Release Date: August 06, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Duke Energy Corp (DUK, Financial) reported adjusted earnings per share of $1.18 for Q2 2024, up $0.27 from the previous year.
- The company reaffirmed its 2024 guidance range of $5.85 to $6.10 and its long-term EPS growth rate of 5% to 7% through 2028.
- Duke Energy Corp (DUK) has a $73 billion capital plan focused on grid and generation investments, supporting long-term growth.
- The company has achieved constructive regulatory outcomes, with approximately $75 billion of rate base investments approved or settled across 7 rate cases since 2023.
- Duke Energy Corp (DUK) is on track to achieve 14% FFO to debt by the end of the year, providing a cushion to its Moody's downgrade threshold.
Negative Points
- Higher interest expenses and depreciation partially offset the growth in the Electric Utilities & Infrastructure segment.
- Gas Utilities & Infrastructure results were down $0.02 compared to last year due to higher interest expenses and depreciation.
- The industrial sector has not rebounded as fast as anticipated, with some customers taking a cautionary stance due to recession fears and labor market challenges.
- The company is still awaiting formal guidance for nuclear PTCs, which was expected by midyear but has been delayed.
- Economic downturns could pose a risk to Duke Energy Corp (DUK)'s growth projections and customer demand.
Q & A Highlights
Q: You highlighted the economic development and growth in kind of the geography is obviously favorable for data center activities, but you're still running on that 1.5%, 2% load growth projections. At what point do you feel you can reassess these assumptions? And what could that mean to the capital plan, just can see some out-of-cycle updates kind of going towards the tail end of the year?
A: (Brian Savoy, CFO) We continue to be encouraged by the economic development opportunities. We were projecting 0.5% load growth CAGR over our planning horizon a year ago, which has now moved to 1.5% to 2%. With the economic development pipeline we're looking at today, we're trending to the high end of that range. We plan to update the full financial plan with the load growth and the capital supported along with the earnings per share outcome in February, which is our normal cadence.
Q: When you get an update on nuclear PTC from the timing and monetization perspective and from the important that they place orders, credit metric targets and any other pieces we should be mindful of?
A: (Brian Savoy, CFO) We were hoping to see guidance by midyear, but it has not transpired. We still expect formal guidance for the nuclear PTCs by the end of this year. Our plans are to test the market on monetizing these PTCs in the third quarter. We don't feel like the delay in the guidance will have any impact on our credit in 2024.
Q: Good to see the settlement in Florida. I was just wondering on DEI with evidentiary hearing at the end of this month, do you think you can settle that case ahead of those hearings and how should we think about that potential?
A: (Harry Sideris, President) We're always open to settlement discussions. We feel very strong about the case we've put together, which includes strong customer benefits and investments for growth in Indiana. We feel comfortable either path on a constructive outcome.
Q: When I think about your roll forward, which I know is not until the fourth quarter, just kind of wondering how you're tracking within this kind of 5% to 7% EPS guide path. What headwinds should we be considering?
A: (Brian Savoy, CFO) We see more tailwinds than headwinds. Accelerating load growth, consistent investment in critical infrastructure, and a stabilizing interest rate environment give us confidence in the 5% to 7% range. Potential headwinds include an economic downturn, which could affect customer demand.
Q: Can you comment on the extent to which the MoUs with companies like Google and Microsoft are incremental versus reflected in the load growth projection for '27-'28? How do you think about the risk sharing within that?
A: (Lynn Good, CEO) Data centers represent about 25% of the economic development pipeline through '28, growing as we move into 2030 and beyond. The MoUs are early discussions aimed at meeting load and sustainability goals while protecting retail customers. We are exploring various structures, including premium pricing and equity investment, to encourage development.
Q: I just wanted to tie back in on the load trends as you laid out in the prepared remarks and how commercial and industrial are tracking versus expectations here today and just what you're seeing on the ground as far as that trends over the back half of the year?
A: (Brian Savoy, CFO) We guided to 2% load growth in 2024 and are tracking on top of that. Residential growth has been robust, with about 80,000 retail customers added in the first half of the year. Commercial has exceeded expectations, driven by data centers, healthcare, and universities. Industrial has not rebounded as fast as anticipated, influenced by interest rates and labor market tightness.
Q: We have elections coming up in North Carolina. Any thoughts on how different outcomes could impact the IRP or stakeholder agreements?
A: (Lynn Good, CEO) No matter the election outcome, our objective remains to serve our customers with reliable, affordable, and increasingly clean energy. We don't expect the election to impact rulings in the Carolinas or Indiana. We believe a bipartisan approach to energy policy has served us well and will continue to be our posture.
Q: Has there been a change in the company's regulatory strategy over the last 5 years, given the strong outcomes in the last 2 years?
A: (Lynn Good, CEO) Regulatory outcomes are an everyday assignment at Duke Energy, involving operational excellence, legislative work, and stakeholder engagement. We underwent an organizational change a few years ago to fine-tune our approach, which has been helpful in this complex environment. Serving customers well is our first job, and we believe this leads to constructive regulatory treatment.
Q: Given the load growth and long-lived asset planning cycle, does the company believe you'll start seeing more frequent IRP filings?
A: (Brian Savoy, CFO) We already have a frequent cadence on IRPs, but we could see more frequent updates as we learn more about load growth. This helps plan the appropriate resources with plenty of lead time.
Q: As you look towards the South Carolina IRP process with hearings starting next month, is there any potential for a settlement there as well?
A: (Lynn Good, CEO) It's a little early to tell. We're still in the middle of a procedural schedule in South Carolina. We believe the plan we've put forward meets the requirements of both states and will keep you informed as we get deeper into the process.
Q: Could you refresh us on your latest thoughts on nuclear technology and the timing for new nuclear to potentially have a place in the resource planning process?
A: (Harry Sideris, President) In North Carolina, we have included SMRs in our near-term action plans, with 600 megawatts slated to come online in 2035 at our Belews Creek station. We're working through technology selection and other construction needs. (Lynn Good, CEO) Duke has a long-standing nuclear history, and we believe continued expansion of nuclear in the Carolinas could make sense as we get into the 2030s and beyond.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
