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, 1999 <TABLE> <CAPTION> COMMISSION REGISTRANTS; STATE OF INCORPORATION; I.R.S. EMPLOYER FILE NUMBER ADDRESS; AND TELEPHONE NUMBER IDENTIFICATION NO. - ----------- ------------------------------------ ------------------ <S> <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 March 31, 1999, 145,045,159 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, 1999 This document contains the Quarterly Reports on Form 10-Q for the quarter ended March 31, 1999 for each of DTE Energy Company and The Detroit Edison Company. Information contained herein relating to an individual registrant is filed by such registrant on its own behalf. Accordingly, except for its subsidiaries, The Detroit Edison Company makes no representation as to information relating to any other companies affiliated with DTE Energy Company. TABLE OF CONTENTS <TABLE> <CAPTION> Page ---- <S> <C> Definitions....................................................................................................3 Quarterly Report on Form 10-Q for DTE Energy Company: Part I - Financial Information..........................................................................4 Item 1 - Financial Statements................................................................4 Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations................................................20 Quarterly Report on Form 10-Q for The Detroit Edison Company: Part I - Financial Information.........................................................................25 Item 1 - Financial Statements...............................................................25 Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations................................................25 Part II - Other Information.............................................................................25 Item 1 - Legal Proceedings...................................................................25 Item 5 - Other Information...................................................................26 Quarterly Reports on Form 10-Q for DTE Energy Company and The Detroit Edison Company: Item 6 - Exhibits and Reports on Form 8-K...................................................27 Signature Page to DTE Energy Company Quarterly Report on Form 10-Q............................................35 Signature Page to The Detroit Edison Company Quarterly Report on Form 10-Q....................................36 </TABLE> 2
3 DEFINITIONS <TABLE> <CAPTION> <S> <C> ABATE............................Association of Businesses Advocating Tariff Equity Annual Report....................1998 Annual Report to the Securities and Exchange Commission on Form 10-K for DTE Energy Company or The Detroit Edison Company, as the case may be Annual Report Notes..............Notes to Consolidated Financial Statements appearing on pages 45 through 72 and 76 through 79 of the 1998 Annual Report to the Securities and Exchange Commission on Form 10-K for DTE Energy Company and The Detroit Edison Company, as the case may be Company..........................DTE Energy Company and Subsidiary Companies Detroit Edison...................The Detroit Edison Company (a wholly owned subsidiary of DTE Energy Company) and Subsidiary Companies 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) EPA..............................United States Environmental Protection Agency FERC.............................Federal Energy Regulatory Commission kWh..............................Kilowatthour 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 Registrant.......................Company or Detroit Edison, as the case may be </TABLE> 3
4 QUARTERLY REPORT ON FORM 10-Q FOR DTE ENERGY COMPANY PART I - FINANCIAL INFORMATION ITEM 1 - CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED). The following condensed consolidated financial statements (unaudited) are included herein. Page ---- DTE Energy Company: Condensed Consolidated Statement of Income...................................5 Condensed Consolidated Balance Sheet.........................................6 Condensed Consolidated Statement of Cash Flows...............................8 Condensed Consolidated Statement of Changes in Shareholders' Equity..........9 The Detroit Edison Company: Condensed Consolidated Statement of Income..................................11 Condensed Consolidated Balance Sheet........................................12 Condensed Consolidated Statement of Cash Flows..............................14 Condensed Consolidated Statement of Changes in Shareholder's Equity.........15 Notes to Condensed Consolidated Financial Statements (Unaudited)..............16 Independent Accountants' Report...............................................19 Note: Detroit Edison's Condensed Consolidated Financial Statements are presented here for ease of reference and are not considered to be part of Item I of the Company's report. 4
5 DTE ENERGY COMPANY CONDENSED CONSOLIDATED STATEMENT OF INCOME (UNAUDITED) (Millions, Except Per Share Amounts) <TABLE> <CAPTION> Three Months Ended March 31 ----------------------------- 1999 1998 ------------ ----------- <S> <C> <C> OPERATING REVENUES $1,024 $ 945 ------ ------ OPERATING EXPENSES Fuel and purchased power 231 208 Operation and maintenance 325 268 Depreciation and amortization 182 165 Taxes other than income 71 71 ------ ------ Total Operating Expenses 809 712 ------ ------ OPERATING INCOME 215 233 ------ ------ INTEREST EXPENSE AND OTHER Interest expense 83 74 Preferred stock dividends of subsidiary - 3 Other - net 3 - ------ ------ Total Interest Expense and Other 86 77 ------ ------ INCOME BEFORE INCOME TAXES 129 156 INCOME TAXES 14 52 ------ ------ NET INCOME $ 115 $ 104 ====== ====== AVERAGE COMMON SHARES OUTSTANDING 145 145 ------ ------ EARNINGS PER COMMON SHARE - BASIC AND DILUTED $ 0.79 $ 0.72 ------ ------ </TABLE> See Notes to Condensed Consolidated Financial Statements (Unaudited). 5
6 DTE ENERGY COMPANY CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED) (Millions, Except Per Share Amounts and Shares) <TABLE> <CAPTION> March 31 December 31 1999 1998 --------------- --------------- <S> <C> <C> ASSETS CURRENT ASSETS Cash and cash equivalents $ 41 $ 130 Restricted cash 132 121 Accounts receivable Customer (less allowance for doubtful accounts of $20) 322 316 Accrued unbilled revenues 143 153 Other 117 135 Inventories (at average cost) Fuel 161 171 Materials and supplies 152 167 Other 136 39 ------- ------- 1,204 1,232 ------- ------- INVESTMENTS Nuclear decommissioning trust funds 327 309 Other 247 261 ------- ------- 574 570 ------- ------- PROPERTY Property, plant and equipment 11,224 11,121 Property under capital leases 241 242 Nuclear fuel under capital lease 662 659 Construction work in progress 198 156 ------- ------- 12,325 12,178 ------- ------- Less accumulated depreciation and amortization 5,336 5,235 ------- ------- 6,989 6,943 ------- ------- REGULATORY ASSETS 3,022 3,091 ------- ------- OTHER ASSETS 264 252 ------- ------- TOTAL ASSETS $12,053 $12,088 ======= ======= </TABLE> See Notes to Condensed Consolidated Financial Statements (Unaudited). 6
