated companies to
participate in the Electric Choice program. The MPSC also opened a proceeding to
develop a permanent code of conduct. A final order from the MPSC is not expected
until the third quarter of 2000.
In March 1999, Detroit Edison filed an application with the MPSC for
true-up of its stranded costs, including Electric Choice implementation costs,
and on September 17, 1999, filed its direct testimony. The testimony recommended
Detroit Edison continue to provide exclusive metering and billing service, as
set forth in its approved Electric Choice Implementation Plan, at least through
the transition period ending in 2007; supported its proposed true-up methodology
including estimated initial transition charge levels for the year 2002 by
customer class; and supported Detroit Xxxxxx's proposed calculation of stranded
costs during the bidding period. The testimony also supported revised stranded
cost balances; presented Detroit Xxxxxx's position concerning the true-up of
stranded costs for actual market clearing price, and proposed a method for
identifying resale mitigation resources. In addition, the testimony supported
adjustment to calculations in the PSCR proceeding to account for the resale of
load lost due to the Electric Choice program; and presented its proposed method
for recovery of Electric Choice implementation costs. MPSC Staff and intervenors
have filed testimony in opposition to Detroit Xxxxxx's position. A final order
is not expected until the first quarter of 2000.
On July 22, 1999, the Association of Businesses Advocating Tariff Equity
(XXXXX) made a filing with the MPSC indicating that Detroit Edison's retail
rates produce approximately $333 million of excess revenues. Of this amount,
approximately $202 million is related to XXXXX'x proposed reversal of the
December 28, 1998 MPSC order authorizing the accelerated amortization of Fermi
2. On September 22, 1999, Detroit Edison, the MPSC Staff (Staff), the Michigan
Environmental Council and Public Research Group in Michigan, and the Attorney
General (AG) filed their direct cases in
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the XXXXX Complaint Case. Of particular significance is the proposal by the
Staff that the MPSC establish three profitability bands for return on equity
which would produce predefined benefits or penalties. Detroit Xxxxxx's testimony
supports a revenue deficiency of $33 million. The Staff concluded that no
revenue sufficiency exists when Detroit Xxxxxx's pending required review of its
depreciation rates is taken into account. The Staff also assumed that the Fermi
2 Amortization Order will not be reversed. The AG proposes the reversal of the
Fermi 2 Amortization Order. Detroit Edison will file rebuttal testimony in
mid-November 1999. A final MPSC order is not expected until spring 2000. Detroit
Edison is unable to predict the outcome of this proceeding.
On September 30, 1999, Detroit Edison filed its 2000 PSCR plan case. Fuel
and purchased power costs for 2000 are projected to increase by up to 6 percent,
on average, over the corresponding forecast for 1999. Detroit Edison is seeking
a corresponding increase in its PSCR Factor for 2000. An order is expected in
the third quarter of 2000.
ELECTRIC CHOICE
On June 29, 1999, the Michigan Supreme Court, on a 4-3 vote, issued an
opinion determining that the MPSC lacked authority to order retail wheeling in
the context of an Electric Choice program. The Court reversed an earlier
Michigan Court of Appeals opinion finding such authority and vacated two MPSC
orders directing implementation of the experimental program. The Court held that
the MPSC possesses no common law powers and may only exercise authority clearly
conferred upon it by the Legislature. It stated that retail wheeling issues
involve many policy concerns and stated that the Legislature, not the Court, is
the body that must consider and weigh the economic and social costs and benefits
of electric restructuring.
On August 17, 1999, the MPSC issued an order setting a deadline of
September 1, 1999 for Detroit Edison and Consumers Energy to notify the MPSC if
they choose to voluntarily implement the Electric Choice program previously
ordered by the MPSC. On September 1, 1999, Detroit Edison filed a letter with
the MPSC reaffirming the decision to expeditiously move ahead with the voluntary
implementation of Electric Choice. Consumers Energy has likewise agreed to
proceed with the Electric Choice program. On September 20, 1999, the bidding on
the 225 MW allotted for Detroit Edison and 150 MW allotted for Consumers Energy
for the first phase of Electric Choice was fully subscribed. Four additional
bidding phases are contemplated, 225 MW closing on November 19, 1999 and 225 MW
each closing in January, March and November 2000.
LIQUIDITY AND CAPITAL RESOURCES
CASH FROM OPERATING ACTIVITIES
Net cash from operating activities for the Company and Detroit Edison was
higher due to increased net income and changes in current assets and
liabilities.
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XXXX USED FOR INVESTING ACTIVITIES
Net cash used for investing activities for the Company was lower due to an
investment in coke oven battery businesses in the prior period and lower plant
and equipment expenditures.
