Duke Energy Corporation (Holding Company) · NYSE:DUK
Duke Energy Corporation (Holding Company) — Q3 2016 Earnings Presentation
50 slides from Duke Energy Corporation (Holding Company)'s earnings presentation, Nov 4, 2016
Slide 1: Third Quarter 2016 Earnings Review and Business Update
Presented by Lynn Good, Chairman, President and CEO Steve Young, Executive VP and CFO Nov. 4, 2016 THIRD QUARTER 2016 EARNINGS REVIEW // BUSINESS UPDATE
Slide 2: Safe Harbor Statement
SAFE HARBOR SAFE HARBOR STATEMENT This document includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements are based on management’s beliefs and assumptions and can often be id
Slide 3: Topics for Today's Call
TOPICS FOR TODAY’S CALL BUSINESS UPDATE Lynn Good, Chairman, President & CEO Portfolio Transition and Strategic Priorities Duke Energy’s Infrastructure Businesses Third Quarter 2016 Financial Highlights Update on Strategic Initiatives Third Quarter 2016 Operational Accomplishments FINANCIA
Slide 4: Completing Transition Towards a Domestic Infrastructure Business
COMPLETING TRANSITION TOWARDS A DOMESTIC INFRASTRUCTURE BUSINESS Duke Energy 2011(1) Duke Energy & & Progress Exit of merchant Post Transition(1) Acquired Piedmont Progress Energy Energy Merge Merge 2014 Midwest Generation Business 2Q 2015 Natural text Gas 4Q 2016 25% ~100% 75% Duke Duke Energy Ener
Slide 5: Duke Energy – A Large-Scale, Highly-Regulated Energy Infrastructure Company
DUKE ENERGY – A LARGE-SCALE, HIGHLY-REGULATED ENERGY INFRASTRUCTURE COMPANY New Business Segments Electric Utilities & Infrastructure Gas Utilities & Infrastructure Commercial Renewables Duke Energy Indiana Duke Energy Ohio / Kentucky (electric) Duke Energy Progress Piedmont Natural Gas Solar energy
Slide 6: Third Quarter 2016 Financial Highlights
THIRD QUARTER 2016 FINANCIAL HIGHLIGHTS 3Q 2016 reported diluted EPS (GAAP) of $1.70, compared to $1.35 in 3Q 2015 3Q 2016 adjusted diluted EPS of $1.68, compared to $1.47 in 3Q 2015 Quarterly results driven by significantly warmer weather, higher retail volumes Sutton Combined Cycle Plant, Wi
Slide 7: Executing on Our Strategic Priorities
EXECUTING ON OUR STRATEGIC PRIORITIES $1.4 B investment in Indiana T&D infrastructure recoverable via rider Modernize the Energy Grid Generate Cleaner Energy $150 M Markland Hydro Station modernization settlement $1.1 B Western Carolinas Modernization $1.3 B investment in Ohio T&D Project site prepa
Slide 8: Recent Operational Highlights
RECENT OPERATIONAL HIGHLIGHTS Mobilized quickly to restore power to more than 1.7 million customers after widespread damage and historic flooding from Hurricane Matthew Incremental costs currently estimated at approximately $200 million Deferral request for incremental costs to be filed in Duk
Slide 9: 3Q 2016 Adjusted Diluted EPS Summary and Primary Drivers
3Q 2016 ADJUSTED DILUTED EPS SUMMARY AND PRIMARY DRIVERS Adjusted Diluted Earnings per Share Segment results vs. prior year quarter (1)(2) CORE BUSINESSES $3.88 Regulated Utilities, +$235 M (+$0.34 per share) $3.66 ▲ Favorable weather ▲ Lower effective tax rate ▲ Higher rider revenues ▲ Increased re
Slide 10: Regulated Utilities Weather-Normal Volume Trends