7 <TABLE> <CAPTION> March 31 December 31 1999 1998 --------------- -------------- <S> <C> <C> LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable $ 187 $ 239 Accrued interest 54 57 Dividends payable 75 75 Accrued payroll 87 101 Short-term borrowings 280 231 Deferred income taxes 100 60 Current portion long-term debt 481 294 Current portion capital leases 109 118 Other 151 217 ------- ------- 1,524 1,392 ------- ------- OTHER LIABILITIES Deferred income taxes 1,846 1,888 Capital leases 124 126 Regulatory Liabilities 322 294 Other 517 493 ------- ------- 2,809 2,801 ------- ------- LONG-TERM DEBT 3,984 4,197 ------- ------- SHAREHOLDERS' EQUITY Common stock, without par value, 400,000,000 shares authorized, 145,045,159 and 145,071,317 issued and outstanding, respectively 1,950 1,951 Retained earnings 1,786 1,747 ------- ------- 3,736 3,698 ------- ------- CONTINGENCIES (NOTE 5) TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $12,053 $12,088 ======= ======= </TABLE> See Notes to Condensed Consolidated Financial Statements (Unaudited). 7
8 DTE ENERGY COMPANY CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED) (Millions) <TABLE> <CAPTION> Three Months Ended March 31 ------------------------ 1999 1998 ------------------------ <S> <C> <C> OPERATING ACTIVITIES Net Income $ 115 $ 104 Adjustments to reconcile net income to net cash from operating activities: Depreciation and amortization 182 165 Other 48 3 Changes in current assets and liabilities: Restricted cash (11) (16) Accounts receivable 22 47 Inventories 25 12 Payables (50) 5 Other (175) (97) - ------------------------------------------------------------------------------------------------------ Net cash from operating activities 156 223 - ------------------------------------------------------------------------------------------------------ INVESTING ACTIVITIES Plant and equipment expenditures (162) (125) Investment in coke oven battery businesses - (200) Nuclear decommissioning trust funds (18) (29) Other (2) 6 - ------------------------------------------------------------------------------------------------------ Net cash used for investing activities (182) (348) - ------------------------------------------------------------------------------------------------------ FINANCING ACTIVITIES Increase in short-term borrowings 49 377 Redemption of long-term debt (37) (169) Dividends on common stock (75) (75) - ------------------------------------------------------------------------------------------------------ Net cash (used for) from financing activities (63) 133 - ------------------------------------------------------------------------------------------------------ NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (89) 8 CASH AND CASH EQUIVALENTS AT BEGINNING OF THE PERIOD 130 45 - ------------------------------------------------------------------------------------------------------ CASH AND CASH EQUIVALENTS AT END OF THE PERIOD $ 41 $ 53 ====================================================================================================== SUPPLEMENTARY CASH FLOW INFORMATION Interest paid (excluding interest capitalized) $ 84 $ 85 Income taxes paid 29 20 New capital lease obligations 9 17 </TABLE> See Notes to the Condensed Consolidated Financial Statements (Unaudited). 8
9 DTE ENERGY COMPANY CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY (UNAUDITED) (Millions, Except Per Share Amounts; Shares in Thousands) <TABLE> <CAPTION> 1999 -------------------------------- Shares Amount -------------------------------- <S> <C> <C> COMMON STOCK Balance at beginning of year 145,071 $ 1,951 Repurchase and retirement of common stock (26) (1) -------- ---------- Balance at March 31, 1999 145,045 $ 1,950 - -------------------------------------------------------------------------------------------------------------- RETAINED EARNINGS Balance at beginning of year $ 1,747 Net income 115 Dividends declared on common stock ($0.515 per share) (75) Repurchase and retirement of common stock (1) ---------- Balance at March 31, 1999 $ 1,786 - -------------------------------------------------------------------------------------------------------------- TOTAL SHAREHOLDERS' EQUITY $ 3,736 ============================================================================================================== </TABLE> See Notes to Condensed Consolidated Financial Statements (Unaudited). 9
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11 THE DETROIT EDISON COMPANY CONDENSED CONSOLIDATED STATEMENT OF INCOME (UNAUDITED) (Millions) <TABLE> <CAPTION> Three Months Ended March 31 ----------------------------------- 1999 1998 --------------- --------------- <S> <C> <C> OPERATING REVENUES $911 $901 ---- ---- OPERATING EXPENSES Fuel and purchased power 206 208 Operation and maintenance 237 223 Depreciation and amortization 173 163 Taxes other than income 71 70 ---- ---- Total Operating Expenses 687 664 ---- ---- OPERATING INCOME 224 237 ---- ---- INTEREST EXPENSE AND OTHER Interest expense 68 68 Other - net 3 5 ---- ---- Total Interest Expense and Other 71 73 ---- ---- INCOME BEFORE INCOME TAXES 153 164 INCOME TAXES 49 66 ---- ---- NET INCOME 104 98 PREFERRED STOCK DIVIDENDS - 3 ---- ---- NET INCOME AVAILABLE FOR COMMON STOCK $104 $ 95 ==== ==== </TABLE> See Notes to Condensed Consolidated Financial Statements (Unaudited). 11
12 THE DETROIT EDISON COMPANY CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED) (Millions, Except Per Share Amounts and Shares) <TABLE> <CAPTION> March 31 December 31 1999 1998 -------------- --------------- <S> <C> <C> ASSETS CURRENT ASSETS Cash and cash equivalents $ 3 $ 5 Accounts receivable Customer (less allowance for doubtful accounts of $20) 302 307 Accrued unbilled revenues 143 153 Other 73 90 Inventories (at average cost) Fuel 161 171 Materials and supplies 139 138 Other 115 21 ------- ------- 936 885 ------- ------- INVESTMENTS Nuclear decommissioning trust funds 327 309 Other 42 74 ------- ------- 369 383 ------- ------- PROPERTY Property, plant and equipment 10,694 10,610 Property under capital leases 240 242 Nuclear fuel under capital lease 662 659 Construction work in progress 143 118 ------- ------- 11,739 11,629 ------- ------- Less accumulated depreciation and amortization 5,293 5,201 ------- ------- 6,446 6,428 ------- ------- REGULATORY ASSETS 3,022 3,091 ------- ------- OTHER ASSETS 212 200 ------- ------- TOTAL ASSETS $10,985 $10,987 ======= ======= </TABLE> See Notes to Condensed Consolidated Financial Statements (Unaudited). 12
13 <TABLE> <CAPTION> March 31 December 31 1999 1998 ------------- -------------- <S> <C> <C> LIABILITIES AND SHAREHOLDER'S EQUITY CURRENT LIABILITIES Accounts payable $ 172 $ 211 Accrued interest 45 54 Dividends payable 80 80 Accrued payroll 85 86 Short-term borrowings 280 231 Deferred income taxes 100 60 Current portion long-term debt 394 219 Current portion capital leases 109 118 Other 120 203 -------- -------- 1,385 1,262 -------- -------- OTHER LIABILITIES Deferred income taxes 1,800 1,846 Capital leases 124 126 Regulatory liabilities 322 294 Other 549 484 -------- -------- 2,795 2,750 -------- -------- LONG-TERM DEBT 3,268 3,462 -------- -------- SHAREHOLDER'S EQUITY Common stock, $10 par value, 400,000,000 shares authorized, 145,119,875 issued and outstanding 1,451 1,451 Premium on common stock 548 548 Common stock expense (48) (48) Retained earnings 1,586 1,562 -------- -------- 3,537 3,513 -------- -------- CONTINGENCIES (NOTE 5) TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY $ 10,985 $ 10,987 ======== ======== </TABLE> See Notes to Condensed Consolidated Financial Statements (Unaudited). 13
