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 JUNE 30, 1998 <TABLE> <CAPTION> COMMISSION REGISTRANTS; STATE OF INCORPORATION; I.R.S. EMPLOYER FILE NUMBER ADDRESS; AND TELEPHONE NUMBER IDENTIFICATION NO. <C> <C> <C> 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 </TABLE> 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 June 30, 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 JUNE 30, 1998 This document contains the Quarterly Reports on Form 10-Q for the quarter ended June 30, 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................................ 19 Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations............................ 20 Item 3 - Quantitative and Qualitative Disclosures about Market Risk..... 27 Part II - Other Information......................................................... 28 Item 4 - Submission of Matters to a Vote of Security Holders.............. 28 Item 5 - Other Information............................................... 29 Quarterly Report on Form 10-Q for The Detroit Edison Company: Part I - Financial Information..................................................... 30 Item 1 - Condensed Consolidated Financial Statements (Unaudited)........ 30 Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations............................ 30 Part II - Other Information......................................................... 30 Item 5 - Other Information................................................ 30 Quarterly Reports on Form 10-Q for DTE Energy Company and The Detroit Edison Company: Item 6 - Exhibits and Reports on Form 8-K............................... 32 Signature Page to DTE Energy Company Quarterly Report on Form 10-Q........................ 39 Signature Page to The Detroit Edison Company Quarterly Report on Form 10-Q................ 40 </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 Direct Access....................Gives all retail customers equal opportunity to utilize the transmission system which results in access to competitive generation resources DTE Capital......................DTE Capital Corporation (a wholly owned subsidiary of DTE Energy Company) Market Power.....................Exists when one company owns a sufficiently large percentage of generation, transmission, or distribution capabilities in a region which allows it to set the market price of electricity 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 quarter ended March 31, 1998 Quarterly Report Notes...........Notes to Condensed Consolidated Financial Statements (Unaudited) appearing on pages 15 through 16 of the Quarterly Report to the Securities and Exchange Commission on Form 10-Q for the quarter ended March 31, 1998 for DTE Energy Company and The Detroit Edison Company QUIDS............................Quarterly Income Debt Securities 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): DTE ENERGY COMPANY CONDENSED CONSOLIDATED STATEMENT OF INCOME (UNAUDITED) (In Millions, Except Per Share Amounts) <TABLE> <CAPTION> Three Months Ended Six Months Ended June 30 June 30 ------------------------------------------------------------- 1998 1997 1998 1997 ------------------------------------------------------------- <S> <C> <C> <C> <C> OPERATING REVENUES $ 1,064 $ 892 $ 2,009 $ 1,761 - ----------------------------------------------------------------------------------------------------------------------- OPERATING EXPENSES Fuel and purchased power 285 197 493 395 Operation and maintenance 300 240 568 474 Depreciation and amortization 162 165 327 330 Taxes other than income 69 66 140 135 - ------------------------------------------------------------------------------------------------------------------------- Total Operating Expenses 816 668 1,528 1,334 - ------------------------------------------------------------------------------------------------------------------------- OPERATING INCOME 248 224 481 427 - ------------------------------------------------------------------------------------------------------------------------- INTEREST EXPENSE AND OTHER Interest expense 79 72 153 143 Preferred stock dividends of subsidiary 2 3 5 6 Other - net 5 3 5 8 - ------------------------------------------------------------------------------------------------------------------------- Total Interest Expense and Other 86 78 163 157 - ------------------------------------------------------------------------------------------------------------------------- INCOME BEFORE INCOME TAXES 162 146 318 270 Income Taxes 61 61 113 114 - ------------------------------------------------------------------------------------------------------------------------- NET INCOME $ 101 $ 85 $ 205 $ 156 ========================================================================================================================= AVERAGE COMMON SHARES OUTSTANDING 145 145 145 145 - ----------------------------------------------------------------------------------------------------------------------- EARNINGS PER COMMON SHARE - BASIC AND DILUTED $ 0.69 $ 0.59 $ 1.41 $ 1.07 - ----------------------------------------------------------------------------------------------------------------------- </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 Six Months Ended June 30 June 30 ------------------------------------------------------------ 1998 1997 1998 1997 ------------------------------------------------------------ OPERATING ACTIVITIES <S> <C> <C> <C> <C> Net Income $ 101 $ 85 $ 205 $ 156 Adjustments to reconcile net income to net cash from operating activities: Depreciation and amortization 162 165 327 330 Other (6) (43) (3) 8 Changes in current assets and liabilities: Accounts receivable (95) (7) (48) (25) Inventories (42) (29) (30) (25) Payables 55 (74) 60 (41) Other 46 35 (51) (36) - ------------------------------------------------------------------------------------------------------------------------------ Net cash from operating activities 221 132 460 367 - ------------------------------------------------------------------------------------------------------------------------------ INVESTING ACTIVITIES Plant and equipment expenditures (116) (336) (241) (427) Investment in limited partnership - - (200) - Nuclear decommissioning trust funds (12) (27) (41) (37) Other (17) 1 (11) 1 - ------------------------------------------------------------------------------------------------------------------------------ Net cash used for investing activities (145) (362) (493) (463) - ------------------------------------------------------------------------------------------------------------------------------ FINANCING ACTIVITIES Issuance of long-term debt 200 243 200 250 (Decrease) Increase in short-term borrowings (115) 215 262 209 Redemption of long-term debt (18) (139) (187) (185) Redemption of preferred stock (100) - (100) - Dividends on common stock (75) (75) (149) (149) Other 3 - 2 (1) - ------------------------------------------------------------------------------------------------------------------------------ Net cash (used for) from financing