The operator, Lydia, welcomes everyone to the Duke Energy Fourth Quarter and End Year 2023 Earnings Call. Abby Motsinger, Vice President of Investor Relations, introduces Lynn Good, Chair, President and CEO, and Brian Savoy, Executive Vice President and CFO. They discuss the use of non-GAAP financial measures and forward-looking information. Duke Energy announced 2023 adjusted earnings per share of $5.56 and 2024 guidance of $5.85 to $6.10. They also mention their ability to exercise agility and meet commitments. Lynn Good highlights the company's momentum and fundamental repositioning, with the commercial renewable sale transforming them into a fully regulated utility. They also mention improved regulatory constructs and their simplified 100% regulated growth plan. The Southeast and Midwest utilities operate in fast-growing and attractive jurisdictions in the US.

The company expects growth in their service territories to accelerate with substantial investment in the energy transition. They have completed a portfolio repositioning and achieved positive regulatory outcomes while maintaining safety and customer commitment. Multiple rate cases were executed with $45 billion in approved rate base investments. The company also implemented forward-looking multiyear rate plans in North Carolina. In terms of operations, the company performed well in extreme weather conditions and had their best reliability performance in over a decade. Their nuclear fleet also generated safe and reliable carbon-free power for the 25th consecutive year.

Duke Energy's commitment to operational excellence is evident in their best safety performance in company history and their top rankings in customer satisfaction. The company is now entering a phase of execution and record infrastructure build to meet the growing energy needs of their customers and communities. This includes a diverse and clean energy mix, as well as new generation facilities in North Carolina and Indiana. Duke Energy is also working with regulators on rate cases in 2024.

Duke Energy has invested over $1.5 billion to improve reliability and meet the energy needs of their customers. They plan to file a rate case in April to cover three years of investments, including adding new solar and grid improvements. They are also evaluating the timing of future rate cases in other jurisdictions. Duke Energy has simplified their portfolio and is now focused on their core regulated business, which has strong growth potential. They have a $73 billion capital plan to invest in grid and generation improvements, and their efficient recovery mechanisms will benefit both customers and investors. Duke Energy is confident in their ability to create long-term value and deliver a low-risk, total return for their stakeholders.

In 2023, the utilities division of the company experienced solid growth with adjusted earnings per share increasing by 6%. This was driven by rate case outcomes, multiyear rate plans, and rider growth. The company also successfully executed cost and agility efforts to offset challenges such as mild weather and lower volumes. For 2024, the company is introducing a guidance range with a midpoint representing over 7% growth. This will be driven by normal weather, retail volume growth, updated rates, and grid investment riders. The gas segment is also expected to continue delivering strong growth, while the other segment may be impacted by higher interest expense and an increase in the effective tax rate.

The retail electric volumes for Duke Energy in 2023 saw strong growth in residential customers in all jurisdictions, with the Carolinas and Florida leading at 2.1% and 2% respectively. The company added 195,000 new customers, the largest increase in its history. Economic development opportunities, including in industries such as semiconductors, EVs, and data centers, are expected to contribute to load growth of 1.5% to 2% over the forecast period. Duke's track record of cost management will support their energy transition and commitment to safety, reliability, and affordability for customers. The company successfully met O&M and agility targets for 2023 despite challenges such as macroeconomic headwinds and unfavorable weather.

Duke Energy expects to maintain a flat O&M cost structure over the next five years through sustainable efficiencies. Their $73 billion capital plan has increased by $8 billion, with a focus on grid investments and transitioning to cleaner energy sources. The majority of their electric investments are eligible for efficient recovery mechanisms, and they are committed to maintaining a strong balance sheet and credit ratings while introducing modest equity to fund the increased capital plan.

The company expects to raise $500 million annually over the next five years through market and dividend reinvestment programs. They also anticipate achieving a 14% FFO to debt ratio by 2024, with improvements from various factors such as rate case activity and the monetization of nuclear PTCs. The company plans to monetize the credits in transferability markets and flow back the benefits to customers over time, while also maintaining their commitment to paying dividends. They anticipate a steady decline in the payout ratio over the next five years and have adjusted their target payout ratio to 60% to 70%. Overall, the company's robust capital plan, strong customer growth, and constructive jurisdictions provide a compelling growth story.

