To the 2018 year-end earnings conference call. Today's conference is being recorded. At this time, I would like to turn the conference over to Barbara Tuckfield. Please go ahead.
Thank you, Tracy, and good morning, everyone. Before we get started, I would like to remind everyone to read the safe harbor statement on page two of the presentation, including the reference to forward-looking statements. Our presentation also includes references to operating earnings, which is a non-GAAP financial measure. Please refer to the reconciliation of GAAP earnings to operating earnings provided in the appendix of today's presentation. With us this morning are Gerry Anderson, Chairman and CEO, Jerry Norcia, President and COO, and Peter Oleksiak, Senior Vice President and CFO. We also have members of the management team to call on during the question and answer period. Now I'll turn it over to Gerry to start the call.
Well, thanks, Barb, and good morning, everyone. Thanks for joining us today. This morning, I'm going to give you a recap of our 2018 performance, then I'll turn it over to Peter, who will provide financial highlights and thoughts on our 2019 guidance, which we will reaffirm. Finally, Jerry Norcia will provide an update on our long-term growth plan, business unit by business unit, and he'll wrap things up and open it up for Q&A. Turning to our 2018 accomplishments, starting on slide four, we have a lot to be proud of as we look back on 2018 at DTE. We logged another strong financial year at DTE and made great progress on many other fronts as well. Our operating EPS was $6.30. That's 13% higher than 2017, and it's 9% higher than our original 2018 guidance.
This is the 10th consecutive year that we've exceeded our earnings guidance. Our cash flow came in $500 million above our plan, which sets us up nicely for 2019, providing a lot of balance sheet flexibility. We also increased the dividend by 7% coming into this year, we'll target 7% dividend growth through 2020. We certainly recognize the importance of that sort of dividend growth in delivering premium shareholder returns to you. Our employee and customer and community initiatives also achieved strong results in 2018, I'll touch on those in a bit more detail in a few minutes. With the new year underway, I'm also confident that we are set up well for success in 2019. I feel really good about the plan that we've put together for the year. A month in, I feel good about how 2019 is starting for us.
For example, NEXUS announced that it has signed an agreement to acquire Generation Pipeline, which is a 355,000,000 cu ft a day pipeline that provides future growth opportunities for NEXUS in the area around Toledo in northern Ohio. This is a great fit for our GSP business, and it's representative of the bolt-on asset acquisitions that are available to NEXUS. Jerry Norcia will provide more details on that transaction in a few minutes. Another accomplishment to kick off 2019 is the signing of definitive agreements for voluntary renewables with two large industrial customers totaling 280 MW. There's likely a third large contract that will follow in the near future. Last fall, we told you that voluntary renewables would become an important new area of investment for us, and these transactions are our first concrete moves in that direction.
Another item I'd like to mention is the recent severe cold snap that we experienced here in Michigan. In January, we saw record-breaking temperatures in our state, and our gas and electric teams did a great job, and our assets performed well. Of course, the weather produced strong demand, which will give our two utilities a solid start to the year. Let's move on to slide five now to discuss some of the employee and customer and community successes from 2018. I'm really proud of these accomplishments. For those of you who've listened to our calls in the past, you know how strongly I believe that if you want to be a great company and continue to achieve great results for your customers, your communities, and your investors, your people need to bring great energy and focus to their work. It's that simple.
Based on the results of our Gallup engagement survey in the fall of 2018, I certainly feel good about our employees' energy. We scored in the top 3% of all companies in Gallup's worldwide database. It's the highest level we've ever achieved at DTE, which is a great way to enter 2019. Earlier in 2018, we earned our sixth consecutive Gallup Great Workplace Award. We remain the only utility company ever to receive that award, and we hope we are on track to our seventh consecutive award here in 2019. Now on to one of the most important areas that we focus on at DTE, and that's employee safety. I'm proud to say that 2018 was one of or maybe the safest years in our company's history.
We placed in the top 2% of the National Safety Council's Safety Culture Survey, and we ranked at the top of our industry on key metrics. In fact, what's known as our DART rate, that's a measure of injuries that have some severity. That rate was the lowest in our industry, so our company had the best performance on that of all companies in our industry. Safety is a big deal in our culture, but it's also a great indicator of employees' level of focus and level of discipline. Having highly engaged and safe employees usually translates into serving your customers well. Because of the customer focus, our gas company ranked highest in customer satisfaction with business customers in the Midwest in J.D. Power's study for 2018. Additionally, our electric and gas companies both ranked second in the Midwest for overall residential customer satisfaction.
Look, we continue to target improvements in customer satisfaction results, and I think our biggest lever for achieving that goal remains continued modernization of our grid and improvements in electric reliability that will come with that. Since we had one of the warmest years on record in 2018, we had the opportunity to reinvest significant revenue in the system to that end. Moving on to slide six. We are also very explicit at DTE about our desire to be a force for good in the communities where we live and serve. We do not take that as a slogan or something that we take lightly. Our work in this area receives the same focus and the same discipline that our other key priorities get. For example, we pushed our employee volunteerism to new heights in 2018, with over 50% of our employees involved in company volunteerism efforts.