activities (105) 244 28 124 - ------------------------------------------------------------------------------------------------------------------------------ NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (29) 14 (5) 28 CASH AND CASH EQUIVALENTS AT BEGINNING OF THE PERIOD 123 67 99 53 - ------------------------------------------------------------------------------------------------------------------------------ CASH AND CASH EQUIVALENTS AT END OF THE PERIOD $ 94 $ 81 $ 94 $ 81 ============================================================================================================================== SUPPLEMENTARY CASH FLOW INFORMATION Interest paid (excluding interest capitalized) $ 61 $ 61 $ 146 $ 138 Income taxes paid 30 127 66 128 New capital lease obligations 31 - 48 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> June 30 December 31 1998 1997 -------------- ---------------- ASSETS CURRENT ASSETS <S> <C> <C> Cash and cash equivalents $ 94 $ 99 Accounts receivable Customer (less allowance for doubtful accounts of $20) 304 305 Accrued unbilled revenues 167 137 Other 97 78 Inventories (at average cost) Fuel 164 130 Materials and supplies 171 173 Assets from risk management activities 129 - Other 52 13 --------------- ---------------- 1,178 935 --------------- ---------------- INVESTMENTS Nuclear decommissioning trust funds 280 239 Other 267 57 --------------- ---------------- 547 296 --------------- ---------------- PROPERTY Property, plant and equipment 14,692 14,495 Property under capital leases 256 256 Nuclear fuel under capital lease 655 607 Construction work in progress 22 16 --------------- ---------------- 15,625 15,374 --------------- ---------------- Less accumulated depreciation and amortization 6,728 6,440 --------------- ---------------- 8,897 8,934 --------------- ---------------- OTHER ASSETS Regulatory assets 747 856 Other 226 202 --------------- ---------------- 973 1,058 --------------- ---------------- TOTAL ASSETS $ 11,595 $ 11,223 =============== ================ </TABLE> See notes to condensed consolidated financial statements (unaudited). 6
7 <TABLE> <CAPTION> June 30 December 31 1998 1997 ---------------- ---------------- LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES <S> <C> <C> Accounts payable $ 194 $ 161 Accrued interest 56 57 Dividends payable 76 78 Accrued payroll 86 81 Short-term borrowings 304 42 Liabilities from risk management activities 135 - Accumulated deferred income taxes 83 64 Current portion long-term debt 159 205 Current portion capital leases 131 110 Other 236 219 --------------- ---------------- 1,460 1,017 --------------- ---------------- OTHER LIABILITIES Accumulated deferred income taxes 1,930 1,983 Accumulated deferred investment tax credits 294 301 Capital leases 132 137 Other 283 302 --------------- ---------------- 2,639 2,723 --------------- ---------------- LONG-TERM DEBT 3,835 3,777 --------------- ---------------- SHAREHOLDERS' EQUITY Detroit Edison cumulative preferred stock, $100 par value, 6,747,484 shares authorized, 5,207,657 issued, 500,000 and 1,501,223 shares outstanding, respectively 48 144 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 1,662 1,611 --------------- ---------------- TOTAL SHAREHOLDERS' EQUITY 3,661 3,706 --------------- ---------------- CONTINGENCIES (NOTE 5) TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 11,595 $ 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 ----------------------------------- DETROIT EDISON CUMULATIVE PREFERRED STOCK <S> <C> <C> Balance at beginning of year 1,501 $ 144 Redemption of cumulative preferred stock (1,001) (100) Preferred stock expense 4 ------------- -------------- Balance at June 30, 1998 500 $ 48 - ------------------------------------------------------------------------------------------------------------------- COMMON STOCK Balance at beginning of year 145,098 $ 1,951 Repurchase and retirement of common stock (23) - -------------- -------------- Balance at June 30, 1998 145,075 $ 1,951 - ------------------------------------------------------------------------------------------------------------------- RETAINED EARNINGS Balance at beginning of year $ 1,611 Net income 205 Dividends declared on common stock ($0.515 per share) (150) Preferred stock expense (4) --------------- Balance at June 30, 1998 $ 1,662 - ------------------------------------------------------------------------------------------------------------------- TOTAL SHAREHOLDERS' EQUITY $ 3,661 =================================================================================================================== </TABLE> See notes to condensed consolidated financial statements (unaudited). 8
9 [This page intentionally left blank.] 9
10 THE DETROIT EDISON COMPANY CONDENSED CONSOLIDATED STATEMENT OF INCOME (UNAUDITED) (In Millions) <TABLE> <CAPTION> Three Months Ended Six Months Ended June 30 June 30 ------------------------------------------------------------------- 1998 1997 1998 1997 ------------------------------------------------------------------- <S> <C> <C> <C> <C> OPERATING REVENUES $ 992 $ 878 $ 1,893 $ 1,742 - ----------------------------------------------------------------------------------------------------------------------------------- OPERATING EXPENSES Fuel and purchased power 266 197 474 395 Operation and maintenance 247 226 470 454 Depreciation and amortization 161 165 324 330 Taxes other than income 70 65 140 134 - ----------------------------------------------------------------------------------------------------------------------------------- Total Operating Expenses 744 653 1,408 1,313 - ----------------------------------------------------------------------------------------------------------------------------------- OPERATING INCOME 248 225 485 429 - ----------------------------------------------------------------------------------------------------------------------------------- INTEREST EXPENSE AND OTHER Interest expense 68 70 136 141 Other - net 5 4 10 9 - ----------------------------------------------------------------------------------------------------------------------------------- Total Interest Expense and Other 73 74 146 150 - ----------------------------------------------------------------------------------------------------------------------------------- INCOME BEFORE INCOME TAXES 175 151 339 279 Income Taxes 80 65 146 119 - ---------------------------------------------------------------------------------------------------------------------------------- NET INCOME 95 86 193 160 PREFERRED STOCK DIVIDENDS 2 3 5 6 - ---------------------------------------------------------------------------------------------------------------------------------- NET INCOME AVAILABLE FOR COMMON STOCK $ 93 $ 83 $ 188 $ 154 =================================================================================================================================== </TABLE> Note: Detroit Edison's condensed consolidated financial statements (unaudited) 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 Six Months Ended June 30 June 30 ------------------------------------------------------------ 1998 1997 1998 1997 ------------------------------------------------------------ OPERATING ACTIVITIES <S> <C> <C> <C> <C> Net Income $ 95 $ 86 $ 193 $ 160 Adjustments to reconcile net income to net cash from operating activities: Depreciation and amortization 161 165 324 330 Other (36) (7) (37) 45 Changes in current assets and liabilities: Accounts receivable (84) (1) (30) (16) Inventories (36) (17) (34) (14) Payables 27 (81) 49 (48) Other 50 36 (58) (35) - ----------------------------------------------------------------------------------------------------------------------------------- Net cash from operating activities 177 181 407 422 - ----------------------------------------------------------------------------------------------------------------------------------- INVESTING ACTIVITIES Plant and equipment expenditures (102) (123) (220) (209) Nuclear decommissioning trust funds (12) (27) (41) (37) Other (1) 5 (4) 7 - ----------------------------------------------------------------------------------------------------------------------------------- Net cash used for investing activities (115) (145) (265) (239) - ----------------------------------------------------------------------------------------------------------------------------------- FINANCING ACTIVITIES Issuance of long-term debt 100 - 100 - Increase in short-term borrowings 23 182 187 176 Redemption of long-term debt - (139) (169) (185) Redemption of preferred stock (100) - (100) - Dividends on common and preferred stock (83) (83) (165) (165) Other 4 - 3 - - ----------------------------------------------------------------------------------------------------------------------------------- Net cash used for financing activities (56) (40) (144) (174) - ----------------------------------------------------------------------------------------------------------------------------------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 6 (4) (2) 9 CASH AND CASH EQUIVALENTS AT BEGINNING OF THE PERIOD 7 15 15 2 - ----------------------------------------------------------------------------------------------------------------------------------- CASH AND CASH EQUIVALENTS AT END OF THE PERIOD $ 13 $ 11 $ 13 $ 11 =================================================================================================================================== SUPPLEMENTARY CASH FLOW INFORMATION Interest paid (excluding interest capitalized) $ 58 $ 60 $ 137 $ 137 Income taxes paid 53 131 111 132 New capital lease obligations 17 - 31 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> June 30 December 31 1998 1997 --------------- ---------------- ASSETS CURRENT ASSETS <S> <C> <C> Cash and cash equivalents $ 13 $ 15 Accounts receivable Customer (less allowance for doubtful accounts of $20) 294 300 Accrued unbilled revenues 167 137 Other 69 63 Inventories (at average cost) Fuel 164 130 Materials and supplies 154 150 Other 51 11 --------------- ---------------- 912 806 --------------- ---------------- INVESTMENTS Nuclear decommissioning trust funds 280 239 Other 43 38 --------------- ---------------- 323 277 --------------- ---------------- PROPERTY Property, plant and equipment 14,387 14,204 Property under capital leases 256 256 Nuclear fuel under capital lease 655 607 Construction work in progress 9 12 --------------- ---------------- 15,307 15,079 --------------- ---------------- Less accumulated depreciation and amortization 6,712 6,431 --------------- ---------------- 8,595 8,648 --------------- ---------------- OTHER ASSETS Regulatory assets 747 856 Other 182 158 --------------- ---------------- 929 1,014 --------------- ---------------- TOTAL ASSETS $ 10,759 $ 10,745 =============== ================ </TABLE> See notes to condensed consolidated financial statements (unaudited). 12
13 <TABLE> <CAPTION> June 30 December 31 1998 1997 --------------- ---------------- LIABILITIES AND SHAREHOLDER'S EQUITY CURRENT LIABILITIES <S> <C> <C> Accounts payable $ 175 $ 150 Accrued interest 54 56 Dividends payable 80 83 Accrued payroll 84 80 Short-term borrowings 187 - Accumulated deferred income taxes 85 64 Current portion long-term debt 119 169 Current portion capital leases 131 110 Other 227 218 --------------- ---------------- 1,142 930 --------------- ---------------- OTHER LIABILITIES Accumulated deferred income taxes 1,906 1,973 Accumulated deferred investment tax credits 294 301 Capital leases 132 137 Other 272 300 --------------- ---------------- 2,604 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, 500,000 and 1,501,223 shares outstanding, respectively 48 144 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 1,502 1,478 --------------- ---------------- TOTAL SHAREHOLDER'S EQUITY 3,501 3,573 --------------- ---------------- CONTINGENCIES (NOTE 5) TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY $ 10,759 $ 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 ---------------------------------- CUMULATIVE PREFERRED STOCK <S> <C> <C> Balance at beginning of year $ 1,501 $ 144 Redemption of cumulative preferred stock (1,001) (100) Preferred stock expense 4 ------------- -------------- Balance at June 30, 1998 500 $ 48 - ------------------------------------------------------------------------------------------------------------------ COMMON STOCK Balance at beginning of year 145,120 $ 1,451 ------------- -------------- Balance at June 30, 1998 145,120 $ 1,451 - ------------------------------------------------------------------------------------------------------------------ PREMIUM ON COMMON STOCK Balance at beginning of year $ 548 -------------- Balance at June 30, 1998 $ 548 - ------------------------------------------------------------------------------------------------------------------ COMMON STOCK EXPENSE Balance at beginning of year $ (48) -------------- Balance at June 30, 1998 $ (48) - ------------------------------------------------------------------------------------------------------------------ RETAINED EARNINGS Balance at beginning of year $ 1,478 Net income 193 Dividends declared Common stock ($0.55 per share) (160) Cumulative preferred stock* (5) Preferred stock expense (4) --------------- Balance at June 30, 1998 $ 1,502 - ------------------------------------------------------------------------------------------------------------------ TOTAL SHAREHOLDER'S EQUITY $ 3,501 ================================================================================================================== </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 (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. 