OREANDA-NEWS. Fitch Ratings has assigned a rating of 'BBB' to DTE Energy Company's (DTE; IDR 'BBB') \$300 million issuance of seven-year senior unsecured notes due June 15, 2022. The senior unsecured notes will rank pari passu with existing unsecured debt. Proceeds from the issuance will be used for general corporate purposes. The Rating Outlook for DTE is Stable.

Fitch's rating of DTE reflects the stable earnings and cash flows of its two regulated utility subsidiaries, DTE Electric Co. (DECo; IDR 'BBB+', Outlook Stable) and DTE Gas Co. (DTEGas; IDR 'BBB+', Outlook Stable). DECo is the primary driver of consolidated cash flows and approximated 72% of consolidated EBITDAR for the latest 12 months (LTM) ending March 31, 2015.

DTE's current ratings reflect the low risk of its regulated operations, a large capex program focused on growing utility and pipeline investments, a constructive regulatory environment, and an improving economy. The company also benefits from a sufficient liquidity position and manageable debt maturities.

KEY RATING DRIVERS
Modest Weakness in Credit Metrics: Fitch forecasts DTE's credit metrics to remain commensurate with Fitch's 'BBB' IDR guidelines for utility companies but anticipates the large capital spending program to modestly pressure leverage metrics. Fitch calculates DTE's EBITDAR coverage ratio at 4.7x for the latest 12 months (LTM) period ending March 31, 2015 and leverage as measured by debt-to-EBITDAR at 3.7x. Going forward, Fitch expects consolidated debt-to-EBITDAR to increase to 4.2x through 2017 due to investments associated with the large capex program and moderate regulatory lag. Fitch also expects funds from operations (FFO)/debt metrics to average 23% through 2017, in line with management's FFO/debt target of 20% to 22%.

First GRC Filing in Over Four Years: In December 2014, DECo filed its 2015 GRC with the Michigan Public Service Commission (MPSC) requesting a \$370 million rate increase predicated on a 10.75% return on equity (ROE) and a 50% equity layer. The filing is based on a forward-looking test year and the rate increase primarily reflects \$2.8 billion in new net plant additions. The new plant additions include the recent purchase of the 732MW natural gas-fired Renaissance Power Plant from LS Power Group for \$240 million as well as the planned purchase of a 300MW Michigan-based simple-cycle natural gas-fired power plant. DECo plans to self-implement rates on or after July, 1, 2015, subject to refund, and a decision by the MPSC is expected by December. Fitch has conservatively modeled a 10% ROE for DECO which approximates recent industry averages.

New MI Energy Legislation Expected in 2015: In December 2014, Michigan Governor Rick Snyder broadly outlined the state's future energy policy goals by 2025 and indicated he would like to have new energy legislation in place this year when current Renewable Portfolio Standards (RPS) and Energy Efficiency (EE) targets end. The governor emphasized the increased use of cleaner natural gas and wind resources while reducing the state's reliance on less efficient coal generation and indicated he would seek to increase RPS and EE targets through 2025.

Growth in Diversified Businesses; GSP Segment Growing: Fitch expects a strong growth in DTE's non-utility businesses, which will be driven by the GSP and Power and Industrial (P&I) business segments. DTE's GSP and P&I segments comprised 10% and 11% of consolidated net operating income for 2014, respectively, and Fitch expects these business segments may contribute up to 15% each of consolidated net income by 2019.

Nexus Gas Pipeline Moves Forward: Fitch views DTE's proposed investment in the Nexus pipeline as favourable due to higher allowed returns on FERC regulated transmission investments and assumes the project will move forward as agreements with several LDC's and key shippers have been executed for the majority of pipeline capacity. DTE and Spectra Energy Corp. are joint developers of NGT, a 250-mile pipeline that will move up to 1.5 billion cubic feet (bcf) of Appalachian shale gas to markets in Michigan, Ohio, Chicago and Ontario, Canada. DTE's expected investment is \$700 million. DTE completed a FERC pre-filing for the Nexus pipeline in the fourth quarter of 2014 (4Q'14) and has an in-service target date during 4Q'17.

High Capex: Capital investments are expected to total approximately \$7.2 billion through 2017 including investments in the proposed Nexus Gas transmission pipeline, levels approximately 20% higher than the preceding three year period. Due to the large capex program, both the regulated utilities will need equity support from the parent through 2017 to help maintain their balanced capital structures. In addition, growing natural gas pipeline investments will render DTE to be free cash flow (FCF) negative in the intermediate term, in Fitch's view. DTE will need to fund the deficit by a roughly 50% mix of debt and equity to maintain the present balanced capital structure. Fitch anticipates annual equity issuances at DTE totaling roughly \$300 million per year through 2017 through its Dividend Reinvestment Programs (DRIP) and employee pension programs and approximately \$300 million increase in parent only long-term debt per annum.

KEY ASSUMPTIONS
Fitch's key assumptions within the rating case for DTE includes:

--Assumes 10% ROE at DTE Electric.
--Capex averaging \$2.3 billion through 2017.
--Maturities of \$140 million in 2015, \$451 million in 2016, and none in 2017.

RATING SENSITIVITIES
Future developments that either individually or combined could lead to positive rating actions include:

--Sustained debt-to-EBITDAR in the 3.50x-3.75x range.

Future developments that either individually or combined could lead to negative rating actions include:
--Sustained debt-to-EBITDAR above 4.25x . Fitch expects consolidated credit metrics to be pressured through 2017 as a result of high capex at the utilities. Persistently weak consolidated leverage metrics beyond Fitch's current forecast period could lead to negative rating action for DTE.

LIQUIDITY
Sufficient Liquidity and Manageable Maturities: DTE has approximately \$1.9 billion of total liquidity available under its respective credit agreements as of March 31, 2015, including \$99 million of unrestricted cash and cash equivalents. DTE's consolidated five-year unsecured revolving credit facilities were extended in April and increased by \$100 million to \$1.9 billion with an April 2020 maturity. The credit facilities are composed of \$1.2 billion at DTE, \$400 million at DECo, and \$300 million at DTE Gas. The facilities have a maximum debt-to-capitalization covenant of 65% and, as of March 31, 2015, DTE was in compliance with consolidated debt-to-capitalization of 49.6% under its credit agreement. Debt maturities over the next four years are manageable and are as follows (excluding securitization maturities): \$140 million in 2015, \$451 million in 2016, no maturities in 2017, and \$400 million in 2018. Maturing debt will be funded through a combination of internal cashflows and external debt refinancings.