Good morning. Thank you for standing by, and welcome to the DTE Energy spinoff of DT Midstream conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer only session. To ask a question during the session, you will need to press star one on your telephone. If you require any further assistance, please press star zero. I would now like to hand the conference over to your speaker today, Barbara Tuckfield. Thank you. Please go ahead.
Thank you. Good morning, everyone. Before we get started, I would like to remind everyone to read the safe harbor statement, including the reference to forward-looking statements. Our presentation includes non-GAAP financial measures. Please refer to the reconciliation of GAAP to non-GAAP financial measures provided in the appendix. With us this morning are Gerardo Norcia, President and CEO, David Slater, President and CEO-elect of DTM, and Jeff Jewell, CFO-elect of DTM. We also have other members of management available to answer your questions today. Now I'll turn it over to Jerry to start the call this morning.
Well, thanks, Barb, and good morning, everyone, and thanks for joining us today. I hope everyone is staying healthy and safe. Last week, we reached the last major milestones in the spin of DT Midstream by receiving SEC effectiveness and board approval, and now we're set for a July 1 spin. This is an exciting time for both companies. This morning, I'll start off by discussing the benefits of the spin. David will give us further details on the spin transaction and the strategy positioning of DTM. Jeff will provide an overview of the financial outlook for the new company and wrap things up before we take your questions. Last fall, we announced the strategic separation of DTE and DTM.
This separation will unlock the full potential of our premier regulated utilities and premium natural gas midstream assets, align DTE Energy's business mix with investor preferences and overall market trends, and create two entities, each with experienced leadership and proven track records. The spin also creates two pure-play companies by positioning DTE Energy as a predominantly pure-play utility and establishing DTM as an independent natural gas C-Corp with assets in premium basins. Each company will be well-positioned in its respective industry. On the next slide, I'll discuss the expected dividends of both DTE Energy and DTM post-spin. A key value-enhancing aspect of the spin is that the combined dividend of DTE Energy and DTM is expected to be higher than the pre-spin dividend.
Pre-spin, the plan was to grow the DTE dividend about 6%. After the spin, we expect a combined annualized dividend to provide an increase of 8%-10% from 2021 to 2022. DTE will target a dividend payout ratio of 60%, consistent with best-performing pure-play utilities, equivalent to a 2021 annualized dividend of $3.30 per share. DTM plans to establish a growing dividend with a 2 times dividend coverage ratio floor that is competitive with its midstream peers. I will give a brief overview of how we are thinking about the future of DTE Energy as a pure-play utility. After the spin, our utilities will make up about 90% of our business.
Our electric utility, which is the largest electric utility in Michigan, has approximately 2.2 million customers, has a five-year plan that sees us investing about $14 billion, which is $2 billion higher than the previous plan and supports robust long-term operating earnings growth. The plan includes investments focused on modernization of the grid, improving the customer experience, and transitioning to cleaner energy, which supports our target of reducing carbon emissions 80% by 2040 and achieving net zero by 2050. DTE Gas is the seventh-largest natural gas utility in the nation, with 1.3 million customers and 139 billion cubic feet of storage capacity. At DTE Gas, we have a $3 billion five-year capital plan. About half will be invested in infrastructure renewal and half in base infrastructure to support increase of reliability to our customers.
The DTE Gas capital plan supports healthy long-term operating earnings growth, as well as our net zero greenhouse gas emissions targets by 2050. The remainder of DTE is comprised of our non-utilities, which will provide about 10% of our operating earnings post-spin with exciting growth opportunities in ESG-focused areas. On the next slide, I'll discuss the long-term outlook of DTE Energy. DTE is committed to a long-term operating EPS growth rate of 5%-7%. The base of this growth is our original 2020 guidance, which excluding the midstream business, is $5.13 per share. For 2021, the guidance ranges for our remaining business units are unchanged after considering the spin of the midstream business. This results in an operating EPS midpoint of $5.51 per share, which is consistent with the guidance we provided last fall.
Beginning in the third quarter, we anticipate classifying midstream earnings for the first half of 2021 as discontinued operations. I can say that we're having a really strong start to 2021. Now we are making plans to use that strength to ensure that we continue to deliver in 2022 and beyond. I am confident in our long-term operating EPS growth target of 5%-7%. DTE Energy is well-positioned to continue to deliver premium shareholder value post-spin. The new midstream company is also a very attractive opportunity for investors. Now I'll turn it over to David to highlight these opportunities for DTM. David, over to you.
Thanks, Jerry, and good morning, everyone. I'll start on slide 10. I am pleased to share that the spin is on track for a July first completion date. We've made substantial progress. In May, we announced our new board of directors. We completed our initial debt raise, which attracted strong interest and achieved great results. On June fourth, the SEC Form 10 was declared effective. Looking forward, our virtual equity roadshow will take place over the next three weeks. DTM shares will start trading on a when-issued basis on June 17th. The record date for distribution of DTM shares will be June 18th, and DTM shares will be distributed to DTE record holders on July first. I'm very excited to begin this new journey at DTM as a standalone company.
Successfully executing this spin has been made possible by the commitment and dedication of hundreds of DTE and DTM employees. For that, I wanted to thank the team for bringing their best energy to work each and every day and keeping everything on track. Let's turn to slide 11. DTM will be a premier standalone gas-focused midstream C-Corp with an extensive footprint. Our asset platforms are well-positioned to serve key markets from the two premier dry gas basins in the country. We have a clean balance sheet with low leverage and no significant maturities for seven years, which supports our sizable growth agenda, provides the flexibility to make value-accretive investments that advance us towards achieving an investment-grade rating, and allows us to pay a durable growing dividend.
