1 ================================================================================ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------ FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTER ENDED MARCH 31, 1998 COMMISSION REGISTRANTS; STATE OF INCORPORATION; I.R.S. EMPLOYER FILE NUMBER ADDRESS; AND TELEPHONE NUMBER IDENTIFICATION NO. - ----------- ------------------------------------------ ------------------ 1-11607 DTE Energy Company 38-3217752 (a Michigan corporation) 2000 2nd Avenue Detroit, Michigan 48226-1279 313-235-4000 1-2198 The Detroit Edison Company 38-0478650 (a Michigan corporation) 2000 2nd Avenue Detroit, Michigan 48226-1279 313-235-8000 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 March 31, 1998, 145,075,152 shares of DTE Energy's Common Stock, substantially all held by non-affiliates, were outstanding. ================================================================================
2 DTE ENERGY COMPANY AND THE DETROIT EDISON COMPANY FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 1998 This document contains the Quarterly Reports on Form 10-Q for the quarter ended March 31, 1998 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 <TABLE> <CAPTION> Page ---- <S> <C> Definitions................................................................................3 Quarterly Report on Form 10-Q for DTE Energy Company: Part I- Financial Information............................................................4 Item 1 - Condensed Consolidated Financial Statements (Unaudited).................4 Notes to Condensed Consolidated Financial Statements (Unaudited).................................................15 Independent Accountants' Report........................................17 Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations....................................18 Item 3 - Quantitative and Qualitative Disclosures about Market Risk.............22 Quarterly Report on Form 10-Q for The Detroit Edison Company: Part I- Financial Information...........................................................23 Item 1 - Condensed Consolidated Financial Statements (Unaudited)................23 Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations....................................23 Part II-Other Information...............................................................23 Item 5 - Other Information......................................................23 Quarterly Reports on Form 10-Q for DTE Energy Company and The Detroit Edison Company: Item 6 - Exhibits and Reports on Form 8-K.......................................24 Signature Page to DTE Energy Company Quarterly Report on Form 10-Q........................32 Signature Page to The Detroit Edison Company Quarterly Report on Form 10-Q................33 </TABLE> 2
3 DEFINITIONS Annual Report ..........1997 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 39 through 61 and 65 through 67 of the 1997 Annual Report to the Securities and Exchange Commission on Form 10-K for DTE Energy Company and The Detroit Edison Company 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) FERC ...................Federal Energy Regulatory Commission kWh ....................Kilowatthour MPSC ...................Michigan Public Service Commission MWh ....................Megawatthour MW .....................Megawatt Note(s) ................Note(s) to Condensed Consolidated Financial Statements (Unaudited) appearing herein PSCR ...................Power Supply Cost Recovery QUIDS ..................Quarterly Income Debt Securities Registrant .............Company or Detroit Edison, as the case may be Retail Access Tariff ...A rate paid to sell power on a utility system 3
4 QUARTERLY REPORT ON FORM 10-Q FOR DTE ENERGY COMPANY PART I - FINANCIAL INFORMATION ITEM 1 - CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED): DTE ENERGY COMPANY CONDENSED CONSOLIDATED STATEMENT OF INCOME (UNAUDITED) (In Millions, Except Per Share Amounts) <TABLE> <CAPTION> Three Months Ended March 31 -------------------- 1998 1997 --------- --------- <S> <C> <C> OPERATING REVENUES $ 945 $ 869 --------- --------- OPERATING EXPENSES Fuel and purchased power 208 199 Operation and maintenance 266 233 Depreciation and amortization 165 166 Taxes other than income 71 69 Other 2 1 --------- --------- Total Operating Expenses 712 668 --------- --------- OPERATING INCOME 233 201 --------- --------- INTEREST EXPENSE AND OTHER Interest expense 74 71 Preferred stock dividends of subsidiary 3 3 Other - net - 4 --------- --------- Total Interest Expense and Other 77 78 --------- --------- INCOME BEFORE INCOME TAXES 156 123 INCOME TAXES 52 52 --------- --------- NET INCOME $ 104 $ 71 ========= ========= AVERAGE COMMON SHARES OUTSTANDING 145 145 --------- --------- EARNINGS PER COMMON SHARE - BASIC AND DILUTED $ 0.72 $ 0.49 --------- --------- </TABLE> See notes to condensed consolidated financial statements (unaudited). 4