Net cash used for investing activities was higher for Detroit Edison due to
higher plant and equipment expenditures.
CASH (USED FOR) FROM FINANCING ACTIVITIES
Net cash used for financing activities for the Company for the nine month
period ended September 30, 1999 was $283 million compared to net cash from
financing activities of $211 million for the same period in 1998. This
fluctuation was mainly due to a decreased usage of short-term borrowings.
Net cash used for financing activities for Detroit Edison increased due
primarily to an increase in restricted cash for debt redemptions and a decreased
usage of short-term borrowings.
Detroit Edison has an effective shelf registration statement on file with
the Securities and Exchange Commission pursuant to which it may issue up to $225
million in debt securities.
In August 1999, Detroit Edison issued $40 million of General and Refunding
Mortgage Bonds.
In August and September 1999, Detroit Edison issued three series of 30-year
collateralized tax-exempt bonds totaling $225 million. The proceeds were used to
redeem $40 million of debt in September 1999 and the remainder will be used for
December 1999 redemptions.
In November 1999, Detroit Edison purchased $24 million of Mortgage Bonds in
the open market. These bonds have been canceled.
YEAR 2000
The Company and Detroit Edison have been involved in an enterprise-wide
program to address Year 2000 issues. A program office was established in
mid-1997 to implement a rigorous plan to address the impact of Year 2000 on
hardware and software systems, embedded systems (which include microprocessors
used in the production and control of electric power), and critical service
providers. The emphasis has been on mission critical systems that support core
business activities or processes. Core business activities/processes include
safety, environmental and regulatory compliance, product production and
delivery, revenue collection, employee and supplier payment and financial asset
management.
The plan for addressing Year 2000 is divided into several phases including
raising general awareness of Year 2000 throughout the Company and Detroit
Edison; maintaining an inventory of systems and devices; performing an
assessment of inventoried systems and devices; performing compliance testing of
suspect systems and devices; remediation of non-compliant systems and devices
through replacement,
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repair, retirement, or identifying an acceptable work around; testing and
remediation of systems and devices in an integrated environment and preparing
business continuity plans.
Inventory, assessment and compliance testing phases have been completed for
known systems and devices. Remediation of mission critical assets is complete.
Integration planning, including the mapping of critical business processes, is
complete for Detroit Edison. Integration testing for Detroit Edison is also
complete.
To support the program, the Year 2000 office has been working with major
utility industry associations and organizations, customers and vendors to gather
and share information on Year 2000 issues. Letters were sent to the North
American Electric Reliability Council (NERC) and the U.S. Nuclear Regulatory
Commission (NRC) concerning Year 2000 readiness on June 29, 1999 and June 30,
1999, respectively. These letters confirmed that Detroit Edison systems critical
to the generation, transmission and distribution of power are ready for
operation into the new millennium. The NRC responded on October 1, 1999,
confirming that all requested information has been provided. The program office
has contacted vendors critical to Company operations to determine their progress
on Year 2000.
To further assist in identifying potential problems, tests of generating
facilities have been conducted by advancing control systems dates to the Year
2000. Results of these tests have shown that the generating facilities operated
successfully in this induced "millennium mode." Exercises were conducted on
December 31, 1998 and January 1, 1999 to assess the ability to reach employees
and the regional security centers of the East Central Area Reliability Group
through various communication channels. The exercised communication channels
operated properly. Detroit Edison back-up telecommunication systems worked as
designed in a North America-wide drill conducted on April 9, 1999. Detroit
Edison participated in the NERC nationwide Year 2000 drill for all utility
systems on September 8 and 9, 1999. As a result of the drill, Detroit Edison was
able to demonstrate its ability to deploy resources, perform operation and
administrative procedures, use backup telecommunication systems and implement
some contingency plans.
In the event that an unknown Year 2000 condition adversely affects service
to customers or an internal business process, contingency and business
continuity plans and procedures have been developed to provide rapid restoration
to normal conditions. The Company and Detroit Edison have always maintained a
comprehensive operational emergency response plan. The business continuity
function of the Year 2000 program supplements the existing emergency plan to
include Year 2000 specific events. To manage and coordinate operations,
including mobilization of all employees as necessary during the transition to
the new millennium, a Year 2000 emergency coordination center was fully
operational as of September 30, 1999. During the rollover event, the emergency
management staffing plan calls for 1,300 working and on-call employees to manage
Year 2000 issues. This is in addition to the normal holiday-weekend staff. Most
of the employees work in the Fossil Generation, Nuclear Generation, Energy
Delivery and Information Systems organizations. Key facilities, including
substations, will be staffed during the rollover. The emergency coordination
center will continuously monitor the impact of Year 2000 as it is experienced in
other parts of the world and moves to the Eastern Standard Time zone.
