Duke Energy reported adjusted earnings per share of $0.91 for the second quarter of 2023 and attributed the mild weather for the quarter as a headwind of nearly $0.30 to the results. Abby Motsinger, Vice President of Investor Relations, welcomed everyone to the earnings review and business update and Lynn Good, Chair, President, and CEO, discussed the cost initiatives put in place to reduce overhead and operating costs. The mild weather trend is expected to continue into August and September.

The company is reaffirming its 5-7% growth rate and is focusing on its regulated businesses as it has completed portfolio repositioning. In North Carolina, the company is in the process of resolving a Duke Energy Progress rate case and has implemented interim rates that increase typical residential customers' rates by 5%. The Duke Energy Carolinas hearing is scheduled to begin on August 28.

Duke Energy is making strategic plans to transition to cleaner energy resources in the Carolinas, while also incorporating IRA benefits and increasing load from economic development announcements into their modeling. In North Carolina, they will begin the CPCN Process for replacement gas generation and solar procurement will continue on an annual basis. In Florida, they are adding 300 megawatts of new solar per year and hardening the grid through their storm protection plan. The commissions in South Carolina and North Carolina will hear from interested parties and expect orders by mid ‘24 and end of ‘24 respectively.

Duke Energy is partnering with Amazon to install a two megawatt solar plant in Northern Kentucky, the largest rooftop solar site in the state, to meet their customers' energy needs. In Indiana, 2000 crew members worked to restore over 370,000 outages during the July 4 holiday. Duke Energy is taking advantage of federal incentives and other opportunities to benefit their customers, such as the Infrastructure Investment and Jobs Act, which could spur economic development. They are advocating for federal and state support to recognize the importance of a responsible energy transition.

Duke Energy reported a second quarter loss of $0.32 per share and adjusted earnings of $0.91 per share, compared to reported and adjusted EPS of $1.14 and $1.09 last year. The electric utilities and infrastructure segment was down $0.14 compared to last year due to unfavorable weather, offset by rate cases and riders, lower O&M, and lower volumes and higher interest expense. Duke Energy announced the sale of its commercial renewable assets as a key milestone in its strategic move, and is positioned to deliver sustainable value and 5% to 7% earnings growth over the next five years.

Duke Energy has implemented a $300 million cost mitigation initiative to address inflation and interest rate headwinds. They have also taken action to offset mild weather pressures, such as launching business agility and reducing spend on outside services. In 2024, residential decoupling in North Carolina will be fully implemented, and Duke Energy will continue to use their agility muscle to remain successful. Electric volumes and economic trends were also discussed.

Volumes have decreased 0.6% on a rolling 12-month basis, with residential customer growth remaining strong at 1.8%. The long-term residential growth trajectory is positive, with residential volumes having increased 4% since before the pandemic. In the commercial class, volumes are trending above estimates due to data center growth, and in the industrial class, there is robust planned investment in the service territories. Credit supportive actions have been taken to maintain balance sheet strength.

The company is continuing to collect deferred fuel balances and is on track to recover 1.7 billion in deferred fuel costs in 2023. In April, they began recovery of 1.2 billion in Florida with a debt return. They have also reached a settlement with the public staff in their DEC North Carolina fuel proceeding and expect to receive an order soon. The sale of their commercial renewables business is expected to close by the end of the year, and the proceeds will be used for debt avoidance at the holding company. The company is also expecting to see balance sheet improvement into 2024 as they recover the remaining deferred fuel costs and the full year impact of their North Carolina rate cases. They are confident in their 5-7% growth rate through 2027, and their attractive dividend yield and long-term earnings growth from investments and their regulated utilities provide a compelling risk-adjusted return for shareholders.

Lynn Good responds to Shar Pourreza's question about Duke Energy's 2023 guidance range and the cost mitigation measures they have put in place. She states that they are on track with their $300 million of O&M cuts and that they can reaffirm the range of the guidance. She also notes that they have been working every possible lever, including any contingencies in the plan. Lastly, she emphasizes that the fundamentals of the company remain unchanged.

Duke Energy's primary focus is on organic growth and any potential M&A opportunities must meet the high standards set by their current plan. The company is confident in their plan and is not looking to over-equitize any potential deals in order to strengthen the balance sheet.

Lynn Good answered a question from Julien Dumoulin-Smith about how Duke Energy is trending on rates. She explained that the financial plan was always back-end loaded, and that mitigation measures would be back-end loaded as well. She also mentioned that July had a positive weather story, and they will monitor August and September to give more information about their range after the third quarter. Brian Savoy had nothing to add.

Lynn Good of Duke Energy stated that their primary focus is on organic growth and that they are expecting to collect $1.7 billion in deferred fuel and $800 million in commercial renewables sales before the end of the year. This, combined with strong weather in July and the third quarter, should help them remain in the 13-14% FFO to debt range for the year.

Brian Savoy explains that the deferred fuel recovery in 2024 and the North Carolina rate cases for the full year of 2024 will be big catalysts for Duke Energy, while interest rates rising again represent an incremental headwind. Lynn Good notes that Duke Energy is using all the tools expected to manage the interest expense, while also looking at levers within the financial plan to offset it. She reaffirms the guidance range for 2023 and believes they can grow 5-7% over the long term. Jeremy Tonet then asks about the drivers this year, noting that weather, inflationary pressure, and higher interest rates all represent headwinds, and inquiring about the assumed 12-month retail load growth of 0.5%.

Lynn Good and Brian Savoy of Duke Energy discussed the trends in retail growth. Residential load is below expectations for the year, but this could be due to mild weather. Commercial load is on track. Industrial load has seen a short-term pullback, likely due to economic uncertainty and prudent inventory management.

Lynn Good thanked the participants for their questions and noted that Duke Energy is focusing on its organic growth plan, rather than other companies' processes. She also mentioned that Duke Energy will be on the stand August 28th for the DEC case, with rebuttal testimony filed at the end of last week. She concluded by saying that she and Duke Energy will be available to answer any further questions and visit some participants.

Duke Energy will be filing important integrated resource plans this August, which will confirm and support their investment thesis. They will be sharing the results of the rate case with the public as well. The operator thanked everyone for joining the call and ended it.

This summary was generated with AI and may contain some inaccuracies.