5 DTE ENERGY COMPANY CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED) (In Millions) <TABLE> <CAPTION> Three Months Ended March 31 -------------------- 1998 1997 -------------------- <S> <C> <C> OPERATING ACTIVITIES Net Income $ 104 $ 71 Adjustments to reconcile net income to net cash from operating activities: Depreciation and amortization 165 166 Other 3 50 Changes in current assets and liabilities: Accounts receivable 47 (17) Inventories 12 4 Payables 5 33 Other (97) (72) - --------------------------------------------------------------------------------------------------- Net cash from operating activities 239 235 - --------------------------------------------------------------------------------------------------- INVESTING ACTIVITIES Plant and equipment expenditures (125) (91) Investment in limited partnership (200) - Nuclear decommissioning trust funds (29) (9) Other 6 (1) - --------------------------------------------------------------------------------------------------- Net cash used for investing activities (348) (101) - --------------------------------------------------------------------------------------------------- FINANCING ACTIVITIES Issuance of long-term debt - 7 Increase (Decrease) in short-term borrowings 377 (6) Redemption of long-term debt (169) (45) Dividends on common stock (75) (75) Other - (1) - --------------------------------------------------------------------------------------------------- Net cash from (used for) financing activities 133 (120) - --------------------------------------------------------------------------------------------------- NET INCREASE IN CASH AND CASH EQUIVALENTS 24 14 CASH AND CASH EQUIVALENTS AT BEGINNING OF THE PERIOD 99 53 - --------------------------------------------------------------------------------------------------- CASH AND CASH EQUIVALENTS AT END OF THE PERIOD $ 123 $ 67 =================================================================================================== SUPPLEMENTARY CASH FLOW INFORMATION Interest paid (excluding interest capitalized) $ 85 $ 77 Income taxes paid 20 1 New capital lease obligations 17 33 </TABLE> See notes to condensed consolidated financial statements (unaudited). 5
6 DTE ENERGY COMPANY CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED) (In Millions, Except Per Share Amounts and Shares) <TABLE> <CAPTION> March 31 December 31 1998 1997 -------- ----------- <S> <C> <C> ASSETS CURRENT ASSETS Cash and cash equivalents $ 123 $ 99 Accounts receivable Customer (less allowance for doubtful accounts of $20) 296 305 Accrued unbilled revenues 124 137 Other 53 78 Inventories (at average cost) Fuel 127 130 Materials and supplies 165 173 Other 101 13 -------- -------- 989 935 -------- -------- INVESTMENTS Nuclear decommissioning trust funds 268 239 Other 264 57 -------- -------- 532 296 -------- -------- PROPERTY Property, plant and equipment 14,612 14,495 Property under capital leases 256 256 Nuclear fuel under capital lease 623 607 Construction work in progress 18 16 -------- -------- 15,509 15,374 -------- -------- Less accumulated depreciation and amortization 6,602 6,440 -------- -------- 8,907 8,934 -------- -------- OTHER ASSETS Regulatory assets 801 856 Other 213 202 -------- -------- 1,014 1,058 -------- -------- TOTAL ASSETS $ 11,442 $ 11,223 ======== ======== </TABLE> See notes to condensed consolidated financial statements (unaudited). 6
7 <TABLE> <CAPTION> March 31 December 31 1998 1997 -------- ----------- <S> <C> <C> LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable $ 146 $ 161 Accrued interest 43 57 Dividends payable 78 78 Accrued payroll 92 81 Short-term borrowings 419 42 Accumulated deferred income taxes 62 64 Current portion long-term debt 55 205 Current portion capital leases 114 110 Other 240 219 -------- ----------- 1,249 1,017 -------- ----------- OTHER LIABILITIES Accumulated deferred income taxes 1,953 1,983 Accumulated deferred investment tax credits 297 301 Capital leases 135 137 Other 316 302 -------- ----------- 2,701 2,723 -------- ----------- LONG-TERM DEBT 3,757 3,777 -------- ----------- SHAREHOLDERS' EQUITY Detroit Edison cumulative preferred stock, $100 par value, 6,747,484 shares authorized, 5,207,657 issued, 1,501,223 shares outstanding 144 144 Common stock, without par value, 400,000,000 shares authorized, 145,075,152 and 145,097,829 issued and outstanding, respectively 1,951 1,951 Retained earnings 1,640 1,611 -------- ----------- TOTAL SHAREHOLDERS' EQUITY 3,735 3,706 -------- ----------- COMMITMENTS AND CONTINGENCIES (NOTE 4) TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 11,442 $ 11,223 ======== =========== </TABLE> See notes to condensed consolidated financial statements (unaudited). 7
8 DTE ENERGY COMPANY CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY (UNAUDITED) (In Millions, Except Per Share Amounts; Shares in Thousands) <TABLE> <CAPTION> 1998 --------------------- Shares Amount --------------------- <S> <C> <C> DETROIT EDISON CUMULATIVE PREFERRED STOCK Balance at beginning of year 1,501 $ 144 ------- ------ Balance at March 31, 1998 1,501 $ 144 - ------------------------------------------------------------------------------ COMMON STOCK Balance at beginning of year 145,098 $1,951 Repurchase and retirement of common stock (23) - ------- ------ Balance at March 31, 1998 145,075 $1,951 - ------------------------------------------------------------------------------ RETAINED EARNINGS Balance at beginning of year $1,611 Net income 104 Dividends declared on common stock ($0.515) per share (75) ------ Balance at March 31, 1998 $1,640 - ------------------------------------------------------------------------------ TOTAL SHAREHOLDERS' EQUITY $3,735 ============================================================================== </TABLE> See notes to condensed consolidated financial statements (unaudited). 8
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10 THE DETROIT EDISON COMPANY CONDENSED CONSOLIDATED STATEMENT OF INCOME (UNAUDITED) (In Millions) <TABLE> <CAPTION> Three Months Ended March 31 -------------------- 1998 1997 --------- --------- <S> <C> <C> OPERATING REVENUES $ 901 $ 864 --------- --------- OPERATING EXPENSES Fuel and purchased power 208 199 Operation and maintenance 221 227 Depreciation and amortization 163 165 Taxes other than income 70 68 Other 2 1 --------- --------- Total Operating Expenses 664 660 --------- --------- OPERATING INCOME 237 204 --------- --------- INTEREST EXPENSE AND OTHER Interest expense 68 71 Other - net 5 5 --------- --------- Total Interest Expense and Other 73 76 --------- --------- INCOME BEFORE INCOME TAXES 164 128 INCOME TAXES 66 54 --------- --------- NET INCOME $ 98 $ 74 PREFERRED STOCK DIVIDENDS 3 3 --------- --------- NET INCOME AVAILABLE FOR COMMON STOCK $ 95 $ 71 ========= ========= </TABLE> Note: Detroit Edison's condensed consolidated financial statements are presented here for ease of reference and are not considered to be part of Item 1 of the Company's report. See notes to condensed consolidated financial statements (unaudited). 10