As an operating business, DTM has an established 20-year record of success as part of DTE, and our strong cash flow generation is supported by long-term take-or-pay contracts. We are also committed to a leading ESG program and to maintaining our culture of sustainability. Let's move on to slide 12. DT Midstream has a distinctive portfolio of high-quality assets located in the Marcellus Utica and Haynesville basins. We have two reportable segments with EBITDA split approximately 50/50 between Pipeline and Gathering. Our Pipeline segment includes FERC interstate pipelines, large-diameter lateral pipelines that are interconnected with interstate pipelines, and a Michigan-based gas storage complex. Our integrated gathering segment assets are all dry gas-focused and support our customers in the Marcellus Utica and Haynesville basins. Let's turn to slide 13. I am proud of our leadership and employee team.
I have worked with this group for years, and I am confident in their ability to lead DTM going forward. Our executive team has a solid track record of delivering results, and in total, they have over 175 years of industry experience. Let's turn to slide 14. DT Midstream has a well-established ESG culture that has been built over the years of working with DTE Energy and the utility industry, and we are committed to continuing to grow best-in-class ESG programs. On the environmental front, we are targeting net zero emissions by 2050, making us one of the first in the industry to implement such a goal. We intend to be focused in this area and work with our customers and communities to reach our sustainability goals. We believe this will be a great business opportunity for DTM and the midstream industry.
On the social front, we focus on the safety, diversity, and well-being of our employees, with safety being our top priority. In addition, we will continue our strong commitment to our communities through focused contributions and vibrant volunteerism of our team. In terms of governance, as a C-Corp, we have already announced our experienced and diverse board members, which will provide strong oversight and governance and ensure that the company is operating in an environmentally and socially responsible manner. Let's move on to slide 15. Our asset platforms are strategically located, allowing us to serve our customers in the premier dry gas basins with connections to strong growing market centers. In total, we have a network of nearly 2,000 miles of operating dry gas pipelines and 94 Bcf of storage capacity. The fundamentals supporting our asset platforms are strong, with projections for continued supply and demand growth.
Most of our assets are recently constructed, which means our maintenance capital needs are low, allowing us to deploy capital to investment opportunities that create shareholder value. Moving to slide 16. DTM's asset base provides diversified and stable cash flow. As I mentioned earlier, our EBITDA is split approximately 50/50 between our pipeline and gathering segments. We serve four attractive and growing markets, including the Gulf Coast, Northeast and Mid-Atlantic, Midwest, and Eastern Canada. We serve the premier dry gas supply regions in the U.S., the Marcellus Utica and Haynesville. Overall, we believe our diversified and balanced portfolio helps de-risk our cash flows and positions us well for future growth investment opportunities. Now let's turn to slide 17. Our cash flows are backed by long-term contracts with no commodity exposure.
Our portfolios are well contracted with remaining average life of approximately nine years, and both segments are 90% supported by take-or-pay contracts and flowing gas. In addition, our customers operate at high utilization levels with respect to their contracted capacities. Now turning to slide 18. We have longstanding and successful relationships with our customers, which includes a mix of demand pull and supply push customers across our assets, including electric and gas utilities, power generators, industrials, national marketers, and producers. Our commercial agreements contain meaningful credit enhancements, such as collateral requirements and durable acreage dedications. We also actively manage our credit exposure and are in frequent dialogue with our customers. There has been material improvement in the financial health of our producers. Several recently announced consolidation plans that are expected to improve the overall credit profile of our customer base.
Southwestern's recently announced transaction to acquire Indigo would, upon closing, make them our largest customer. We have a great relationship with Southwestern for over a decade in Appalachia. They are a top operator, very financially disciplined, and have been a great partner, and we are excited about the potential of working with them in the Haynesville. With the position of our assets and the strength of our counterparties and contracts, the company has highly visible cash flows and a solid long-term growth outlook. Let's turn to slide 19, and I'll unpack our growth plans. Our attractive assets provide strong investment opportunities, positioning us to grow and achieve an investment-grade rating over the next five years. We plan to invest $1.2 billion-$1.7 billion in total capital over the five-year period.
We'll follow the same disciplined approach to deployment of capital as we have done in the past and only pursue accretive growth opportunities. Our first priority for growth investments will be organic expansions enabled by our existing platform. We have key assets that are in the early phase of the commercial life cycle, including NEXUS, Blue Union, and LEAP. We plan to grow in the regions that we are currently located in and anticipate our capital will be split 50/50 between Pipeline and Gathering. Now I'll turn it over to Jeff to discuss DTM's financials.
Thanks, David, and good morning, everyone. I'll start on slide 20. DTM has a proven track record of disciplined and substantial growth over the past 20 years. This growth was underpinned by successfully executing on organic projects as well as strategic acquisitions. With the scale that we have built from our existing asset platforms, we are well-positioned as a standalone company. Now let's turn to slide 21. We are on track to achieve both our 2021 EBITDA and operating earnings guidance. Our 2021 EBITDA guidance provides approximately 7% growth from 2020 original guidance. This growth is driven by strong operational performance across our portfolio and includes offsetting a half year of new public company expenses. We expect 2022 EBITDA will grow by 5%-7% from 2021 guidance, which includes overcoming the full year of public company costs.
