DTE Energy Company DTE recently announced its plans to invest over $100 million to build three new electric substations, along with installing new poles, power lines and electric equipment, in Michigan. This is part of the company’s broader grid investment strategy involves reducing its power outages by 30% and lowering restoration time by 50% by 2029.
Smart grid technology will be incorporated in all the new substations, allowing DTE Energy to monitor the grid from its headquarters, and facilitating to reduce the frequency and length of outages. This should strengthen the state of Michigan’s power grid infrastructure amid the rising electricity demand from the state’s consumers.
Continuous Investment in Grid-A Critical Need
The existing electrical grid and infrastructure are aging, requiring ongoing investment to upgrade and replace outdated equipment. Regular improvements are essential to prevent power outages, reduce service interruptions and enhance grid reliability. Modernizing the grid also reduces safety risks and supports the growing electricity transmission, with the increasing addition of renewable energy and electric vehicle chargers. These upgrades ensure that utilities can deliver a consistent, safe and reliable power supply to their customers.
Being no exception, DTE has also been investing heavily in strengthening its grid, as is evident from its latest announcement. In addition to the aforementioned substations, DTE is actively rebuilding power delivery systems across its service territory, with several other substations in various stages of development. Some areas under active construction include Almont, Ann Arbor, Detroit, Lapeer, Port Hope, Port Huron, Van Buren Township and Vassar Township.
DTE Stock’s Investment Spree
Per the financial reports of the Federal Energy Regulatory Commission, annual spending by major utilities to produce and deliver electricity increased 12% from $287 billion in 2003 to $320 billion. Capital investment in electric infrastructure mostly drove the increase, which more than doubled during this decade.
These investments can be expected to grow even more in the coming years. Per a report by the International Renewable Energy Agency, the world’s leading utility companies announced in September 2024 that they jointly intend to invest more than $116 billion per year in clean power generation and power system grid infrastructure globally in the coming years.
In line with this, DTE Energy has been investing capital to support a modern, reliable grid and cleaner, affordable energy through investments in base infrastructure and new generation. The company aims to invest $25 billion over the next five years, which implies an 8.7% improvement over its prior five-year investment plan. This includes $4 billion for the base infrastructure and $9 billion for the distribution infrastructure.
Investment Strategy by DTE’s Peer Stocks
Other electric utilities like CMS Energy CMS, Consolidated Edison ED and American Electric Power Company, Inc. AEP also have strategic capital investment plans to strengthen infrastructure.
CMS Energy is investing heavily in infrastructure upgrades, replacements of old infrastructures and clean power generation to improve customer reliability and resiliency of its infrastructure. It aims to make capital expenditure worth $17 billion during 2024-2028.
CMS delivered an average earnings surprise of 4.71% in the last four quarters. The Zacks Consensus Estimate for 2024 sales indicates year-over-year growth of 4.6%.
Consolidated Edison follows a systematic capital investment plan for infrastructure development and maintains the reliability of its electric, gas and steam delivery systems. The company spent $4.51 billion in 2023 and has a robust capital expenditure plan of $28.05 billion for 2024-2028.
ED delivered an average earnings surprise of 7.69% in the last four quarters. The Zacks Consensus Estimate for 2024 sales indicates year-over-year growth of 4.2%.
American Electric Power Company plans to invest $43 billion from 2024 to 2028 in its core regulated operations, contracted renewables and wires. Out of this, $7.4 billion of capital expenditure is expected in 2024.
AEP delivered an average earnings surprise of 0.03% in the last four quarters. The Zacks Consensus Estimate for 2024 sales indicates a year-over-year growth of 5.7%.
DTE Stock’s Price Performance
Shares of DTE have gained 17.2% in the year-to-date period compared with the industry’s 21% growth.
Image Source: Zacks Investment Research
DTE’s Zacks Rank
DTE currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks Rank #1 (Strong Buy) stocks here.
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