Duke Energy Corporation (Holding Company) · NYSE:DUK
Duke Energy Corporation (Holding Company) — Q2 2014 Earnings Presentation
63 slides from Duke Energy Corporation (Holding Company)'s earnings presentation, Aug 7, 2014
Slide 1: Earnings Review and Business Update
Earnings Review and Business Update August 7, 2014 | Second Quarter 2014 Lynn Good, President and CEO Steve Young, Executive VP and CFO
Slide 2: Safe Harbor
Safe Harbor Safe Harbor statement Some of the statements in this document concerning future company performance will be forward-looking within the meanings of the securities laws. Actual results may materially differ from those discussed in these forward-looking statements, and you should refer to t
Slide 3: Topics for today's call
Topics for today’s call Position Core Businesses for Growth Maximize Commercial Business Value New generation investments in Exit of Midwest generation FL and Carolinas business Regulated & unregulated Status of International renewable investments strategic review NCEMPA purchase agreement
Slide 4: Growth investments of $16-20B from 2014-2018
Growth investments of $16-20B from 2014-2018 New Generation ($6-8 Billion) Infrastructure ($7-9 Billion) Compliance & Other ($3 Billion) Florida CC / CT SB560 in Indiana EPA regulations, Investments Grid modernization and including existing and W.S. Lee CCGT in SC T&D in OH, FL, NC, SC pot
Slide 5: New generation projects update
New generation projects update 2016/17 Gas Capacity – Florida ($350 Million Investment) Major Generation Projects • Two new CT gas plants at the Suwannee Plant (320 MW), expected online in 2016 ($ millions) • Air chilling units for Hines Energy Complex, adding 220 MW, expected in-service by the end
Slide 6: Growing renewables portfolio (~$2 billion of investments through 2018)
Growing renewables portfolio (~$2 billion of investments through 2018) Commercial Renewables Regulated Solar Rooftop solar installation in NC Happy Jack Wind Farm Wind North Carolina RFP Process – Construction of Los Vientos III and IV wind projects – Strong response to our 300 MW RFP, issued in the
Slide 7: Incremental growth projects update (up to $4 billion through 2018)
Incremental growth projects update (up to $4 billion of investments through 2018) – Purchase price of approximately $1.2 billion (2) Discretionary Capital – Will enter into a 30-year full-requirements wholesale NCEMPA joint power contract with NCEMPA Announced owner purchase – Transaction requires a
Slide 8: Planned exit from non-regulated Midwest generation business
Planned exit from non-regulated Midwest generation business – Initial indicative bids received / short-listed bidders Major Milestones & Timeline – Expect to announce winning bidder in fall and close the 2014 2015 transaction in late 2014 or 1Q 2015 Transfer – Expect transaction to be accretive to a
Slide 9: International strategic review
International strategic review Strategic review of International is underway International owns and operates – Wide range of options being considered 4,600 MW of net generation – Includes optimizing offshore cash and development of growth plan; $1.7 billion offshore as of June 30 – Expect to complet
Slide 10: Dan River coal ash cleanup
Dan River coal ash cleanup Dan River cleanup progress Cleanup of ash in Dan River – Clean-up activities identified by the EPA in the Dan River are complete; ongoing monitoring will continue – EPA recently stated that the water quality of the river is back to normal – Reached constructive agreements
Slide 11: Edwardsport IGCC plant operations on track
Edwardsport IGCC plant operations on track Operational Status IGCC Rider Proceeding Status Tracker Costs Thru Filed Status – Plant began commercial operations in June 2013 IGCC-10 Sept 2012 Nov. 2012 Approved – Performance testing is complete; reviewing test data received from GE IGCC-11 Mar. 2013 M
Slide 12: 2Q 2014 earnings summary and key drivers
2Q 2014 earnings summary and key drivers Adjusted diluted EPS 2Q 2014 Key adjusted segment income drivers (2) REGULATED UTILITIES (+$99 million) +$0.13 ▲Increased pricing and riders +$0.07 ▲Favorable weather +$0.07 ▲Lower effective tax rate +$0.05 ▲Lower O&M expenses +$0.03 ▲Increased wholesale net