14 THE DETROIT EDISON COMPANY CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED) (Millions) <TABLE> <CAPTION> Three Months Ended March 31 ----------------------------- 1999 1998 ----------------------------- <S> <C> <C> OPERATING ACTIVITIES Net Income $ 104 $ 98 Adjustments to reconcile net income to net cash from operating activities: Depreciation and amortization 173 163 Other 65 (1) Changes in current assets and liabilities: Accounts receivable 33 54 Inventories 16 2 Payables (43) 22 Other (178) (108) - ---------------------------------------------------------------------------------------------------------------- Net cash from operating activities 170 230 - ---------------------------------------------------------------------------------------------------------------- INVESTING ACTIVITIES Plant and equipment expenditures (125) (118) Nuclear decommissioning trust funds (18) (29) Other 21 (3) - ---------------------------------------------------------------------------------------------------------------- Net cash used for investing activities (122) (150) - ---------------------------------------------------------------------------------------------------------------- FINANCING ACTIVITIES Increase in short-term borrowings 49 164 Redemption of long-term debt (19) (169) Dividends on common stock and preferred stock (80) (83) - ---------------------------------------------------------------------------------------------------------------- Net cash used for financing activities (50) (88) - ---------------------------------------------------------------------------------------------------------------- NET DECREASE IN CASH AND CASH EQUIVALENTS (2) (8) CASH AND CASH EQUIVALENTS AT BEGINNING OF THE PERIOD 5 15 - ---------------------------------------------------------------------------------------------------------------- CASH AND CASH EQUIVALENTS AT END OF THE PERIOD $ 3 $ 7 ================================================================================================================ SUPPLEMENTARY CASH FLOW INFORMATION Interest paid (excluding interest capitalized) $ 78 $ 79 Income taxes paid 26 26 New capital lease obligations 9 17 </TABLE> See Notes to Condensed Consolidated Financial Statements (Unaudited). 14
15 THE DETROIT EDISON COMPANY CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDER'S EQUITY (UNAUDITED) (Millions, Except Per Share Amounts; Shares in Thousands) <TABLE> <CAPTION> 1999 ---------------------------------- Shares Amount ---------------------------------- <S> <C> <C> COMMON STOCK Balance at beginning of year 145,120 $ 1,451 ------- -------------- Balance at March 31, 1999 145,120 $ 1,451 - ------------------------------------------------------------------------------------------------------------------ PREMIUM ON COMMON STOCK Balance at beginning of year $ 548 -------------- Balance at March 31, 1999 $ 548 - ------------------------------------------------------------------------------------------------------------------ COMMON STOCK EXPENSE Balance at beginning of year $ (48) -------------- Balance at March 31, 1999 $ (48) - ------------------------------------------------------------------------------------------------------------------ RETAINED EARNINGS Balance at beginning of year $ 1,562 Net income 104 Dividends declared on common stock ($0.55 per share) (80) -------------- Balance at March 31, 1999 $ 1,586 - ------------------------------------------------------------------------------------------------------------------ TOTAL SHAREHOLDER'S EQUITY $ 3,537 ================================================================================================================== </TABLE> See Notes to Condensed Consolidated Financial Statements (Unaudited). 15
16 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. 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 - REGULATORY MATTERS On March 8, 1999 the MPSC issued orders clarifying several issues related to Direct Access. Among other things, the MPSC ruled that: - - Detroit Edison must reduce rates effective January 1, 2000 by $14.8 million to reflect the expiration of the 2-year extraordinary storm damage surcharge. - - Detroit Edison will be required to use its "best efforts" to provide standby service to Direct Access customers. Best efforts means that Detroit Edison must make the service available to Direct Access customers who request it, but Detroit Edison does not have to build or purchase new capacity or interrupt firm customers to provide the service. - - Standby service is to be priced at Detroit Edison's top incremental cost plus 1 cent. The service must be contracted for and scheduled in advance. There are no reservation charges or monthly fees. - - Detroit Edison should move expeditiously on the 90 MW of Direct Access pilot program, but the larger 675 MW block of Direct Access power should not become effective until the third quarter of 1999. - - DTE Energy affiliates may not participate in Direct Access until Detroit Edison files a code of conduct with the MPSC. On April 12, 1999, Detroit Edison filed a code of conduct with the MPSC. Several parties have filed petitions for rehearing or clarification of some of the March 8, 1999 orders; the MPSC has not ruled on these petitions. ABATE and the Michigan Attorney General have also filed for leave to appeal the MPSC's decision authorizing accelerated 16
17 amortization of Detroit Edison's Fermi 2 assets, to the Michigan Court of Appeals. Detroit Edison is unable to determine the timing or outcome of these proceedings. NOTE 3 - SHORT-TERM CREDIT ARRANGEMENTS AND BORROWINGS At March 31, 1999, Detroit Edison had total short-term credit arrangements of approximately $690 million under which $280 million of commercial paper was outstanding. At March 31, 1999, DTE Capital had short-term credit arrangements of $400 million, backed by a Support Agreement from the Company, under which no amounts were outstanding. In February 1999, the Company entered into a $40 million Support Agreement with DTE Capital for the purpose of DTE Capital's credit enhancing activities on behalf of DTE Energy affiliates. NOTE 4 - SEGMENT AND RELATED INFORMATION Effective December 31, 1998, the Company adopted Statement of Financial Accounting Standards No. 131, "Disclosure about Segments of an Enterprise and Related Information." The Company's reportable business segment is its electric utility, Detroit Edison, which is engaged in the generation, purchase, transmission, distribution and sale of electric energy in a 7,600 square mile area in Southeastern Michigan. All other includes non-regulated energy-related businesses and services, which develop and manage electricity and other energy-related projects, and engage in domestic energy trading and marketing. Inter-segment revenues are not material. Financial data for business segments are as follows: <TABLE> <CAPTION> - ----------------------------------------------------------------------------------------------------------------- Reconciliations Electric All and Utility Other Eliminations Consolidated - ----------------------------------------------------------------------------------------------------------------- Three Months Ended March 31, 1999 (Millions) <S> <C> <C> <C> <C> Operating revenues $ 911 $ 113 $ - $ 1,024 Net income 104 14 (3) 115 - ----------------------------------------------------------------------------------------------------------------- Three Months Ended March 31, 1998 (Millions) Operating revenues $ 901 $ 44 $ - $ 945 Net income 95 9 - 104 - ----------------------------------------------------------------------------------------------------------------- </TABLE> 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 17
