Good morning. Thank you for standing by, and welcome to the DTE Energy Spin Off of DTE Midstream Conference Call. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer session. I would now like to hand the conference over to your speaker today, Barbara Chuckfield.
Thank you. Please go ahead.
Thank you, and 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 Jerry Marcia, 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. And 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. It's an exciting time for both companies. This morning, I'll start off by discussing the benefits of the spin, then 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's business mix with investor preferences and overall market trends, and create 2 entities each with experienced leadership and proven track records. The spin also creates 2 pure play companies by positioning DTE 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 and DTM post spin. A key value enhancing aspect of the spin is that the combined dividend of DTE and DTM is expected to be higher than the pre spin dividend. Pre spin, the plan was to grow the DTE dividend about 6%, but after the spin, we expect a combined annualized dividend to provide an increase of 8% to 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.
Next, 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 2,200,000 customers, has a 5 year plan that sees us investing about $14,000,000,000 which is $2,000,000,000 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 2,040 and achieving net 0 by 2,050. DTE Gas is the 7th largest natural gas utility in the nation with 1,300,000 customers and 139,000,000,000 cubic feet of storage capacity.
At DTE Gas, we have a $3,000,000,000 5 year capital plan, about half will be invested in infrastructure renewal and half in base infrastructure to support increase of reliability for 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 2,050. 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% to 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 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 Q3, we anticipate classifying midstream earnings for the first half of twenty twenty one as discontinued operations. I can say that we are having a really strong start to 2021 and now we are making plans to use that strength to ensure that we continue to deliver in 2022 beyond. And I am confident in our long term operating EPS growth target of 5% to 7%. So DTE is well positioned to continue to deliver premium shareholder value for 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 1 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. And on June 4, the SEC Form 10 was declared effective. Looking forward, our virtual equity roadshow will take place over the next 3 weeks. DTM shares will start trading on a when issued basis on June 17. The record date for distribution of DTM shares will be June 18 and DTM shares will be distributed to DTE record holders on July 1.
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 100 of DTE and DTM employees. And for that, I wanted to thank the team for bringing their best energy to work each and every day and keeping everything on track. Now, 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 2 premier dry gas basins in the country. We have a clean balance sheet with low leverage and no significant maturities for 7 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. Now let's move on to Slide 12.
DTE Midstream has a distinctive portfolio of high quality assets located in the Marcellus Utica and Haynesville Basins. We have 2 reportable segments with EBITDA split approximately fifty-fifty between pipeline and gathering. Our pipeline segment includes FERC Interstate pipelines, large diameter lateral pipelines that are interconnected with interstate pipelines and the 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. Now 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. Now let's turn to Slide 14.
DT Midstream has a well established ESG culture that has been built over the years of working with DT 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 2,050, 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 experience 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. Now, 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 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. DKM's asset base provides diversified and stable cash flow. As I mentioned earlier, our EBITDA is split approximately fifty-fifty between our pipeline and gathering segments. We serve 4 attractive and growing markets, including the Gulf Coast, Northeast and Mid Atlantic, Midwest and Eastern Canada.
And 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 9 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 long standing 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 Southwestern's recently announced transaction to acquire Indigo Wood 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. Now 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 5 years. We plan to invest $1,200,000,000 to $1,700,000,000 in total capital over the 5 year period. We will 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 lifecycle, 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 fifty-fifty 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 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% to 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. PPM Midstream is uniquely positioned with a very clean balance sheet.
Our debt structure provides us with financial flexibility and no significant debt maturities for 7 years. We are targeting a debt to EBITDA ceiling of 4 times and plan on deleveraging 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 $750,000,000 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 BTM 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. So in order to be helpful, we are providing an annualized pro form a 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 5 year plan. We expect that we will have total annual distributable cash flow of $500,000,000 to $550,000,000 And 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 $275,000,000 to $325,000,000 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 5 year period. We plan to pursue highly accretive growth and invest a total of 1.2 $1,700,000,000 in capital over the 5 year period, which can be funded by internal cash flow. And 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, DTE Midstream will start its journey as a standalone C Corp with a very clean story on July 1. Our high quality assets are located in the 2 most prolific dry gas basins. We have a strong balance sheet with no significant debt maturities for 7 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.
And with that, we want to 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.
And your first question here comes from the line of Shar Pourreza from Bighgenheim Partners. Please go ahead. Your line is now open.
Hey, good morning, guys.
Good morning.
Good morning.
