Fitch Affirms DTE Energy Co. & Subsidiaries' Ratings

Business Wire, March 18, 2009

CHICAGO -- Fitch Ratings affirms the Issuer Default Ratings (IDRs) and debt ratings for DTE Energy Co. (DTE) and its subsidiaries, Detroit Edison Co. (DECo) and Michigan Consolidated Gas Co. (MichCon) as follows:

DTE

--Long-term IDR at 'BBB';

--Senior unsecured debt at 'BBB';

--Preferred stock at 'BBB-';

--Short-term IDR at 'F2';

--Commercial paper at 'F2'.

DTE Energy Trust II

--Trust preferred stock at 'BBB-'.

DECo

--Long-term IDR at 'BBB';

--Senior secured debt at 'A-';

--Preferred stock at 'BBB';

--Short-term IDR at 'F2';

--Commercial paper at 'F2'.

MichCon

--Long-term IDR at 'BBB-';

--Senior secured debt at 'BBB ';

--Short-term IDR at 'F2';

--Commercial paper at 'F2'.

The Rating Outlook for DTE remains Negative; the Rating Outlooks for DECo and MichCon remain Stable. Approximately $4.3 billion of debt is affected by the rating actions.

DTE's ratings reflect the company's ownership of two regulated utilities which provide stable cash flows and benefit from favorable operating characteristics, a more conservative business strategy that is primarily focused on utility rate base growth, and a constructive regulatory environment in Michigan. The regulated subsidiaries account for more than 90% of DTE's cash flow and upstream cash distributions to fund parent interest and common dividend obligations. Fitch initially revised DTE's Rating Outlook to Negative in March 2008 following less than expected debt reductions and consolidated credit metrics that are below average for Fitch's guidelines for the 'BBB' rating category. An inability to complete the monetization of DTE's Power and Industrial (P&I) business left the company with higher than anticipated leverage at year-end 2007. Despite this, DTE's financial performance in 2008 exceeded Fitch's prior expectations due to cost reductions, the expiration of a temporary rate reduction at DECo and colder weather. DTE's consolidated credit metrics included EBITDA to interest at 4.6 times (x) and funds flow interest coverage at 4.8x for the year-ended Dec. 31, 2008. Leverage, as measured by Debt to EBITDA, was 3.8x for the same time period.

Fitch's rating analysis takes into consideration several events that have occurred in 2008. The primary favorable event was the passage of supportive electric legislation in Michigan, which Fitch expects will increase certainty of cost recovery and reduce regulatory lag through the ability to self-implement rates six months after filing, and a statutory one-year timeframe for rate case decisions from the Michigan Public Service Commission (MPSC). Indeed the regulatory environment in Michigan continues to be balanced for investor owned utilities, as evidenced by the recent constructive outcome of the DECo rate case. This, combined with management's cost containment efforts, including reduced capital expenditures, planned equity issuances (with the proceeds used to pay down debt), and solid liquidity position, is supportive of the 'BBB' rating. Fitch's forecasted credit metrics for DTE, which incorporate the company's announced 6% decline in sales in 2009, and flat growth thereafter, continue to be moderately weak for the 'BBB' category, but are in line with parent company utility peers. Fitch expects the company to be able to successfully renew the $975 million of credit facilities prior to their October 2009 maturity. Total net available liquidity for DTE and its subsidiaries was approximately $1.4 billion as of mid-March 2009.

The Negative Outlook currently reflects the struggling economy in Michigan, and in particular the uncertainty stemming from financial distress of the automotive industry. January 2009 unemployment for the state of Michigan was at 11.6%, compared with 7.6% nationally. Foreclosures in the Detroit Metro area ranked 30th out of 203 metropolitan areas in March 2009. The immediate impact of the recession on DTE is the increasing levels of past due receivables from DECo and MichCon customers. The uncollectible accounts expense for the two utilities increased to $213 million in 2008 from $135 million in 2007 and $123 million in 2006. MichCon currently operates under an uncollectible true-up mechanism which enables the company to recover 90% of the difference between actual uncollectible expense for each year and $37 million after an annual reconciliation proceeding before the MPSC. DECo has requested a similar uncollectibles tracker in its 2009 rate case. In the interim, the company believes it will receive additional monies from low income relief funds at the federal and state level to keep uncollectibles from increasing at a faster pace until July 2009 when it can self-implement rates. Despite this, should the load loss in Michigan be deeper or last longer than currently contemplated, this could exert negative pressure on DTE and its credit profile.