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 - ACCOUNTING FOR RISK MANAGEMENT ACTIVITIES DTE Energy Trading, Inc. (DTE ET) is an indirect wholly owned subsidiary of the Company and began operations in the first quarter of 1998. The new subsidiary markets and trades electricity and natural gas physical products and financial instruments, and provides risk management services utilizing energy commodity derivative instruments which include futures, exchange traded and over-the-counter options, and forward purchase and sale commitments. Activities for trading purposes of DTE ET are accounted for using the mark-to-market method of accounting. Under such method, DTE ET's electric power trading contracts, including both transactions for physical delivery and financial instruments, are recorded at market value. The resulting unrealized gains and losses from changes in market value of open positions are recorded as "Assets or Liabilities from risk management activities" on the Consolidated Balance Sheet. Current period changes in the "Assets or Liabilities from risk management activities" are recognized as net gains or losses in "Operating Revenues" on the Consolidated Statement of Income. The market prices used to value these transactions reflect management's best estimate considering various factors including closing exchange and over-the-counter quotations, time value and volatility factors underlying the commitments. Detroit Edison continues to account for its forward purchase and sale commitments and over-the-counter options on a settlement basis. 15
16 NOTE 3 - SHORT-TERM CREDIT ARRANGEMENTS AND BORROWINGS At June 30, 1998, Detroit Edison had total short-term credit arrangements of approximately $634 million under which $187 million was outstanding. The amounts outstanding at June 30, 1998 consisted of $87 million of commercial paper and $100 million secured by its customer accounts receivable and unbilled revenues portfolio. At June 30, 1998, DTE Capital had $117 million of commercial paper outstanding, backed by a Support Agreement from the Company. NOTE 4 - LONG-TERM DEBT In May 1998, Detroit Edison issued $100 million of 7.54% QUIDS. The proceeds were used to redeem all of the outstanding 7.75% Series Cumulative Preferred Stock totaling approximately $100 million. In June 1998, DTE Capital issued $100 million of Remarketed Notes, Series A due 2038. The notes pay interest at 6.17% through 2003. DTE Capital's obligations have the benefit of a Support Agreement from the Company. The Company had $62 million in cash and cash equivalents restricted by debt covenants at June 30, 1998. NOTE 5 - CONTINGENCIES LEGAL PROCEEDINGS Detroit Edison and 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 continued negotiations following a February 1998 agreement to settle the matters through binding arbitration. In July 1998, Detroit Edison and the plaintiffs reached agreement on the terms of a Consent Judgement, which is subject to approval by the Court. A Fairness Hearing with respect to the terms of the settlement is scheduled for August 1998. 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 proceeding was accrued in 1997. 16
17 NOTE 6 - FINANCIAL INSTRUMENTS TRADING ACTIVITIES NOTIONAL AMOUNTS AND TERMS The notional amounts and terms of DTE ET's outstanding energy trading financial instruments at June 30, 1998 were: <TABLE> <CAPTION> Fixed Price Fixed Price Maximum Payor Receiver Terms in Years (Thousands of MWh) <S> <C> <C> <C> Electricity Commodities 523 1,063 1.5 years --- ----- </TABLE> At June 30, 1998, DTE ET also had sales and purchase commitments for physical delivery associated with contracts based on fixed prices totaling 2,692,394 MWh with terms extending up to 1.5 years. Notional amounts reflect the volume of transactions but do not necessarily represent the amounts exchanged by the parties to the energy commodity derivative instruments. Accordingly, notional amounts do not accurately measure DTE ET's exposure to market or credit risks. The maximum terms in years detailed above are not indicative of likely future cash flows as these positions may be offset in the markets at any time in response to DTE ET's risk management needs. FAIR VALUE At June 30, 1998, the fair values of DTE ET's energy commodity derivative instruments were : <TABLE> <CAPTION> Current Current Assets Liabilities (Dollars in Millions) <S> <C> <C> Average Fair Value for the Three Months Ended June 30, 1998 $ 49 $ 54 ======= ====== Fair Value as of June 30, 1998 $ 129 $ 135 ======= ====== </TABLE> The weighted average term of DTE ET's energy commodity derivative instruments as of June 30, 1998 was less than three months. MARKET RISK DTE ET manages, on a portfolio basis, the market risks inherent in its activities subject to parameters established by the Company's Risk Management Committee (RMC), which is 17
18 authorized by its Board of Directors. Market risks are monitored by the RMC to ensure compliance with the Company's stated risk management policies. DTE ET marks its portfolio to market and measures its risk on a daily basis in accordance with Value-at-Risk (VaR) and other risk methodologies. The quantification of market risk using VaR provides a consistent measure of risk across diverse energy markets and products. CREDIT RISK DTE ET is exposed to credit risk in the event of nonperformance by customers or counterparties of its contractual obligations. The concentration of customers and/or counterparties may impact overall exposure to credit risk, either positively or negatively, in that the counterparties may be similarly affected by changes in economic, regulatory or other conditions. However, DTE ET maintains credit policies with regard to its customers' and counterparties' that management believes significantly minimize overall credit risk. These policies include an evaluation of potential customers and counterparties financial condition and credit rating, collateral requirements or other credit enhancements such as letters of credit or guarantees, and the use of standardized agreements which allow for the netting or offsetting of positive and negative exposures associated with a single counterparty. Based on these policies, the Company does not anticipate a materially adverse effect on financial position or results of operations as a result of customer or counterparty nonperformance. Those futures and option contracts which are traded on the New York Mercantile Exchange are financially guaranteed by the Exchange and have nominal credit risk. ----------------------------------- 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 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. 18
19 INDEPENDENT ACCOUNTANTS' REPORT To the Boards 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 The Detroit Edison Company and subsidiaries as of June 30, 1998, and the related condensed consolidated statements of income and of cash flows for the three-month and six-month periods ended June 30, 1998 and 1997, and the condensed consolidated statements of changes in shareholders' equity for the six-month period ended June 30, 1998. These financial statements are the responsibility of DTE Energy Company's management and 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 primarily of applying analytical procedures to financial data and 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 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 they have been derived. DELOITTE & TOUCHE LLP Detroit, Michigan July 27, 1998 19