Just on the growth profile of DTM, you obviously have an have an early outlook for 'twenty two of 5% to 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 sort of implied by the top end of the range? And to what degree are you guys sort of embedding any dis synergies in those numbers?
Sure. I'll take that question. Thanks for it. So first off, we are carrying incremental costs in that growth rate that will show up in the 1st full year. So they would be the incremental public company costs.
So that's a component that's embedded in the 5% to 7%. The 5% to 7% is effectively contracted in the portfolio for next year. So we're in flight executing those projects as we speak. So very confidence in that 5% to 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. And then 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 in various stages of development, it seems allocation is going to be more skewed towards at least reinvestment in the near term.
Is that sort of how you're envisioning it? And what sort of timeframes are you looking at for growth versus delevering stages of capital allocation?
Yes. The way to think about it at a high level, we're viewing that $1,200,000,000 to $1,700,000,000 capital investment agenda 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. So that's how we're thinking about it at a high level. 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. We're going to have options. We can delever. We can return to the shareholders. So there's going to be some options there that we would consider, but the primary goal is to continue to grow the company in a disciplined, accretive way.
Got it. And just lastly for me on contracting. Can you just maybe elaborate on the dynamics of the tenor? You have obviously 9 years of contract revenue there. So there's clearly some roll off.
So how are you sort of thinking about maybe future contracting? Is there room to improve some of the pricing with the recontracting? Thank you.
Yes, great question. So 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. And the rationale there was we were at a cyclical low in storage values, and we are climbing out of that low as we speak. And I expect as we recontract that portfolio, we'll add tenure and should see some rate expansion is the expectation.
So that would be the one area of the portfolio. The other area would be the NexSys portfolio. So we 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. So those are the two areas in the portfolio, Shar, where I would see that playing out.
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, Steve. Congratulations on all the updates there.
Thank you. Good morning.
Absolutely. How do you think about addressing investment grade and just repositioning the company there? And 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 $1,000,000,000 EBITDA kind of threshold or what have you. Just any thoughts there?
Yes, great question. And you're right, Jeremy. When we went through the credit rating process, the company effectively scored IG across all the metrics with the exception of the scale metric. So Jeff and I want to grow the company in that into that $1,000,000,000 EBITDA neighborhood. And I think at that point, we'll position the company for an investment grade rating.
So that's the goal and aspiration that Jeff and I have for DTM here over the next 5 year window. And that very much aligns with the capital deployment agenda that we've been talking about, the $1,200,000,000 to $1,700,000,000 So 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 going to be a goal of ours.
Got it. And if I can ask you to elaborate a
little bit, in terms of
a 5 year view here, having line
of sight on $1,000,000,000 of EBITDA,
as you think about that, is that all organically achievable, whether it's in the recontract and incremental adds at Nexus or in storage and or on your existing platforms? Or do you need to go perhaps inorganically there to get to reach that target? Just want to make sure we're on
the same page.
Yes. Another great question. Our primary goal is to deploy that organically inside our the regions that we're operating in. And I would say that certainly on the front end of that 5 year plan, we have line of sight to those types of investments. We'll play out the 5 year plan will play out before us here, but that typically is the best and most value creating deployment of capital.
And that's always our number one area of focus for incremental capital deployment.
And sorry, just to clarify that last response, if you don't mind, you started your response and saying on the front end of that plan, how do you think about sort of the profile of running from the 'twenty two initial target that you talk about up to that $1,000,000,000 Is it front end loaded by that first comment there?
Yes. No, I only made that comment is in terms of what's most visible and what's advanced in what I'll call the business development pipeline inside the company. So that's my only reference to the front ends. We have a lot more visibility obviously in the 1st 2 or 3 years of the 5 year plan than we do on the back 2 years, but that's normal. And yes, so we will continue to have an active business development activity that fills those opportunities.
And as they make sense to deploy capital to, we will. In terms of I'm just maybe reading into your question a little bit, but I think part of it was, is it going to be a smooth trajectory to the $1,000,000,000 These investments tend to be lumpy and come in large swaths. So 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.
Your next question comes from the line of Jimmy Tonet from JPMorgan. Please go ahead. Your line is now open.
Hi, good morning.
Good morning. Good 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 Q1, there was EBITDA of $193,000,000 but the guidance top end is $750,000,000 So 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 going to pass it over to Jeff and he can fill in the detail. But I'd say that quarterly number, it was just an extrapolation of Q1. Q1 was a really strong quarter for us. There's some seasonality in that.