We also invested $1.7 billion in Michigan-based and Detroit-based businesses last year, and it has been a huge initiative for us. Since we made our original pledge to this effort in 2010, we have increased our annual spend with Michigan companies from $450 million per year to $1.7 billion per year. We have invested over $9 billion with state-owned companies over that timeframe, which has helped to create and support an estimated 16,000 sustainable jobs, more jobs than we have at DTE, actually. The significant investments we are making in Michigan businesses are paralleled by the investments we are making in our communities. This work in our communities is getting noticed. Points of Light named DTE one of its Civic 50, the top 50 most civic-minded companies in the nation, recognizing the community and customer-focused approach that we take to our work.
DTE was the only Michigan company to be named and was acknowledged as the leading energy company nationally. J.D. Power also has chosen DTE as the number one energy company in corporate citizenship. The work I have just described on behalf of our customers and our communities helps to shape the broader context in which we operate in Michigan, and that is really important work. Part of that context is our regulatory and political environment. You all know how important earning a constructive regulatory environment is for a company like ours, especially when you are investing heavily in the transformation of your utility infrastructure, which we are. We have always said that if you serve your customers well, manage your costs and rates well, and if you are a positive force in your communities, your odds of having effective regulation are a lot higher.
Michigan currently earns a Tier 1 ranking of regulatory environments, and that regulatory construct in Michigan has some important features as we work our way through a period of heavy investment, including a special recovery mechanism for renewables, which allows for timely recovery of those investments, an infrastructure recovery mechanism at our gas utility, which leads to timely recovery of gas investments and decreased rate case frequency. There is a similar mechanism under discussion for our electric business. Along with our constructive regulatory environment, we also have a new governor, and she will have the opportunity to appoint two new commissioners this year. We congratulate Governor Gretchen Whitmer, and look forward to working with her and the new commissioners. Finally, I would like to highlight some of the 2018 accomplishments in the area of growth and value creation.
The NEXUS Pipeline was placed in service in the fourth quarter on schedule and on budget. I don't have to tell you that in the current environment, this is no small feat. We also completed expansions at both Link and Millennium in 2018. Last year, our P&I team acquired two new RNG projects and positioned us for further growth in this area this year.
They also broke ground on the Central Energy Plant at Ford Motor Company, which is a significant project for us. Along with the significant investments underway at our two utilities, these non-utility successes undergird our 5%-7% long-term earnings per share growth rate. With that, I'll turn it over to Peter to talk about our 2018 financial results and our guidance for 2019. Peter, over to you.
Thanks, Gerry, and good morning, everyone. Before I get into financials, I always like to give an update on my Detroit Tigers. Even though it's cold here in Michigan, it's warm in Florida. Spring training will be in full swing in less than two weeks, and I'm feeling really good about the Tigers in 2019 and beyond. We're rebuilding the right way. We have some of the best pitching prospects in the game. Actually, four of our pitchers in the top 100 prospects in Major League Baseball. Back to the business at hand, turning now to the financial results. I will start on slide seven. DTE had a great year in 2018 across all of our business lines. DTE had operating earnings of $1.14 billion. This translates to $6.30 per share, a new high for the company.
EPS performance is a strong beat to our original guidance. You can find a detailed breakdown of EPS by segment, including our reconciliation to GAAP-reported earnings in the appendix. Let me start my review at the top of the page with our utilities. The utilities' great financial performance was driven by an extremely hot summer and a colder than normal winter. DTE Electric earnings were $669 million for the year. This is $52 million higher than 2017. This increase was driven largely by a hot summer as well as new rates implemented. We reinvested a good portion of this favorable weather back into the operations to improve customer reliability. A more detailed year-over-year earnings variance walk for DTE Electric can be found in the appendix. DTE Gas operating earnings were $159 million. This is an increase of $10 million versus 2017.
The earnings increase is driven primarily by cooler winter weather, offset by increased O&M expense. Let's move down the page to the third row to our Gas Storage and Pipelines business. GSP operating earnings were $233 million for the year. This is $73 million higher than prior year. The increase is due to lower corporate tax rate and favorability across all platforms. On the next row, you can see that our Power & Industrial business operating earnings were $163 million. Earnings are $39 million higher than in 2017. This increase is due mainly to higher IREF volumes and steel-related earnings. Our energy trading business also had a strong year, producing $40 million of operating earnings. Earnings are up $20 million versus 2017. Our trading segment had a particularly strong economic year in its gas portfolio.
The $40 million in operating earnings this year is consistent with our average economic income over the past five years, and is also consistent with our EEI disclosures for expectations from this segment in our five-year outlook. Finally, our corporate and other was $53 million unfavorable compared to last year, due to the lower tax rate, higher interest expense, and a significant one-time item in 2018. Inside the $122 million loss for the segment in 2018 is a sizable contribution to our foundation and other charitable causes. This will enable us to continue to be a force for growth in communities for years to come. Overall, DTE had a great 2018, earning $6.30 per share. Let's move to our 2019 guidance on slide eight. Gerry mentioned in his opening remarks, we are reaffirming our 2019 operating earnings guidance from the early outlook we provided on the third quarter call.