11 THE DETROIT EDISON COMPANY CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED) (In Millions) <TABLE> <CAPTION> Three Months Ended March 31 ------------------ 1998 1997 ------------------ <S> <C> <C> OPERATING ACTIVITIES Net Income $ 98 $ 74 Adjustments to reconcile net income to net cash from operating activities: Depreciation and amortization 163 165 Other (1) 53 Changes in current assets and liabilities: Accounts receivable 54 (15) Inventories 2 4 Payables 22 32 Other (108) (72) - ------------------------------------------------------------------------------------------------ Net cash from operating activities 230 241 - ------------------------------------------------------------------------------------------------ INVESTING ACTIVITIES Plant and equipment expenditures (118) (86) Nuclear decommissioning trust funds (29) (9) Other (3) 1 - ------------------------------------------------------------------------------------------------ Net cash used for investing activities (150) (94) - ------------------------------------------------------------------------------------------------ FINANCING ACTIVITIES Increase (Decrease) in short-term borrowings 164 (6) Redemption of long-term debt (169) (45) Dividends on common stock and preferred stock (83) (83) - ------------------------------------------------------------------------------------------------ Net cash used for financing activities (88) (134) - ------------------------------------------------------------------------------------------------ NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (8) 13 CASH AND CASH EQUIVALENTS AT BEGINNING OF THE PERIOD 15 2 - ------------------------------------------------------------------------------------------------ CASH AND CASH EQUIVALENTS AT END OF THE PERIOD $ 7 $ 15 ================================================================================================ SUPPLEMENTARY CASH FLOW INFORMATION Interest paid (excluding interest capitalized) $ 79 $ 77 Income taxes paid 26 1 New capital lease obligations 17 33 </TABLE> See notes to condensed consolidated financial statements (unaudited). 11
12 THE DETROIT EDISON COMPANY CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED) (In Millions, Except Per Share Amounts and Shares) <TABLE> <CAPTION> March 31 December 31 1998 1997 -------- ----------- <S> <C> <C> ASSETS CURRENT ASSETS Cash and cash equivalents $ 7 $ 15 Accounts receivable Customer (less allowance for doubtful accounts of $20) 291 300 Accrued unbilled revenues 124 137 Other 32 63 Inventories (at average cost) Fuel 127 130 Materials and supplies 155 150 Other 98 11 ------- ------- 834 806 ------- ------- INVESTMENTS Nuclear decommissioning trust funds 268 239 Other 48 38 ------- ------- 316 277 ------- ------- PROPERTY Property, plant and equipment 14,316 14,204 Property under capital leases 256 256 Nuclear fuel under capital lease 623 607 Construction work in progress 10 12 ------- ------- 15,205 15,079 ------- ------- Less accumulated depreciation and amortization 6,589 6,431 ------- ------- 8,616 8,648 ------- ------- OTHER ASSETS Regulatory assets 801 856 Other 168 158 ------- ------- 969 1,014 ------- ------- TOTAL ASSETS $10,735 $10,745 ======= ======= </TABLE> See notes to condensed consolidated financial statements (unaudited). 12
13 <TABLE> <CAPTION> March 31 December 31 1998 1997 -------- ----------- <S> <C> <C> LIABILITIES AND SHAREHOLDER'S EQUITY CURRENT LIABILITIES Accounts payable $ 141 $ 150 Accrued interest 42 56 Dividends payable 83 83 Accrued payroll 92 80 Short-term borrowings 164 - Accumulated deferred income taxes 62 64 Current portion long-term debt 19 169 Current portion capital leases 114 110 Other 237 218 ------- ------- 954 930 ------- ------- OTHER LIABILITIES Accumulated deferred income taxes 1,937 1,973 Accumulated deferred investment tax credits 297 301 Capital leases 135 137 Other 312 300 ------- ------- 2,681 2,711 ------- ------- LONG-TERM DEBT 3,512 3,531 ------- ------- SHAREHOLDER'S EQUITY Cumulative preferred stock, $100 par value, 6,747,484 shares authorized, 5,207,657 issued, 1,501,223 shares outstanding 144 144 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 1,493 1,478 ------- ------- TOTAL SHAREHOLDER'S EQUITY 3,588 3,573 ------- ------- COMMITMENTS AND CONTINGENCIES (NOTE 4) TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY $10,735 $10,745 ======= ======= </TABLE> See notes to condensed consolidated financial statements (unaudited). 13
14 THE DETROIT EDISON COMPANY CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDER'S EQUITY (UNAUDITED) (In Millions, Except Per Share Amounts; Shares in Thousands) <TABLE> <CAPTION> 1998 ---------------------- Shares Amount ---------------------- <S> <C> <C> CUMULATIVE PREFERRED STOCK Balance at beginning of year 1,501 $ 144 ------- ------- Balance at March 31, 1998 1,501 $ 144 - ------------------------------------------------------------------ COMMON STOCK Balance at beginning of year 145,120 $1,451 ------- ------- Balance at March 31, 1998 145,120 $1,451 - ------------------------------------------------------------------ PREMIUM ON COMMON STOCK Balance at beginning of year $ 548 ------- Balance at March 31, 1998 $ 548 - ------------------------------------------------------------------ COMMON STOCK EXPENSE Balance at beginning of year $ (48) ------- Balance at March 31, 1998 $ (48) - ------------------------------------------------------------------ RETAINED EARNINGS Balance at beginning of year $1,478 Net income 98 Dividends declared Common stock ($0.55 per share) (80) Cumulative preferred stock* (3) ------- Balance at March 31, 1998 $1,493 - ------------------------------------------------------------------ TOTAL SHAREHOLDER'S EQUITY $3,588 ================================================================= </TABLE> * At established rate for each series. See notes to condensed consolidated financial statements (unaudited). 14