And then there's obviously going to be some additional costs that show up post spin. But I'll pass it over to Jeff. And Jeff, I don't know if you wanted to add to that.
Yes. And good morning. Yes, David, yes, that's spot on. And there's also so you're going to have a little bit of seasonality, additional public cost piece. And then there's also going to be a little bit of conservatism and contingency is going to be in that.
That's why we're guiding for 2021 to that 7.10 to the 750. We think that's a good guidance for everybody.
Got it. So there's no expectation of Southwestern buying indigo slowing down activity that you don't see that happening right now?
No, we don't. It was just announced last week, but we expect what we're hearing is the close will be in Q4. They will all the contracts will go over to
in the portfolio. We're in flight executing on that as
we speak. Okay. And then in the portfolio. We're in flight executing on that as we speak.
Got it. That's helpful. And then thanks for the projects on Slide 19. That's helpful there. But 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.
But with regards to the other projects, what are some of the other ones that might be a bit sizable and move needle here? Just trying to get a feeling for where the growth is because I think there's a thought in the market that the Appalachia is somewhat constrained for takeaway capacity given pipelines not getting built anymore and what that does for long term drilling activities. So just trying to get flesh out a bit more what the levers are for the future growth as you see it. What are some of the chunkier projects?
Yes, great question. I'm going to start down south in Haynesville and then I'll pivot and talk about the north. But I'd say number 1, we're seeing really strong drilling activity emerge in the Haynesville and we're also seeing a really strong demand uptick along the Gulf Coast. So 2 significant fundamental shifts have occurred probably in the last 3 or 4 months. That we're working really hard on LEAP right now and looking at opportunities to bring 3rd parties on to those assets, the Blue Union and the LEAP assets and to expand the LEAP assets.
So I'd say that's I'll call that priority 1 and focus number 1 in our portfolio. Then if we talk about the north, I'd say the area that we're seeing most activity, while we're seeing activity in 2 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. But the other area that we've had a lot of success in and we continue to progress new opportunities is what I'm going to call kind of our lateral our pipeline lateral business where we're connecting large industrial loadpower generation load to the network. And examples of success we've had in the past, Burtsboro Pipeline, that's a FERC pipeline that we built specifically to a new power plant.
We did the same on Millennium with the CPV plant. There's 3 or 4 that we 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. So more to come on that, but those are the areas of activity that we're seeing right now. So 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. And 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 energy transition or forward look for fossil fuels?
Yes. And this question relates to the last question. So 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 going to call low carbon incremental investment opportunities. And you touched on the one that's the most obvious.
You probably looked at our portfolio. You understand that our treatment plants in Louisiana, we extract CO2 from the stream. So we have a pure form of CO2 inside our portfolio today, which is one of the key ingredients for successful carbon capture and sequestration program. So that's something that we're very active in right now and more to come on that. But I view that as another as sort of a third leg that could mature fairly quickly in 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.
Great question. Thank you.
Your next question comes from the line of Jeanine Salisbury from Bernstein. Please go ahead. Your line is now open.
Hi, good morning. There have been some asset sales the last week or so of gas storage and of Northeast Gas interbasin pipelines, I'm thinking stagecoach here. I mean, 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 $1,000,000,000 in EBITDA to get IG?
Yes, great question, Noah. So first off, I was very encouraged when I saw the kind of the valuation of those assets. That's a very small asset, but that stagecoast asset is very similar to our portfolio in terms of there were some storage in there, there were some pipeline assets in there and there are some gathering assets in there. So number 1, I was encouraged by the value that the market placed on it. I'll answer the question maybe at the highest level.
Jeff and I's job is to maximize value for our investors. And we will always look at different strategies that will do that. So that being said, I'm very optimistic that this company is 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. So we really have a premium portfolio that we're going to offer here July 1.
So I'm very optimistic that we're going to see a strong multiple when we trade.
Great. Thanks. That makes sense. And then as a follow-up, just more of a fundamentals question around intra basin pipelines, which is a lot of your assets, I think, would be classified as that. And if they have sort of a long term note, I think investors are pretty comfortable with kind of lead 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 9 year tenure in which I think if everything is 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 9 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?
So a great question. And when we make investments, I'm going to just kind of elevate to some of our criteria when we make long term investments. We look at the fundamentals around these assets. And as I mentioned earlier, it's one of our gating criteria before we even seriously consider making investments. And 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 re term out when contracts come up for expiry. We've done a great job on that with Vector. Vector is an asset that went into service in 2000. So it's 20 years into its life. It's been fully re contracted.