Our 2019 operating EPS guidance range is $5.97- $6.33, with the midpoint of the range at $6.15. This is 6.4% higher than our 2018 original guidance. We are also reiterating our 5%-7% EPS growth rate from this 2019 guidance. We are projecting another strong year for cash flows in 2019, which will help fund our robust capital investment plan. The details of our cash and capital guidance for 2019 are included in the appendix.
Before I turn the presentation over to Jerry Norcia, I'd like to mention that our one- and three-year equity issuance plan has not changed from the one we provided you at EEI. This year, we plan on issuing up to $250 million using internal mechanisms. We plan to issue $1 billion- $1.5 billion of equity from 2019 to 2021. I'll turn it over to Jerry Norcia to discuss the growth and investment opportunities in our business lines.
Thanks, Peter. As Gerry mentioned, we made a lot of progress in 2018, which gives us positive momentum going into 2019 at our utilities as well as our non-utilities. I'll start on slide nine with our utility businesses. I'll begin with the electric company. In 2019, we will continue to move along the path to deliver 50% clean energy by 2030 and reduce carbon emissions by more than 80% by 2050. We're on track to achieve our interim goal of a 30% reduction by the early 2020s. Wind energy will be instrumental in achieving this interim goal. Our wind fleet wrapped up 2018 with its best operating year ever, generating 1.400,000 MWh Of clean energy and finishing up in the top quartile for fleet availability in North America.
When the fleet performs well, it plays a key role in providing clean air energy to our customers while helping us maintain reliability and affordability. We expect our megawatt hours to increase significantly in 2019 as we expect to commission Pine River Wind Park in the first quarter of this year. Pine River is the largest energy-producing wind park in Michigan and is the most cost-effective wind park in DTE's fleet. Our electric company also received Michigan Public Service Commission approval for our voluntary renewable energy plan. This plan includes adding 300 MW of new wind capacity to supply a voluntary renewable energy program for large industrial customers who are looking to reduce carbon emissions. As Jerry mentioned, we have already signed up two large industrial customers for 280 MW. A third large contract is pending.
Based on current levels of interest, we believe we can expand this voluntary renewable plan by an additional 300 MW in the future. Last year, we received a certificate of need to build a new gas combined cycle plant. We broke ground in August, and we expect operations to begin in 2022. Along with renewable energy, natural gas will be a critical part of our power generation capacity in the decades ahead. In March, we will be filing our Integrated Resource Plan, or IRP, with the MPSC, covering the next 20 years with very specific plans for the first five years. The IRP will help to guide energy resource mix decisions, which are necessary to meet future demand for clean, reliable, and affordable electricity. We use an integrated cost-based system planning process that accounts for demand, reliability, resource diversity, and our environmental goals.
Because markets of technologies continue to evolve rapidly, we expect our IRP recommendations to be quite specific in the early years, but present a range of options for the later years of our plan as we continue to retire coal plants and understand market dynamics more deeply. Moving on to our gas utility, DTE Gas received a constructive rate order in September, accelerating over $450 million of main renewal capital over the next five years, allowing us to shorten the pace of this renewal program from 25 years to 18 years. I'm very pleased with the progress of this program. Additionally, we announced our plans to reduce methane emissions by more than 80% by 2040. Made good progress on this effort so far, and our accelerated gas main replacement plan will help this initiative as well. Now I'd like to move on to our non-utility businesses.
Turning to slide 10, I'll start with an update on the growth opportunities at our Gas Storage and Pipelines business. The left side of this slide lays out the core geography of which GSP is active in and pursuing growth. We are always on the lookout for potential organic build-outs or acquisitions that would support our position in this geography, as our assets are strategically positioned to connect high-quality markets to world-class geology. On the third quarter call, we told you that NEXUS was placed in service, which was a huge milestone for our company. The completion of NEXUS, along with the progress at our other platforms, is setting us up nicely for growth in this segment. I told you that NEXUS provides us with additional opportunities to expand our footprint, and one opportunity is the NEXUS acquisition of Generation Pipeline, owned in a 50/50 partnership with Enbridge.
Generation Pipeline is in the core of the northern industrial route in Ohio, will likely present additional opportunities for supplying natural gas to Power & Industrial customers in that area. The 23 mi, 24 in pipe is fully contracted, has a purchase price between $150 million-$200 million, is located four miles north of NEXUS, interconnects with the ANR and Panhandle Eastern Pipelines as well. With potential future interconnections to NEXUS, this acquisition provides direct access to the Toledo industrial corridor. We expect both NEXUS and Link to spawn an array of organic and bolt-on acquisition opportunities of this sort. Growth plans on our other assets are on track. We completed expansions on our Link and Millennium Pipeline assets, as Jerry mentioned, and our assets are performing extremely well. During this polar vortex, Vector Pipeline was flowing full in both directions to Canada and into Chicago.