18 Edison, Circuit Court for Wayne County, Michigan; and Frazier v. Detroit Edison, United States District Court, Eastern District of Michigan), are preparing for binding arbitration to settle these matters. A July 1998 Consent Judgement has received preliminary Court approval. A Fairness Hearing with respect to the terms of the settlement was held in August 1998, and no objections to the settlement were raised. A second Fairness Hearing is contemplated following the results of the arbitration. The settlement 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. Detroit Edison has accrued an amount considered to be probable. -------------------------- This Quarterly Report on Form 10-Q, including the report of Deloitte & Touche LLP (on page 19) will automatically be incorporated by reference in the Prospectuses constituting part of the Registration Statements on Form S-3 (Registration Nos. 33-53207, 33-64296 and 333-65765) of The Detroit Edison Company and Form S-8 (Registration No. 333-00023) 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 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, 1999, and the related condensed consolidated statements of income and cash flows for the three-month periods ended March 31, 1999 and 1998, and the condensed consolidated statements of changes in shareholders' equity for the three-month period ended March 31, 1999. These financial statements are the responsibility of DTE Energy Company's management and of The Detroit Edison Company's management. We conducted our reviews in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data and of making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. Based on our reviews, we are not aware of any material modifications that should be made to such condensed consolidated financial statements for them to be in conformity with generally accepted accounting principles. We have previously audited, in accordance with generally accepted auditing standards, the consolidated balance sheets of DTE Energy Company and subsidiaries and of The Detroit Edison Company and subsidiaries as of December 31, 1998, and the related consolidated statements of income, changes in shareholders' equity, and cash flows for the year then ended (not presented herein); and in our report dated January 27, 1999, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheets as of December 31, 1998 is fairly stated, in all material respects, in relation to the consolidated balance sheets from which it has been derived. DELOITTE & TOUCHE LLP Detroit, Michigan April 28, 1999 19
20 ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. This analysis for the three months ended March 31, 1999, as compared to the same period in 1998, 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 operating subsidiary of the Company and, as such, unless otherwise identified, this discussion explains material changes in results of operations of both the Company and Detroit Edison and identifies recent trends and events affecting both the Company and Detroit Edison. ELECTRIC INDUSTRY RESTRUCTURING MICHIGAN PUBLIC SERVICE COMMISSION On March 8, 1999, the MPSC initiated new dockets to 1) evaluate the need to expedite the supplier licensing program as an alternative for suppliers to obtain local franchises and Certificates of Public Convenience and Necessity from the MPSC, and 2) to establish guidelines for transactions between affiliates. The MPSC also set for hearing the ABATE complaint that had been filed in August 1997 alleging that Detroit Edison's earnings are excessive. A procedural schedule was set whereby an order could be issued in the first quarter of 2000. On March 31, 1999, Detroit Edison filed an application with the MPSC for true-up of its stranded costs, including Direct Access implementation costs. Detroit Edison requested that the proceedings be conducted in two phases. The first phase should involve only a prudency review of incurred implementation costs, approval of forecasted spending and allocation of implementation costs among customers and the timing of cost recovery. The second phase should be structured to address the remaining true-up issues; including the appropriate stranded cost balances, the appropriate level of the transition charge, the establishment of the mechanics of the true-up and stranded cost recovery processes, and to address policy issues such as Detroit Edison's billing and metering rights and obligations in a restructured electric utility industry. Expedited proceedings were requested for both phases, and a procedural schedule will be determined in May 1999. FEDERAL ENERGY REGULATORY COMMISSION On February 15, 1999, Detroit Edison submitted a request to the FERC for authorization to use certain plant accounts to recognize the impairment loss of Detroit Edison's Fermi 2 plant and associated assets in accordance with generally accepted accounting principles. On March 26, 1999, the Michigan Attorney General filed a protest with the FERC and requested that the FERC set the issue for hearing. On April 12, 1999, Detroit Edison filed its response with the FERC, requesting that the FERC reject the Michigan Attorney General's protest as an improper collateral attack on MPSC orders. The FERC has not made a ruling on these matters. 20
21 LIQUIDITY AND CAPITAL RESOURCES CASH FROM OPERATING ACTIVITIES Net cash from operating activities decreased in 1999 due primarily to decreases in accounts payable and changes in other current assets and liabilities. CASH USED FOR INVESTING ACTIVITIES Net cash used for investing was lower due primarily to decreased non-regulated investments and contributions to the nuclear decommissioning trust funds. CASH (USED FOR) FROM FINANCING ACTIVITIES Net cash used for financing was $63 million for the three months ended March 31, 1999 compared to net cash from financing of $133 million for the same period during 1998. This fluctuation was primarily due to decreased DTE Capital short-term borrowings, partially offset by redemptions of long-term debt. YEAR 2000 The Company and Detroit Edison have been involved in an enterprise-wide program to address Year 2000 issues. A program office was established in mid-1997 to implement a rigorous plan to address the impact of Year 2000 on hardware and software systems, embedded systems (which include microprocessors used in the production and control of electric power), and critical service providers. The emphasis has been on mission critical systems that support core business activities or processes. Core business activities/processes include safety, environmental and regulatory compliance, product production and delivery, revenue collection, employee and supplier payment and financial asset management. The plan for addressing Year 2000 is divided into several phases including raising general awareness of Year 2000 throughout the Company and Detroit Edison; maintaining an inventory of systems and devices; performing an assessment of inventoried systems and devices; performing compliance testing of suspect systems and devices; remediation of non-compliant systems and devices through replacement, repair, retirement, or identifying an acceptable work around; testing and remediation of systems and devices in an integrated environment and preparing business continuity plans. Inventory, assessment and compliance testing phases have been completed for known systems and devices. The remediation phase is approximately 91% complete and is expected to be fully complete by August 1999 for mission critical assets and supporting assets. Integration planning, including the mapping of critical business processes, is near completion for Detroit Edison. Integration testing and contingency planning is approximately 18% complete and is expected to be fully complete by October 1999. To support the program phases, the program office has been working with major utility industry associations and organizations, customers and vendors to gather and share 21