We expect 2022 operating earnings to be consistent with 2021, with strong operational growth offsetting a full year of public company and interest expenses. Following the rebasing in 2022, our expectation is that the operating earnings will grow in line with EBITDA. Post-spin, we expect to provide additional forward-looking financial disclosures. Moving to slide 22. DT Midstream is uniquely positioned with a very clean balance sheet. Our debt structure provides us with financial flexibility and no significant debt maturities for seven years. We are targeting a debt-to-EBITDA ceiling of 4x and plan on de-leveraging further through accretive growth and/or debt repayments. We expected and received strong interest in our initial debt offering and received supportive credit ratings from all three agencies. In addition to our long-term debt, we also have a $750 million credit facility.
Let's turn to slide 23, and I'll take you through our cash flows and investment flexibility. As you can appreciate, the initial year of DTM will only be a half year, and we have governance items that are still in flight till we are officially spun and our board becomes effective. In order to be helpful, we are providing an annualized pro forma view of our go-forward cash flow using 2021 adjusted EBITDA guidance as a base. Our strong cash flow generation provides significant financial flexibility with predictable interest payments, low maintenance capital, and minimal cash taxes expected until the end of the five-year plan. We expect that we will have total annual distributable cash flow of $500 million-$550 million. Coming from a successful utility, a durable and growing dividend is very important to us.
We are targeting a coverage ratio floor of 2x . We expect our dividend payment to be in line with our midstream peers and to grow at commensurate with cash flows. Our strong cash flow generation is expected to yield $275 million-$325 million of cash after dividends, giving us options for maximizing shareholder value and achieving our goal of an investment-grade credit rating by the end of the five-year period. We plan to pursue highly accretive growth and invest a total of $1.2 billion-$1.7 billion in capital over the five-year period, which can be funded by internal cash flow. We will also have the optionality to deleverage the balance sheet or return capital to shareholders. Now let's turn to slide 24 to wrap up the call.
In summary, DT Midstream will start its journey as a standalone C-Corp with a very clean story on July 1st. Our high-quality assets are located in the two most prolific dry gas basins. We have a strong balance sheet with no significant debt maturities for seven years. Long-term contracts with take-or-pay provisions support our cash flows, and operational and financial execution will be backed by an established ESG culture. Our strategy positions DTM to be a premier independent midstream company that is distinguished from its peers and will create significant value for our shareholders. With that, we wanna thank you for joining us today and showing your interest in what we believe is going to be a fantastic company. Now we can open up the line for questions.
Great. Thank you. As a reminder, to ask a question, you will need to press star one on your telephone. To withdraw your question, press the pound or hash key. Please stand by while we compile the Q&A roster. Your first question here comes from the line of Shar Pourreza from Guggenheim Partners. Please go ahead. Your line is now open.
Hey, good morning, guys.
Good morning.
Morning.
Just on the growth profile of DTM, you obviously have an early outlook for 2022 of 5%-7% EBITDA growth, which may be obviously a bit slower than historical levels. Can we maybe talk a little bit about any bias that's built into those expectations, especially as you advance development projects? What assumptions are implied by that top end of the range, and to what degree are you guys embedding any dissynergies in those numbers?
Sure, I'll take that question. Thanks for it. First off, we are carrying incremental costs in that growth rate that will show up in the first full year, they would be the incremental public company costs. That's a component that's embedded in the 5%-7%. The 5%-7% is effectively contracted in the portfolio for next year, we're in flight executing those projects as we speak, very confident in that 5%-7%. I characterize that outlook is using the consistent way that DTE would frame up its forecast for the investors.
Got it. So you're embedding some level of conservatism. Okay. Just on the balance of capital allocation, the slides indicate that capital will be used obviously for accretive reinvestment or delevering. Between sort of compression laterals and gathering expansions and various stages of development, it seems allocation is gonna be more skewed towards at least reinvestment in the near term. Is that sort of how you're envisioning it? What sort of time frames are you looking at for growth versus delevering stages of capital allocation?
Yeah, the way to think about it at a high level, we're viewing that $1.2 billion-$1.7 billion capital investment agenda, you know, equally split between the two segments, primarily focused on the current asset platforms, so incremental investments on or around those platforms, which tend to be more accretive, as you mentioned. That's how we're thinking about at a high level. You know, our objective is to continue to grow the company in a disciplined way and provide accretive growth. To the extent that some of those investment opportunities do not meet that investment criteria, then yes, we would look at creating shareholder value through deploying that cash. You know, we're gonna have options. We can delever, we can return to the shareholders.
There's gonna be some options there that we would consider.
The primary goal is to continue to grow the company in a disciplined, accretive way.
Got it. Just lastly from me on contracting, can you just maybe elaborate on the dynamics of the tenant? You have obviously nine years of contract revenue there, so there's clearly some roll-off. How are you sort of thinking about maybe future contracting? Is there room to improve some of the pricing with the recontracting? Thank you.
Yeah, great question. The bulk of the portfolio is well contracted. I would say the one area in the portfolio that we have intentionally kept the tenor short is around our storage assets. The rationale there was we were at a cyclical low in storage values, and we are climbing out of that low as we speak. I expect as we recontract that portfolio, we'll add tenor and should see some rate expansion, is the expectation. That would be the one area of the portfolio. The other area would be the NEXUS portfolio. I think as we've been talking over the past few quarters, we've been seeing term expansion and rate expansion on NEXUS related to the portion of capacity that is contracted shorter term.
Those are the two areas in the portfolio, Shar, where I would see that playing out.
Got it. Fantastic, guys. Congrats on today's announcement.