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The Company and Detroit Edison believe that with all Year 2000
modifications, business continuity and emergency management plans in place, the
Year 2000 will not have a material effect on their financial position, liquidity
and results of operations. Despite all efforts, there can be no assurances that
Year 2000 issues can be totally eliminated. Results of modifications and testing
done through September 30, 1999 have demonstrated that Detroit Edison should be
able to maintain normal operating conditions into the Year 2000, although there
may be isolated electric service interruptions. Detroit Edison's internal
business systems may be affected by a Year 2000 related failure that could
temporarily interrupt the ability to communicate with customers, collect
revenue, or complete cash transactions. In addition, no assurances can be given
that the systems of vendors, interconnected utilities and customers will not
result in Year 2000 problems.
The Company estimates that Year 2000 costs will approximate $87 million
with $81 million expended through September 30, 1999. Operating cash flow is
expected to be sufficient to pay Year 2000 modification costs with no material
impact on operating results or cash flows.
RESULTS OF OPERATIONS
For the three months ended September 30, 1999, the Company's net income was
$161 million or $1.11 per common share as compared to $132 million or $0.91 per
common share during the same period in 1998. For the nine months ended September
30, 1999, net income was $386 million or $2.66 per common share compared to $337
million or $2.32 per common share during the same period in 1998.
The 1999 three and nine month earnings were higher than 1998 due to higher
electric system sales and increased utilization of tax credits generated by
non-regulated businesses, partially offset by higher operating expenses,
primarily Year 2000, fuel and purchased power, and depreciation and amortization
expenses.
OPERATING REVENUES
Increases in operating revenues were due primarily to higher non-regulated
subsidiary revenues, principally energy trading and coke oven battery
operations, higher system sales due to increased customer base and electric
usage and increased heating load for the nine month period, partially offset by
decreased sales between utilities and regulated rate decreases.
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Detroit Edison kWh sales increased (decreased) as compared to the prior
year as follows:
THREE NINE
MONTHS MONTHS
------ ------
Residential................................................. 2.0% 3.2%
Commercial.................................................. (0.6) 2.8
Industrial.................................................. 11.1 4.7
Other (includes primarily sales for resale)................. 12.6 10.3
Total System........................................... 3.9 3.8
Sales between utilities..................................... (26.0) (29.6)
Total.................................................. 2.2 0.9
The increase in residential sales resulted from growth in the customer base
and electric usage, and more heating related demand for the nine month period.
Industrial sales increased, reflecting more heating related demand along with
replacement energy sales for the Ford Rouge Power Plant for the nine month
period and a continuation of favorable economic conditions. Commercial sales
decreased for the three month period due to cooler weather. Sales to other
customers increased reflecting increased demand from sales for resale customers.
Sales between utilities decreased due to less power available for sale.
OPERATING EXPENSES
Fuel and Purchased Power
For the three and nine month periods ended, fuel and purchased power
expense increased for the Company due primarily to new non-regulated subsidiary
expenses, principally energy trading operations. Detroit Edison fuel and
purchased power expense increased due to increased purchases of higher cost
power and higher system output, partially offset by increased usage of lower
cost system generation as a result of increased system availability and lower
fuel unit costs due to decreased nuclear fuel cost and increased usage of low
cost Fermi 2 generation.
Net system output and average fuel and purchased power unit costs for
Detroit Edison were as follows:
THREE MONTHS NINE MONTHS
---------------- ----------------
1999 1998 1999 1998
---- ---- ---- ----
(THOUSANDS OF MWH)
Power plant generation
Fossil.................................................... 11,847 11,387 32,021 32,784
Nuclear................................................... 2,377 1,445 7,028 5,734
Purchased power............................................. 1,988 2,924 5,761 5,706
------ ------ ------ ------
Net system output........................................... 16,212 15,756 44,510 44,224
====== ====== ====== ======
Average unit cost ($/MWh)
Generation................................................ $12.80 $13.18 $12.54 $12.88
Purchased power........................................... 101.62 53.81 60.38 48.33
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Operation and Maintenance
Operation and maintenance expense increased for the three and nine month
periods due to new non-regulated subsidiary operation expense ($33 million) and
($126 million), respectively, higher transmission and distribution related
expenses for the three month period ($26 million) and higher expenses for Year
2000 testing and remediation for the nine month period ($27 million). The
increase in non-regulated subsidiary operation expense was due to the increased
level of operation and the addition of new businesses.