22 information on Year 2000 issues. The program office has contacted vendors critical to Company operations to determine their progress on Year 2000. To further assist in identifying potential problems, tests of generating facilities have been conducted by advancing control systems dates to the Year 2000. Results of these tests have shown that the generating facilities operated successfully in this induced "millennium mode." Exercises were conducted on December 31, 1998 and January 1, 1999 to assess the ability to reach employees and the regional security centers of the East Central Area Reliability Group through various communication channels. The exercised communication channels operated properly. The business continuity program will provide opportunities to conduct similar exercises on other systems in advance of the Year 2000. Similar analysis has not been completed for other affiliates. In the event that an unknown Year 2000 condition adversely affects service to customers or an internal business process, contingency and business continuity plans and procedures are being developed to provide rapid restoration to normal conditions. The Company and Detroit Edison have always maintained a comprehensive operational emergency response plan. The business continuity function of the Year 2000 program will supplement the existing emergency plan to include Year 2000 specific events. A Year 2000 emergency response office will be fully operational by November 1999 to manage and coordinate operations, including mobilization of all employees as necessary, during the transition to the new millennium. The Company and Detroit Edison believe that with all Year 2000 modifications, business continuity and emergency management plans in place, the Year 2000 will not have a material effect on their financial position, liquidity and results of operations. Despite all efforts, there can be no assurances that Year 2000 issues can be totally eliminated. Results of modifications and testing done during the fourth quarter of 1998 have demonstrated that Detroit Edison should be able to maintain normal operating conditions into the Year 2000, although there may be isolated electric service interruptions. Detroit Edison's internal business systems may be affected by a Year 2000 related failure that could temporarily interrupt the ability to communicate with customers, collect revenue, or complete cash transactions. In addition, no assurances can be given that the systems of vendors, interconnected utilities and customers will not result in Year 2000 problems. The Company estimates that Year 2000 costs will approximate $80 million with $57 million expended through March 31, 1999. Operating cash flow is expected to be sufficient to pay Year 2000 modification costs with no material impact on operating results or cash flows. RESULTS OF OPERATIONS For the three months ended March 31, 1999, the Company's net income was $115 million, or $0.79 per common share as compared to $104 million, or $0.72 per common share earned in the three months ended March 31, 1998. 22
23 The 1999 three-month earnings were higher than 1998 due to increased earnings resulting from increased utilization of tax credits generated by non-regulated businesses and increased electric system sales due to higher demand resulting from colder weather. OPERATING REVENUES Increases in operating revenues were due primarily to higher non-regulated subsidiary revenues, higher system and interconnection sales due to increased heating load and usage, partially offset by decreases in total system revenues driven mainly by lower rates. Detroit Edison kWh sales increased (decreased) as compared to the prior year as follows: Three Months ------ Residential 5.2 % Commercial 3.8 Industrial 0.4 Other (includes primarily sales for resale) 11.2 Total System 3.6 Sales between utilities (21.5) Total 0.9 The increase in residential sales resulted from more heating related demand and growth in the customer base. Commercial sales increased for the three-month period, reflecting more heating related demand and a continuation of favorable economic conditions. Sales to other customers increased reflecting increased demand from sales for resale customers. Sales between utilities decreased due to less power available for sale. OPERATING EXPENSES FUEL AND PURCHASED POWER Net system output and average fuel and purchased power unit costs were as follows: Three Months ----------------------- 1999 1998 ---- ---- (Thousands of MWh) Power plant generation Fossil 10,474 11,043 Nuclear 2,399 1,983 Purchased power 1,331 966 --------- --------- Net system output 14,024 13,992 ========= ========= Average unit cost ($/MWh) $ 13.49 $ 13.54 ========= ========= 23
24 Fuel and purchased power expense increased for the Company due primarily to new non-regulated subsidiary expenses. Detroit Edison fuel and purchased power expense decreased due to an 18.3% reduction in steam heating sales and lower average unit costs resulting from a decrease in the cost of nuclear fuel, partially offset by higher net system output and increased purchases of higher cost power to replace lower cost system generation as a result of plant outages. OPERATION AND MAINTENANCE Operation and maintenance expense for the Company increased due primarily to new non-regulated subsidiary operation expense ($44 million), higher expenses related to the timing of the periodic plant outages ($8.3 million), higher expenses for Year 2000 testing and remediation ($7.9 million), higher expenses for information systems ($2.4 million), partially offset by lower nuclear generation expenses ($5.9 million). INCOME TAXES Income tax expense for the Company decreased in 1999 due primarily to increased utilization of alternate fuels credits generated from non-regulated businesses. Alternate fuels credits phase out beginning in 2003 through 2007. FORWARD-LOOKING STATEMENTS Certain information presented herein is based on the expectations of the Company and Detroit Edison, and, as such, is forward-looking. The Private Securities Litigation Reform Act of 1995 encourages reporting companies to provide analyses and estimates of future prospects and also permits reporting companies to point out that actual results may differ from those anticipated. Actual results for the Company and Detroit Edison may differ from those expected due to a number of variables including, but not limited to, weather, actual sales, the effects of competition and the phased-in implementation of Direct Access, the implementation of utility restructuring in Michigan (which involves pending regulatory proceedings, possible legislative activity, and the recovery of stranded costs), environmental (including proposed regulations to limit nitrogen oxide emissions) and nuclear requirements, the impact of FERC proceedings and regulations, the success of non-regulated lines of business and the timely completion of Year 2000 modifications. While the Company and Detroit Edison believe that estimates given accurately measure the expected outcome, actual results could vary materially due to the variables mentioned as well as others. This discussion contains a Year 2000 readiness disclosure. 24