20 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 and six months ended June 30, 1998, as compared to the same periods in 1997, 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 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 second quarter of 1998, the Company invested in DTE Energy Solutions Inc., an indirect subsidiary of the Company, which provides high quality and innovative utility products and services, specifically in the area of system distribution and customer service for utilities, municipals and cooperatives. DTE Energy Solutions Inc. and Probyn & Co. of Toronto have formed a joint venture to market utility and energy related services to municipal electric utilities in Canada. The new company, DTE/Probyn Energy Solutions Inc., will combine the energy expertise of the Company with Probyn, a provider of financial and energy advisory services, and the owner-operator of five generating stations in four Canadian provinces. DTE Energy Solutions Inc. also formed a partnership with National Pole Recycling Inc. to develop a sawmill operation to recycle, manufacture and market products from retired utility poles supplied by Detroit Edison. DTE Energy Services, Inc. a wholly owned subsidiary of the Company, purchased a coke oven battery from Bethlehem Steel Corp. in the third quarter of 1998. The coke battery will serve the Bethlehem Burns Harbor, Indiania a Steelmaking plant. Non-regulated operations are projected to increase over the five year period ending 2002, which could result in earnings of as much as $150 million annually from those operations. A new record electrical demand of 10,701 MW was set in June 1998. Detroit Edison was able to meet the record demand through careful planning and implementation of a summer electricity supply plan. See Detroit Edison's Part II, "Item 5 - Other Information" for a discussion of proceedings related to Detroit Edison's Conners Creek Power Plant. ELECTRIC INDUSTRY DEREGULATION Federal and state legislators and regulators are working to introduce competition and customer choice into the generation segment of the electric public utility industry, believing that competition will lead to reduced electric rates and stimulate economic growth. Traditional utility services are being unbundled, with many of such services becoming competitive; and a demand is being created for new energy-related services. As discussed in the Annual Report and the Quarterly Report, there are ongoing Michigan legislative, judicial and administrative proceedings, which address among other things, deregulation of the generation segment of the Michigan electric public 20
21 utility industry. Federal legislation relating to deregulation has also been proposed. Although the Company and Detroit Edison expect a favorable outcome, neither the Company nor Detroit Edison are able to predict the outcome or timing of these proceedings. The Financial Accountings Standards Board (FASB) and the Securities and Exchange Commission (SEC) have been considering various accounting issues as a result of the transition to competition. Regulatory Accounting Issues As discussed in Note 1 of the Annual Report, Detroit Edison is subject to regulation by the MPSC and the Federal Energy Regulatory Commission (FERC). Detroit Edison meets the criteria of Statement of Financial Accounting Standards (SFAS) No. 71, "Accounting for the Effects of Certain Types of Regulation." This accounting standard recognizes the cost based ratemaking process which results in differences in the application of generally accepted accounting principles between regulated and non-regulated businesses. SFAS No. 71 permits the recording of regulatory assets and liabilities that would have been treated as revenue and expense in non-regulated businesses. The deferred amounts are being amortized to revenue and expense as they are included in rates. Continued applicability of SFAS No. 71 requires that rates be designed to recover specific costs of providing regulated services and products, including regulatory assets, and that it be reasonable to assume that rates are set at levels that will recover a utility's costs and can be charged to and collected from customers. In guidance issued in 1997, the Emerging Issues Task Force (EITF) of the FASB concluded that the application of SFAS No. 71 to a separable portion of a business which is subject to a deregulation plan should cease when legislation is passed and/or a rate order is issued that contains sufficient detail on a transition plan. Various MPSC Orders and proposed Michigan legislation would alter the regulatory process in Michigan and provide a plan for transition to competition for the generation segment of Detroit Edison's business. However, Detroit Edison has appealed the MPSC Orders that require the implementation of a Direct Access program in Michigan. Detroit Edison believes that it continues to qualify under the accounting model prescribed by SFAS No. 7l. The continued applicability of SFAS No. 71 will depend on the outcome of legal and legislative proceedings discussed herein. During the second quarter of 1998, the SEC issued guidance regarding the accounting treatment for the recovery of stranded costs during the transition to competition. The SEC concluded that when an entity ceases to apply SFAS No. 71, any impaired portion of plant assets, identified for recovery in legislation/rate order by means of a regulated cash flow, should be treated as a regulatory asset in the separable portion of the enterprise from which the regulated cash flows are derived. The plant impairment analysis, performed at the lowest level of identifiable cash flows based on the facts and circumstances, should be exclusive of the regulated cash flows. The EITF 1997 guidance also concluded that regulatory assets and liabilities originating in the separable portion of the business which is no longer under SFAS No. 71 should not 21
22 be written off if they are recoverable from a separable portion of business which still meets the criteria of SFAS No. 71. Detroit Edison's ability to recover regulatory assets and investment in generation plant in the transition to competition will depend on the outcome of regulatory and/or legislative action which provides for and permits recovery of such assets. Detroit Edison has $383 million of net regulatory assets and $4.9 billion of net investment in generation plant recorded in Property, Plant and Equipment at June 30, 1998. At the present time Detroit Edison believes that a satisfactory mechanism to recover regulatory assets and the investment in generation plant will be adopted by its regulators and/or legislators, although there can be no assurances that this will occur. Michigan Public Service Commission In July 1998, Detroit Edison filed an application with the MPSC for accounting authority to accelerate amortization of the Fermi 2 plant and its related regulatory assets by $164.2 million annually beginning January 1, 1999. Detroit Edison believes approval of its request will allow a reasonable