Income Taxes
Income tax expense for the Company decreased in 1999 due primarily to
increased utilization of alternate fuels credits generated from non-regulated
businesses and the end of the Fermi 2 phase-in plan.
FORWARD-LOOKING STATEMENTS
Certain information presented herein is based on the expectations of the
Company and Detroit Edison, and, as such, is forward-looking. The Private
Securities Litigation Reform Act of 1995 encourages reporting companies to
provide analyses and estimates of future prospects and also permits reporting
companies to point out that actual results may differ from those anticipated.
Actual results for the Company and Detroit Edison may differ from those
expected due to a number of variables including, but not limited to, weather,
actual sales, the effects of competition and the phased-in implementation of
Electric Choice, the implementation of utility restructuring in Michigan (which
involves pending and proposed regulatory and legislative proceedings, and the
recovery of stranded costs), environmental (including proposed regulations to
limit nitrogen oxide emissions) and nuclear requirements, the impact of FERC
proceedings and regulations, the success of non-regulated lines of business and
the timely completion and functioning of Year 2000 modifications. In addition,
expected results will be dependent upon the successful completion and
implementation of the Company's pending merger with MCN. While the Company and
Detroit Edison believe that estimates given accurately measure the expected
outcome, actual results could vary materially due to the variables mentioned as
well as others. This discussion contains a Year 2000 readiness disclosure.
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QUARTERLY REPORT ON FORM 10-Q FOR DTE ENERGY COMPANY
PART II -- OTHER INFORMATION
ITEM 5 -- OTHER INFORMATION.
A special meeting of the Company's common shareholders will be held on
December 20, 1999. At this meeting, Shareholders will be asked to approve the
issuance of common stock in connection with the MCN merger. The affirmative vote
of a majority of shares voting is required for passage.
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QUARTERLY REPORT ON FORM 10-Q FOR THE DETROIT EDISON COMPANY
PART I -- FINANCIAL INFORMATION
ITEM 1 -- CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED).
See pages 11 through 15.
ITEM 2 -- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
See the Company's and Detroit Edison's "Item 2 -- Management's Discussion
and Analysis of Financial Condition and Results of Operations," which is
incorporated herein by this reference.
PART II -- OTHER INFORMATION
ITEM 1 -- LEGAL PROCEEDINGS.
In a lawsuit filed in January 1999 in the Circuit Court for Xxxxx County
Michigan (Xxxx, et al v. Detroit Edison), a number of individual plaintiffs have
claimed employment-related sex, gender and race discrimination, as well as
harassment. A hearing on plaintiffs' request for class action certification is
scheduled to be held in December 1999. Detroit Edison believes the claims are
without merit and class action certification is not appropriate.
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QUARTERLY REPORTS ON FORM 10-Q FOR
DTE ENERGY COMPANY AND THE DETROIT EDISON COMPANY
ITEM 6 -- EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
(i) Exhibits filed herewith.
EXHIBIT
NUMBER
-------
3-14 -- Bylaws of Detroit Edison, as amended through September 22,
1999.
4-204 -- Supplemental Indenture, dated as of August 1, 1999, creating
the General and Refunding Mortgage Bonds, 1999 Series AP,
Due September 1, 2029; 1999 Series BP, Due September 1,
2029; and 1999 Series LP, Due September 1, 2029.
4-205 -- Supplemental Indenture, dated as of August 15, 1999,
creating the General and Refunding Mortgage Bonds, Floating
Rate 1999 Series D Due September 17, 2001.
11-17 -- DTE Energy Company Basic and Diluted Earnings Per Share of
Common Stock.
12-20 -- DTE Energy Company Computation of Ratio of Earnings to Fixed
Charges.
12-21 -- The Detroit Edison Company Computation of Ratio of Earnings
to Fixed Charges.
15-12 -- Awareness Letter of Deloitte & Touche LLP regarding their
report dated November, 1999.
27-29 -- Financial Data Schedule for the period ended September 30,
1999 for DTE Energy Company.
27-30 -- Financial Data Schedule for the period ended September 30,
1999 for The Detroit Edison Company.
99-29 -- U.S. $160,000,000 Standby Note Purchase Credit Facility,
dated as of October 26, 1999, among Detroit Edison, the
Bank's signatory thereto, Barclays Bank PLC, as
Administrative Agent and Barclays Capital Inc., Xxxxxx
Brothers Inc. and Banc One Capital Markets, Inc., as
Remarketing Agents.