We expect Vector Pipeline to see increasing opportunities serving markets in Chicago and Wisconsin. I feel very good about the position we are in at GSP, giving me confidence that we'll continue to execute on opportunities that support our growth targets. I'd like to move on to slide 11 for a look at our Power & Industrial business. Our P&I business continued to see progress in the development of both industrial energy projects and renewable natural gas, or RNG. As we discussed at EEI, the RNG market is the one that we have done business in for over 15 years. In recent years, demand for RNG has surged, and we feel the market is poised for a strong growth trajectory in the future. We now have five operating RNG sites and three under construction.
We're also finalizing agreements on two new RNG projects, we continue to advance the discussions to secure additional RNG projects in 2019. On the industrial energy side, we are focusing on our cogeneration business. Cogeneration projects enable our customers to improve their environmental footprint and lower their energy costs. We continue to construct our most recent project at Ford, it will go into operations later this year. We expect to add a series of similar cogeneration projects over the next five years. I mentioned at EEI, our P&I queue of development opportunity was very strong, that certainly continues to be the case. I'll wrap up on slide 12, we'll open it up for questions. All in all, I feel great of our 2018 results and our positioning for continued growth in the years to come.
We exceeded our original operating EPS guidance for the 10th consecutive year in 2018. Additionally, our annualized total shareholder return has consistently beat the S&P 500 utility index by a large margin over that decade. Our utilities continue to focus on necessary infrastructure investments tied to clean generation
Improved reliability and enhanced customer experience. NEXUS is now in service and flowing gas to customers and is acquiring the Generation Pipeline. Our P&I business unit is working to secure additional RNG and cogen projects. This sets us up well to continue to deliver strong EPS and dividend growth. We increased our dividend by 7% for 2019 and anticipate the same increase in 2020. Our goal is to use our disciplined approach to operations and investment to continue to deliver premium total shareholder returns in the future. With that, I'd like to thank everyone for joining us this morning. Now, Tracy, you can open up the line for questions.
Thank you, sir. If you would like to ask a question, please signal by pressing star one on your telephone keypad. If you're using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. Again, press star one to ask a question. We will now take our first question from Shar Pourreza from Guggenheim Partners. Please go ahead.
Hey, good morning, guys.
Good morning, Shar.
Morning.
Just real quick on the Generation Pipeline. Can we talk a little bit on returns, even in general terms, and what sort of accretion we can expect from this deal? How should we think about it relative to your plan? More important, when do you expect to decide on the lateral off of Nexus, and could this change your current assumption on the mix of short-term versus long-term contracts?
All right. We'll have Jerry Norcia dive into that one for you, Shar.
We expect the connection certainly to be accretive. It does meet our returns thresholds for this business, so we're happy with the returns. In terms of strategic value, it is four miles off the Nexus pipeline, and our plan is to interconnect Nexus to this pipeline. That'll provide significant market access for the Nexus pipeline of over 300 million a day and growing as we attach new customers on that line. Will create value for our shippers in the future.
Great. Okay. Yep.
It's significant, as you say, $350 million, and with the potential to expand that, is a really nice interconnection of market area load for this pipe. We've always said that that route across northern Ohio, which we had interconnection points all along that pipe, we said from early on that we expected those to play out over time with load addition opportunities, and we had struck a couple of those earlier. This is one we really like. As Jerry mentioned, the deal itself, which is fully contracted, is accretive, but we think there's upside opportunity to this as we pursue growth in that area. It also has opportunity for NEXUS, clearly, as we interconnect it.
Do you think you'll be in a position to update around that incremental growth opportunities as we head into EEI?
In the fall?
Yep.
Yeah, I think we'll probably have the acquisition obviously, clearly in hand. We will probably have our thinking advanced about potential timing of interconnection and things like that. We'll give you what we can additional at EEI.
Excellent. Just lastly, on the RNG deals that were just announced, what's the structure of the deals, sort of the tenor of the contracts, the returns, and should we just, for modeling purposes, assume they start to contribute in the second half of this year?
Yeah, the deals that we closed just in the recent past. We use various contracting methods to secure revenues. There's ability to hedge the product. There's also ability to have long-term contracts. We're in the process of making all that happen right now.
Without getting into not wanting to reveal stuff that's confidential to the business, I'd say that we always have the offtake of these locked up. You can do fixed price contracts, although sometimes fixed price contracts, if you do them, may not have the return that you get when you hedge them. We've got some that are fixed price, some that are hedged. You could take some of these open in the short term too, if you like the short-term price dynamics. Hedge them later. I think what we'll end up with, Shar, is a portfolio that we manage in that way with offtakes clearly locked down. Prices managed through contracts and hedging to make sure that we like the predictability of it.
Thanks, guys. I'll jump in the queue. Congrats on the execution.
Thank you.
We will now take our next question from Julien Dumoulin-Smith from Bank of America. Please go ahead.