opportunity, consistent with SFAS No. 71 and EITF guidance, to recover its stranded assets by the MPSC imposed deadline for recovery, December 31, 2007. An expedited hearing schedule has been requested. Detroit Edison filed an application with the MPSC in June 1998 requesting approval of its Customer Choice Plan and accounting authority to defer costs that would be incurred to implement Direct Access. In its filing, Detroit Edison estimated that the cost to implement Direct Access would be approximately $100 million. Deferral of $19.9 million has been specifically requested in 1998. Detroit Edison also indicated in its filings with the MPSC that recovery of Fermi 2 assets and other stranded assets must be reasonably assured before implementation of any Direct Access program begins. Under current accounting rules, to the extent that Detroit Edison cannot be assured recovery prior to implementation of a Direct Access program, it would be required to write off such assets; however, the Company and Detroit Edison do not anticipate a write off at this time. The MPSC staff's Market Power Report was issued in June 1998. The MPSC staff concluded that Detroit Edison and Consumers Energy Company will both possess Market Power in a Michigan electricity market unless implementation of a proactive regulatory strategy to counterbalance utility Market Power is undertaken. The report notes, "The current Michigan market is so highly concentrated and the advantages of incumbent utility companies are so pervasive that proactive measures are imperative." Divestiture of generation, while discussed as an effective and popular option in other states, is not recommended by the MPSC staff at this time. However, the MPSC staff believes if measures undertaken to mitigate Market Power are not successful, divestiture could be revisited. Detroit Edison has withdrawn its March 1998 request to suspend the PSCR clause, but continues to pursue the suspension through its ongoing 1998 PSCR case. 22
23 LIQUIDITY AND CAPITAL RESOURCES CASH PROVIDED BY OPERATING ACTIVITIES Net cash from operating activities was higher in the three and six month periods due to decreases in accounts payable partially offset by increases in accounts receivable. CASH USED FOR INVESTING ACTIVITIES Net cash used for investing was lower for the three month period due to lower plant and equipment expenditures and lower contributions to the nuclear decommissioning trust funds. Net cash used for investing was higher for the six month period due to higher investment in non-regulated investments, partially offset by lower plant and equipment expenditures. Cash requirements for non-regulated investments are estimated to be approximately $488 million in 1998, of which $221 million had been expended as of June 30, 1998. DTE Energy Services Inc., a wholly owned subsidiary of the Company, purchased a coke battery from Bethlehem Steel Corp. for approximately $227 million in the third quarter of 1998. Detroit Edison's 1998 cash requirements for its capital expenditure program are estimated at $512 million, of which $220 million had been expended as of June 30, 1998. CASH (USED FOR) FROM FINANCING ACTIVITIES Net cash used for financing was higher in the three month period due primarily to the repayment of short-term borrowings and redemption of preferred stock. Net cash from financing was lower in the six month period due primarily to the redemption of preferred stock partially offset by higher short-term borrowings. Detroit Edison will redeem tax exempt obligations Series A-1989 of $100 million and A-1989 B of $18.4 million in December 1999 utilizing the proceeds of a forward refinancing, with the issuance of refunding bonds planned for September 1999, subject to the satisfactory completion of all documentation. Detroit Edison is also considering refinancing approximately $157 million of tax exempt obligations (Series I-1989, I-1989 B, CC, I-1990) issued on its behalf by Monroe County, MI. RESULTS OF OPERATIONS For the three months ended June 30, 1998, the Company's net income was $101 million or $0.69 per common share as compared to $85 million or $0.59 per common share earned in the three months ended June 30, 1997. For the six months ended June 30, 1998 net income was $205 million or $1.41 per common share compared to $156 million or $1.07 per common share earned in the six months ended June 30, 1997. 23
24 The 1998 three month and six month earnings were higher than 1997 due to higher sales and increased earnings from non-regulated subsidiary operations, partially offset by higher operating expenses. On July 21, 1998, the Detroit Edison service territory experienced a severe thunderstorm. High winds and lightning strikes caused approximately $28 million of damage to its distribution system. Approximately $24 million will be a charge to earnings in the third quarter of 1998. OPERATING REVENUES Increases in operating revenues were due primarily to higher non-regulated subsidiary revenues, higher system sales and sales between utilities. Detroit Edison kWh sales increased as compared to the prior year as follows: <TABLE> <CAPTION> Three Six Months Months -------- -------- <S> <C> <C> Residential 9.8 % 4.9 % Commercial 8.4 5.7 Industrial 4.9 3.1 Other (primarily sales for resale) 20.7 35.0 Total System 8.1 5.8 Sales between utilities 157.3 194.3 Total 14.6 13.2 </TABLE> The increase in residential sales resulted from growth in the customer base, increased usage and increased cooling related sales in the second quarter due to unusually warm weather. Commercial sales increased, reflecting a continuation of favorable economic conditions. The increase in industrial sales reflects increased demand in the construction and automotive sectors in spite of the General Motors strike. Sales to other customers increased reflecting increased demand from sales for resale customers. Sales between utilities increased due to greater demand for energy and increased availability of energy for sale. OPERATING EXPENSES FUEL AND PURCHASED POWER Net system output and average fuel and purchased power unit costs for Detroit Edison were as follows: 24