15 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) DTE ENERGY COMPANY AND THE DETROIT EDISON COMPANY NOTE 1 - ANNUAL REPORT NOTES These condensed consolidated financial statements should be read in conjunction with the Annual Report Notes. The Notes contained herein update and supplement matters discussed in the Annual 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. NOTE 2 - SHORT-TERM CREDIT ARRANGEMENTS AND BORROWINGS At March 31, 1998, Detroit Edison had total short-term credit arrangements of approximately $683 million under which $164 million was outstanding. The amounts outstanding at March 31, 1998 consisted of $64 million of commercial paper and $100 million secured by its customer accounts receivable and unbilled revenues portfolio. At March 31, 1998, DTE Capital had $255 million of commercial paper outstanding, backed by a Support Agreement from the Company. NOTE 3 - LONG-TERM DEBT The Company had $78.5 million in cash and cash equivalents restricted by debt covenants at March 31, 1998. NOTE 4- CONTINGENCIES LEGAL PROCEEDINGS - Plaintiffs in a class action pending in the Circuit Court for Wayne County, Michigan (Gilford, et al v. Detroit Edison), as well as plaintiffs in two other pending actions which make class claims (Sanchez, et al v. Detroit Edison, Circuit Court for Wayne County, Michigan; and Frazier v. Detroit Edison, United States District Court, Eastern District of Michigan), have entered into a settlement with Detroit Edison. The agreement provides that Detroit Edison's monetary liability is to be no less than $17.5 million and no greater than $65 million after the conclusion of all related proceedings. An amount related to this agreement was accrued at December 31, 1997. 15
16 ---------------------------------- This Quarterly Report on Form 10-Q, including the report of Deloitte & Touche LLP (on page 17) will automatically be incorporated by reference in the Prospectuses constituting part of the Registration Statements on Form S-3 (Registration Nos. 33-53207 and 33-64296) of The Detroit Edison Company and Form S-8 (Registration Nos. 333-00023 and 333-47247) 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. 16
17 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 March 31, 1998, and the related condensed consolidated statements of income and cash flows for the three-month periods ended March 31, 1998 and 1997, and the condensed consolidated statements of changes in shareholders' equity for the three-month period ended March 31, 1998. 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, 1997, 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 26, 1998, 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, 1997 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 April 27, 1998 17
18 ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. DTE ENERGY COMPANY AND THE DETROIT EDISON COMPANY This analysis for the three months ended March 31, 1998, as compared to the same period in 1997, should be read in conjunction with the condensed consolidated financial statements (unaudited), the accompanying Notes, and the Annual Report Notes. Detroit Edison is the principal 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 During the first quarter of 1998, the Company invested in the following new non-regulated energy related businesses: - - DTE Energy Services, Inc. purchased a limited partnership interest in Indiana Harbor Coke Company, L.P. for $200 million. The partnership will own and operate four heat-recovery coke batteries consisting of 268 ovens, to serve the Inland Steel Co. integrated steel mill in East Chicago, Indiana, and other customers. The batteries are scheduled to begin operating in the second quarter of 1998. - - DTE Energy Technologies, Inc. was formed to market systems integrator solutions to supermarkets, restaurants and retail chains. The subsidiary acquired the assets of Hy-Save, a refrigerant pump manufacturer. Detroit Edison plans to put the Conners Creek generation plant back in service by July 1, 1998. The plant is expected to add 120 MW of coal-fired capacity. ELECTRIC INDUSTRY DEREGULATION MICHIGAN PUBLIC SERVICE COMMISSION As discussed in the Annual Report, there are ongoing Michigan legislative, judicial and administrative proceedings considering the deregulation of the generation segment of the Michigan electric public utility industry, among other things. Neither the Company nor Detroit Edison are able to predict the outcome or timing of these proceedings. On February 11, the MPSC issued an order directing Detroit Edison to file its retail access tariff by February 25, and also directed the MPSC Staff to begin discussions to amicably resolve implementation issues. In its February 25 filing of the retail access tariffs, Detroit Edison indicated that several preconditions must be met prior to 18
