Dispositions and Impairments

6 Months Ended

Jun. 30, 2021

Discontinued Operations and Disposal Groups [Abstract]

Dispositions and Impairments

DISPOSITIONS AND IMPAIRMENTS

Separation of DT Midstream

On October 27, 2020, DTE Energy announced that its Board of Directors had authorized management to pursue a plan to spin-off its natural gas pipeline, storage and gathering non-utility business. On July 1, 2021, DTE Energy completed the separation of the new company, DT Midstream, through the distribution of 96,732,466 shares of DT Midstream common stock to DTE Energy shareholders. The distribution reflected 100% of the outstanding common stock of DT Midstream as of 5:00 p.m. ET on June 18, 2021 (the “record date”). DTE Energy shareholders received one share of DT Midstream common stock for every two shares of DTE Energy common stock held at the close of business on the record date, with certain shareholders receiving cash in lieu of fractional shares of DT Midstream common stock. For U.S. federal income tax purposes, DTE Energy’s U.S. shareholders generally should not recognize gain or loss as a result of the distribution of DT Midstream stock, except with respect to cash received in lieu of fractional shares.

In June 2021, in order to facilitate the separation and settle intercompany balances with DTE Energy, DT Midstream issued long-term debt in the form of $2.1 billion senior notes and a $1.0 billion term loan. Using the debt proceeds, net of discount and issuance costs of $53 million, DT Midstream made the following cash payments:

•Settled Short-term borrowings due to DTE Energy as of June 30, 2021 of $2,537 million

•Settled affiliate Accounts Receivable due from DTE Energy and affiliate Accounts payable due to DTE Energy as of June 30, 2021 for net cash paid to DTE Energy of $9 million

•Provided a one-time special dividend to DTE Energy of $501 million

These payments eliminated in consolidation and had no impact on DTE Energy’s Consolidated Financial Statements of Financial Position for the period ended June 30, 2021. During July 2021, DTE Energy used the proceeds received from DT Midstream to optionally redeem $2.2 billion of long-term debt and provided notice of its intent to redeem an additional $374 million of long-term debt in August 2021. Refer to Note 10 to the Consolidated Financial Statements, “Long-term Debt,” for additional information. Prior to the debt redemptions, the proceeds were held in a temporary investment account within the Corporate and Other segment and included in Cash and cash equivalents in the Consolidated Statements of Financial Position as of June 30, 2021.

Through June 30, 2021, DTE Energy has incurred $43 million of transaction costs associated with the separation of DT Midstream, including legal, accounting and other professional services fees. These transaction costs included $24 million and $34 million for the three and six months ended June 30, 2021, respectively, and were recorded in Operation and maintenance expense in DTE Energy’s Consolidated Statements of Operations for the respective periods. DTE Energy expects additional transaction costs to be incurred in the third quarter in conjunction with the completed separation.

Following the separation on July 1, 2021, DT Midstream became an independent public company listed under the symbol “DTM” on the New York Stock Exchange (NYSE) and DTE Energy no longer retains any ownership in DT Midstream. In order to govern the ongoing relationships between DT Midstream and DTE Energy after the separation and to facilitate an orderly transition, the parties entered into a series of agreements including the following:

•Separation and Distribution Agreement – sets forth the principal actions to be taken in connection with the separation, including the transfer of assets and assumption of liabilities, among others, and sets forth other agreements governing aspects of the relationship between DTE Energy and DT Midstream

•Transition Services Agreement – allows for DTE Energy to provide DT Midstream with specified services for a limited time and no longer than 24 months following the separation, including support for accounting, tax, legal, human resources, informational technology, and various other administrative and operational services

•Tax Matters Agreement – governs the respective rights, responsibilities and obligations of DTE Energy and DT Midstream after the separation with respect to all tax matters

•Employee Matters Agreement – addresses certain employment, compensation and benefits matters, including the allocation and treatment of certain assets and liabilities relating to DT Midstream employees

In addition, DTE Energy and its subsidiaries have various commercial agreements that will continue after the separation. These agreements include certain pipeline, gathering, and storage services and operating and maintenance agreements, and are not considered material to the Consolidated Financial Statements.

Power and Industrial Projects Segment Impairment

Power & Industrial Projects owns a pulverized coal facility located at DTE Electric’s River Rouge power plant. The facility provides pulverized coal to a steel industry customer through a supply agreement expiring in 2028. The River Rouge plant provides operation and maintenance services to the facility through an agreement which also expires in 2028.

During the second quarter 2021, DTE Electric retired the River Rouge plant and provided an early termination notice of the operation and maintenance services agreement with the pulverized coal facility. The termination will be effective December 31, 2021, at which point Power and Industrial Projects will cease operations at the facility.

In connection with these events, DTE Energy performed an impairment analysis of the pulverized coal facility long-lived assets in accordance with ASC 360, Property, Plant and Equipment. Based on its undiscounted cash flow projections, DTE Energy determined that the carrying value of the pulverized coal facility asset group is not recoverable. As a result, DTE Energy recorded a non-cash impairment charge of $27 million, which is included in Asset (gains) losses and impairments, net on DTE Energy’s Consolidated Statements of Operations for the three and six months ended June 30, 2021. The charge included $18 million to fully impair the long-lived assets recorded to Property, plant and equipment and a $9 million write-down of Other noncurrent assets to fair value. Fair value of the assets was determined using an income approach, which utilized assumptions including management’s best estimates of the expected future cash flows, the estimated useful life of the asset group and discount rate.

There were no other adjustments deemed necessary as of June 30, 2021 related to the closure of the facility. DTE Energy is currently monitoring contract negotiations with the steel industry customer to determine any future impacts. An estimate of such impacts cannot be determined at this time as alternatives are currently being evaluated; however, the likelihood of any impact being material to DTE Energy’s Consolidated Financial Statements is remote.