Slide 13: Regulated Utilities weather-normal volume trends
Regulated Utilities weather-normal volume trends 2Q 2014 weather-normalized load growth was in line with full-year expectation of ~0.5% Regulated Utilities weather-normal volume changes Residential Commercial Industrial Total – Residential: continued steady growth in average number of customers of ~
Slide 14: Financial objectives for 2014 and beyond
Financial objectives for 2014 and beyond Achieve Grow increased 2014 EPS EPS 4 - 6% guidance range of through 2016 (1)(2) $4.50 - $4.65 (1) Grow Maintain strong dividend within 65 - 70% credit ratings and target payout (1) balance sheet (1) Based on adjusted diluted EPS / assumes normal weather for
Slide 15: Appendix materials
Appendix materials Item Slides Update on Key 2014 Assumptions 16-20 2Q 2014 Earnings Supplement 21-29 Environmental Overview 30-36 Coal Ash Supplement 37-43 Additional Financial Information 44-52 Upcoming Events 53 15 | Second Quarter 2014 Earnings Review and Business Update
Slide 16: Update on Key 2014 Assumptions
Update on Key 2014 Assumptions 16 | Second Quarter 2014 Earnings Review and Business Update
Slide 17: Duke Energy value proposition
Duke Energy value proposition Superior Total Shareholder Return (TSR) Potential Long-term EPS growth of 4-6% (1) R Attractive annual dividend yield (~4.6%) (2) with growth flexibility ~8.6%-10.6% average annual TSR potential Strong balance sheet Operate in constructive regulated jurisdicti
Slide 18: Business segment structure
Business segment structure DUKE ENERGY REGULATED COMMERCIAL INTERNATIONAL UTILITIES POWER ENERGY North and South Duke Energy Duke Energy Carolinas Carolina Renewables North and South Duke Energy Duke Energy Progress Carolina Retail Duke Energy Florida Florida Duke Energy Indiana Indiana Ohio T&D Mid
Slide 19: Update on key 2014 earnings guidance assumptions
Update on key 2014 earnings guidance assumptions ($ in millions) 2014 2014 YTD assumptions (thru 6/30/14) Adjusted segment income (expense) (1): Regulated Utilities $2,855 $1,426 International Energy $430 $276 Commercial Power $130 $26 Other ($215) ($113) Duke Energy Consolidated $3,200 $1,615 Addit
Slide 20: ~$5-6 billion of environmental compliance costs through 2023
~$5-6 billion of environmental compliance costs through 2023 – Anticipate ~$5-6 billion(3) in Carolinas (1) 2014 – 2016 2017 – 2023 compliance costs for approved Mercury Controls/Sorbent Injection or pending air, water and waste Response to Emissions Standards regulations over next 10 years Wastewat
Slide 21: 2Q 2014 Earnings Supplement
2Q 2014 Earnings Supplement 21 | Second Quarter 2014 Earnings Review and Business Update
Slide 22: Regulated Utilities weather-normalized volume trends, by jurisdiction
Regulated Utilities weather-normalized volume trends, by jurisdiction Q2 2014 Rolling 12-month Volume Trends Duke Energy Duke Energy Duke Energy Duke Energy Duke Energy Regulated Carolinas Progress Florida Indiana Ohio/Kentucky Utilities 4.1% 2.7% 2.4% 2.3% 2.1% 2.1% 2.0% 2.0% 1.8% 1.7% 1.6% 1.6% 1.
Slide 23: Regulated Utilities quarterly weather impacts
Regulated Utilities quarterly weather impacts Weather segment 2014 2013 income to normal: Pretax impact Weighted avg. EPS impact – Pretax impact Weighted avg. EPS impact – ($ in millions) diluted shares favorable / ($ in millions) diluted shares favorable / (unfavorable) (unfavorable) First Quarter
Slide 24: Fuel and Joint Dispatch savings update
Fuel and Joint Dispatch savings update Fuel and Joint Dispatch (JDA) Savings Quarterly Savings Results ($ in millions) Guaranteed $687 million in fuel and joint $50 $350 dispatch savings to Carolinas customers over $300 $40 5 years (1) $250 – During 2Q 2014 achieved ~$40 million in $30 $200 total sa
Slide 25: 2014 quarterly earnings expectations
2014 quarterly earnings expectations Key 2014 Drivers vs. 2013 (Actual) 1Q 2014 2Q 2014 Key 2H 2014 year-over-year drivers Weather + + $4.32 ▲Revised customer rates at Duke $2.17 Impact of 2013 rate cases + + Impact of nuclear levelization + + Energy Carolinas (3Q only) Reduced $2.16Florida COR amor