Hey, good morning.
Good morning.
Morning.
Just to follow up a little bit on Shar's question, if you can. Obviously $150 million-$200 million for this first transaction. Can you elaborate a little bit further on how you're thinking about filling out the remainder of potential even white space for acquisitions here on the GSP side? I suppose that there's ample latitude in the capital budget still for further such deals. To the extent to which you are looking at them, are we looking at more platforms, or are we looking at more simple bolt-ons than Link and NEXUS more narrowly?
Julien, I would say our first order of dispatch, we have a series of organic development opportunities that we're pursuing. That'll be our first order of dispatch for capital. Yes, we do have additional flexibility in our capital plan to accommodate the organic developments. In addition, we're always surveying the market for potential bolt-ons in and around our platform. We'd like for them to be contiguous, just like the most recent one will become contiguous over time. The order of dispatch is organic development, which we see the highest return potential from, and then acquisitions that have growth potential in them.
Got it. You aren't necessarily saying whether it would be more bolt-ons versus larger platform acquisitions at this point.
No, Julien, we judge all that by the merits of the returns and economics. I think we told investors last year that we were looking hard at an acquisition and eventually concluded didn't meet our return requirements, didn't create value for us, we walked away from it. This one we liked, and we liked the future growth potential. This one will probably turn out to be an acquisition that's then followed by organic growth, which usually leads to a really good result. Dollars spent on acquisitions is not nearly as good a measure as value created through often organic upside, which is sort of high-value EPS growth, and we love that sort of stuff. If we can do more like the one we just did, we'd love to. They're good opportunities at a scale that's comfortable with upside. Those produce really good value.
Excellent. Then if I can, just quickly complementing that, speaking of organic growth, what is reflected in your current plan with respect to the voluntary renewable expansion? You talked about 280 MW as being signed up, a third one on the way, and then an additional 300 MW in total. Out of that almost 600 MW, what's reflected in your outlook as it stands?
We have 300 MW in the plan that we laid out for you at EEI, but we did talk at that time about the potential to go up. I think with 280 MW signed up with another contract waiting in the queue, we're sort of through the first 300 MW and working our way into the next 300 MW. This is an area we like. It's obviously fulfilling a need for our customers. They want it. It also is a way to move the state forward in terms of additions of renewable capacity, but do it in a way that isn't rate-based, and doesn't work its way through rate cases. It works its way through this approved tariff.
We really like this area, and we're going to continue to work with customers who have the goal to help accelerate things here in Michigan, and there's obvious value for these customers in terms of their own profile and what they can communicate to their customer bases. It's a good area for us to work, and we're into the second 300 MW now. As we look forward, I think there may be upside to that as we're working with our very largest customers, but we have a lot of customers. We're thinking now about how to make more of this.
Excellent. Thank you all.
Thank you.
We will now take our next question from Michael Weinstein from Credit Suisse. Please go ahead.
Hi, guys.
Michael, are you there?
Sorry about that. Yes, thanks. You can hear my question. I just wanted to find out about the equity issuance. In addition to the $250 million of internal funding, at what point do you think you'll have to complete the plan with block issuance at some point?
We are in early stages of looking at that right now. We still do have some room in our pension plan to get equity. We're at about a 85% funded level in our pension plan. I would say within the three-year window, probably the back half of that. We'd probably be looking at more ATMs or dribbles versus a big block equity issuance.
Right. On the Generation Pipeline, one question I had is, are you anticipating expansion through compression in addition to the lateral as part of the value proposition to that?
Right now, our first order of business is to look to connect that pipeline to NEXUS. It does have the fact that NEXUS carries a very high pressure, creates some potential.
That's one of the values NEXUS can bring to this pipe is that it itself is very high pressure.
Right.
That can create expansion capability and growth capability for this pipe alone.
Okay. I've gotten a lot of questions about the Link asset and what is the contracted status there. Then also, what are the expansion opportunities that you're looking at, and what's the plan for expansion down there?
We had planned expansions, and those are progressing as scheduled. Those will continue into this year for one of our large clients on that pipeline. The status of the pipe is that it's performing better than the pro forma that we had described to our investors. We're feeling really good about that asset and its dynamics.
Okay. Thank you very much.
Thank you.
Thank you, Michael.
We will now take our next question from Angie Storozynski from Macquarie. Please go ahead.
Good morning. Just finishing the M&A topic in the GSP sector. Last year, you guys were preparing us, in a sense, for some acquisitions, seemingly in that sector. At least for 2019, do you think that you are done with this Generation Pipeline deal?
Angie, it's, I think in M&A, to say you're done or not done probably wouldn't be smart on our part, because totally depends upon whether there's an opportunity with really good value. If we look at a handful of them this year and there's no value, we don't do any. If we look at them, which we do continue to scan the environment, and we find one that we really like, we could do one this year. It's completely, I'd say, market and opportunity dependent.
Okay. Changing topics on your regulated electric utility. Last year, we were hoping to see a CapEx rider on the electric side. We saw the CMS Energy's rate case. They didn't get the rider. Could you give us an update? What are your thoughts about that? When such a rider would be achievable?