Thank you.
Your next question comes from the line of Julien Dumoulin-Smith from Bank of America. Please go ahead, your line is now open.
Hey, good morning, team. Congratulations on all the updates there.
Thank you. Good morning.
Perhaps, absolutely. How do you think about addressing investment-grade and just repositioning the company there? Perhaps if I can just in tandem with that, how do you think about gaining scale here, perhaps to address some of the embedded questions on IG, perhaps hitting a $1 billion EBITDA kind of threshold or what have you? Just any thoughts there.
Yeah, great question. You're right, Jeremy. When we went through the credit rating process, you know, the company effectively scored IG across all the metrics with the exception of the scale metric. You know, Jeff and I wanna grow the company into that $1 billion EBITDA neighborhood. I think at that point, we'll position the company for an investment-grade rating. That's the goal and aspiration that Jeff and I have for DTM here over the next five-year window. That very much aligns with the capital deployment agenda that we've been talking about, the $1.2 billion-$1.7 billion. You're exactly right. Our goal is to get DTM to investment-grade.
creates lots of additional value when we cross that threshold, and that's gonna be a goal of ours.
Got it. If I can ask you to elaborate a little bit. You talked about a five-year view here, you know, having line of sight on $1 billion of EBITDA. As you think about that, is that all organically achievable, whether it's in the recontracting and incremental, you know, adds at NEXUS or in storage, and/or on your existing platforms? Do you need to go perhaps inorganically there to reach that target? Just wanna make sure we're on the same page.
Yeah, no, another great question. Our primary goal is to deploy that organically inside the regions that we're operating in. I would say that certainly on the front end of that five-year plan, we have line of sight to those types of investments. You know, we'll play out the five-year plan will play out before us here, but that typically is the best and most value-creating deployment of capital. That's always our number one area of focus for incremental capital deployment.
Sorry, just to clarify that last response, if you don't mind. You started your response saying on the front end of that plan. How do you think about sort of the sort of the profile of running from the 22 initial target that you talk about up to that billion? Is it front-end loaded by that first comment there?
No, that I only made that comment in terms of what's most visible and what's advanced in what I'll call the business development pipeline inside the company. That's my only reference to the front end. We have a lot more visibility, obviously, in the first two or three years of the five-year plan than we do on the back two years, but that's normal. You know, we will continue to have an active business development activity that fills those opportunities. As they make sense to deploy capital to, we will. In terms of, you know, I'm just maybe reading into your question a little bit, but you know, I think part of it was, is it gonna be a smooth trajectory to the billion?
These investments tend to be lumpy and come in large swaths. I think we'll provide more color and guidance on that as we progress in terms of the trajectory of the curve to the billion.
Got it. All right, I'll leave it there. Thanks, all, and best of luck here.
Thank you.
Your next question comes from the line of Jeremy Tonet from JP Morgan. Please go ahead. Your line is now open.
Hi, good morning.
Good morning.
Morning.
I was just hoping you could help reconcile a bit in my mind, I guess, the results versus the guide here. I think in the first quarter, there was EBITDA of $193 million, but the guidance top end is $750. I'm just wondering how DTM doesn't eclipse that top end. Is this something where Southwestern buying Indigo kind of slows down growth in the near term as far as drilling activity is concerned, or is there some other item that I guess I'm missing here?
Great question. I'll start, and then maybe I'm gonna pass it over to Jeff, and he can fill in the detail. I'd say, you know, that quarterly number, it was just an extrapolation of Q1. Q1 was a really strong quarter for us. There's some seasonality in that. Then there's obviously going to be some additional costs that show up post-spin. I'll pass it over to Jeff. Jeff, I don't know if you wanted to add to that.
Yeah. Good morning. Yeah, David, that's spot on. There's also You're gonna have a little bit of seasonality, additional public costs piece, and then there's also gonna be a little bit of conservatism, and contingency is gonna be in that. That's why we're guiding for 2021 to that $7.10-$7.50. We think that's a good guidance for everybody.
Got it. There's no expectation of Southwestern buying Indigo slowing down activity. You don't see that happening right now?
No, we don't. You know, it was just announced last week. What we're hearing is the close will be in Q4. They will All the contracts will go over to Southwestern, no change. Like I said, the 2022 plan is really locked and loaded, contracted in the portfolio. We're in flight executing on that as we speak.
Got it. That's helpful. Thanks for the projects on slide 19. That's helpful there. I'm just trying to think of what some of the chunkier projects besides Rover and LEAP. It seems like those could be nice sizable expansions, low multiple additions there. With regards to the other projects, what are some of the other ones that might be a bit sizable and move the needle here? Just trying to get a feeling for where the growth is. Because I think there's a thought in the market that Appalachia is somewhat constrained for takeaway capacity, given, you know, pipelines not getting built anymore and what that does for long-term drilling activity. Just trying to flesh out a bit more what the levers are for the future growth as you see it.
What are some of the chunkier projects?
Yeah, great question. I'm gonna start down south in Haynesville. I'll pivot then talk about the north. I'd say number one, we're seeing really strong drilling activity emerge in Haynesville, and we're also seeing a really strong demand uptick along the Gulf Coast. Two significant fundamental shifts have occurred probably in the last three-four months. W e're working really hard on LEAP right now and looking at opportunities to bring third parties on to those assets, the Blue Union and the LEAP assets, and to expand the LEAP assets. I'll call that priority one and focus number one in our portfolio. If we talk about the north, I'd say the area that we're seeing most activity. Well, we're seeing activity in two areas.