Slide 26: Open Major Regulatory Proceedings
Open Major Regulatory Proceedings State Filing Docket number Status Hearings Expected Order 140110 – Citrus Co. CC GBRA Florida 140111 – Peaking Procedural schedule set August 2014 2H 2014 Investments Generation Ohio 2014 ESP 14-0841-EL-SSO Procedural schedule set September 2014 1H 2015 Indiana IGCC
Slide 27: Edwardsport IGCC rider summary
Edwardsport IGCC rider summary Six-Month Revenue Tracker Costs Thru (1) Rates Effective Status Requirement IGCC-1 Feb. 2008 Jan. 2009 Approved $ 8 million IGCC-2 Sept. 2008 May 2009 Approved $ 17 million IGCC-3 Mar. 2009 Dec. 2009 Approved $ 27 million IGCC-4 Sept. 2009 July 2010 Approved $ 49 milli
Slide 28: Brazil's reservoir levels – SE region
Brazil’s reservoir levels – SE region 90 80 Reservoir Level (% Maximum Volume) 70 62.90 63.75 62.45 60 60.83 48.71 50 43.18 45.48 54.13 55.06 45.05 43.18 40.30 41.62 38.80 37.40 40 34.60 36.30 36.30 28.86 37.46 30 20 10 2000 2001 2012 2013 2014 0 Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec –
Slide 29: Duke Energy Ohio – PJM capacity auction results
Duke Energy Ohio – PJM capacity auction results $132 $150 Capacity Price per MW-day 6,000 Capacity Offered (MW) $125 PJM Capacity price 5,000 planning year per MW-day $85 $91 $95 $100 4,000 2013 / 2014 $28 $75 3,000 2014 / 2015 $126 2,000 $50 2015 / 2016 $136 1,000 $25 2016 / 2017 $59 0 $- 2017 / 20
Slide 30: Environmental Overview
Environmental Overview 30 | Second Quarter 2014 Earnings Review and Business Update
Slide 31: Pending environmental regulations
Pending environmental regulations Rule overview Potential impacts to Duke Energy Regulates Hazardous Air Pollutants (e.g., mercury & non-mercury HAPs) Additional air emissions control Mercury and Air Compliance deadline April 16, 2015 with possible one-year extension equipment Toxics Standards
Slide 32: Pending environmental regulations, cont.
Pending environmental regulations, cont. Rule overview Potential impacts to Duke Energy Regulates coal combustion residuals (e.g., coal ash) Close or upgrade wet ash ponds Coal Combustion Rule proposed in June 2010 Convert wet ash handling to dry Residuals Rule (CCR) EPA expected to finali
Slide 33: Pending EPA regulations will impact U.S. generation
Pending EPA regulations will impact U.S. generation Major regulations Duke Energy domestic generation (as of 6/30/14) Considerations for EPA Coal Combustion Residuals Coal generation profile Transition period must Rule (Coal Ash) TODAY – POST MODERNIZATION (2) – be reasonable to allow 21.8 GW (1) 7
Slide 34: Positioning our coal fleet for EPA regulations
Positioning our coal fleet for EPA regulations Coal generation profile – as of 6/30/14 Plans for coal generation without controls Duke Carolinas 4.3 GW 2.5 GW 0.4 – Lee 1&2 ~200 MW potential to be retired by 2015 ~7.2 GW GW – Lee 3 ~170 MW expected to be converted to gas in 2014 Duke Progress 3.3 GW
Slide 35: Duke Energy steam facility data (As of 6/30/14)
Duke Energy steam facility data (As of 6/30/14) Owned capacity – Current cooling Ash Handling (3) Structure Operating state Jurisdiction Steam unit facility summer rating (MW) Fuel type method Air Emissions controls (flyash; bottom ash) Regulated In Operation DE Carolinas Allen 1,127 Coal Once-Throu
Slide 36: Duke Energy steam facility data, cont. (As of 6/30/14)
Duke Energy steam facility data, cont. (As of 6/30/14) Owned capacity – Current cooling Ash Handling (2) Structure Operating state Jurisdiction Steam unit facility summer rating (MW) Fuel type method Air Emissions controls (flyash; bottom ash) Scrubber; SCR Under Wet Sluice (Dry Under Regulated In O
Slide 37: Coal Ash Supplement
Coal Ash Supplement 37 | Second Quarter 2014 Earnings Review and Business Update
Slide 38: Ash Basins: Coal ash background
Ash Basins: Coal ash background Facts About Coal Ash Destinations of Coal Ash in the US According to the U.S. Energy Information Administration, about 37 percent of all Mines electricity generated in the United States 8% comes from coal. In the Carolinas, Duke Energy produces Landfills about 28