In our case, it's in our rate case that that discussion is playing out. Last year, we did introduce the idea of it because we were filing the case. If you look at the staff reactions to our case, I think you'll find the commentary around the infrastructure recovery mechanism is positive, although they suggest that perhaps finalizing it should be done outside of a rate case. With the opportunity for more definition of the details, I guess you'd say. That could be the case. It's possible that the commissioners will feel they have enough information on record to establish it. That, really, we will see through the finalization of the case. If you're asking how do we feel about continued quality of discussions around this at the commission, we feel good.
We feel that there's been constructive engagement with the staff, and prior to the case with the commissioners on this, and that it's set up for continued discussion. I think they just want to get it right. We have one at our Gas Company. It's operated very well, that shows that a well-designed mechanism can work well here in Michigan. I think the process we're in now is getting the design right and getting both sides comfortable that we're ready to move forward with this.
Great. Thank you.
Thank you.
We will now take our next question from Praful Mehta from Citi. Please go ahead.
Thanks so much. Hi, guys.
Hello.
Good morning.
Hi. Just following up on Angie's question on the regulation and the rate case. Given the new governor and new commissioners, how do you see that playing out? Do you see that impacting the process? What kind of regulatory sentiment or mood do you see going forward with the environment in Michigan?
We do have two sitting commissioners that we've worked with for quite some time now, they obviously can keep the commission flowing and active in the near term. That said, we do expect one appointment to play out shorter term, the other would come after July when Norman Saari will retire. It wouldn't make any sense to be speculating or commenting on specific commissioners, I would just say that we've had inflow and outflow of commissioners and governors across many years here at DTE, including the 10 that we mentioned earlier, where our financial performance has been strong and steady. Our job is to work really well with the commissioners that the governor appoints. We know the governor well.
Worked with her through her long career in the Michigan legislature and since then, we'll work closely with her on the agenda that she has for the state moving forward. I think she understands that the appointments to this sector, it's a big sector with heavy investment in the state. I think she understands how important these appointments are, I'm confident we'll get a competent person.
Gotcha. Thank you. Maybe just a specific question on the results and on the corporate and other segment, the 122- versus the 100 to 110 range, you said there was a specific one-time item that kind of drove that. Could you provide any little bit more color around what kind of drove that corporate and other segment impact?
Yeah, this is Peter Oleksiak. We had a contribution to our DTE Foundation and other charitable causes. This is part of our strategy to be a force for growth and good in our communities. It really sets us up nicely, as we have strong results for the year, we like to do that. This year we did. In 2018, we did roughly about $20 million after tax in 2018.
I got you. That was incremental to the plan. That was something you hadn't planned for, but then kind of did it at the very end in 2018.
It was incremental to the plan. If you adjust 2018 results for that, you'll see it's in line with our 2019 guidance for that segment.
Got you. Understood. Finally, quickly, just back to Generation Pipeline acquisition. Just wanted to understand why the range of $150-$200. If you have a deal, is that range to kind of not provide more specifics so that you kind of keep the economics a little vague? Is there anything specific around the range of the price?
The deal is finalized. We do have confidentiality agreements in place. This is what our counterparty is comfortable with at this point in time.
We did ask.
I got you.
We did ask about revealing the specific number, and they just didn't want to do that. You can understand that as they are active in the marketplace, maybe in other positions, they want to keep their hand a little vague. This was the agreement we reached with them.
I got you. There's no specific term in the contract that would change the price. The price is fixed. There isn't a earn-out or anything else that kind of drives any change in the price going forward.
The price is fixed.
Okay, perfect. Thanks.
Price is fixed. They just didn't want to be clear about it. We were happy to be clear. They weren't. It is what it is.
Understood. We've seen that in the past and understandable from their perspective. Appreciate the color, guys. Thank you.
Thank you.
We will now take our next question from Greg from Evercore ISI. Please go ahead.
Thanks. Good morning. I think you pretty much just answered my question. At some point in the future, we'll get more specific purchase price financing and the expected EBITDA contribution off the pipe. For now, you're just limited in what you can say. Fair?
Yeah, I think certainly we're limited in what we can say, and we may find that the seller is okay with us down the road being more specific. If that's the case, we will be.
I see that the owner is Generation Pipeline LLC. Can you disclose to us who owns Generation Pipeline LLC?
No, that's under CA also.
Okay. You did say that going in day one, the investment hits your traditional cost to capital hurdles for a pipeline investment, and that over time, as you integrate it into the NEXUS system, you expect that to expand?
Yes. I'll be honest with you, if we never improve the pipe a bit, we're happy with the returns. The value, we always say the value in heat in these sorts of investments is what you can do with them once they become part of your portfolio. Yes, happy with the returns from the contracts that are in place for the pipe, with a belief that there's good value to create beyond that.