19 beginning direct access, including assurance of stranded cost recovery through a statewide true-up mechanism, and a base rate freeze. Several parties have filed objections to Detroit Edison's retail access tariff and the preconditions. In March Detroit Edison filed a proposal to suspend the PSCR clause and to set the Fermi 2 Performance Standard adjustment at zero. The MPSC has not yet acted on this request. On April 6, Detroit Edison submitted a Draft Customer Choice Implementation Plan to the MPSC Staff. The draft plan outlines the guidelines and processes necessary to successfully implement retail access in the State of Michigan. Key aspects of this plan include: rules for supplier and customer participation, an explanation of the tasks and processes involved in changing Detroit Edison's business practices to accommodate customer choice, and a description of an awareness and education campaign to educate employees, customers, and others on the basics of customer choice. The MPSC Staff has initiated a series of three public forums to discuss the draft implementation plans of Detroit Edison and Consumers Energy Company. The Company is continuing to hold discussions with the MPSC, the Michigan legislature and other interested parties on all of the above matters. LIQUIDITY AND CAPITAL RESOURCES CASH PROVIDED BY OPERATING ACTIVITIES Net cash from operating activities was comparable in 1998 and 1997. CASH USED FOR INVESTING ACTIVITIES Net cash used for investing was higher due to increased non-regulated investments, plant and equipment expenditures and contributions to the nuclear decommissioning trust funds. Cash requirements for non-regulated investments are estimated to be approximately $488 million in 1998, of which $200 million had been expended as of March 31, 1998. Detroit Edison's 1998 cash requirements for its capital expenditure program are estimated at $512 million, of which $118 million had been expended as of March 31, 1998. CASH FROM (USED FOR) FINANCING ACTIVITIES Net cash from financing was higher due to increased DTE Capital and Detroit Edison short-term borrowings, partially offset by redemptions of long-term debt. In May 1998, Detroit Edison plans to issue $100 million of QUID's which will be used to redeem $100 million of the 7.75% series of Cumulative Preferred Stock. 19
20 RESULTS OF OPERATIONS For the three months ended March 31, 1998, the Company's net income was $104 million, or $0.72 per common share as compared to $71 million, or $0.49 per common share earned in the three months ended March 31, 1997. The 1998 three-month earnings were higher than the 1997 due to increased earnings from non-regulated subsidiary operations, the 1997 increase in the Fermi 2 Performance Standard accrual and 1997 expenses for a major ice storm. Storm damage costs of $30 million incurred during the first three quarters of 1997 were deferred in the fourth quarter of 1997 and are being amortized to expense over a 24 month period beginning in January 1998. OPERATING REVENUES Increases in operating revenues were due primarily to higher non-regulated subsidiary revenues, higher system and interconnection sales, partially offset by decreases in total system revenues driven mainly by lower rates. Detroit Edison kWh sales increased as compared to the prior year as follows: <TABLE> <CAPTION> Three Months ------ <S> <C> Residential 0.5 % Commercial 2.8 Industrial 1.3 Other (includes primarily sales for resale) 51.6 Total System 3.4 Sales between utilities 239.2 Total 11.8 </TABLE> The increase in residential sales resulted from growth in the customer base. Commercial sales increased for the three-month period, reflecting a continuation of favorable economic conditions. The increase in industrial sales reflects increased demand in the construction and automotive sectors. Sales to other customers increased reflecting increased demand from sales for resale customers. Sales between utilities increased due to greater demand for energy and increased availability of energy for sale. 20
21 OPERATING EXPENSES FUEL AND PURCHASED POWER Net system output and average fuel and purchased power unit costs were as follows: <TABLE> <CAPTION> Three Months -------------------------- 1998 1997 ------- ------- (Thousands of MWh) <S> <C> <C> Power plant generation Fossil 11,043 10,366 Nuclear 1,983 (14) Purchased power 966 2,204 ------- ------- Net system output 13,992 12,556 ======= ======= Average unit cost ($/MWh) $ 13.54 $ 14.92 ======= ======= </TABLE> Fuel and purchased power expense increased due to higher net system output and the prior-period receipt of Fermi 2 business insurance proceeds, partially offset by lower average unit costs resulting from replacing higher cost purchased power with lower cost nuclear generation as a result of Fermi 2 being back in service. OPERATION AND MAINTENANCE Operation and maintenance expense for the Company increased due primarily to new non-regulated subsidiary operation expense ($40 million) and higher Detroit Edison compensation expense related to a shareholder value improvement plan ($5.8 million), partially offset by lower Detroit Edison major storm expense ($13.1 million). INCOME TAXES Although income before income taxes was higher in 1998 than 1997, income tax expense for the Company did not change due primarily to increased alternate fuels credits in 1998. FORWARD-LOOKING STATEMENTS Certain information presented in this Quarterly Report on Form 10-Q is based upon 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, the impact of newly-required FERC tariffs, actual sales, the effects of competition, the implementation of utility 21
22 restructuring in Michigan (which involves pending regulatory proceedings, pending and proposed statutory changes and the recovery of stranded costs), environmental and nuclear requirements and the success of non-regulated lines of business. 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. ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. DTE ENERGY COMPANY AND THE DETROIT EDISON COMPANY DTE Energy Trading Company began operations in the first quarter of 1998. Its operations did not have a material impact on the Company. 22