We continue to see gathering build-out in the southwestern portion of Appalachia, so around our AGS assets. That continues to progress nicely for us. The other area that we've had a lot of success in, and we continue to progress new opportunities, is what I'm gonna call kind of our lateral, our pipeline lateral business, where we're connecting large industrial load/power generation load to the network. Examples of success we've had in the past, Birdsboro Pipeline. That's a, you know, a FERC pipeline that we built specifically to a new power plant. We did the same on Millennium with the CPV plant. There's three or four that we've put in place that hang off of Vector.
We continue to see strong interest in that space, and we are continuing to advance those types of projects across the portfolio. More to come on that, but those are the areas of activity that we're seeing right now. It's really a filling out. I'd call it a filling out around the current network and optimizing the current network.
Got it. That's helpful. Maybe just one more, if I could. I think, as it relates to ESG, there might have been a reference to the potential for carbon capture down the line. Just wondering if that's something that you see that DTM could pursue on the ESG side or kind of anything else as we think about, you know, energy transition or look for fossil fuels.
Yeah. This question relates to the last question. I really think this is an exciting part of our portfolio as I look forward. Our positioning around ESG and specifically reducing our carbon footprint, we have a significant initiative occurring internally looking at intersections inside of our current footprint and portfolio with what I'm gonna call low carbon incremental investment opportunities. You touched on the one that's the most obvious. You've probably looked at our portfolio. You understand that our treatment plants in Louisiana, we extract CO2 from the stream. We have a pure form of CO2 inside our portfolio today, which is one of the key ingredients for a successful carbon capture and sequestration program. That's something that we're very active in right now and, you know, more to come on that.
I view that as another, as sort of a third leg that could mature fairly quickly inside our portfolio, incremental investment opportunities that are really focused around a lower carbon economy in the future.
Great. That's very helpful. Thanks for taking my question.
Oh, great question. Thank you.
Your next question comes from the line of Jean Ann Salisbury from Bernstein. Please go ahead. Your line is now open.
Hi, good morning. There have been some asset sales in the last week or so of gas storage and of Northeast gas intrabasin pipelines. I'm thinking Stagecoach here. They were at decent multiples. What is your level of interest in selling assets one-off if someone offers more than you're eventually getting in the market, considering that you're also trying to grow to a billion in EBITDA to get IG?
Yeah, great question. No, first off, I was very encouraged when I saw the kind of the valuation of those assets. You know, that's a very small asset, but that Stagecoach asset is very similar to our portfolio in terms of there was some storage in there was some pipeline assets in there, and there's some gathering assets in there. Number one, I was encouraged by the value that the market placed on it. You know, I'll answer the question maybe at the highest level. Jeff and I's job is to maximize value for our investors. We will always look at different strategies that will do that.
That being said, I'm very optimistic that this company's going to be highly valued by the investment community when we go public, just given the nature of the portfolio, the cleanness of the balance sheet, the contract profiles across our assets, and the positioning of the assets. We're sitting in the best dry basins in the country, attached to the best most durable and growing markets in the country. We really have a premium portfolio that we're going to offer here, July first. I'm very optimistic that we're going to see a strong multiple when we trade.
Great. Thanks. That makes sense. As a follow-up, just more of a fundamentals question around intrabasin pipelines, which is a lot of your assets I think would be classified as that, and if they have sort of a long-term moat I think investors are pretty comfortable with kind of lease gathering and with pipelines and what happens at the end of the contract, if there are some. Can you just talk about different scenarios after the nine-year tenor, in which I think if everything's still full, it's pretty clear that you can probably just extend the contract rates. If things are not going as well and you're not full in nine years, are there competitive outlets? What would be a scenario in which you would expect to see the rate come down materially, if there are any?
A great question. You know, when we make investments, I'm gonna just kind of elevate to some of our criteria when we make long-term investments. We look at the fundamentals around these assets. As I mentioned earlier, it's one of our gating criteria before we even seriously consider making investments. We certainly believe and believe that you can look and see publicly really strong fundamentals around these assets. Our track record with this portfolio has been to successfully recontract and reterm out when contracts come up for expiry. We've done a great job on that with Vector. You know, Vector is an asset that went into service in 2000, so it's 20 years into its life. It's been fully recontracted.
You know, I'll say it's gone through one to 1.5 full cycles of recontracting. Again, the fundamentals around that asset have allowed us to successfully do that. Quite frankly, I see the same thing playing out across all of our pipeline assets. You know, again, these assets, these pipeline assets are either FERC-regulated or state-regulated. There's a strong regulatory framework that we operate these assets around and strong fundamentals around both sides. I'm currently not worried about that.
Okay. I guess I actually meant more like Bluestone and some of the more intrabasin types of pipelines.
The intrabasin, so the gathering assets, they're very much long term, they're tied to the resource that they sit over top of. Again, fundamentally, when we invest in those assets, we want to make sure that they're sitting over tier 1 rock. That's the most economic rock in the country. That would be number one. Number two is, the shale resource has a very long production profile to them. You know, once they go through their, what I'll call their growth and cycle and they hit maturity, they have a very flat decline profile longer term. We view these assets as having a long, you know, successful tail on them that will generate strong cash flow for literally for decades.
Great. Thanks. That's all for me.
You're welcome.
Your next question comes from the line of Angie Storozynski from Seaport Global. Please go ahead. Your line is now open.