The updated range for the company's financial flexibility has been increased to minimize external equity needs and align with current investments. Dividends will still need to be approved by the Board of Directors. The company had a successful year in 2023 and is confident in its ability to deliver sustainable value and growth through 2028. The $8 billion increase in CapEx reflects an early estimate and may be subject to further refinement as the company goes through regulatory processes and introduces new plans in other states. There are many opportunities for the company to invest in.

In this paragraph, Lynn Good, CEO of Duke Energy, discusses the company's strong growth and their decisions on reliability, affordability, and clean energy. She also mentions that the nuclear PTC is a material driver of their FFO and they have begun testing the transferability market with positive results. Good also addresses concerns about a potential repeal of the PTC, stating that they are engaged with policymakers and believe there is support for infrastructure and affordability for customers.

The speaker discusses the importance of continuing to invest in infrastructure to support the growth in their service territories. They also mention their goal of maintaining a strong balance sheet and being able to adjust to any potential impacts on credit metrics. They address a question about the reduction in forecasted rate base, attributing it to the amortization of nuclear PTCs and the balance between capital and tax attributes. Overall, they are confident in their ability to both grow and maintain a strong balance sheet.

The company has reached a constructive settlement in North Carolina and is expecting a 2% load growth in 2024 due to economic development projects, normalization of residential usage, and optimistic existing C&I customers.

Lynn Good and Brian Savoy discuss the factors that give them confidence in a 2% load growth in 2024. They mention customer migration and economic development as key drivers, with the DRIP program and signed letters of agreement contributing to their optimism. They also mention that their thinking has continued to evolve and mature, leading to a solid growth range estimate. Finally, they address a question about the nuclear PTC and mention that they are still waiting for details from the treasury.

Brian Savoy and Steve Fleishman discuss the company's projected timeline for final guidance from treasury and the financing of their equity plan. Lynn Good provides an update on the gas plant filing in the Carolinas, stating that the plants are expected to come online in 2028 and 2029. The company is also seeing growth in all of its service territories, with the Carolinas experiencing the most economic development.

In paragraph 15, Lynn Good discusses the growth of Florida and the Carolinas in terms of customer migration and commercial businesses. She notes that while the Carolinas may be slightly ahead, all three states are experiencing good growth. Good also mentions that different customer classes have varying levels of growth, but overall, the opportunities are beneficial for Duke Energy and the states they serve. When asked about financing for future capital expenditures, Good states that it is premature to discuss, but the company's focus is on capital optimization and maintaining a strong balance sheet.

During a conference call, Nicholas Campanella of Barclays asked Lynn Good, CEO of the company, about the payout ratio and EPS growth. Good responded that they are confident in their 5-7% EPS growth rate and have been planning for it for several years. She also mentioned that they intend to continue growing the dividend but believe it is prudent to introduce some financial flexibility and have a 60-70% payout ratio. Good also mentioned that they recently filed in Florida and have a history of constructive outcomes in that state.

In response to a question about regulatory strategy, Lynn Good explains that they have accomplished what they need to do and will continue to engage with parties in Florida. She also mentions that Florida is a constructive jurisdiction and they will keep investors updated on the rate case. In another question, Good is asked about the equity plan and she explains that they have considered various factors such as capital, regulatory outcomes, and nuclear PTC in establishing the plan. They believe that the 30% equity ratio is the best balance between growth and maintaining a strong balance sheet.

The company's goal is to achieve both growth for investors and overall success. The rate base has been growing at a healthy rate within the company's long-term EPS growth guidance. The company strives to hit this target every year and plans investments and strategies accordingly. The timing and consideration for the Indiana rate case is under review and will be announced when a decision is made.

The speaker discusses the projected financial outlook for Duke in 2024, with over 40% of the projected growth coming from "other" sources. They mention factors such as higher interest rates, lower tax rates, and returns from investments, and attribute the majority of the growth to tax optimization efforts. They also mention that half of their agility efforts in 2023 will be sustainable and that the tax team is doing well. The speaker thanks everyone for their participation and invites further questions and comments.

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