25 QUARTERLY REPORT ON FORM 10-Q FOR THE DETROIT EDISON COMPANY PART I - FINANCIAL INFORMATION ITEM 1 - CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED). See pages 11 through 15. ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. See the Company's and Detroit Edison's "Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations," which is incorporated herein by this reference. PART II - OTHER INFORMATION ITEM 1 - LEGAL PROCEEDINGS. In a lawsuit filed in January 1999 in the Circuit Court for Wayne County Michigan (Cook, et al v. Detroit Edison), a number of individual plaintiffs have claimed employment-related sex, gender and race discrimination, as well as harassment. The suit seeks certification as a class action. Detroit Edison believes the claims are without merit. As discussed in "Part I, Item 1 - Business" in the Company's Annual Report, in 1998 Detroit Edison attempted to restart the Conners Creek Power Plant (in reserve status from 1988 to 1998) to meet expected high summer demand for electricity. Although Detroit Edison believed that the plant complied with all applicable environmental requirements, several regulatory agencies contended that Detroit Edison was required to obtain a series of new permits prior to plant operation and issued notices of violation. In August 1998, Detroit Edison filed suit seeking a review of the agencies' determinations. On January 11, 1999, the Department of Justice (DOJ) on behalf of the EPA sent Detroit Edison a Demand Letter requiring the payment of $2.3 million in civil penalties and an unconditional commitment to abandon the use of the facility as a coal plant. Detroit Edison rejected the demand and on January 15, 1999 the DOJ/EPA filed suit in United States District Court for the Eastern District of Michigan. An interim order issued on March 11, 1999 required Detroit Edison to convert the plant from a coal to a natural gas fired facility. The ruling is the preliminary outcome of the lawsuit filed by Detroit Edison seeking resolution of the regulatory issues challenging any use of the plant. The operation of the plant by early summer 1999 was found to be necessary to protect the health, safety and welfare of the people of the Detroit metropolitan area. Resolution of the remaining issues is proceeding. The cost of the conversion is estimated at $11 million. It is impossible to predict what impact, if any, the final outcome of this will have upon Detroit Edison. 25
26 ITEM 5 - OTHER INFORMATION. On March 31, 1999, Detroit Edison filed for reconciliation of its MPSC jurisdictional 1998 PSCR revenues and expenses. Detroit Edison indicated that an under recovery of $45.5 million, including interest, existed, and when offset by a Fermi 2 performance standard credit of $33.7 million, a net amount of $11.8 million remains to be collected from PSCR customers. 26
27 QUARTERLY REPORTS ON FORM 10-Q FOR DTE ENERGY COMPANY AND THE DETROIT EDISON COMPANY ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K. (a) Exhibits (i) Exhibits filed herewith. Exhibit Number ------ 3-11 Bylaws of DTE Energy Company, as amended through April 28,1999. 3-12 Bylaws of The Detroit Edison Company, as amended through April 28, 1999. 4-202 $40,000,000 Support Agreement dated as of February 24, 1999 between DTE Energy Company and DTE Capital Corporation. *10-32 1999 Shareholder Value Improvement Plan-A Measures. *10-33 1999 Executive Incentive Plan Measures. 11-15 - DTE Energy Company Basic and Diluted Earnings Per Share of Common Stock. 12-16 - DTE Energy Company Computation of Ratio of Earnings to Fixed Charges. 12-17 - The Detroit Edison Company Computation of Ratio of Earnings to Fixed Charges. 15-10 - Awareness Letter of Deloitte & Touche LLP regarding their report dated April 28, 1999. 27-27 - Financial Data Schedule for the period ended March 31, 1999 for DTE Energy Company. 27-28 - Financial Data Schedule for the period ended March 31, 1999 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) 27
28 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 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 23, 1997). 3(g) - Agreement and Plan of Exchange (Exhibit 1(2) to DTE Energy Form 8-B filed January 2, 1996, File No. 1-11607). 4(a) - Mortgage and Deed of Trust, dated as of October 1, 1924, between Detroit Edison (File No. 1-2198) and Bankers Trust Company as Trustee (Exhibit B-1 to Registration No. 2-1630) and indentures supplemental thereto, dated as of dates indicated below, and filed as exhibits to the filings as set forth below: <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 November 30, 1987 Exhibit 4-139 to Form 10-K for year ended December 31, 1992 July 15, 1989 Exhibit 4-171 to Form 10-K for year ended December 31, 1994 </TABLE> 28
29 <TABLE> <S> <C> December 1, 1989 Exhibit 4-172 to Form 10-K for year ended December 31, 1994 February 15, 1990 Exhibit 4-173 to Form 10-K for year ended December 31, 1994 April 1, 1991 Exhibit 4-15 to Form 10-K for year ended December 31, 1996 May 1, 1991 Exhibit 4-178 to Form 10-K for year ended December 31, 1996 May 15, 1991 Exhibit 4-179 to Form 10-K for year ended December 31, 1996 September 1, 1991 Exhibit 4-180 to Form 10-K for year ended December 31, 1996 November 1, 1991 Exhibit 4-181 to Form 10-K for year ended December 31, 1996 January 15, 1992 Exhibit 4-182 to Form 10-K for year ended December 31, 1996 February 29, 1992 Exhibit 4-187 to Form 10-Q for quarter ended March 31, 1998 April 15, 1992 Exhibit 4-188 to Form 10-Q for quarter ended March 31, 1998 July 15, 1992 Exhibit 4-189 to Form 10-Q for quarter ended March 31, 1998 July 31, 1992 Exhibit 4-190 to Form 10-Q for quarter ended March 31, 1998 November 30, 1992 Exhibit 4-130 to Registration No. 33-56496 January 1, 1993 Exhibit 4-131 to Registration No. 33-56496 March 1, 1993 Exhibit 4-191 to Form 10-Q for quarter ended March 31, 1998 March 15, 1993 Exhibit 4-192 to Form 10-Q for quarter ended March 31, 1998 April 1, 1993 Exhibit 4-143 to Form 10-Q for quarter ended March 31, 1993 April 26, 1993 Exhibit 4-144 to Form 10-Q for quarter ended March 31, 1993 May 31, 1993 Exhibit 4-148 to Registration No. 33-64296 June 30, 1993 Exhibit 4-149 to Form 10-Q for quarter ended June 30, 1993 (1993 Series AP) June 30, 1993 Exhibit 4-150 to Form 10-Q for quarter ended June 30, 1993 (1993 Series H) 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 </TABLE> 29