Thank you. I just wanted to start with, you maintained your guidance both for DTE and DTM, for 2021, which are both based on early outlooks. Is it fair to assume that you would be updating those on the second quarter earnings calls, given that you stated that you have had a strong start to the year?
Angie, this is Jerry. Certainly, we will be updating our views on our 2021 guidance on our 2nd quarter call. More to come on that. We continue to have a strong year. With the weather in Detroit, we're continuing to build our contingency. We're feeling really good about 2021, starting to feel real strong about 2022 as well.
How about DTM?
Yeah, it's David. We continue to perform well year to date. As we've spoken earlier, we had a strong 1st quarter as well. We continue to see the business performing really well. There's a lot that's gonna happen in the next 30 days. I think when Jeff and I get on the other side, yeah, we'll provide more color on the 2nd quarter call.
Okay. I recognize this call is about DTM. For DTE, given the spin-off of DTM and given yesterday's announcement from your Michigan peer about a sale of another non-utility asset, how should we think about the future of P&I within DTE?
First of all, I'll start by saying that with all our non-utility operations, as we grow them or transact around them, our goal is to create incremental value for our shareholders. That's our going-in position. I think you've seen that with the DTM spin, where we're recycling a very large set of assets and creating tremendous value for our investors over the last several months. As I think about P&I going forward, we are really positioning that business, which will be about 10% of overall portfolio, focused on investments that are ESG complementary to our utility investment agenda. For example, our RNG investments and our co-generation investments really do fuel our ESG agenda. That's what primarily we'll be focused on going forward.
I recognize that. Just wondering, have you maybe seen market comps that would indicate that this business could be potentially monetized at multiples somewhere near where DTE is currently trading at? Again, just going from yesterday's announcement from your Michigan peer.
I would say that the multiples that we've seen in the market for our P&I assets are slightly different than, say, what, you know, utility assets are valued at. These assets and these investments do create strong cash flows and good returns that drive value for our shareholders.
Very good. Thank you.
Thank you.
Your next question comes from the line of Sunil Sibal from Seaport Global. Please go ahead, your line is now open.
Yes. Hi, good morning, folks, and congratulations on the transaction. Some of my questions have been hit, but I just wanted to explore a little bit more about your ESG goals of net zero by 2050. Beyond CCS, could you talk a little bit broadly about, you know, some of the other opportunities that you could look at for DTM?
Sure can. Thank you for the question. When I look at our different pathways that we've modeled to net zero 2050, certainly carbon capture and sequestration is a sizable chunk out of our carbon footprint. It's a very meaningful transaction for that objective and that goal, but it's also, you know, a very interesting investment opportunity. It's kind of got a dual dimension to it that's makes it very attractive for us to pursue. When I look across the portfolio and I look at the other actions that we will be taking, there's a series of actions, what I'll call operational enhancements on our current asset footprint.
Just, you know, how we control compressor stations, how we do maintenance, how we do blowdowns. Each one of those are very small, but cumulatively, if you just change the mindset about how you operate, they add up and, you know, it can take a chunk out of our carbon footprint. The other area that's very interesting is electric compression. Over time, you know, potentially changing the fleet from gas-fired compression to electric compression or for new incremental projects, designing in electric compression, with a renewable generation source is another very interesting way to take a significant chunk out of that carbon footprint. Those are what I'll call at a high level, the three significant areas.
The last one that I'll mention is just our methane mitigation that we've been actively doing that for four or five years. We were one of the first companies to participate in a methane emissions reduction program kind of on a voluntary basis. We've seen a lot of benefit from that activity over the last three or four years. Again, that just goes to being more rigorous and disciplined around how you do standard maintenance and really be thoughtful about any blowdowns that you do, and if you have to do them, really minimizing those blowdowns. Hopefully that was helpful.
Yeah, that's great. One kind of housekeeping question from me. I think you'd mentioned that majority of your contracts are above MVCs as per current flows. Could you know, quantify that a little bit in terms of, you know, what percentage are above MVCs currently?
Yeah, that's a great question. I believe in the deck there's some information on our gathering segment that sort of lays out the revenue contribution across that segment. The way I'd say it is on a segment level, we're operating well above the MVC level. The MVC level represents, I believe, 73% of the segment earnings for gathering. There's about 20 some odd percent on top of that that's related to flowing gas. That's really a good indication on a segment level, how we're sitting vis-a-vis total gas flowing versus MVC at the segment level. Obviously, contract by contract is different on every contract. But I think the segment level view is sort of what you need to focus on.
Okay. Got it. Thanks.
You're welcome.
Your next question comes from the line of Steve Fleishman from Wolfe Research. Please go ahead, your line is now open.
Yeah. Hi, good morning.
Good morning.
Morning.
Hey, Jerry.
Dave, thank you.
Hi, Steve.
Just two questions. First, on the Southwestern and Indigo transaction. I think Southwestern stated that they're gonna be in maintenance mode going forward, across the system. Could you talk about how that may, if at all, impact your growth plans?
Yeah, I can tackle that. The growth, that 5%-7% is, as I said earlier, everything's factored into that. We're feeling very confident in that for 2022. In terms of Southwestern, and the transaction with Indigo, just a couple comments. Number one, I was really pleased when I saw that transaction. The way Southwestern framed the rationale, you know, they talked specifically about, you know, accessing tier 1 resource, which we always believed was the case when we did our acquisition two years ago. Really good to see a strong producer, a better credit counterparty, recognition of tier 1 resource. You know, Southwestern has a great, you know, reputation of being a disciplined driller and they also have a reputation of growing.