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99-30 -- Seventh Amendment, dated as of August 26, 1999, to
$200,000,000 364-Day Credit Agreement, dated as of September
1, 1993, as amended among The Detroit Edison Company,
Renaissance Energy Company, the Banks parties thereto and
Barclays Bank PLC, New York branch as Agent.
99-31 -- Eighth Amendment, dated as of August 26, 1999 to 1988
Amended and Restated Nuclear Fuel Heat Purchase Contract
between Detroit Edison and Renaissance Energy Company.
(ii) Exhibits incorporated herein by reference.
2(a) -- Agreement and Plan of Merger, among DTE Energy Company, MCN
Energy Group Inc. and DTE Enterprises, Inc., dated as of
October 4, 1999 (Exhibit 2(a) to Form 8-K dated October 5,
1999).
3(a) -- Amended and Restated Articles of Incorporation of DTE Energy
Company, dated December 13, 1995. (Exhibit 3-5 to Form 10-Q
for quarter ended September 30, 1997).
3(b) -- Certificate of Designation of Series A Junior Participating
Preferred Stock of DTE Energy Company. Exhibit 3-6 to Form
10-Q for quarter ended September 30, 1997.)
3(c) -- Bylaws of DTE Energy Company, as amended through September
22, 1999 (Exhibit 3-3 to Registration No. 333-89175).
3(d) -- Articles of Incorporation of DTE Enterprises, Inc. (Exhibit
3.5 to Registration No. 333-89175).
3(e) -- Bylaws of DTE Enterprises, Inc. (Exhibit 3.6 to Registration
No. 333-89175).
3(f) -- Rights Agreement, dated as of September 23, 1997, by and
between DTE Energy Company and The Detroit Edison Company,
as Rights Agent (Exhibit 4-1 to DTE Energy Company Current
Report on Form 8-K, dated September 23, 1997).
3(g) -- Agreement and Plan of Exchange (Exhibit 1(2) to DTE Energy
Form 8-B filed January 2, 1996, File No. 1-11607).
4(a) -- Mortgage and Deed of Trust, dated as of October 1, 1924,
between Detroit Edison (File No. 1-2198) and Bankers Trust
Company as Trustee (Exhibit B-1 to Registration No. 2-1630)
and indentures supplemental thereto, dated as of dates
indicated below, and filed as exhibits to the filings as set
forth below:
September 1, 1947 Exhibit B-20 to Registration No. 2-7136
October 1, 1968 Exhibit 2-B-33 to Registration No. 2-30096
November 15, 1971 Exhibit 2-B-38 to Registration No. 2-42160
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January 15, 1973 Exhibit 2-B-39 to Registration No. 2-46595
June 1, 1978 Exhibit 2-B-51 to Registration No. 2-61643
June 30, 1982 Exhibit 4-30 to Registration No. 2-78941
August 15, 1982 Exhibit 4-32 to Registration No. 2-79674
October 15, 1985 Exhibit 4-170 to Form 10-K for year ended December 31, 1994
November 30, 1987 Exhibit 4-139 to Form 10-K for year ended December 31, 1992
July 15, 1989 Exhibit 4-171 to Form 10-K for year ended December 31, 1994
December 1, 1989 Exhibit 4-172 to Form 10-K for year ended December 31, 1994
February 15, 1990 Exhibit 4-173 to Form 10-K for year ended December 31, 1994
April 1, 1991 Exhibit 4-15 to Form 10-K for year ended December 31, 1996
May 1, 1991 Exhibit 4-178 to Form 10-K for year ended December 31, 1996
May 15, 1991 Exhibit 4-179 to Form 10-K for year ended December 31, 1996
September 1, 1991 Exhibit 4-180 to Form 10-K for year ended December 31, 1996
November 1, 1991 Exhibit 4-181 to Form 10-K for year ended December 31, 1996
January 15, 1992 Exhibit 4-182 to Form 10-K for year ended December 31, 1996
February 29, 1992 Exhibit 4-187 to Form 10-Q for quarter ended March 31, 1998
April 15, 1992 Exhibit 4-188 to Form 10-Q for quarter ended March 31, 1998
July 15, 1992 Exhibit 4-189 to Form 10-Q for quarter ended March 31, 1998
July 31, 1992 Exhibit 4-190 to Form 10-Q for quarter ended March 31, 1998
November 30, 1992 Exhibit 4-130 to Registration No. 33-56496
January 1, 1993 Exhibit 4-131 to Registration No. 33-56496
March 1, 1993 Exhibit 4-191 to Form 10-Q for quarter ended March 31, 1998
March 15, 1993 Exhibit 4-192 to Form 10-Q for quarter ended March 31, 1998
April 1, 1993 Exhibit 4-143 to Form 10-Q for quarter ended March 31, 1993
April 26, 1993 Exhibit 4-144 to Form 10-Q for quarter ended March 31, 1993
May 31, 1993 Exhibit 4-148 to Registration No. 33-64296
June 30, 1993 Exhibit 4-149 to Form 10-Q for quarter ended June 30, 1993
(1993 Series AP)
June 30, 1993 Exhibit 4-150 to Form 10-Q for quarter ended June 30, 1993
(1993 Series H)
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September 15, 1993 Exhibit 4-158 to Form 10-Q for quarter ended September 30,
1993
March 1, 1994 Exhibit 4-163 to Registration No. 33-53207
June 15, 1994 Exhibit 4-166 to Form 10-Q for quarter ended June 30, 1994
August 15, 1994 Exhibit 4-168 to Form 10-Q for quarter ended September 30,
1994
December 1, 1994 Exhibit 4-169 to Form 10-K for year ended December 31, 1994
August 1, 1995 Exhibit 4-174 to Form 10-Q for quarter ended September 30,
1995
4(b) -- Collateral Trust Indenture (notes), dated as of June 30,
1993 (Exhibit 4-152 to Registration No. 33-50325).