30 <TABLE> <S> <C> 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) - Sixth Supplemental Note Indenture, dated as of May 1, 1998, between Detroit Edison and Bankers Trust Company, as Trustee, creating the 7.54% Quarterly Income Debt Securities ("QUIDS"), including form of QUIDS. (Exhibit 4-193 to form 10-Q for quarter ended June 30, 1998.) 4(k - Seventh Supplemental Note Indenture, dated as of October 15, 1998, between Detroit Edison and Bankers Trust Company, as Trustee, creating the 7.375% QUIDS, including form of QUIDS. (Exhibit 4-198 to Form 10-K for year ended December 31, 1998.) 4(l) - Standby Note Purchase Credit Facility, dated as of August 17, 1994, among The Detroit Edison Company, Barclays Bank PLC, as Bank and Administrative Agent, Bank of America, The Bank of New York, The Fuji Bank Limited, The Long-Term Credit Bank of Japan, LTD, Union Bank and Citicorp Securities, Inc. and First Chicago Capital Markets, Inc. as 30
31 Remarketing Agents (Exhibit 99-18 to Form 10-Q for quarter ended September 30, 1994). 4-(m) - $60,000,000 Support Agreement dated as of January 21, 1998 between DTE Energy Company and DTE Capital Corporation. (Exhibit 4-183 to Form 10-K for year ended December 31, 1997.) 4-(n) - $100,000,000 Support Agreement, dated as of June 16, 1998, between DTE Energy Company and DTE Capital Corporation. (Exhibit 4-194 to Form 10-Q for quarter ended June 30, 1998.) 4-(o) - $300,000,000 Support Agreement, dated as of November 18, 1998, between DTE Energy and DTE Capital Corporation. (Exhibit 4-199 to Form 10-K for year ended December 31, 1998.) 4-(p) - $400,000,000 Support Agreement, dated as of January 19, 1999, between DTE Energy Company and DTE Capital Corporation. (Exhibit 4-201 to form 10-K for year ended December 31, 1998.) 4-(q) - Indenture, dated as of June 15, 1998, between DTE Capital Corporation and The Bank of New York, as Trustee. (Exhibit 4-196 to Form 10-Q for quarter ended June 30, 1998.) 4-(r) - First Supplemental Indenture, dated as of June 15, 1998, between DTE Capital Corporation and The Bank of New York, as Trustee, creating the $100,000,000 Remarketed Notes, Series A due 2038, including form of Note. (Exhibit 4-197 to Form 10-Q for quarter ended June 30, 1998.) 4-(s) - Second Supplemental Indenture, dated as of November 1, 1998, between DTE Capital Corporation and The Bank of New York, as Trustee, creating the $300,000,000 Remarketed Notes, 1998 Series B, including form of Note. (Exhibit 4-200 to Form 10-K for year ended December 31, 1998.) 4(t) - Second Amended and Restated Credit Agreement, Dated as of January 19, 1999 among DTE Capital Corporation, the Initial Lenders, Citibank, N.A., as Agent, and ABN AMRO Bank N.V., Barclays Bank PLC, Bayerische Landesbank Giruzertrale, Cayman Islands Branch, Comerica Bank, Den Daske Bank Aktieselskab and The First National Bank of Chicago, as Co-Agents, and Salomon Smith Barney Inc., as Arranger. (Exhibit 99-28 to Form 10-K for year ended December 31, 1998.) *10-(a) The Detroit Edison Company Executive Incentive Plan (October 1997). (Exhibit 10-13* to Form 10-K for the year ended December 31, 1997.) 31
32 10-(b) Detroit Edison Company Shareholder Value Improvement Plan-A (October 1997). (Exhibit 10 15* to Form 10-K for year ended December 31, 1997.) 99-(a)- Belle River Participation Agreement between Detroit Edison and Michigan Public Power Agency, dated as of December 1, 1982 (Exhibit 28-5 to Registration No. 2-81501). 99(b)- Belle River Transmission Ownership and Operating Agreement between Detroit Edison and Michigan Public Power Agency, dated as of December 1, 1982 (Exhibit 28-6 to Registration No. 2-81501). 99(c)- 1988 Amended and Restated Loan Agreement, dated as of October 4, 1988, between Renaissance Energy Company (an unaffiliated company) ("Renaissance") and Detroit Edison (Exhibit 99-6 to Registration No. 33-50325). 99(d)- First Amendment to 1988 Amended and Restated Loan Agreement, dated as of February 1, 1990, between Detroit Edison and Renaissance (Exhibit 99-7 to Registration No. 33-50325). 99(e)- Second Amendment to 1988 Amended and Restated Loan Agreement, dated as of September 1, 1993, between Detroit Edison and Renaissance (Exhibit 99-8 to Registration No. 33-50325). 99(f)- Third Amendment, dated as of August 28, 1997, to 1988 Amended and Restated Loan Agreement between Detroit Edison and Renaissance. (Exhibit 99-22 to Form 10-Q for quarter ended September 30, 1997.) 99(g)- $200,000,000 364-Day Credit Agreement, dated as of September 1, 1993, among Detroit Edison, Renaissance and Barclays Bank PLC, New York Branch, as Agent (Exhibit 99-12 to Registration No. 33-50325). 99(h)- First Amendment, dated as of August 31, 1994, to $200,000,000 364-Day Credit Agreement, dated September 1, 1993, among The Detroit Edison Company, Renaissance Energy Company, the Banks party thereto and Barclays Bank, PLC, New York Branch, as Agent (Exhibit 99-19 to Form 10-Q for quarter ended September 30, 1994). 99(i)- Third Amendment, dated as of March 8, 1996, to $200,000,000 364-Day Credit Agreement, dated September 1, 1993, as amended, among Detroit Edison, Renaissance, the Banks party thereto and Barclays Bank, PLC, New York Branch, as Agent (Exhibit 99-11 to Form 10-Q for quarter ended March 31, 1996). 32
33 99(j)- Fourth Amendment, dated as of August 29, 1996, to $200,000,000 364-Day Credit Agreement as of September 1, 1990, as amended, among Detroit Edison, Renaissance, the Banks party thereto and Barclays Bank, PLC, New York Branch, as Agent (Exhibit 99-13 to Form 10-Q for quarter ended September 30, 1996). 99(k)- Fifth Amendment, dated as of September 1, 1997, to $200,000,000 Multi-Year Credit Agreement, dated as of September 1, 1993, as amended, among Detroit Edison, Renaissance, the Banks Party thereto and Barclays Bank PLC, New York Branch, as Agent. (Exhibit 99-24 to Form 10-Q for quarter ended September 30, 1997.) 99(l)- $200,000,000 Three-Year Credit Agreement, dated September 1, 1993, among Detroit Edison, Renaissance and Barclays Bank, PLC, New York Branch, as Agent (Exhibit 99-13 to Registration No. 33-50325). 99(m)- First Amendment, dated as of September 1, 1994, to $200,000,000 Three-Year Credit Agreement, dated as of September 1, 1993, among The Detroit Edison Company, Renaissance Energy Company, the Banks party thereto and Barclays 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)- Sixth Amendment, dated as of August 27, 1998, to $200,000,000 364-Day Credit Agreement dated as of September 1, 1990, as amended, among Detroit Edison, Renaissance, the Banks party thereto and Barclays Bank PLC, New York Branch, as agent. (Exhibit 99-32 to Registration No. 333-65765.) 33
34 99(r)- 1988 Amended and Restated Nuclear Fuel Heat Purchase Contract, dated October 4, 1988, between Detroit Edison and Renaissance (Exhibit 99-9 to Registration No. 33-50325). 99(s)- First Amendment to 1988 Amended and Restated Nuclear Fuel Heat Purchase Contract, dated as of February 1, 1990, between Detroit Edison and Renaissance (Exhibit 99-10 to Registration No. 33-50325). 99(t)- Second Amendment, dated as of September 1, 1993, to 1988 Amended and Restated Nuclear Fuel Heat Purchase Contract between Detroit Edison and Renaissance (Exhibit 99-11 to Registration No. 33-50325). 99(u)- Third Amendment, dated as of August 31, 1994, to 1988 Amended and Restated Nuclear Fuel Heat Purchase Contract, dated October 4, 1988, between The Detroit Edison Company and Renaissance Energy Company (Exhibit 99-21 to Form 10-Q for quarter ended September 30, 1994). 99(v)- Fourth Amendment, dated as of March 8, 1996, to 1988 Amended and Restated Nuclear Fuel Heat Purchase Contract Agreement, dated as of October 4, 1988, between Detroit Edison and Renaissance (Exhibit 99-10 to Form 10-Q for quarter ended March 31, 1996). 99(w)- Sixth Amendment, dated as of August 28, 1997, to 1988 Amended and Restated Nuclear Fuel Heat Purchase Contract between Detroit Edison and Renaissance. (Exhibit 99-23 to Form 10-Q for quarter ended September 30, 1997.) 99(x) - Standby Note Purchase Credit Facility, dated as of September 12, 1997, among The Detroit Edison Company and the Bank's Signatory thereto and The Chase Manhattan Bank, as Administrative Agent, and Citicorp Securities, Inc., Lehman Brokers, Inc., as Remarketing Agents and Chase Securities, Inc. as Arranger. (Exhibit 999-26 to Form 10-Q for quarter ended September 30, 1997.) (b) Registrants filed a report on Form 8-K, dated January 22, 1999, discussing a series of MPSC Orders issued December 28, 1998. *Denotes management contract or compensatory plan or arrangement. 34