REGULATED UTILITIES WEATHER-NORMAL VOLUME TRENDS RESIDENTIAL Rolling 12 Month Retail Sales Growth (1) Continued strength in average customer growth (+1.4%) 1.1% Usage per customer continues to partially offset customer growth over the rolling 12 months, but was positive in the quarter 0.6% 0.4%
Slide 11: Hearing Completed for the Duke Energy Progress SC Rate Case
HEARING COMPLETED FOR THE DUKE ENERGY PROGRESS SC RATE CASE Requested Settled Retail revenue increase ~$79 M ~$56 M Return on equity 10.75% 10.1% Equity component of 53% 53% capital structure Proposed rate base (1) ~$1.3 B ~$1.3 B Rates expected to be in Jan. 1, 2017 effect (if approved) Duke Energy
Slide 12: A Look Ahead Toward 2017
A LOOK AHEAD TOWARD 2017 Adjusted Diluted Earnings per Share Expectations 2017 Considerations 2016 Guidance 2017 Expectation Midpoint (1) Core business growth includes Core businesses $4.30 ~ 5% growth(1) Piedmont accretion of $0.08 - $0.10 International $0.30 ~$0.10 - $0.15(2) per share Duke Ener
Slide 13: Key Investor Considerations
KEY INVESTOR CONSIDERATIONS Large-scale utility in the Portfolio of low-risk, U.S. with valuable high-quality geographic diversity & core businesses competitive rates Highly defined & achievable Attractive dividend yield long-term growth with growth commitment Long-term 4 – 6%(1) Core Business Annua
Slide 14: Appendix Materials
APPENDIX MATERIALS Item Slides Update on Key 2016 Assumptions 15-17 3Q 2016 Supplemental Data 18-25 Update on Brazil Operations 26-28 Financial Supplement 29-33 Other Information 34-36 14 | Third Quarter 2016 Earnings Review and Business Update
Slide 15: Update on Key 2016 Assumptions
Update on Key 2016 Assumptions 15 | Third Quarter 2016 Earnings Review and Business Update
Slide 16: Key 2016 Adjusted Earnings Guidance Assumptions
KEY 2016 ADJUSTED EARNINGS GUIDANCE ASSUMPTIONS ($ in millions) Original 2016 2016 YTD assumptions (1) (thru 9/30/2016) Adjusted segment income / (expense) (2): Regulated Utilities $3,090 $2,613 International Energy $210 $230 Commercial Portfolio $140 $65 Other ($265) ($229) Duke Energy Consolidated
Slide 17: Key 2016 Earnings Sensitivities
KEY 2016 EARNINGS SENSITIVITIES Driver EPS Impact Regulated Utilities 100 bps change in earned return on equity +/- $0.40 $1 billion change in rate base +/- $0.08 1% change in Regulated Utilities volumes +/- $0.10 International 10% change in BRL/US$ foreign exchange rate +/- $0.01 - 0.02 $10/barrel
Slide 18: 3Q 2016 Supplemental Data
3Q 2016 Supplemental Data 18 | Third Quarter 2016 Earnings Review and Business Update
Slide 19: New Business Segment Structure Beginning 4Q 2016
NEW BUSINESS SEGMENT STRUCTURE BEGINNING 4Q 2016 Duke Energy Electric Utilities Gas Utilities Commercial International & Infrastructure & Infrastructure Renewables Energy(1) North and South Duke Energy Carolinas Piedmont Natural Gas Carolina North and South Commercial Duke Energy Progress Carolina P
Slide 20: 3Q 2015 – 3Q 2016 Adjusted Diluted EPS Waterfall
3Q 2015 – 3Q 2016 ADJUSTED DILUTED EPS WATERFALL Favorable Regulated Commercial International Q3 2016 Other Utilities Portfolio Energy Weather $0.02 $1.81 ▲ Additional ($0.14) ($0.01) $0.20 wind and solar plants and $1.69 ▼ Higher effective $1.68 $1.68 $1.61 ▲ Lower effective improved wind tax rate