Slide 39: Immediate actions following Dan River coal ash accident
Immediate actions following Dan River coal ash accident 1. Formed dedicated internal task Site Baseline coal ash basin plan in NC (1) Timing Cost (est.) force to address near and long-term Dan River Dewater, close and excavate to lined structural fill 20-24 mo. (2) coal ash management system-wide so
Slide 40: North Carolina coal ash plan cost estimate comparisons
North Carolina coal ash plan cost estimate comparisons (1)(2) The comprehensive, long-term closure strategy to be developed for remaining sites by the end of 2014 will be a site-specific, fact-based approach. $B Movement to full excavation and all dry handling significantly increases expected costs
Slide 41: Terms and Background
Terms and Background Fly ash – A fine material similar to the consistency of talcum powder. Fly ash accounts for about 78 percent of the coal ash generated annually in the United States. When many early coal plants were built, fly ash was emitted through smokestacks; later, emissions equipment captu
Slide 42: Ash Basins: Notice of Violations in the Carolinas
Ash Basins: Notice of Violations in the Carolinas Site NOV Duke’s NOV Cited Violation Duke’s Response Summary Next Steps Issuance Response Dan River 2/28/2014 3/13/14 Notice of unlawful discharge and – Duke Energy was operating in full compliance Awaiting action from NC potential issuance of civil p
Slide 43: Ash Basins: Dedicated company website
Ash Basins: Dedicated company website Visit: www.duke-energy.com/ash-management for up-to-date information 43 | Second Quarter 2014 Earnings Review and Business Update
Slide 44: Additional Financial Information
Additional Financial Information 44 | Second Quarter 2014 Earnings Review and Business Update
Slide 45: Achieving long term earnings growth of 4-6% through 2016
Achieving long term earnings growth of 4-6% through 2016 (1) Adjusted diluted EPS summary (1) EPS CAGR Long-term segment earnings drivers Contribution Thru 2016 Regulated Investments in regulated fleet 4% Utilities Long-term load growth of 0.5 – 1.0% 1 - 2% $4.65 Wholesale and customer program
Slide 46: Established track record of dividend growth
Established track record of dividend growth DUK annual dividend per share (1) Supported by strong regulated earnings 88-year history of quarterly cash dividends Increased quarterly dividend to $0.795/share in 2014 Target long-term payout range of 65 - 70% of adjusted diluted EPS Flexibilit
Slide 47: Simplified financing structure
Simplified financing structure Duke Energy (HoldCo) Cinergy Corp. Duke Energy Progress Energy (HoldCo) International (HoldCo) (1) Duke Energy Duke Energy Duke Energy Duke Energy Duke Energy Carolinas Ohio Indiana Progress Florida Duke Energy Commercial Paper and LT Financings Duke Energy Money Pool
Slide 48: Progress on 2014 financing plan
Progress on 2014 financing plan (as of August 7, 2014) (1) ($ in millions) $2,000 $1,500 $1,000 $500 $- Duke Duke Duke International Renewables Duke Duke Energy Energy Energy Energy Energy (HoldCo)(2) Progress Florida Ohio Carolinas Full-year Maturities Expected issuances remaining Completed issuanc
Slide 49: Access to capital – 2014 long-term debt financing activity
Access to capital – 2014 long-term debt financing activity Amount Credit Ratings ($ in Entity Date Issued Term Type Rate (M/S&P/F) millions) Accounts Receivable Initial variable rate of $225 DE Florida March 2014 N/A 3 Year securitization ~0.85% Aa2 / A / A+ $400 million – 30 year First Mortgage Bon
Slide 50: Liquidity summary (as of June 30, 2014)
Liquidity summary (as of June 30, 2014) ($ in millions) Duke Duke Duke Duke Duke Duke Duke Energy Carolinas Progress Florida Indiana Ohio Kentucky Total (1) $ 2,250 $ 1,000 $ 750 $ 650 $ 700 $ 550 $ 100 $ 6,000 Master Credit Facility Less: Notes payable and commercial paper (2) (873) (300) (75) - (1
Slide 51: Credit ratings (as of August 7, 2014)
Credit ratings (as of August 7, 2014) Holding companies Operating companies Fitch Moody's S&P Fitch Moody's S&P DUKE ENERGY Stable Stable Stable DUKE ENERGY CAROLINAS Positive Stable Stable Senior Unsecured Debt BBB+ A3 BBB Senior Secured Debt A+ Aa2 A Commercial Paper F-2 P-2 A-2 Senior Unsecured D