You know, we're feeling really good about that acquisition. Feeling really good about how, you know, a new counterparty will step into those assets that we're very familiar with, how they operate and how they think. We just look forward to working with Southwestern and really digging in. Again, they're not gonna, you know, we understand the close isn't until later in the year, and they're gonna have to digest everything between now and then. You know, more to come as their forward plan becomes more visible.
Okay. I guess just related to that question though, is that I thought the Haynesville assets were supposed to, you know, kind of grow 10% a year or something in that light. How does that fit into the context then of their comment of maintenance mode?
Yeah. Those assets are continuing to grow. There's significant hardwired growth in those assets as we sit here today. That's not changing.
Got it. Okay.
Those commitments, those are contractual commitments that are in place. Yeah, Steve, as kind of I was alluding to, I think we need to let SWN digest what they just acquired and sort of run that through their entire portfolio. Sort of I'm sure they're gonna come out with a more definitive plan later in the year once they close the transaction.
Okay. Then I guess the other question, just in the, I think in Jeff's comments, he said that there might be more disclosures, kind of after the spin, that you'll give. Could you just elaborate on what additional disclosures you might give after the spin?
Sure can. Jeff, you feel free to jump in here, but I think what Jeff was referring to is, you know, we need to officially have the board form and there's some governance items that we need to run through our board. I'd say the most obvious one is our dividend. I mean, we all know everyone wants to know what the dividend is, we want to provide that to you. We just need to go through the, you know, the proper governance channels to get that through the board and then get that communicated to the investors. Jeff, I don't know if you want to add anything else to that.
Yeah. Hi, Steve. Yeah, that's exactly right. We'll probably give a little more detail around 21 and more detail around 22. For exactly what David said. You know, we gotta get through our board, get on the other side, make sure it's all clean, and then we'll provide more clarity on both those years.
Okay. I'm sorry, I have one other question. On the 2022 , 5%-7%, what are the main drivers of that 5%-7% in 2022 versus 2021?
Yeah. It's coming broadly across the portfolio, Steve. You know, obviously, the Haynesville assets are one of the drivers. We're seeing growth in the north. We see growth on NEXUS. We see growth on the Link assets. We see growth in the storage portfolio. It's really coming from across the portfolio. Everything's contributing.
Great. Okay. Thank you.
Your next question comes from the line of Durgesh Chopra from Evercore ISI. Please go ahead, your line is now open.
Hey, guys. Good morning. Thank you for taking my question. I'll be quick. First, maybe can you, I didn't see it on the slide, but what post Indigo and Southwestern merger, what is your total percentage of EBITDA contribution from Southwestern?
Yeah, Southwestern will grow. They're going to approach 50% of the, of the contribution. They're gonna be our single largest customer.
Okay. Super helpful. Thank you. Just Jeff for you, can you remind us when would DTM start paying taxes, cash taxes? The implications of a potential federal tax rate hike, what does that do to DTM?
Yeah, absolutely. Our view is on cash taxes is probably gonna be a minimal payer until the end of the five-year period because we've got revenue, the credits and those kinds of things. That's kind of how we're looking about that. We're still looking through there's a lot in those tax plans of how that's gonna play itself out. Again, for us, given where our tax position and with the credits, again, we think that would be probably minimal impact to us from a cash perspective throughout the five-year period.
Okay. Perfect. Minimal tax payments throughout the 5 years. If tax rates were to be increased, that would still be sort of a non-significant drag on cash flow.
Yeah. That's right. Again, obviously, depending on the size and, you know, there's a lot of things that go into that. Yeah, that's kind of how I would guide people to think about that way for us.
Okay, perfect. Congrats, guys. Thank you for taking my questions.
You bet. Thank you.
Thank you.
Your next question comes from the line of Holly Stewart from Scotiabank. Please go ahead. Your line is now open.
Good morning, gentlemen.
Morning.
Maybe one just on, you mentioned additional disclosures post-spin. Do you anticipate providing details on gathering volumes at that point? Maybe here today, could you tell us total midstream throughput, and then how that's divided between Marcellus and Haynesville?
Hey, Holly, this is David. Great question. I'm not gonna rattle those off the top of my head 'cause I don't wanna get them wrong. I'm gonna have our, I'm gonna have Barbara follow up with you directly and give you a sense of the volumes that currently reside around the portfolio. A number of the volumes deliver into interstate pipelines. Again, that's public information, so we'll be able to share some of that with you.
That'd be great. Then maybe one last one for me to follow up on Jean's last question. Are there gathering competitors nearby that would make recontracting more competitive as your contracts, you know, near the end of term? Or is your system pretty situated, right, where it would just make it difficult for others to come in for a build-out?
Yeah, Holly. We that's one of the things that we look at really closely before we make gathering investments to make sure that we're not putting pipe in the ground right beside someone else's pipe that's in the ground. That typically doesn't end well for either gatherer. The vast majority of our gathering assets are situated and designed specifically for the customer and the acreage that's dedicated to those assets. What that means and what the result of that is that when you do approach contract renewals, you're somewhat married and it's just a matter of working through the new commercial arrangement.
Yep. Yep. No, that's perfect. I appreciate the time.
Yeah. No, thank you.
Your next question comes from the line of Insoo Kim from Goldman Sachs. Once again, Insoo Kim from Goldman Sachs. Please go ahead with your question, you may be on mute. Moving on to the next question here from the line of Michael Lapides from Goldman Sachs. Please go ahead, your line is now open.