35 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 28, 1999 /s/ SUSAN M. BEALE ------------------------------ -------------------------------------- Susan M. Beale Vice President and Corporate Secretary Date April 28, 1999 /s/ DAVID E. MEADOR ------------------------------ -------------------------------------- David E. Meador Vice President and Controller 35
36 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 28, 1999 /s/ SUSAN M. BEALE ------------------------------ -------------------------------------- Susan M. Beale Vice President and Corporate Secretary Date April 28, 1999 /s/ DAVID E. MEADOR ------------------------------ -------------------------------------- David E. Meador Vice President and Controller 36
37 QUARTERLY REPORTS ON FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 1999 DTE ENERGY COMPANY FILE NO. 1-11607 DETROIT EDISON COMPANY FILE NO. 1-2198 EXHIBIT INDEX Exhibits filed herewith. Exhibit Number -------- 3-11 Bylaws of DTE Energy Company, as amended through April 28,1999. 3-12 Bylaws of The Detroit Edison Company, as amended through April 28, 1999. 4-202 $40,000,000 Support Agreement dated as of February 24, 1999 between DTE Energy Company and DTE Capital Corporation. *10-32 1999 Shareholder Value Improvement Plan-A Measures. *10-33 1999 Executive Incentive Plan Measures. 11-15- DTE Energy Company Basic and Diluted Earnings Per Share of Common Stock. 12-16- DTE Energy Company Computation of Ratio of Earnings to Fixed Charges. 12-17- The Detroit Edison Company Computation of Ratio of Earnings to Fixed Charges. 15-10- Awareness Letter of Deloitte & Touche LLP regarding their report dated April 28, 1999. 27-27- Financial Data Schedule for the period ended March 31, 1999 for DTE Energy Company. 27-28- Financial Data Schedule for the period ended March 31, 1999 for The Detroit Edison Company.
38 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 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, and filed as exhibits to the filings as set forth 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 November 30, 1987 July 15, 1989 December 1, 1989 February 15, 1990 April 1, 1991 May 1, 1991
39 September 1, 1991 November 1, 1991 January 15, 1992 February 29, 1992 April 15, 1992 July 15, 1992 July 31, 1992 November 30, 1992 January 1, 1993 March 1, 1993 March 15, 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. 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) - 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(k) - Seventh Supplemental Note Indenture, dated as of October 15, 1998, between Detroit Edison and Bankers Trust Company, as Trustee, creating the 7.375% QUIDS, including form of QUIDS.
40 4(l) - Standby Note Purchase Credit Facility, dated as of August 17, 1994, among The Detroit Edison Company, Barclays Bank PLC, as Bank and Administrative Agent, Bank of America, The Bank of New York, The Fuji Bank Limited, The Long-Term Credit Bank of Japan, LTD, Union Bank and Citicorp Securities, Inc. and First Chicago Capital Markets, Inc. as Remarketing Agents. 4-(m) - $60,000,000 Support Agreement dated as of January 21, 1998 between DTE Energy Company and DTE Capital Corporation. 4-(n) - $100,000,000 Support Agreement, dated as of June 16, 1998, between DTE Energy Company and DTE Capital Corporation. 4-(o) - $300,000,000 Support Agreement, dated as of November 18, 1998, between DTE Energy and DTE Capital Corporation. 4-(p) - $400,000,000 Support Agreement, dated as of January 19, 1999, between DTE Energy Company and DTE Capital Corporation. 4-(q) - Indenture, dated as of June 15, 1998, between DTE Capital Corporation and The Bank of New York, as Trustee. 4-(r) - 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. 4-(s) - Second Supplemental Indenture, dated as of November 1, 1998, between DTE Capital Corporation and The Bank of New York, as Trustee, creating the $300,000,000 Remarketed Notes, 1998 Series B, including form of Note. 4(t) - Second Amended and Restated Credit Agreement, Dated as of January 19, 1999 among DTE Capital Corporation, the Initial Lenders, Citibank, N.A., as Agent, and ABN AMRO Bank N.V., Barclays Bank PLC, Bayerische Landesbank Giruzertrale, Cayman Islands Branch, Comerica Bank, Den Daske Bank Aktieselskab and The First National Bank of Chicago, as Co-Agents, and Salomon Smith Barney Inc., as Arranger. *10-(a) The Detroit Edison Company Executive Incentive Plan (October 1997). *10-(b) Detroit Edison Company Shareholder Value Improvement Plan-A (October 1997). 99-(a)- Belle River Participation Agreement between Detroit Edison and Michigan Public Power Agency, dated as of December 1, 1982.
41 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 Energy Company, 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.
42 99(m) - First Amendment, dated as of September 1, 1994, to $200,000,000 Three-Year Credit Agreement, dated as of September 1, 1993, among The Detroit Edison Company, Renaissance Energy Company, the Banks party thereto and Barclays 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) - Sixth Amendment, dated as of August 27, 1998, to $200,000,000 364-Day Credit Agreement dated as of September 1, 1990, as amended, among Detroit Edison, Renaissance, the Banks party thereto and Barclays Bank PLC, New York Branch, as agent. 99(r) - 1988 Amended and Restated Nuclear Fuel Heat Purchase Contract, dated October 4, 1988, between Detroit Edison and Renaissance. 99(s) - First Amendment to 1988 Amended and Restated Nuclear Fuel Heat Purchase Contract, dated as of February 1, 1990, between Detroit Edison and Renaissance. 99(t) - Second Amendment, dated as of September 1, 1993, to 1988 Amended and Restated Nuclear Fuel Heat Purchase Contract between Detroit Edison and Renaissance. 99(u) - Third Amendment, dated as of August 31, 1994, to 1988 Amended and Restated Nuclear Fuel Heat Purchase Contract, dated October 4, 1988, between The Detroit Edison Company and Renaissance Energy Company. 99(v) - Fourth Amendment, dated as of March 8, 1996, to 1988 Amended and Restated Nuclear Fuel Heat Purchase Contract Agreement, dated as of October 4, 1988, between Detroit Edison and Renaissance.
43 99(w) - Sixth Amendment, dated as of August 28, 1997, to 1988 Amended and Restated Nuclear Fuel Heat Purchase Contract between Detroit Edison and Renaissance. 99(x) - Standby Note Purchase Credit Facility, dated as of September 12, 1997, among The Detroit Edison Company and the Bank's Signatory thereto and The Chase Manhattan Bank, as Administrative Agent, and Citicorp Securities, Inc., Lehman Brokers, Inc., as Remarketing Agents and Chase Securities, Inc. as Arranger. *Denotes management contract or compensatory plan or arrangement.