23 QUARTERLY REPORT ON FORM 10-Q FOR THE DETROIT EDISON COMPANY PART I - FINANCIAL INFORMATION ITEM 1 - CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED). See pages 10 through 16. 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 5 - OTHER INFORMATION. A March MPSC Order directed Detroit Edison to refund to customers $24.1 million in April, the total of the 1996 PSCR Reconciliation and Fermi 2 Performance Standard disallowance. This amount was accrued at December 31, 1997. On April 14, the MPSC issued an order granting Detroit Edison's March 31 request to waive competitive bidding for Connors Creek and restart the plant. Based on a 1995 case, the MPSC concluded that Detroit Edison has a need for at least 417 MW of additional capacity in 1998, 570 MW of additional capacity in 1999, and additional capacity in future years. The MPSC reiterated findings from an earlier order which directed Detroit Edison to implement a retail wheeling experiment covering 90 MW of load once the utility required additional capacity. The order indicated that if Detroit Edison fails to take reasonable actions to provide adequate supplies for its customers, then the MPSC will make corresponding adjustments to the utility's authorized rate of return to reflect actual service quality. In an April 24 informational filing with the MPSC, Detroit Edison has proposed customer options that will assist in meeting customer demand this summer. Detroit Edison also proposed an experimental program permitting certain industrial customers with interruptible service to secure their own backup power during the summer peak periods in 1998 and 1999. The filing also suggests that large customers may be permitted to negotiate for reduced usage under a capacity release program. Detroit Edison declined to implement the 90MW retail wheeling experiment for the reason that it would not contribute to meeting the capacity need. 23
24 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 4-187 - Supplemental Mortgage Indenture, dated as of February 29, 1992, with respect to the 1992 Series AP Mortgage Bonds. 4-188 - Supplemental Mortgage Indenture, dated as of April 15, 1992, with respect to the Series KKP No. 13 Mortgage Bonds. 4-189 - Supplemental Mortgage Indenture, dated as of July 15, 1992, with respect to the 1992 Series CP Mortgage Bonds. 4-190 - Supplemental Mortgage Indenture, dated as of July 31, 1992, with respect to the 1992 Series D Mortgage Bonds. 4-191 - Supplemental Indenture, dated as of March 1, 1993, with respect to the 1993 Series E Mortgage Bonds. 4-192 - Supplemental Indenture, dated as of March 15, 1993, with respect to the 1993 Series D Mortgage Bonds. 10-17* - 1998 Shareholder Value Improvement Plan Measures. 10-18* - 1998 Executive Incentive Plan Measures. 10-19* - Amended and Restated Detroit Edison Savings Reparation Plan (February 23, 1998). 10-20* - Restricted Stock Agreement, dated March 23, 1998, between Detroit Edison and Anthony F. Earley, Jr. 10-21* - Amended and Restated Post-Employment Income Agreement, dated March 23, 1998, between Detroit Edison and Anthony F. Earley, Jr. 10-22* - Certain Arrangements pertaining to the employment of S. Martin Taylor. 24
25 Exhibit Number 10-23* - Certain Arrangements pertaining to the employment of Larry G. Garberding. 10-24* - Form of Indemnification Agreement between Detroit Edison and (1) John E. Lobbia, (2) Larry G. Garberding and (3) Anthony F. Earley, Jr. 10-25* - Form of Indemnification Agreement between Detroit Edison and its Directors. 11-11 - DTE Energy Company Basic and Diluted Earnings Per Share of Common Stock. 15-7 - Awareness Letter of Deloitte & Touche LLP regarding their report dated April 27, 1998. 27-19 - Financial Data Schedule for the period ended March 31, 1998 for DTE Energy Company. 27-20 - Financial Data Schedule for the period ended March 31, 1998 for The Detroit Edison Company. (ii) Exhibits incorporated herein by reference. 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) - Restated Articles of Incorporation of Detroit Edison, as filed December 10, 1991 with the State of Michigan, Department of Commerce - Corporation and Securities Bureau (Exhibit 4-117 to Form 10-Q for quarter ended March 31, 1993). 3(d) - Certificate containing resolution of the Detroit Edison Board of Directors establishing the Cumulative Preferred Stock, 7.75% Series as filed February 22, 1993 with the State of Michigan, Department of Commerce - Corporation and Securities Bureau (Exhibit 4-134 to Form 10-Q for quarter ended March 31, 1993). 3(e) - Certificate containing resolution of the Detroit Edison Board of Directors establishing the Cumulative Preferred Stock, 7.74% Series, 25
26 Exhibit Number as filed April 21, 1993 with the State of Michigan, Department of Commerce - Corporation and Securities Bureau (Exhibit 4-140 to Form 10-Q for quarter ended March 31, 1993). 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 22, 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: <TABLE> <S> <C> 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 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 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 </TABLE> 26
27 Exhibit Number <TABLE> <S> <C> November 30, 1992 Exhibit 4-130 to Registration No. 33-56496 January 1, 1993 Exhibit 4-131 to Registration No. 33-56496 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) 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 </TABLE> 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). 27
28 Exhibit Number 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) - 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). 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). 28