Slide 52: Investor Relations App
Investor Relations App – Free mobile app for Investor Relations materials now available for iPhone, iPad, and Android mobile devices – The Duke Energy app provides mobile access to commonly used IR materials, including: – SEC Filings – Earnings Materials – Company Presentations – Press Releases – Se
Slide 53: Upcoming events
Upcoming events Event Date 3Q 2014 earnings call (tentative) November 5 EEI Financial Conference (Dallas) November 12-13 53 | Second Quarter 2014 Earnings Review and Business Update
Slide 54: For additional information on Duke Energy, please visit: www.duke-energy.com/investors
For additional information on Duke Energy, please visit: www.duke-energy.com/investors 54 | Second Quarter 2014 Earnings Review and Business Update
Slide 55: Non-GAAP Reconciliations
Duke Energy Corporation Non-GAAP Reconciliations Second Quarter Earnings Review & Business Update August 7, 2014 Adjusted Diluted Earnings per Share (“EPS”) The materials for Duke Energy Corporation’s (“Duke Energy”) Second Quarter Earnings Review and Business Update on August 7, 2014 include a disc
Slide 56: Non-GAAP Reconciliations (continued)
reasonably possible such charges and credits could recur. Mark-to-market adjustments reflect the impact of derivative contracts, which are used in Duke Energy’s hedging of a portion of the economic value of its generation assets in the Commercial Power segment and relate to existing derivative posit
Slide 57: Adjusted Effective Tax Rate
Adjusted Effective Tax Rate The materials for Duke Energy’s Second Quarter Earnings Review and Business Update on August 7, 2014 include a discussion of the adjusted effective tax rate (“ETR”) for the year-to-date period ended June 30, 2014. The materials also include a discussion of the 2014 foreca
Slide 58: Available Liquidity
Available Liquidity The materials for Duke Energy’s Second Quarter Earnings Review and Business Update on August 7, 2014 include a discussion of Duke Energy’s available liquidity balance. The available liquidity balance presented is a non-GAAP financial measure as it represents cash and cash equival
Slide 59: Adjusted to Reported Earnings Reconciliation, Three Months Ended June 30, 2014
DUKE ENERGY CORPORTATION ADJUSTED TO REPORTED EARNINGS RECONCILIATION Three Months Ended June 30, 2014 (Dollars in millions, except per-share amounts) Special Items Costs to Achieve, Economic Adjusted Progress Hedges (Mark- Discontinued Total Reported Earnings Merger to-Market) * Operations Adjustme
Slide 60: Adjusted to Reported Earnings Reconciliation, Six Months Ended June 30, 2014
DUKE ENERGY CORPORATION ADJUSTED TO REPORTED EARNINGS RECONCILIATION Six Months Ended June 30, 2014 (Dollars in millions, except per-share amounts) Special Items Costs to Economic Achieve, Midwest Hedges Adjusted Progress Generation (Mark-to- Discontinued Total Reported Earnings Merger Impairment Ma
Slide 61: Adjusted to Reported Earnings Reconciliation, Three Months Ended June 30, 2013
DUKE ENERGY CORPORATION ADJUSTED TO REPORTED EARNINGS RECONCILIATION Three Months Ended June 30, 2013 (Dollars in millions, except per-share amounts) Special Items Costs to Economic Achieve, Nuclear Crystal Hedges Adjusted Progress Development Litigation River Unit 3 (Mark-to- Discontinued Total Rep
Slide 62: Adjusted to Reported Earnings Reconciliation, Six Months Ended June 30, 2013
DUKE ENERGY CORPORATION ADJUSTED TO REPORTED EARNINGS RECONCILIATION Six Months Ended June 30, 2013 (Dollars in millions, except per-share amounts) Special Items Costs to Economic Achieve, Nuclear Crystal Hedges Adjusted Progress Development Litigation River Unit 3 (Mark-to- Discontinued Total Repor
Slide 63: Available Liquidity Reconciliation as of June 30, 2014
Duke Energy Corporation Available Liquidity Reconciliation As of June 30, 2014 (In millions) Cash and Cash Equivalents $ 2,008 Short-Term Investments - Subtotal 2,008 Less: Amounts Held in Foreign Jurisdictions (1,702) Less: Unavailable Domestic Cash (58) 248 Plus: Remaining Availability under Maste