Hey, guys. Thanks for taking my question. I'm subbing in for Insoo a little bit here. Easy one for you, just on NEXUS, two topics. One, there was a decent uncontracted portion of NEXUS, if I remember correctly. Can you talk about the progress in signing up long-term contracts for that piece? Two, there was still the outstanding FERC dockets, and even if I remember correctly, some litigation relative to kind of some complaints from Ohio municipalities and on NEXUS. Can you just give a latest update on where those stand?
Sure can, Michael. First on NEXUS with respect to that portion of the capacity that was shorter-term contracted. We've been making really great progress over the last six months. Again, the fundamentals around the asset just continue to improve. We are seeing again this spring congestion pricing leaving Appalachia. We've been able to put some of that capacity into long-term contracts, one with one of the utilities, East Ohio Gas of Ohio, stepped in for a, you know, a contract at what I'll call anchor shipper-type rates. We followed on with a series of multi-year contracts with another set of strong investment-grade counterparties.
The team's doing a really nice job there, expanding the term of that capacity and starting to term it out long term and expanding the rate as the market fundamentals have improved. Very positive activity around NEXUS. In terms of any outstanding regulatory items, you know, I'm gonna double-check on your question. There were a few that we worked through that were resolved last year, and I do not believe there are any open items. Barbara, if you could just add that to our list, and we will go back and double-check and circle back with you, Michael, just to confirm that I've got that right.
Got it. Thank you, guys. Much appreciated.
Welcome.
Your next question comes from the line of Ryan Levine from Citi. Please go ahead. Your line is now open.
Good morning.
Morning.
Some of the organic growth opportunities at DTM don't materialize. What types of asset packages could be attractive to DTM over time for acquisition?
Yeah, that's a really good question. Maybe I'll start, you know, with a few caveats. Number one, the first objective is to deploy greenfield. That would be just the first item. We'll get that off the table. To the extent that some of those other opportunities presented themselves, you know, we do have a very good track record over the last four or five years of doing acquisitions in this segment at DTE. We've done small ones, and we've done larger ones.
You know, we've established what I'll call a playbook, a rigorous process that we follow to assess them well on the front end, make sure they meet a very rigorous investment criteria, and then make sure that we can integrate them in and realize all that value for the investors once we do the transaction. We feel that we have that playbook established. We have a track record of doing that and delivering the results. That strategic capability is in the quiver. If an opportunity did present itself, we certainly would not be afraid to look at it, but it would have to meet those rigorous standards. It would also have to be inside our kind of our wheelhouse or the current footprint.
I don't see us going into an, you know, a different commodity, nor would I see us leaving, premium locations. When I say premium, I mean locations that have really strong fundamentals, whether they're market fundamentals or supply fundamentals. That's just one of those, gating issues for us is. An asset package like that would have to meet those criteria, to attract our attention. I'm gonna stop there. Hopefully, I answered your question.
Yeah, that was helpful. Maybe just to clarify, in light of the Southwestern Indigo announcement, can you just remind us what portion of the organic CapEx for DTE is associated with the Indigo or future Southwestern drilling profile?
Yeah, that's a good question. I'm just doing the math in my head right now. We're in flight on a number of projects in Haynesville right now. Those effectively become SWN's, assuming the transaction closes. About half of our CapEx for this year is being deployed in the Haynesville. There isn't currently any material CapEx being deployed in the north specifically related to SWN. I'm just doing the math in my head. About half of our CapEx this year will be Indigo/SWN related.
Okay. Is that outlook comparable for future years in terms of the CapEx?
I'm gonna have to get back to you on that. That's not a number I've looked at, so I don't wanna guess at it.
Okay. Can you comment on the hydrogen-based opportunities that you may pursue in Louisiana, given your asset footprint and the geographic advantages of that geography?
Yeah, that's another good question. I didn't touch on that when we talked about our ESG positioning, but I did mention that we're actively pursuing these power generation laterals in the north, and that is certainly something that is coming up in almost all conversations right now. Those power generators are looking at potentially a hydrogen blend. That is definitely something that is in our business development pipeline in terms of how we could introduce hydrogen blends into.
Market laterals that are going to large customers that can accommodate, what I'll call a high blend of hydrogen. That's something that we're looking at, but it's very early in what I'll call the development cycle. Really early in the development cycle. It feels promising.
Okay. Last question from me. In terms of the debt profile, to the extent that you were to have excess free cash flow, is there any repayment penalties that we should be mindful of to the extent you wanted to delever if some of the growth doesn't materialize?
Yeah. Jeff, can you take that one?
Yeah, I sure can. Hey, Ryan. Yeah, when we set up the capital structure, we were pretty intentional how we did that. As you saw, you know, the $3.1 billion, we've got $1 billion that's in that term loan B, and then the other, you know, the remainder of that $2.1 billion is in the senior piece. That term loan B, the reason why we set it up like that, 'cause it's got a really neat feature which is pre-payable. We're able to retire that, you know, we don't have all the penalties, don't have all the breakage fees and those kind of things. That's kind of why we intentionally did that to give us that strategic optionality to spend, you know, growth or delevering the balance sheet straight up.
Great. Thanks for taking my question.
Yeah, you bet.
Thank you. That is all the time that we have for questions today. I will now turn the call back over to Gerardo Norcia for closing comments.
Well, thank you everyone for joining us today. This is a great opportunity as you can see for DTE and DTM, and we are confident the spin will drive additional shareholder value. Have a great morning. Stay healthy and safe.
Thank you. This concludes today's conference call. Thank you for participating, and you may now disconnect.