25 <TABLE> <CAPTION> Three Months Six Months ---------------- ------------------ 1998 1997 1998 1997 ---- ---- ---- ---- (Thousands of MWh) <S> <C> <C> <C> <C> Power plant generation Fossil 10,353 10,032 21,397 20,398 Nuclear 2,305 1,260 4,288 1,247 Purchased power 1,817 1,368 2,783 3,572 -------- --------- --------- -------- Net system output 14,475 12,660 28,468 25,217 ======== ========= ========= ======== Average unit cost ($/MWh) $ 17.69 $ 14.26 $ 15.65 $ 14.59 ======== ========= ========= ======== </TABLE> Fuel and purchased power expense increased in the three month period due to higher average unit costs because of higher purchased power unit costs as a result of increased market demand for power during periods of hot weather and higher net output. For the six month period, fuel and purchased power expense increased due to higher net system output, higher average unit costs because of higher purchased power unit costs as a result of increased market demand for power during periods of hot weather and the prior-period receipt of Fermi 2 business insurance proceeds. OPERATION AND MAINTENANCE Operation and maintenance expense increased for the three month period due primarily to new non-regulated subsidiary operation expense ($39 million), the Conners Creek restart ($7.3 million), storm expense ($5.2 million) and Year 2000 expenses ($3.5 million). Operation and maintenance expense increased for the six month period due primarily to non-regulated subsidiary operation expense ($78 million), prior year storm amoritization ($7.5 million), the Conners Creek restart ($7.3 million) and Year 2000 expense ($4.5 million), partially offset by lower storm expense ($14.2 million). 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. INCOME TAXES Although income before income taxes was higher in 1998 than 1997, income tax expense for the Company did not increase due primarily to increased alternate fuels credits in 1998, partially offset by an increase relating to prior years income taxes of Detroit Edison. 25
26 NEW ACCOUNTING STANDARD In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities". This Statement requires companies to record derivatives on the balance sheet as assets and liabilities, measured at fair value. Gains or losses resulting from changes in the values of those derivatives would be accounted for depending on the use of the derivative and whether it qualifies for hedge accounting. The Company has not yet determined the impact of this Statement on the consolidated financial statements. This Statement is effective for fiscal years beginning after June 15, 1999, with earlier adoption encouraged. The Company will adopt this accounting standard as required by January 1, 2000. 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, actual sales, the effects of competition, the implementation of utility restructuring in Michigan (which involves pending regulatory proceedings, pending and proposed statutory changes and the recovery of stranded costs), environmental and nuclear requirements, the impact of newly-required FERC tariffs 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. 26
27 ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. DTE ENERGY COMPANY AND THE DETROIT EDISON COMPANY The Company measures the risk inherent in DTE ET's portfolio utilizing VaR analysis and other methodologies, which simulate forward price curves in electric power markets to quantify estimates of the magnitude and probability of potential future losses related to open contract positions. DTE ET's VaR expresses the potential loss in fair value of its forward contract and option position over a particular period of time, with a specified likelihood of occurrence, due to an adverse market movement. The Company reports VaR as a percentage of its earnings, based on a 95% confidence interval, utilizing 10 day holding periods. At of June 30, 1998, DTE ET's VaR from its power marketing and trading activities was less than 1% of the Company's consolidated "Income Before Income Taxes" for the six month period ended June 30, 1998. The VaR model uses the variance-covariance statistical modeling technique, and implied and historical volatilities and correlations over the past 20 day period. The estimated market prices used to value these transactions for VaR purposes reflect the use of established pricing models and various factors including quotations from exchanges and over-the-counter markets, price volatility factors, the time value of money, and location differentials. For further information, see the Company's and Detroit Edison's Note 2 - Accounting for Risk Management Activities and Note 6 - Financial Instruments. 27
28 DTE ENERGY COMPANY PART II - OTHER INFORMATION ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. (a) The annual meeting of the holders of Common Stock of the Company was held on April 27, 1998. Proxies for the meeting were solicited pursuant to Regulation 14(a). (b) The following four directors were elected to serve until the annual meeting in the year 2001 with the votes shown: Total Vote Total Vote For Withheld From Each Director Each Director --------------- -------------- Terence E. Adderley 111,704,821 3,736,422 Anthony F. Earley, Jr. 111,714,268 3,725,697 Allan D. Gilmour 111,715,170 3,725,221 Theodore S. Leipprandt 111,684,996 3,754,969 The terms of the previously elected nine directors listed below continue until the annual meeting dates shown after each name: Lillian Bauder April 28, 1999 David Bing April 28, 1999 Larry G. Garberding April 28, 1999 Alan E. Schwartz April 28, 1999 William Wegner April 28, 1999 William C. Brooks April 26, 2000 John E. Lobbia April 26, 2000 Eugene A. Miller April 26, 2000 Dean E. Richardson April 26, 2000 (c) (i) Shareholders ratified the apointment of Deloitte & Touche LLP as the Company's independent auditors for the year 1998 with the votes shown: For Against Abstain --- ------- ------- 114,070,736 561,936 807,730 (ii) Shareholders also voted on the item below: A shareholder proposal regarding the impact of deregulation, including its impact on the operation of Fermi 2. For Against Abstain --- ------- ------- 6,027,145 88,875,815 7,312,687 (d) Not applicable. 28
29 DTE ENERGY COMPANY PART II - OTHER INFORMATION ITEM 5 - OTHER INFORMATION. Effective August 1, 1998, Mr. Anthony F. Earley, Jr., currently President and Chief Operating Officer of the Company and Detroit Edison, assumed the positions of Chairman of the Board, Chief Executive Officer, President, and member of a newly created Office of the President of the Company and Detroit Edison. In addition to Mr. Earley, members of the Office of the President are Gerard M. Anderson, currently Executive Vice President, who will also assume the position of President and Chief Operating Officer, DTE Energy Resources and Robert J. Buckler, currently Executive Vice President, who will assume the position of President and Chief Operating Officer, DTE Energy Distribution. DTE Energy Resources encompasses Detroit Edison's non-nuclear power generation and fuel supply activities and the Company's non-regulated operating units. DTE Energy Distribution includes Detroit Edison's electric transmission and distribution activities and the Company's non-regulated retail product and service activities. Also effective August 1, 1998, Mr. John E. Lobbia retired from his duties as Chairman of the Board and Chief Executive Officer of the Company and Detroit Edison. He will continue as a director of both companies. 29