Yeah. I was able to find a detailed map of the pipeline's route online. It does look like it goes through some pretty dense industrial areas. The assumption being once you build that lateral, that you'll be able to goose the volumes and maybe goose the contracted volumes on NEXUS by serving those customers. Is that the obvious synergy from this?
Yes, absolutely. I think that's exactly our plan.
Okay. One other-
That part of Toledo is where every industry plays out. It's an area where I think there's an opportunity for our producers tied to NEXUS to be able to deliver into that base over time through this pipeline. It'd be good for that industrial community and good for us, too.
Okay. One final question, maybe it's semantics, but in the EEI deck, you said very specifically you're targeting 5%-7% operating EPS growth through 2023. I think your language was slightly different in your script today, is that still your commitment?
Yep. It was slightly different. It wasn't meant to be. It's exactly what we said at EEI, 5%-7% operating EPS growth.
I just wanted to make sure that that was on the record, guys. Thanks.
Yep, you bet.
Have a good morning.
You too.
Thanks, Greg.
We will now take our next question from Paul Ridzon from KeyBanc. Please go ahead.
Thank you. Just on the returns on the Generation Pipeline, how do we think about your hurdle rates for that segment? Kind of a little bit north of utility hurdle rates?
Yes. That's where we like to start. I think what's proved out over time is if you can buy and start there, either construct and start there or buy and start there, the value comes from the options that it presents down the road for upside.
I think you've already said this, you're already there, correct?
Yeah. Correct.
What kind of capital structure should we assume on that accretive analysis?
Just 50/50.
50/50, Paul.
Getting an IRM on the electric side is not legislative. That's all before the commission. I think you said that earlier?
That's correct.
Okay. Thank you very much.
The other positive thing in our current regular rate case is that the commission has been very supportive of the capital that we're planning to invest in the electric utility.
Thank you very much, and congratulations on the year.
Thank you.
Appreciate it. Thank you.
Thanks, Paul.
We'll now take our next question from Andrew Weisel from Scotia Howard. Go ahead.
Thank you. Good morning, guys. First question-
Sure.
This also similar to Greg's, might just be semantics, but I want to clarify. The EEI slide deck, you said you were targeting strong investment-grade credit ratings. Now it looks like targeting changed to maintaining. Is there anything to that? Are the metrics where you want them to be, and particularly after this acquisition?
Yeah, there's nothing meant through that. Peter, if you want to say more.
No. We definitely are committed to our ratings and we're targeting to have those strong credit ratings that we have today. It gives us a lot of flexibility to have a strong balance sheet, and it has been proven out over the years.
Actually, our FFO results for last year played out stronger because of the cash flow and earnings. We had good strong FFO to debt, and when you do that, it builds in some strength or flexibility forward. We're probably in a better position than we were when we talked to you at EEI.
Got it. Just wanted to make sure you weren't changing the messaging. Next question is relative to last week's cold snap. How would you describe the utility natural gas supplies going into the snap, and how are you positioned for the rest of the winter?
Well, we were positioned really well going into it. I'll just describe the day for you. We did hit design conditions during those peak conditions, and we moved about 4,500,000,000 cubic ft of gas through the gas utility that day, of which 2.5 billion was destined for our enfranchised customers, and 2 billion we were exporting to other interstate pipelines that serve markets as far as New York, Wisconsin, Chicago. We were extremely well-positioned to move gas on that day.
Does that answer the question?
Yes. Just wondering how you're positioned going forward. If we have another cold stretch, is that going to be trouble?
We welcome it. We're well positioned for it.
Good. Next question on the electric side. The weather-normalized sales were flat for the year. Obviously, given the extreme weather this past summer, it's hard to do the math on that. My question is, what's your estimate of the impact of energy efficiency these days, and what's embedded in your guidance for 2019 and beyond?
Yeah, Andrew, we did have flat sales 2018 versus 2017. You look at the residential sector in particular, we had flat usage, but we had customer count, actually a very healthy 0.7% increase in customer counts. Really, there's an offset in energy efficiency. Energy efficiency is definitely helping our customers. We do have targeted energy efficiency programs there.
What's embedded in the outlook?
What we're building into forward plans is very flat. There just isn't growth. We aren't counting on it. Frankly, I don't want this to sound the wrong way, but we don't want it. We want these energy efficiency programs to really bite for our customers because it helps manage their bills and their affordability at a time when we're making significant investments of capital. That's the whole trick here, is to help customers keep their energy costs affordable while we really fundamentally reinvest in the assets that our business is. We're driving that efficiency side hard. There are things that are growing, and as Peter said, we're getting customer count additions. We got a lot of construction in the city of Detroit, and so on and so forth. There are healthy signs, but we are working the efficiency side of it hard.
I like the strategy. Maybe one last one, if I could squeeze it in here. An update on the volumes flowing through NEXUS, and if NEXUS does connect to Generation, how much capacity is there on NEXUS to add that 355 and potentially more?