Slide 21: YTD 2015 – YTD 2016 Adjusted Diluted EPS Waterfall
YTD 2015 – YTD 2016 ADJUSTED DILUTED EPS WATERFALL Favorable Accelerated Regulated Commercial International YTD 2016 Other Stock Utilities Portfolio Energy Weather Repurchase $0.32 ($0.08) $0.04 ▼ Q1$3.93 2015 ($0.19) earnings from $3.88 MW $0.10 $3.84 $0.03 Generation -$0.12 ▼ Higher $3.74 ▲ Lower
Slide 22: Regulated Utilities Quarterly Weather Impacts
REGULATED UTILITIES QUARTERLY WEATHER IMPACTS Weather segment 2016 2015(2) income to normal: Pretax impact Weighted avg. EPS impact – Pretax impact Weighted avg. EPS impact – diluted shares favorable / diluted shares favorable / (unfavorable) (unfavorable) First Quarter ($10) 689 ($0.01) $110 708 $0
Slide 23: Weather Normalized Volume Trends, by Jurisdiction
WEATHER NORMALIZED VOLUME TRENDS, BY JURISDICTION Rolling Twelve Months, as of Sept. 30, 2016 Duke Energy Duke Energy Duke Energy Duke Energy Duke Energy Regulated Carolinas Progress Florida Indiana Ohio/Kentucky Utilities 2.8% 1.9% 1.6% 1.4% 1.4% 1.0% 1.0% 1.1% 0.5% 0.6% 0.4% 0.2% 0.2% 0.0% 0.0% 0.
Slide 24: Moving Toward a Lower Carbon Footprint and Increased Fuel Diversity
MOVING TOWARD A LOWER CARBON FOOTPRINT AND INCREASED FUEL DIVERSITY U.S. Fuel Diversity (MWh output)(1) 2005(2) Coal 2015(2) 2030 (Est.) 2% Nuclear 4% Natural Gas/Oil 8% Hydro, Wind & Solar 10% 28% 35% 35% 23% 32% 58% 33% 32% Reduction of U.S. Generation Emissions U.S. Carbon Intensity(3) From 2005
Slide 25: North Carolina Coal Ash Supplement
NORTH CAROLINA COAL ASH SUPPLEMENT North Carolina Ash Basin Classifications Site Ranking Compliance Tons of Ash(1) Date In Millions Riverbend(2) High 2019 3.6 Dan River(2) High 2019 1.6 Sutton(2) High 2019 6.7 Asheville (2)(3) High 2022 6.3 Cape Fear Intermediate 2028 5.7 H.F. Lee Intermediate 2028
Slide 26: Update on Brazil Operations
Update on Brazil Operations 26 | Third Quarter 2016 Earnings Review and Business Update
Slide 27: Brazil's Reservoir Levels – SE Region
BRAZIL’S RESERVOIR LEVELS – SE REGION 70 62.5 62.9 63.8 60.8 58.3 Reservoir Level (% Maximum Volume) 60 55.1 50.9 57.6 56.7 54.1 56.0 48.7 50 46.0 45.1 44.4 51.5 43.2 40.1 41.6 45.5 37.4 40 29.8 34.1 37.5 32.3 36.0 36.1 29.8 30 33.5 27.6 27.5 28.9 28.5 20 19.4 20.6 16.8 10 0 Dec Jan Feb Mar Apr May
Slide 28: Brazil Spot (PLD) Prices
BRAZIL SPOT (PLD) PRICES 450 400 388.5 388.5 388.5 388.5 387.2 372.2 350 Avg. Spot Price (R$/MWh) 300 250 240.1 202.9 200 227.0 212.3 150 145.1 149.0 100 116.1 115.6 75.9 83.4 50 61.3 35.7 49.4 30.4 37.7 0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2015 PLD CAP 2015 2016 28 | Third Quarter 2016
Slide 29: Financial Supplement
Financial Supplement 29 | Third Quarter 2016 Earnings Review and Business Update
Slide 30: 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 Piedmont Carolinas Ohio Indiana Progress Florida Natural Gas (2) Duke Energy Duke Energy Renewables and Kentuc
Slide 31: 2016 Financing Plan (as of Sept. 30, 2016)
2016 FINANCING PLAN (AS OF SEPT. 30, 2016) (1) ($ in millions) $2,000 $1,800 $1,600 $1,400 Includes CR3 $1,200 financing of ~$1.3B $1,000 $800 $600 $400 $200 $- Holding Duke Duke Duke Duke Duke Duke Renewables International Company Energy Energy Energy Energy Energy Energy Carolinas Progress Florida