I'll say it's gone through 1 to 1.5 full cycles of recontracting. And again, the fundamentals around that asset have allowed us to successfully do that. So I see the same quite frankly, I see the same thing playing out across all of our pipeline assets. And again, these assets these pipeline assets are either FERC regulated or state regulated. So there's a strong regulatory framework that we operate these assets around and strong fundamentals around both sides.
So I'm currently not worried about that.
Okay. And I guess I actually meant more like Bluestone and some of the more intra basin types of pipelines?
Yes. So the intra basin, so the gathering assets, they're very much long term. They're tied to the over to the resource that they sit over top of. So 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.
And so that would be number 1. Number 2 is the shale resource has a very long production profile to them. So once they go through their, what I'll call their growth cycle and they hit maturity, they have a very flat decline profile longer term. So we view these assets as having a long successful tail on them that will generate strong cash flow for literally for decades.
Great. Thanks. That's all for me.
Welcome.
Your next question comes from the line of Angie Storozynski from Seaport Global. Please go ahead. Your line is now open.
Thank you. So I just wanted to start with, you've maintained your guidance both for DTE and DTM, which are both for 2021, which are both based on early outlooks. Is it fair to assume that you would be updating those on the Q2 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 Q2 call. And so more to come on that. We continue to have a strong year. And with the weather in Detroit, we're continuing to build our contingencies.
So we're feeling really good about 'twenty one and starting to feel real strong about 'twenty two as well.
How about DTM?
Yes, it's David. We continue to perform well year to date. So as we've spoken earlier, we had a strong Q1 as well. We continue to see the business performing really well. There's a lot that's going to happen in the next 30 days.
So I think when Jeff and I get on the other side and yes, we'll provide more color on the 2nd quarter call.
Okay. And then I recognize this call is about DTM, but for DTE, given the spin off of BTM and given yesterday's So first of all, I'll start by saying that,
So 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. So that's our going in position. And I think you've seen that with the DTM spend 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 and I going forward, we are really positioning that business, which will be about 10% of overall portfolio to focus on investments that are ESG complementary to our utility investment agenda. So for example, our RNG investments and our cogeneration investments really do fuel our ESG agenda.
So that's what primarily we'll be focused on going forward.
But I recognize that. But just wondering, have you maybe seen market comps that would indicate that this business could be potentially monetized at multiple somewhere near where DTE is currently trading at? Again, just drawing from yesterday's announcement from your Michigan tier?
I would say that the multiples will be that we've seen in the market for our P and I assets are slightly different than say what utility assets are valued at. But these assets and these investments do create strong cash flows and good returns that drive value for our shareholders.
Your next question comes from the line of Sunil Chaval 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 are ahead, but I just wanted to explore a little bit more about your ESG goals on net 0 by 2,050. Beyond CCS, could you talk a little bit broadly about some of the other opportunities that you could look at for DTM?
Sure, Ken. And yes, thank you for the question. To net 0 to 2,050. Certainly, carbon capture and sequestration is a size it takes a sizable chunk out of our carbon footprint. So it's a very meaningful transaction for that objective and that goal, but it's also a very interesting investment opportunity.
So it's kind of got a dual dimension to it that 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 how we control compressor stations, how we do maintenance, how we do blowdowns, just and they're all each one of those are very small. But cumulatively, if you just change the mindset about how you operate, they add up and it can take a chunk out of our carbon footprint. The other area that's very interesting is electric compression.
And over time, potentially changing the fleet from gas fired compression to electric compression or for new incremental projects, designing and electric compression with renewable generation source is another very interesting way to take a significant chunk out of that carbon footprint. So those are what I'll call at a high level the 3 significant areas. The last one that I'll mention is just our methane mitigation that we've been actively doing that for 4 or 5 years. We were one of the first companies to participate in a methane emissions reduction program kind of on a voluntary basis. So we've seen a lot of benefit from that activity over the last 3 or 4 years.
And again, that just goes to being more rigorous and disciplined blowdowns that you do and if you have to do them, really minimizing those blowdowns. So hopefully that was helpful.
Yes, that's great. And one kind of housekeeping question from me. I think you had mentioned that majority of your contracts are above NVCs as per current flows. Could you quantify that a little bit in terms of what percentage are above MVCs currently? Yes.