First I'll say that NEXUS is flowing at its current capacity. That'll also increase over time as we bring more assets online as it relates to the upstream portion of NEXUS. In terms of connecting Generation Pipeline, it will provide a significant market outlet and demand source for the pipeline. We expect that as we make those connections two things will happen. One is it'll make the pipeline much more attractive for our current shippers and also for future shippers. Your question of could we accept all of that on the NEXUS, the answer is yes.
Great. Thank you very much.
We will now take our next question from Steve Fleishman from Wolfe Research. Please go ahead.
Yeah, hi. Good morning. Just first on the curious kind of your view on Northeast gas. We've had some of the producers come out, and I think the production expectations for this year come in a little bit lower than people expected. Just how are they coming in with kind of what you're planning for this year on your system?
Good question, Steve. Obviously we've been watching that very closely on our platforms, All of the projections of the producers that we do business with are in line with our current guidance and our current forecast. We're feeling really good about it at this point. Also, I think we kind of see this discipline that's entering the market as positive for the long term with producers. In addition to that. We see it as a short-term phenomenon because the demand for the product is there. I think as producers get healthier, it'll help improve the price complex for the producers as the discipline sets in.
Steve, just to add to that. As Jerry said, I think the producers are being encouraged by investors to show capital discipline, there's been this flip in the market from investors really looking for how fast can you grow production to show me the cash flow. Show me the healthy cash flow. They're all being encouraged to show capital discipline, and that can wiggle things in the short run. As Jerry just said, we don't see it for us. It's in line with our plan. When you think about this longer term, the production is what it is.
I mean, the demand will be what it is from the Power & Industrial and LDC sectors, declines in well productivity happen every year, and those need to be fulfilled. Those need to be backfilled, the declines, and the demand growth needs to be met. Even though there's capital discipline, that's really a short-run phenomenon. You get into the medium and long term, it's just dictated by the realities of supply and demand. We continue to see the region that we're serving very well-positioned to continue to meet and grow as that plays out.
Okay. Great. Just one question, high level on the equity issuance that you're planning, the $1 billion-$1.5 billion. Just to clarify, I guess this really goes back to EEI, does that include an assumption of more acquisitions beyond what you said or not? If you announced a larger one, would that potentially already be embedded in there?
It assumes that we have each of the segments we provided disclosure around the level of capital spend. It does assume capital spend on each of those platforms and subsidiaries. As Jerry Norcia mentioned, our first order of business is greenfield. In many cases, instead of greenfield, we'll do acquisitions occasionally.
Okay.
I would assume they're all in capital spend. That's really what's supporting that acquisitions plan.
Okay, great. That's helpful. Thank you.
Thank you.
Thank you.
We'll now take our next question from David Fishman from Goldman Sachs. Please go ahead.
Hey, guys. Good morning.
Good morning.
Good morning.
Thanks. On the Generation Pipeline, this is some quick research. I apologize, let me know if I'm wrong here, but it looks like they filed for an Ironville lateral already that could begin construction as early as February 25th. Is this something that was anticipated and expected as part of the purchase price?
Yes.
Okay. With those sort of opportunities, especially because this is a little more exposed to Ohio industrials, do you see this as presenting a competitive advantage for P&I as well on maybe the combined heat and gas opportunities in the future?
I mean, we are having some of those conversations, I wouldn't say any of them are well advanced. There are potential synergies between the two businesses for sure.
Okay. Thanks, guys. Congrats on a good year.
Thank you.
Thank you.
We will now take our next question from Michael Weinstein from Credit Suisse. Please go ahead.
Hey, guys. Just a quick follow-up. I just was noticing that sequentially, earnings at the GSP business decline in the fourth quarter versus the first three quarters of the year. Just wondering if you could explain that and what drives the seasonality of that or whatever it is.
David, Peter, you want to?
Yeah, we can probably get back with you, Michael. My first sense is I know we had a strong kind of mid-year with the summer and some of the flows of gas or something may just be some gas volume which are related to some of our pipelines.
Michael, this is David. Yeah, I think this just may be the timing of how each platform plays out over the course of the year. Yeah.
There was nothing material or anything really that we took notice of. If you're seeing that, we can do a tick and tock for you and just tell you what it was.
Got you.
We see some seasonality there, obviously, because our pipes flow hot and heavy and hard at certain times of the year like they have been this past month, and other parts of the year less so. That produces some variation.
All right. Thanks a lot, guys. Have a great day.
Thank you.
Thank you.
This concludes the question and answer session. I would now like to turn the conference back to Gerry Anderson for any additional or closing remarks.
Well, I want to say thanks again to all of you for joining the call and for the good questions. As I said at the beginning of the call, I feel great about the year that we had in 2018, not only financially, but on a lot of other fronts that go such a long way to keeping the context here in Michigan positive. I feel really good about the position we're in heading into 2019, both the start of the year and the plan that we have for the balance of the year. I think we're in a really good position to deliver another good year and strong results for you all. We look forward to providing you updates on all of that as we move forward. Thanks again for joining. We'll talk to all of you soon.
This concludes today's call. Thank you for your participation, ladies and gentlemen. You may now disconnect.