Slide 32: Access to Capital – 2016 Long-Term Debt Financing Activity
ACCESS TO CAPITAL – 2016 LONG-TERM DEBT FINANCING ACTIVITY Amount Credit Ratings Entity Date Issued Term Type Rate ($ in millions) (F/M/S&P) $45 DE Kentucky January 2016 N/A 10 Year Debentures Fixed – 3.420% $50 DE Kentucky January 2016 N/A 30 Year Debentures Fixed – 4.450% $500 DE Carolinas March 2
Slide 33: Liquidity Summary (as of Sept. 30, 2016)
LIQUIDITY SUMMARY (AS OF SEPT. 30, 2016) ($ in millions) Duke Duke Duke Duke Duke Duke Duke Energy Energy Energy Energy Energy Energy Energy Carolinas Progress Florida Indiana Ohio Kentucky Total Master Credit Facility (1) $ 3,400 $ 1,100 $ 1,000 $ 950 $ 600 $ 300 $ 150 $ 7,500 Less: Notes payable a
Slide 34: Other Information
Other Information 34 | Third Quarter 2016 Earnings Review and Business Update
Slide 35: Investor Relations Contact Information
INVESTOR RELATIONS CONTACT INFORMATION Mike Callahan, Vice President Investor Relations Michael.Callahan@duke-energy.com (704) 382-0459 Mike Switzer, Director Investor Relations Mike.Switzer@duke-energy.com (704) 382-6473 Chris Bauer, Manager Investor Relations Chris.Bauer@duke-energy.com
Slide 36: Upcoming Events
UPCOMING EVENTS Event Date EEI Financial Conference (Phoenix, AZ) Nov. 6-8, 2016 4Q 2016 earnings call (tentative) Feb. 16, 2017 36 | Third Quarter 2016 Earnings Review and Business Update
Slide 37: For additional information, visit duke-energy.com/investors
For additional information on Duke Energy, please visit: www.duke-energy.com/investors 37 | Third Quarter 2016 Earnings Review and Business Update
Slide 38: Non-GAAP Reconciliations
Duke Energy Corporation Non-GAAP Reconciliations Third Quarter Earnings Review & Business Update November 4, 2016 Adjusted Diluted Earnings per Share (EPS) The materials for Duke Energy Corporation’s (Duke Energy) Third Quarter Earnings Review and Business Update on November 4, 2016, include a discu
Slide 39: Non-GAAP Reconciliations (continued): Core Business Outlook
which represents Duke Energy’s Regulated Utilities and Commercial Portfolio segments, as well as Other. The core business expected contribution is based on the midpoint of the adjusted diluted EPS guidance range, less the expected contribution from International Energy. The materials also reference
Slide 40: Adjusted Effective Tax Rate and Available Liquidity Notes
forward-looking nature of 2016 forecasted adjusted ETR, information to reconcile it to the most directly comparable GAAP financial measure is not available at this time, as management is unable to project all special items (as discussed above under Adjusted Diluted EPS Outlook). Available Liquidity
Slide 41: Adjusted Interest Expense
Adjusted Interest Expense The materials for Duke Energy’s Third Quarter Earnings Review and Business Update on November 4, 2016, include a discussion of Duke Energy’s adjusted interest expense for the period ended September 30, 2016, as well as the forecasted year-to-date period ended December 31, 2
Slide 42: Reported to Adjusted Earnings Reconciliation – Three Months Ended Sept. 30, 2016