29 Exhibit Number 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, 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). 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 Detroit Edison, Renaissance, the Banks party thereto and Barclays Bank, PLC, New York Branch, as Agent (Exhibit 99-20 to Form 10-Q for quarter ended September 30, 1994). 99(n) - Third Amendment, dated as of March 8, 1996, to $200,000,000 Three-Year 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 99-12 to Form 10-Q for quarter ended March 31, 1996). 99(o) - Fourth Amendment, dated as of September 1, 1996, to $200,000,000 Multi-Year (formerly Three-Year) Credit Agreement, dated as of September 1, 1993, as amended among Detroit Edison, Renaissance, the Banks party thereto and Barclays Bank, PLC, New 29
30 Exhibit Number 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) - 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(r) - 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(s) - 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(t) - Third Amendment, dated as of August 31, 1994, to 1988 Amended and Restated Nuclear Fuel Heat Purchase Contract, dated October 4, 1988, between Detroit Edison and Renaissance (Exhibit 99-21 to Form 10-Q for quarter ended September 30, 1994). 99(u) - 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(v) - 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(w) - Standby Note Purchase Credit Facility, dated as of September 12, 1997, among Detroit Edison 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 99-26 to Form 10-Q for quarter ended September 30, 1997). 30
31 Exhibit Number 99(x) - Amended and Restated Credit Agreement, Dated as of January 21, 1998 among DTE Capital Corporation, the Initial Lenders, Citibank, N.A., as Agent, and Barclays Bank PLC, New York Branch and The First National Bank of Chicago, as Co-Agents, and Citicorp Securities, Inc., as Arranger. (Exhibit 99-27 to Form 10-K for year ended December 31, 1997.) 99(y) - $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.) 99(z) - $400,000,000 Support Agreement, dated as of January 21, 1998, between DTE Energy Company and DTE Capital Corporation. (Exhibit 4-184 to Form 10-K for year ended December 31, 1997.) (b) Registrants did not file any reports on Form 8-K during first quarter 1998. (c) *Denotes management contract or compensatory plan or arrangement required to be entered as an exhibit to this report. 31
32 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 April 27, 1998 /s/ SUSAN M. BEALE -------------- -------------------------------------- Susan M. Beale Vice President and Corporate Secretary Date April 27, 1998 /s/ DAVID E. MEADOR -------------- -------------------------------------- David E. Meador Vice President and Controller 32
33 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 April 27, 1998 /s/ SUSAN M. BEALE -------------- -------------------------------------- Susan M. Beale Vice President and Corporate Secretary Date April 27, 1998 /s/ DAVID E. MEADOR -------------- -------------------------------------- David E. Meador Vice President and Controller 33
34 QUARTERLY REPORTS ON FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 1998 DTE ENERGY COMPANY FILE NO. 1-11607 DETROIT EDISON COMPANY FILE NO. 1-2198 Exhibits filed herewith. Exhibit Number 4-187- Supplemental Mortgage Indenture, dated as of February 29, 1992, with respect to the 1992 Series AP Mortgage Bonds. 4-188- Supplemental Mortgage Indenture, dated as of April 15, 1992 with respect to the Series KKP No. 13 Mortgage Bonds. 4-189- Supplemental Mortgage Indenture, dated as of July 15, 1992, with respect to the 1992 Series CP Mortgage Bonds. 4-190- Supplemental Mortgage Indenture, dated as of July 31, 1992, with respect to the 1992 Series D Mortgage Bonds. 4-191- Supplemental Indenture, dated as of March 1, 1993, with respect to the 1993 Series E Mortgage Bonds. 4-192- Supplemental Indenture, dated as of March 15, 1993, with respect to the 1993 Series D Mortgage Bonds. 10-17*- 1998 Shareholder Value Improvement Plan Measures. 10-18*- 1998 Executive Incentive Plan Measures. 10-19* Amended and Restated Detroit Edison Savings Reparation Plan (February 23, 1998). 10-20* Restricted Stock Agreement, dated March 23, 1998, between Detroit Edison and Anthony F. Early, Jr.
35 10-21*- Amended and Restated Post-Employment Income Agreement, dated March 23, 1998, between Detroit Edison and Anthony F. Earley, Jr. 10-22*- Certain Arrangements pertaining to the employment of S. Martin Taylor. 10-23* Certain Arrangements pertaining to the employment of Larry G. Garberding. 10-24*- Form of Indemnification Agreement between Detroit Edison and (1) John E. Lobbia, (2) Larry G. Garberding and (3) Anthony F. Earley. 10-25* Form of Indemnification Agreement between Detroit Edison and its Directors. 11-11- DTE Energy Company Basic and Diluted Earnings Per Share of Common Stock. 15-7- Awareness Letter of Deloitte & Touche LLP regarding their report dated April 27, 1998. 27-19- Financial Data Schedule for the period ended March 31, 1998 for DTE Energy Company. 27-20- Financial Data Schedule for the period ended March 31, 1998 for The Detroit Edison Company. Exhibits incorporated herein by reference. See Page Nos.___ through ___ for location of exhibits incorporated by reference 3(a)- Amended and Restated Articles of Incorporation of DTE Energy Company, dated December 13, 1995. 3(b)- Certificate of Designation of Series A Junior Participating Preferred Stock of DTE Energy Company. 3(c)- Restated Articles of Incorporation of Detroit Edison, as filed December 10, 1991 with the State of Michigan, Department of Commerce - Corporation and Securities Bureau.
