A subscriber who is a former oil and gas banker shared some analysis on DTE’s upcoming spin-off of its midstream business. And I thought it would be helpful to share.

  • DTE Energy – I’m not a utility guy by any means, but a cursory look at EV/EBITDA valuations would indicate a hit to the share price concurrent with the spin-off.  And as Midstream is likely to trade at a lower multiple than the utility, this doesn’t look like a “value-unlocking” event.  Caveats:
    • A P/E analysis would be useful for the utility, I need the prospectus to see some PF assumptions around the earnings split.  While they trade in line with their peers on EV/EBITDA, they have more upward room on P/E. 
    • These are capIQ-generated peers, so I may not have the best group
    • The presentation indicates a higher combined dividend post-spinoff, so that may drive some value potential
    • Did not account for any halo effect of ditching the gas assets

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