4(c) -- First Supplemental Note Indenture, dated as of June 30, 1993
(Exhibit 4-153 to Registration No. 33-50325).
4(d) -- Second Supplemental Note Indenture, dated as of September
15, 1993 (Exhibit 4-159 to Form 10-Q for quarter ended
September 30, 1993).
4(e) -- First Amendment, dated as of August 15, 1996, to Second
Supplemental Note Indenture (Exhibit 4-17 to Form 10-Q for
quarter ended September 30, 1996).
4(f) -- Third Supplemental Note Indenture, dated as of August 15,
1994 (Exhibit 4-169 to Form 10-Q for quarter ended September
30, 1994).
4(g) -- First Amendment, dated as of December 12, 1995, to Third
Supplemental Note Indenture, dated as of August 15, 1994
(Exhibit 4-12 to Registration No. 333-00023).
4(h) -- Fourth Supplemental Note Indenture, dated as of August 15,
1995 (Exhibit 4-175 to Detroit Edison Form 10-Q for quarter
ended September 30, 1995).
4(i) -- Fifth Supplemental Note Indenture, dated as of February 1,
1996 (Exhibit 4-14 to Form 10-K for year ended December 31,
1996).
4(j) -- Sixth Supplemental Note Indenture, dated as of May 1, 1998,
between Detroit Edison and Bankers Trust Company, as
Trustee, creating the 7.54% Quarterly Income Debt Securities
("QUIDS"), including form of QUIDS. (Exhibit 4-193 to Form
10-Q for quarter ended June 30, 1998.)
4(k) -- Seventh Supplemental Note Indenture, dated as of October 15,
1998, between Detroit Edison and Bankers Trust Company, as
Trustee, creating the 7.375% QUIDS, including form of QUIDS.
(Exhibit 4-198 to Form 10-K for year ended December 31,
1998.)
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4(l) -- Standby Note Purchase Credit Facility, dated as of August
17, 1994, among The Detroit Edison Company, Barclays Bank
PLC, as Bank and Administrative Agent, Bank of America, The
Bank of New York, The Fuji Bank Limited, The Long-Term
Credit Bank of Japan, LTD, Union Bank and Citicorp
Securities, Inc. and First Chicago Capital Markets, Inc. as
Remarketing Agents (Exhibit 99-18 to Form 10-Q for quarter
ended September 30, 1994).
4(m) -- $60,000,000 Support Agreement dated as of January 21, 1998
between DTE Energy Company and DTE Capital Corporation.
(Exhibit 4-183 to Form 10-K for year ended December 31,
1997.)
4(n) -- $100,000,000 Support Agreement, dated as of June 16, 1998,
between DTE Energy Company and DTE Capital Corporation.
(Exhibit 4-194 to Form 10-Q for quarter ended June 30,
1998.)
4(o) -- $300,000,000 Support Agreement, dated as of November 18,
1998, between DTE Energy and DTE Capital Corporation.
(Exhibit 4-199 to Form 10-K for year ended December 31,
1998.)
4(p) -- $400,000,000 Support Agreement, dated as of January 19,
1999, between DTE Energy Company and DTE Capital
Corporation. (Exhibit 4-201 to Form 10-K for year ended
December 31, 1998.)
4(q) -- $50,000,000 Support Agreement dated as of June 10, 1999
between DTE Energy Company and DTE Capital Corporation
(Exhibit 4-203 to Form 10-Q for quarter ended June 30,
1999).