DUKE ENERGY CORPORATION REPORTED TO ADJUSTED EARNINGS RECONCILIATION Three Months Ended September 30, 2016 (Dollars in millions, except per-share amounts) Special Items Costs to Cost Commercial Reported Achieve, Savings Renewables Discontinued Total Adjusted Earnings Mergers Initiatives Impairment O
Slide 43: Reported to Adjusted Earnings Reconciliation – Nine Months Ended Sept. 30, 2016
DUKE ENERGY CORPORATION REPORTED TO ADJUSTED EARNINGS RECONCILIATION Nine Months Ended September 30, 2016 (Dollars in millions, except per-share amounts) Special Items Costs to Cost Commercial Reported Achieve, International Savings Renewables Discontinued Total Adjusted Earnings Mergers Impairment
Slide 44: Reported to Adjusted Earnings Reconciliation – Three Months Ended Sept. 30, 2015
DUKE ENERGY CORPORATION REPORTED TO ADJUSTED EARNINGS RECONCILIATION Three Months Ended September 30, 2015 (Dollars in millions, except per-share amounts) Special Items Costs to Economic Achieve, Hedges Reported Progress Edwardsport Ash Basin (Mark-to- Discontinued Total Adjusted Earnings Merger Set
Slide 45: Reported to Adjusted Earnings Reconciliation – Nine Months Ended Sept. 30, 2015
DUKE ENERGY CORPORATION REPORTED TO ADJUSTED EARNINGS RECONCILIATION Nine Months Ended September 30, 2015 (Dollars in millions, except per-share amounts) Special Items Costs to Economic Achieve, Midwest Hedges Reported Progress Edwardsport Generation Ash Basin (Mark-to- Discontinued Total Adjusted E
Slide 46: Adjusted to Reported Earnings Reconciliation – Twelve Months Ended Dec. 31, 2011
DUKE ENERGY CORPORATION ADJUSTED TO REPORTED EARNINGS RECONCILIATION Twelve Months Ended December 31, 2011 (Dollars in millions, except per-share amounts) Special Items Costs to Achieve, Midwest Economic Reported Progress Edwardsport Generation Hedges (Mark- Discontinued Total Adjusted Earnings Merg
Slide 47: Reported to Adjusted Earnings Reconciliation – Twelve Months Ended Dec. 31, 2014
DUKE ENERGY CORPORATION REPORTED TO ADJUSTED EARNINGS RECONCILIATION Twelve Months Ended December 31, 2014 (Dollars in millions, except per‐share amounts) Special Items Costs to Economic Achieve, Midwest International Hedges Reported Progress Asset Generation Litigation Asset Tax (Mark‐to‐ Discontin
Slide 48: Reported to Adjusted Earnings Reconciliation – Twelve Months Ended Dec. 31, 2015
DUKE ENERGY CORPORATION REPORTED TO ADJUSTED EARNINGS RECONCILIATION Twelve Months Ended December 31, 2015 (Dollars in millions, except per‐share amounts) Special Items Costs to Midwest Ash Basin Cost Reported Achieve, Edwardsport Generation Settlement and Savings Discontinued Total Adjusted Earning
Slide 49: Adjusted Effective Tax Reconciliation
DUKE ENERGY CORPORATION ADJUSTED EFFECTIVE TAX RECONCILIATION Three and Nine Months Ended September 30, 2016 (Dollars in Millions) Three Months Ended Nine Months Ended September 30, 2016 September 30, 2016 Balance Effective Tax Rate Balance Effective Tax Rate Reported Income From Continuing Operatio
Slide 50: Available Liquidity Reconciliation
Duke Energy Corporation Available Liquidity Reconciliation As of September 30, 2016 (In millions) Cash and Cash Equivalents $ 6,179 Less: Certain Amounts Held in Foreign Jurisdictions (511) Less: Unavailable Domestic Cash (40) 5,628 Plus: Remaining Availability under Master Credit Facility 5,155 Tot