Duke Energy Corporation (DUK) 2024 Q2 Earnings Call Summary

Optimistic Highlights

• Strong Q2 Earnings: Duke Energy announced adjusted earnings per share of $1.18 for Q2 2024, a $0.27 increase from the previous year, driven by growth across electric utilities and improved weather conditions.
• Reaffirmed Guidance: The company reaffirmed its 2024 guidance range of $5.85 to $6.10 and a long-term EPS growth rate of 5% to 7% through 2028.
• Regulatory Successes: Duke Energy highlighted approximately $75 billion of rate base investments approved or settled across 7 rate cases since the start of 2023, demonstrating a strong track record of constructive regulatory outcomes.
• Infrastructure Investments: The company is on track with its $73 billion capital plan focused on grid and generation investments to support growing communities, including the addition of 1,500 megawatts of solar in Florida by the end of the year.
• Customer Growth and Load Increase: Customer growth remains robust, especially in the Carolinas and Florida, with a 2.4% increase in the first half of the year and a 1.9% increase in weather-normal volumes.

Pessimistic Highlights

• Industrial Rebound Delay: The industrial sector has not rebounded as quickly as anticipated, with some legacy industries like textiles and paper experiencing pressure, partially due to interest rates.
• Higher Expenses: Partially offsetting Q2 earnings growth were higher interest expense and depreciation.

Company Outlook

• Positive Load Growth Forecast: Duke Energy is optimistic about its economic development pipeline, expecting to update its full financial plan with load growth and capital support in February. The company sees more tailwinds than headwinds, with accelerating load growth providing a potential to earn at the top end of the 5% to 7% EPS growth range.
• Strategic Investments: The company plans to continue investing in critical infrastructure and is exploring tailored solutions with major companies like Google and Amazon to meet large-scale energy needs while developing rate structures to lower the cost of investing in clean energy technologies.

Q & A Highlights

• Q: Can you reassess the 1.5% to 2% load growth projections and its impact on the capital plan? (Constantine Lednev, from Guggenheim Partners)

  A: Duke Energy is encouraged by the economic development pipeline and trends towards the high end of the 1.5% to 2% load growth projection. A comprehensive update on load and capital is planned for February. The company continues to see growth in the economic development pipeline.

• Q: Could you provide an update on nuclear PTCs from a timing and monetization perspective? (Constantine Lednev, from Guggenheim Partners)

  A: Duke Energy expects formal guidance for nuclear PTCs by the end of the year and plans to test the market for monetizing these PTCs in the third quarter. The company has earned about $250 million of nuclear PTCs through June.

• Q: Do you think you can settle the DEI case ahead of the evidentiary hearing at the end of this month? (Nick Campanella, from Barclays)

  A: Duke Energy is open to settlement discussions but feels strong about the case they've put together for DEI, focusing on customer benefits and investments for growth in Indiana.

• Q: How are you tracking within the 5% to 7% EPS guide path considering various sensitivities? (Nick Campanella, from Barclays)

  A: Duke Energy sees more tailwinds than headwinds, with accelerating load growth and a stabilizing interest rate environment contributing to confidence in achieving at least the 5% to 7% growth rate, potentially at the top end later in the period.

• Q: Can you comment on the incremental versus reflected projection on load growth in '27-'28 from the MoUs with companies like Google and Amazon? (Julien Dumoulin-Smith, from Jefferies)

  A: Data centers represent about 25% of the economic development pipeline through '28, expected to grow beyond 2030. Discussions on tailored solutions to meet large-scale energy needs are constructive, with a focus on sustainability, reliability, and affordability.

• Q: How are commercial and industrial load trends tracking versus expectations? (Jeremy Tonet, from JPMorgan)

  A: Duke Energy is tracking on top of the 2% load growth projection for 2024, with residential growth robust and commercial higher than expectations. The industrial sector has not rebounded as fast as anticipated, with a cautious stance from customers.

• Q: Could the November elections impact the IRP or regulatory outcomes? (Jeremy Tonet, from JPMorgan)

  A: Duke Energy does not expect the November elections to impact the rulings in the Carolinas or Indiana. The company maintains a bipartisan approach to energy policy.

• Q: Has there been a change in the company's regulatory strategy given the strong outcomes in the last 2 years? (Anthony Crowdell, from Mizuho)

  A: Duke Energy has not changed its regulatory strategy but has focused on operational excellence, stakeholder engagement, and clear energy policy through organizational changes and CEO roles for different regions.

• Q: Given the load growth and long-lived asset planning cycle, will there be more frequent IRP filings? (Anthony Crowdell, from Mizuho)

  A: Duke Energy already has a frequent cadence for IRPs but may provide more frequent updates as they learn more about load growth over time to plan appropriate resources.

• Q: Is there potential for a settlement in the South Carolina IRP process? (Carly Davenport, from Goldman Sachs)

  A: It's too early to tell if there will be a settlement in South Carolina, but Duke Energy believes the plan put forward meets the state's objectives and continues discussions.

• Q: Can you refresh us on your latest thoughts on new nuclear technology and its place in resource planning? (Carly Davenport, from Goldman Sachs)

  A: Duke Energy includes SMRs in its IRP, with plans for 600 megawatts to come online in 2035 at Belews Creek station. The company is working through technology selection and construction needs, with a focus on serving customers with reliable, affordable, and increasingly clean energy.