That's a great question. And I believe in the deck, there's some information on our gathering segment that sort of lays out the revenue contribution across that segment. And the way I'd say it is on a segment level, we're operating well above the MVC level. And the MVC level represents, I believe, 73% of the segment earnings for gathering. And there's about 20 some odd percent on top of that, that's related to flowing gas.
So that's really a good indication on a segment level, how we're sitting visavis, total gas flowing versus MPC at the segment level. Obviously, contract by contract, it's 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.
Yes. Hi, good morning. Good morning. Hey, Jerry. Dave, thank you.
So just two questions. First on the Southwestern and Indigo transaction. I think Southwestern stated that they're going to be in maintenance mode going forward across the system. Could you talk about how that
may, if
at all, impact your growth plans?
Yes, I can tackle that. So the growth that 5% to 7% is, as I said earlier, that's everything is factored into that. So we're feeling very confident in that for 2022. In terms of Southwestern and the transaction with Indigo, couple just a couple of comments. Number 1, I was really pleased when I saw that transaction.
The way Southwestern framed the rationale, they talked specifically about accessing Tier 1 resource, which we always believed was the case when we did our acquisition 2 years ago. So really good to see a strong producer, a better credit counterparty, recognition of Tier 1 resource. Southwestern has a great reputation of being a disciplined driller and but they also have a reputation of growing. So we're feeling really good about that acquisition, feeling really good about how a new counterparty will step into those assets that we're very familiar with, how they operate and how they think. And we just look forward to working with Southwestern and really digging in.
And again, they're not going to we understand the close isn't until later in the year, and they're going to have to digest everything between now and then. So more to come as their forward plan becomes more visible.
Okay. I guess the only I
guess just related to that question though is that I thought the Haynesville assets were supposed to kind of grow 10% a year or something in that light. So is that is your how does that fit into the context then of their comment of maintenance mode?
Yes. So those assets are continuing to grow. There's significant hardwired growth in those assets as we sit here today, and that's not changing.
Got
it. Those commitments, those
are contractual commitments that are in place. So 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 and sort of I'm sure they're going to come out with a more definitive plan later in the year once they close the transaction.
Okay. And then I guess the other question, just
in the
I think in Jeff's comments, he said that the 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, Ken. And Jeff, feel free to jump in here. But I think what Jeff was referring to is we need to officially have the Board form and there some governance items that we need to run through our Board. So I'd say the most obvious one is our dividend. I mean, we all know everyone wants to know what the dividend is and we want to provide that to you.
We just need to go through 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.
Yes. Hi, Steve. Yes, that's exactly right. We'll probably give a little more detail around 'twenty one and more detail around 'twenty two. I'm pretty sure exactly what David said.
We got to get through our board, get on the other side, make sure it's all clean and then we'll provide more clarity on both of those years. Okay.
I'm sorry, I have one other question. Just on the 'twenty two percent, 5% to 7%, what are the main drivers of that 5% to 7% in 'twenty two versus 'twenty one?
Yes. It's coming broadly across the portfolio, Steve. Obviously, on Nexus. We see growth on the Link assets. We see growth in the storage portfolio.
So it's really coming from across the portfolio. Everything is 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?
Yes. Southwestern will grow. They're going to approach 50% of the contribution. They're going to be our single largest customer.
Okay. Super helpful. Thank you. And then just, Jeff, for you, can you remind us when would DTM start paying taxes, cash taxes? And then the implications of a potential federal tax rate hike, what does that do to BTM?
Yes, absolutely. So our view is on cash taxes, it's probably going to be a minimal payer until probably the end of the 5 year period because we've revenues, credits and those kinds of things. So that's kind of how we're looking about that. And then we're still looking through. There's a lot in those tax plans of how that's going to play itself out.
But again, for us, given where our tax position in with the credits, again, we think that would be probably minimal impact to us from a cash perspective throughout the 5 year period.
Okay, perfect. So minimal tax payments throughout the 5 years. And then if tax rates were to be increased, that would still be sort of a non significant drag on cash taxes on cash
taxes. That's right. Again, obviously, depending on the size and there's a lot of things that go into that. But yes, that's kind of how we guide people to think of
it 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. Maybe one just on you mentioned additional disclosures post spin. Do you anticipate providing details on gathering volumes at that point? And then maybe here today, could you tell us total midstream throughput and then how that divided between Marcellus and Haynesville?
Holly, this is David. Great question. I'm not going to rattle those off the top of my head because I don't want to get them wrong. But I'm going to have Barb 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 And again, that's public information, so we'll be able to share some of that with you.