4(r) -- Indenture, dated as of June 15, 1998, between DTE Capital
Corporation and The Bank of New York, as Trustee. (Exhibit
4-196 to Form 10-Q for quarter ended June 30, 1998.)
4(s) -- First Supplemental Indenture, dated as of June 15, 1998,
between DTE Capital Corporation and The Bank of New York, as
Trustee, creating the $100,000,000 Remarketed Notes, Series
A due 2038, including form of Note. Exhibit 4-197 to Form
10-Q for quarter ended June 30, 1998.)
4(t) -- Second Supplemental Indenture, dated as of November 1, 1998,
between DTE Capital Corporation and The Bank of New York, as
Trustee, creating the $300,000,000 Remarketed Notes, 1998
Series B, including form of Note. (Exhibit 4-200 to Form
10-K for year ended December 31, 1998.)
4(u) -- Second Amended and Restated Credit Agreement, Dated as of J
January 19, 1999 among DTE Capital Corporation, the Initial
Lenders, Citibank, N.A., as Agent, and ABN AMRO Bank N.V.,
Barclays Bank PLC, Bayerische Landesbank Giruzertrale,
Cayman Islands Branch, Comerica Bank, Den Daske Bank
Aktieselskab and The First National Bank of Chicago, as
Co-Agents, and Xxxxxxx Xxxxx Xxxxxx Inc., as
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Arranger. (Exhibit 99-28 to Form 10-K for year ended
December 31, 1998).
4(v) -- $40,000,000 Support Agreement dated as of February 24, 1999
between DTE Energy Company and DTE Capital Corporation
(Exhibit 4-202 to Form 10-Q for quarter ended March 31,
1999).
99(a) -- Belle River Participation Agreement between Detroit Edison
and Michigan Public Power Agency, dated as of December 1,
1982 (Exhibit 28-5 to Registration No. 2-81501).
99(b) -- Belle River Transmission Ownership and Operating Agreement
between Detroit Edison and Michigan Public Power Agency,
dated as of December 1, 1982 (Exhibit 28-6 to Registration
No. 2-81501).
99(c) -- 1988 Amended and Restated Loan Agreement, dated as of
October 4, 1988, between Renaissance Energy Company (an
unaffiliated company) ("Renaissance") and Detroit Edison
(Exhibit 99-6 to Registration No. 33-50325).
99(d) -- First Amendment to 1988 Amended and Restated Loan Agreement,
dated as of February 1, 1990, between Detroit Edison and
Renaissance (Exhibit 99-7 to Registration No. 33-50325).
99(e) -- Second Amendment to 1988 Amended and Restated Loan
Agreement, dated as of September 1, 1993, between Detroit
Edison and Renaissance (Exhibit 99-8 to Registration No.
33-50325).
99(f) -- Third Amendment, dated as of August 28, 1997, to 1988
Amended and Restated Loan Agreement between Detroit Edison
and Renaissance (Exhibit 99-22 to Form 10-Q for quarter
ended September 30, 1997.)
99(g) -- $200,000,000 364-Day Credit Agreement, dated as of September
1, 1993, among Detroit Edison, Renaissance and Barclays Bank
PLC, New York Branch, as Agent (Exhibit 99-12 to
Registration No. 33-50325).
99(h) -- First Amendment, dated as of August 31, 1994, to
$200,000,000 364-Day Credit Agreement, dated September 1,
1993, among The Detroit Edison Company, Renaissance Energy
Company, the Banks party thereto and Barclays Bank, PLC, New
York Branch, as Agent (Exhibit 99-19 to Form 10-Q for
quarter ended September 30, 1994).
99(i) -- Third Amendment, dated as of March 8, 1996, to $200,000,000
364-Day Credit Agreement, dated September 1, 1993, as
amended, among Detroit Edison, Renaissance, the Banks party
thereto and Barclays Bank, PLC, New York Branch, as Agent
(Exhibit 99-11 to Form 10-Q for quarter ended March 31,
1996).
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99(j) -- Fourth Amendment, dated as of August 29, 1996, to
$200,000,000 364-Day Credit Agreement as of September 1,
1990, as amended, among Detroit Edison, Renaissance, the
Banks party thereto and Barclays Bank, PLC, New York Branch,
as Agent (Exhibit 99-13 to Form 10-Q for quarter ended
September 30, 1996).