36 3(d)- Certificate containing resolution of the Detroit Edison Board of Directors establishing the Cumulative Preferred Stock, 7.75% Series as filed February 22, 1993 with the State of Michigan, Department of Commerce Corporation and Securities Bureau. 3(e)- Certificate containing resolution of the Detroit Edison Board of Directors establishing the Cumulative Preferred Stock, 7.74% Series, as filed April 21, 1993 with the State of Michigan, Department of Commerce - Corporation and Securities Bureau. 3(f)- Rights Agreement, dated as of September 23, 1997, by and between DTE Energy Company and The Detroit Edison Company, as Rights Agent. 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 and Bankers Trust Company as Trustee and indentures supplemental thereto, dated as of dates indicated below: September 1, 1947 October 1, 1968 November 15, 1971 January 15, 1973 June 1, 1978 June 30, 1982 August 15, 1982 October 15, 1985 July 15, 1989 December 1, 1989 February 15, 1990 April 1, 1991 May 1, 1991 May 15, 1991 September 1, 1991 November 1, 1991 January 15, 1992 November 30, 1992 January 1, 1993 April 1, 1993 April 26, 1993
37 May 31, 1993 June 30, 1993 June 30, 1993 September 15, 1993 March 1, 1994 June 15, 1994 August 15, 1994 December 1, 1994 August 1, 1995 4(b)- Collateral Trust Indenture (notes), dated as of June 30, 1993. 4(c)- First Supplemental Note Indenture, dated as of June 30, 1993. 4(d)- Second Supplemental Note Indenture, dated as of September 15, 1993. 4(e)- First Amendment, dated as of August 15, 1996, to Second Supplemental Note Indenture. 4(f)- Third Supplemental Note Indenture, dated as of August 15, 1994. 4(g)- First Amendment, dated as of December 12, 1995, to Third Supplemental Note Indenture, dated as of August 15, 1994. 4(h)- Fourth Supplemental Note Indenture, dated as of August 15, 1995. 4(i)- Fifth Supplemental Note Indenture, dated as of February 1, 1996. 4(j)- 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. 99(a)- Belle River Participation Agreement between Detroit Edison and Michigan Public Power Agency, dated as of December 1, 1982.
38 99(b)- Belle River Transmission Ownership and Operating Agreement between Detroit Edison and Michigan Public Power Agency, dated as of December 1, 1982 . 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. 99(d)- First Amendment to 1988 Amended and Restated Loan Agreement, dated as of February 1, 1990, between Detroit Edison and Renaissance. 99(e)- Second Amendment to 1988 Amended and Restated Loan Agreement, dated as of September 1, 1993, between Detroit Edison and Renaissance. 99(f)- Third Amendment, dated as of August 28, 1997, to 1988 Amended and Restated Loan Agreement between Detroit Edison and Renaissance. 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. 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, the Banks party thereto and Barclays Bank, PLC, New York Branch, as Agent. 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. 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. 99(k)- Fifth Amendment, dated as of September 1, 1997, to $200,000,000 Multi-Year Credit Agreement, dated as of
39 September 1, 1993, as amended, among Detroit Edison, Renaissance, the Banks Party thereto and Barclays Bank PLC, New York Branch, as Agent. 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. 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 Detroit Edison, Renaissance, the Banks party thereto and Barclays Bank, PLC, New York Branch, as Agent. 99(n)- Third Amendment, dated as of March 8, 1996, to $200,000,000 Three-Year 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. 99(o)- Fourth Amendment, dated as of September 1, 1996, to $200,000,000 Multi-Year (formerly Three-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. 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. 99(q)- 1988 Amended and Restated Nuclear Fuel Heat Purchase Contract, dated October 4, 1988, between Detroit Edison and Renaissance. 99(r)- First Amendment to 1988 Amended and Restated Nuclear Fuel Heat Purchase Contract, dated as of February 1, 1990, between Detroit Edison and Renaissance. 99(s)- Second Amendment, dated as of September 1, 1993, to 1988 Amended and Restated Nuclear Fuel Heat Purchase Contract between Detroit Edison and Renaissance.
40 99(t)- Third Amendment, dated as of August 31, 1994, to 1988 Amended and Restated Nuclear Fuel Heat Purchase Contract, dated October 4, 1988, between Detroit Edison and Renaissance. 99(u)- 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. 99(v)- Sixth Amendment, dated as of August 28, 1997, to 1988 Amended and Restated Nuclear Fuel Heat Purchase Contract between Detroit Edison and Renaissance. 99(w)- Standby Note Purchase Credit Facility, dated as of September 12, 1997, among Detroit Edison 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. 99(x)- Amended and Restated Credit Agreement, Dated as of January 21, 1998 among DTE Capital Corporation, the Initial Lenders, Citibank, N.A., as Agent, and Barclays Bank PLC, New York Branch and The First National Bnak of Chicago, as Co-Agents, and Citicorp Securities, Inc., as Arranger. 99(y)- $60,000,000 Support Agreement dated as of January 21, 1998 between DTE Energy Company and DTE Capital Corporation. 99(z)- $400,000,000 Support Agreement, dated as of January 21, 1998, between DTE Energy Company and DTE Capital Corporation. *Denotes management contract or compensatory plan or arrangement required to be entered as an exhibit to this report.