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DTE Energy Announces Midstream Spin-off; Spin-off Does Not Include Retail Supplier, Wholesale Electric Supply Business

October 27, 2020

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Copyright 2010-20 EnergyChoiceMatters.com
Reporting by Paul Ring • ring@energychoicematters.com

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DTE Energy today announced that the Company’s Board of Directors has unanimously authorized management to pursue a plan to spin-off the DTE Midstream business ('Midstream') from DTE Energy.

Midstream is the Company’s non-utility natural gas pipeline, storage and gathering business that serves producers, gas and electric utilities, marketers, power plants and large industrial customers

The spin-off does not include DTE Energy Supply, which operates as a competitive retail natural gas supplier in certain markets such as Ohio, and it does not include DTE Energy Trading, which, as a wholesale supplier, supplies default service in various restructured electric markets, in addition to engaging in various other trading activities

DTE said that, "The transaction would transform DTE Energy into a predominantly pure-play regulated electric and natural gas utility. Midstream would become an independent, publicly traded company well positioned for sustainable growth. The separation transaction is not expected to have any adverse impact on DTE Energy’s utility operations, customers or customer rates."

"With the completion of the separation, DTE Energy’s utility operating earnings would be in-line with its pure-play peers. Approximately 90% of DTE Energy’s operating earnings would be generated by its regulated utility business compared to 70% today. Approximately 92% of capital investments would be devoted to DTE Energy’s utility operations," DTE said

"Under the separation plan, DTE Energy shareholders will retain their current shares of DTE Energy 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 actual number of Midstream shares to be distributed to DTE Energy shareholders will be determined prior to closing. DTE Energy is targeting to complete the spin-off by mid-year 2021," DTE said

Among other benefits, DTE said that the Midstream spin-off, "Aligns the companies’ respective business mix with investor preferences and overall market trends, leading to expected enhanced valuations for both DTE Energy and Midstream."

DTE further said that the spin-off, "Generates a combined dividend that is expected to be higher than DTE’s current, pre-transaction dividend. Upon closing, DTE Energy plans to continue a payout ratio and dividend growth target consistent with pure-play utility companies. Upon closing, Midstream expects to establish a growing dividend with an initial level competitive with its midstream peers. Until the planned separation has been completed, DTE Energy expects to continue to pay its regular quarterly dividend. All dividends will be subject to approval by the respective Board of Directors following the completion of the separation."

Upon completion of the separation, David Slater, currently president and COO of DTE Midstream, will become president and CEO of the new Midstream company.

DTE Energy will continue to be led by Jerry Norcia, president and CEO, 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.

Robert Skaggs Jr., a member of the DTE Energy Board, will serve as executive chairman of the new Midstream Board and will continue to serve as a member of the DTE Energy Board

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