99(k) -- Fifth Amendment, dated as of September 1, 1997, to
$200,000,000 Multi-Year Credit Agreement, dated as of
September 1, 1993, as amended, among Detroit Edison,
Renaissance, the Banks Party thereto and Barclays Bank PLC,
New York Branch, as Agent. (Exhibit 99-24 to Form 10-Q for
quarter ended September 30, 1997.)
99(l) -- $200,000,000 Three-Year Credit Agreement, dated September 1,
1993, among Detroit Edison, Renaissance and Barclays Bank,
PLC, New York Branch, as Agent (Exhibit 99-13 to
Registration No. 33-50325).
99(m) -- First Amendment, dated as of September 1, 1994, to
$200,000,000 Three-Year Credit Agreement, dated as of
September 1, 1993, among The Detroit Edison Company,
Renaissance Energy Company, the Banks party thereto and
Barclays Banks party thereto and Barclays Bank, PLC, New
York Branch, as Agent (Exhibit 99-14 to Form 10-Q for
quarter ended September 30, 1996).
99(p) -- Fifth Amendment, dated as of August 28, 1997, to
$200,000,000 364-Day Credit Agreement, dated as of September
1, 1990, as amended, among Detroit Edison, Renaissance, the
Banks Party thereto and Barclays Bank PLC, New York Branch,
as Agent (Exhibit 99-25 to Form 10-Q for quarter ended
September 30, 1997.)
99(q) -- Sixth Amendment, dated as of August 27, 1998, to
$200,000,000 364-Day Credit Agreement dated as of September
1, 1990, as amended, among Detroit Edison, Renaissance, the
Banks party thereto and Barclays Bank PLC, New York Branch,
as agent. (Exhibit 99-32 to Registration No. 333-65765.)
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99(r) -- 1988 Amended and Restated Nuclear Fuel Heat Purchase
Contract, dated October 4, 1988, between Detroit Edison and
Renaissance (Exhibit 99-9 to Registration No. 33-50325).
99(s) -- First Amendment to 1988 Amended and Restated Nuclear Fuel
Heat Purchase Contract, dated as of February 1, 1990,
between Detroit Edison and Renaissance (Exhibit 99-10 to
Registration No. 33-50325).
99(t) -- Second Amendment, dated as of September 1, 1993, to 1988
Amended and Restated Nuclear Fuel Heat Purchase Contract
between Detroit Edison and Renaissance (Exhibit 99-11 to
Registration No. 33-50325).
99(u) -- Third Amendment, dated as of August 31, 1994, to 1988
Amended and Restated Nuclear Fuel Heat Purchase Contract,
dated October 4, 1988, between The Detroit Edison Company
and Renaissance Energy Company (Exhibit 99-21 to Form 10-Q
for quarter ended September 30, 1994).
99(v) -- Fourth Amendment, dated as of March 8, 1996, to 1988 Amended
and Restated Nuclear Fuel Heat Purchase Contract Agreement,
dated as of October 4, 1988, between Detroit Edison and
Renaissance (Exhibit 99-10 to Form 10-Q for quarter ended
March 31, 1996).
99(w) -- Sixth Amendment, dated as of August 28, 1997, to 1988
Amended and Restated Nuclear Fuel Heat Purchase Contract
between Detroit Edison and Renaissance. (Exhibit 99-23 to
Form 10-Q for quarter ended September 30, 1997.)
99(x) -- Standby Note Purchase Credit Facility, dated as of September
12, 1997, among The Detroit Edison Company and the Bank's
Signatory thereto and The Chase Manhattan Bank, as
Administrative Agent, and Citicorp Securities, Inc., Lehman
Brokers, Inc., as Remarketing Agents and Chase Securities,
Inc. as Arranger. (Exhibit 999-26 to Form 10-Q for quarter
ended September 30, 1997.)
(b) On October 5, 1999 the Company filed a Current Report on Form 8-K discussing
the proposed merger with MCN.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
DTE ENERGY COMPANY
--------------------------------------------------------
(Registrant)
Date November 8, 1999 /s/ XXXXX X. XXXXX
--------------------------------------------------------
Xxxxx X. Xxxxx
Vice President and Corporate Secretary
Date November 8, 1999 /s/ XXXXX X. XXXXXX
--------------------------------------------------------
Xxxxx X. Xxxxxx
Vice President
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
THE DETROIT EDISON COMPANY
--------------------------------------------------------
(Registrant)
Date November 8, 1999 /s/ XXXXX X. XXXXX
--------------------------------------------------------
Xxxxx X. Xxxxx
Vice President and Corporate Secretary
Date November 8, 1999 /s/ XXXXXX X. XXXXXXXXXX
--------------------------------------------------------
Xxxxxx X. Xxxxxxxxxx
Controller
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