30 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 18. 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. In March 1998, Detroit Edison filed its 1997 PSCR Reconciliation Case with the MPSC. PSCR costs for 1997 which were under-recovered by $2.7 million, when combined with Fermi 2 performance standards, would result in a refund to customers of approximately $21 million. The Company has accrued for the refund. In an April 24, 1998 informational filing with the MPSC, Detroit Edison 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 summer peak periods in 1998 and 1999. The filing also suggested that large customers may be permitted to negotiate for reduced usage under a capacity release program. Detroit Edison declined to implement the 90 MW retail wheeling experiment for the reason that it would not contribute to meeting the capacity need. In June 1998, the MPSC approved customer capacity options conditioned on customer backup power being obtained from sources not available to Detroit Edison. In July 1998, Detroit Edison filed a required review of its current depreciation expense with the MPSC. The application requests a change in the current non-nuclear depreciation accrual rate from 3.35% to 4.01%, in effect increasing annual depreciation expenses by 20%, or $68 million. An adjustment in electric rates is not being sought at this time. As discussed in Detroit Edison's Part II, "Item 5 - Other Information" of the Quarterly Report, on April 14, 1998 the MPSC issued an order granting Detroit Edison's March 31, 1998 request to waive competitive bidding for Conners Creek and restart the plant. Although Detroit Edison believes that the plant complies with all applicable environmental requirements, the Michigan Department of Environmental Quality and 30
31 the Wayne County Michigan Air Quality Management Division have issued notices of violation contending that Detroit Edison is required to obtain a series of new licenses prior to plant operation. Detroit Edison is contesting these notices of violation. Effective May 26, 1998, Lynne Halpin was elected Vice President and Chief Information Officer. Since 1996 she was Vice President of Business Applications at Netscape Communications Corp. From 1993 to 1996, she was Director of Business Systems Development and Acting Vice President of Global Systems Development at Xerox Corp. Effective August 1, 1998, Ron A. May, currently Assistant Vice President, Energy Delivery, was elected Vice President, Energy Delivery and Service. See the Company's Part II, "Item 5 - Other Information" which is incorporated herein by reference. 31
32 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 -------- 4-193 - 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. 4-194 - $100,000,000 Support Agreement, dated as of June 16, 1998, between DTE Energy Company and DTE Capital Corporation. 4-196 - Indenture, dated as of June 15, 1998, between DTE Capital Corporation and The Bank of New York, as Trustee. 4-197 - 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. 10-26* - Employment Agreement, dated April 16, 1998, between Detroit Edison and Lynn Halpin. 11-12 - DTE Energy Company Basic and Diluted Earnings Per Share. 12-12 - The Detroit Edison Company Computation of Ratio of Earnings to Fixed Charges and Preferred Stock Dividends. 15-8 - Awareness Letter of Deloitte & Touche LLP regarding their report dated July 27, 1998. 27-21 - Financial Data Schedule for the period ended June 30, 1998 for DTE Energy Company. 27-22 - Financial Data Schedule for the period ended June 30, 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). 32
33 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, 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 </TABLE> 33
34 <TABLE> <S> <C> 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 February 29, 1992 Exhibit 4-187 to form 10-Q for quarter ended March 31, 1998 April 15, 1992 Exhibit 4-188 for quarter ended March 31, 1998 July 15, 1992 Exhibit 4-189 for quarter ended March 31, 1998 July 31, 1992 Exhibit 4-190 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) September 15, 1993 Exhibit 4-158 to Form 10-Q for quarter ended September 30, 1993 </TABLE> 34
35 <TABLE> <S> <C> <C> 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). 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). 35
36 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, 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 36
37 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 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). 37
38 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 999-26 to Form 10-Q for quarter ended September 30, 1997). 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. (b) Registrants did not file any reports on Form 8-K during second quarter 1998. (c) *Denotes management contract or compensatory plan or arrangement. 38
39 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 August 13, 1998 /s/ SUSAN M. BEALE --------------------- --------------------------------------------- Susan M. Beale Vice President and Corporate Secretary Date August 13, 1998 /s/ DAVID E. MEADOR --------------------- --------------------------------------------- David E. Meador Vice President and Controller 39
40 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 August 13, 1998 /s/ SUSAN M. BEALE --------------------- --------------------------------------------- Susan M. Beale Vice President and Corporate Secretary Date August 13, 1998 /s/ DAVID E. MEADOR --------------------- --------------------------------------------- David E. Meador Vice President and Controller 40
41 QUARTERLY REPORTS ON FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 1998 DTE ENERGY COMPANY FILE NO. 1-11607 DETROIT EDISON COMPANY FILE NO. 1-2198 EXHIBIT INDEX Exhibits filed herewith. Exhibit Number 4-193 - 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. 4-194 - $100,000,000 Support Agreement, dated as of June 16, 1998 between DTE Energy Company and DTE Capital Corporation. 4-196 - Indenture, dated as of June 15, 1998, between DTE Capital Corporation and The Bank of New York, as Trustee. 4-197 - 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. 10-26* - Employment Agreement, dated April 16, 1998, between Detroit Edison and Lynn Halpin. 11-12 - DTE Energy Company and Diluted Earnings Per Share. 12-12 - The Detroit Edison Company Computation of Ratio of Earnings to Fixed Charges and Preferred Stock Dividends. 15-8 - Awareness Letter of Deloitte & Touche LLP regarding their report dated July , 1998. 41
42 27-21 - Financial Data Schedule for the period ended June 30. 1998 for DTE Energy Company. 27-22 - Financial Data Schedule for the period ended June 30, 1998 for The Detroit Edison Company and Subsidiary Companies. 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. 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. 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 42
43 February 29, 1992 April 5, 1992 July 15, 1992 July 31, 1992 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 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. 43
44 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. 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, 44
45 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 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, 45
46 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. 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. 46
47 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. 47