That'd be great. And then maybe one last one for me to follow-up on Jane's last question. Are there gathering competitors nearby that would make re contracting more competitive as your contracts near the end of term?
Or is your system pretty situated, right, where
it would just
Yes, Holly, 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 gatherers. So the vast majority of our gathering assets are situated and designed specifically for the customer and the acreage that's dedicated to those assets. So 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.
Your next question comes from the line of Eun Sook Kim from Goldman Sachs. Please go ahead. Your line is now open. And moving on to your 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, 2 topics.
1, there was a decent uncontracted portion of Nexus, if I remember correctly. Can you talk about progress in signing up long term contracts for that piece? And second, there was still the outstanding FERC dockets and even if I remember correctly, some litigation relative to kind of some complaints from Ohio municipalities on Nexus. Can you just talk give a latest update on where those stand?
Sure can, Michael. So first on NEXUS with respect to that portion of the capacity that was shorter term contracted. So we've been making really great progress over the last 6 months. So again, the fundamentals around the asset just continue to improve. We are seeing again the spring congestion pricing leaving Appalachia.
So we've been able to put some of that capacity into long term contracts, one with 1 of the utilities, East Ohio Gas of Ohio, stepped in for a contract at what I'll call anchor shipper type rates. And we followed on with a series of multiyear contracts with a set of another set of strong investment grade counterparties. So the team is 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. So very positive activity around Nexus. In terms of any I'm going to 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. But 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
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?
Yes, that's a really good question. So maybe I'll start with a few caveats. Number 1, the first objective is to deploy greenfield. That would be just the first item, we'll get that off the table. But to the extent that some of those other opportunities present themselves, we do have a very good track record over the last 4 or 5 years of doing acquisitions in this segment at DTE.
We've done small ones and we've done larger ones. And 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 our 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. So we feel that we have that playbook established. We have a track record of doing that and delivering the results. So that strategic capability is in the quiver.
And 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. And it would also have to be inside our kind of our wheelhouse or the current footprint. I don't see us going into a different commodity nor would I see us leaving premium locations. And 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 so an asset package like that would have to meet those criteria to attract our attention.
And so I'm going to stop there. Hopefully, I answered your question.
Yes. That was helpful. And then maybe just to clarify, in light of the Southwestern Indigo announcement, can you just remind us what portion of cash organic CapEx for DTE is associated with the Indigo or future Southwestern drilling profile?
Yes, that's a good question. I'm just doing the math in my head right now. So we're in flight on a number of projects in Haynesville right now. So those effectively become swings assuming the transaction closes. So about half of our CapEx for this year is being deployed in the Haynesville.
And there isn't currently any material CapEx being deployed in the north specifically related to SWN. So I'm just doing the math in my head. About half of our CapEx this year will be indigoswinn related.
Okay. Is that outlook comparable for future years
in
terms of the CapEx?
I'm going to have to get back to you on that. That's not a number I've looked at. So I don't want to guess at it.
Okay. And then can you comment on the hydrogen based you may pursue in Louisiana, given your asset footprint and the geographic advantages of that geography?
Yes, that's another good question. I didn't touch on that when we talked about our ESG positioning. But
I did mention that
we are actively pursuing these north. And that is certainly something that is coming up in almost all conversations right now. Those power generators are looking at potentially hydrogen blend. So 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. So 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.
But it feels promising.
Okay. And then last question for 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?
Yes. Jeff, can you take that one?
Yes, I sure can. Hey, Ryan. Yes, when we set up the capital structure, we were pretty intentional how we did that. As you saw, the $3,100,000,000 We've got $1,000,000,000 that's in that term loan B and then the other the remainder is in that $2,100,000,000 in the senior piece. That term loan B, the reason why we set it up like that because it's got a really neat feature, which is prepayable.
So we're able to retire that. We don't have all the penalties, don't have all the breakage fees and those kind of things. So that's kind of why we intentionally did that to give us that strategic optionality. Kind of grow or delevering the balance sheet straight up.
Great. Thanks for taking my questions.
Yes, you bet.
Thank you. And that is all the time that we have for questions today. I will now turn the call back over to Jerry Norcia for closing comments.
Well, thank you everyone for joining us today. This is a great opportunity you can see for DTE and DTM, and we are confident this spin will drive additional shareholder value. Have a great morning. Stay healthy and safe.
Thank you. And this concludes today's conference call. Thank you for participating and you may now disconnect.