Duke Energy Corporation (holding Company) · NYSE:DUK
Duke Energy Corporation (holding Company) — Q3 2019 Earnings Presentation
52 slides from Duke Energy Corporation (holding Company)'s earnings presentation, Nov 8, 2019
Slide 1: Duke Energy Earnings Review & Business Update
November 8, 2019 THIRD QUARTER 2019 Duke Energy Earnings Review & Business Update Lynn Good Chairman, President & CEO Steve Young Executive Vice President & CFO
Slide 2: Safe Harbor statement; Regulation G disclosure
Safe Harbor statement This presentation includes forward-looking statements within the meaning of the federal securities laws. Actual results could differ materially from such forward- looking statements. The factors that could cause actual results to differ are discussed in the Appendix herein and
Slide 3: Topics for today's call
Topics for today’s call BUSINESS UPDATE Lynn Good, Chairman, President & CEO ▪ Third quarter 2019 update ▪ Progress on strategic initiatives ▪ Legislative updates FINANCIAL UPDATE Steve Young, Executive VP & CFO ▪ Third quarter 2019 earnings drivers ▪ Economic conditions and volume trends ▪ Regulato
Slide 4: Third quarter 2019 update
Third quarter 2019 update FINANCIAL HIGHLIGHTS(1) $1.82 REPORTED DILUTED EPS ▪ Raising the midpoint of 2019 EPS guidance range FOR 3Q 2019 on strong year-to-date results COMPARED TO $1.51 IN 3Q 2018 ▪ EPS growth of 7% through the first three quarters ▪ Reaffirming 4-6% long-term growth CAGR through
Slide 5: Companywide CO2 Emissions Reduction Goals
Working to achieve net-zero carbon emissions by 2050 Companywide CO2 Emissions Cut CO2 emissions by at least 50% by 2030 Reduction Goals(1) Attain net-zero CO2 emissions by 2050 ✓ Exceeded 2025 reduction benchmarks agreed to by the U.S. CO2 Reductions for the Paris climate accord Already Achieve
Slide 6: Generating cleaner energy
Generating cleaner energy ELECTRIC UTILITIES AND INFRASTRUCTURE ▪ Asheville combined cycle (DEP) on target for late-2019 completion (part of the $1.1B Western Carolinas Modernization Project) ▪ Second renewable energy RFP in NC launched in October; expect ~1,200 MW to be procured through two RFPs ▪
Slide 7: Expanding natural gas infrastructure: Atlantic Coast Pipeline
Expanding natural gas infrastructure ATLANTIC COAST PIPELINE ▪ SCOTUS agreed to hear appeal of the Appalachian Trail decision; DOJ and Solicitor General joined the appeal; expect decision in Q2 2020 ▪ Work continues with Fish and Wildlife Service to resolve issues with Biological Opinion and Inciden
Slide 8: Legislative updates
Legislative updates North Carolina ▪ SB559 was enacted into law on Nov. 6, enabling storm cost securitization ▪ Provides customers with 15-20% savings on storm recovery costs ▪ Supports balance sheet strength ▪ Opportunity for progress on alternative regulatory mechanisms, including multi-year rate
Slide 9: 3Q 2019 adjusted diluted EPS summary and primary drivers
3Q 2019 adjusted diluted EPS summary and primary drivers ADJUSTED DILUTED SEGMENT RESULTS VS. PRIOR YEAR QUARTER(1) EARNINGS PER SHARE Electric Utilities & Infrastructure, +$191 M (+$0.25 per share(2)) ~7% growth ▲ Contribution from base rate changes and riders (+$0.11 per share) $4.15 ▲ Weather (+$
Slide 10: Customer growth and weather-normal electric volume trends
Customer growth and weather-normal electric volume trends ANNUAL GROWTH IN NUMBER OF RESIDENTIAL RESIDENTIAL CUSTOMERS ▪ Increase in average number of customers in our Electric Utilities Gas Utilities attractive service territories drives long-term volume 1.8% growth for electric and gas utilities 1
Slide 11: Rate cases in the Carolinas support clean energy future
Rate cases in the Carolinas support clean energy future Duke Energy Duke Energy Carolinas Progress Retail revenue increase requested $291 M $464 M Return on equity requested 10.3% DUKE ENERGY CAROLINAS Equity component of capital structure 53% FILED CASE SEPT. 30, 2019 Proposed rate base(1) ~$15.5 B
Slide 12: Financing plan update
Financing plan update ADDITIONAL EQUITY TO MAINTAIN BALANCE SHEET STRENGTH… ▪ Expect to issue ~$2.5 billion of equity to maintain our strong credit metrics during ACP construction ▪ Enables company to address a wider range of ACP outcomes ▪ Expect to issue by end of 2020 to coincide with timing of A
Slide 13: Demonstrated ability to grow core electric and gas earnings
Demonstrated ability to grow core electric and gas earnings(1) 2017-2018 Full-year Adjusted Earnings(2) CORE ELECTRIC AND GAS FRANCHISES DELIVERING AT THE ~5.5% growth TOP END OF THE LONG-TERM $4.71 ADJUSTED EARNINGS GROWTH $4.46 RANGE SUPPORTED BY: $37 BILLION GROWTH(3) CAPITAL PLAN 2019-2023 2017
Slide 14: Reaffirming long-term earnings growth guidance
Reaffirming long-term earnings growth guidance 2020 PRIMARY GROWTH DRIVERS *ALSO ENABLES EARNINGS GROWTH INTO 2021 Electric Utilities & Infrastructure ▪ Florida multi-year rate plan and Solar BRA* ▪ Rate case activity to recover and earn on investments: ▪ DEC/DEP SC: Q2 2019 (full year effect in 202
Slide 15: Our investor value proposition
Our investor value proposition A SOLID LONG-TERM HOLDING 4.0% ~8-10% 4 -6% DIVIDEND YIELD(1) zzz ATTRACTIVE HIGHLY WITH DIVIDEND RISK-ADJUSTED ACHIEVABLE GROWTH TOTAL SHAREHOLDER EPS GROWTH COMMITMENT(2) RETURN(3) THROUGH 2023(4) CONSTRUCTIVE JURISDICTIONS, LOW-RISK REGULATED INVESTMENTS AND BALANCE
Slide 16: Appendix
Appendix ITEM SLIDES Financial supplement 17-27 Sustainability / ESG 28-31 Other supplemental information 32-35 Upcoming events & other 36-39 THIRD QUARTER 2019 EARNINGS REVIEW AND BUSINESS UPDATE // 16
Slide 17: Financial supplement
Financial supplement THIRD QUARTER 2019 EARNINGS REVIEW AND BUSINESS UPDATE // 17
Slide 18: Key 2019 adjusted earnings guidance assumptions
Key 2019 adjusted earnings guidance assumptions ($ in millions) Original 2019 2019 YTD Assumptions (1) (thru 9/30/2019) Adjusted segment income/(expense)(2): Electric Utilities & Infrastructure $3,480 $2,925 Gas Utilities & Infrastructure $375 $292 Commercial Renewables $230 $139 Other ($440) ($328)
Slide 19: Key 2019 earnings sensitivities
Key 2019 earnings sensitivities Driver EPS Impact 1% change in earned return on equity +/- $0.49 Electric Utilities & $1 billion change in rate base +/- $0.07 Infrastructure 1% change in volumes +/- $0.13 1% change in earned return on equity +/- $0.06 Gas Utilities & $200 million change in rate base
Slide 20: Electric utilities quarterly weather impacts
Electric utilities quarterly weather impacts Weather segment 2019 2018 income to normal: Pretax impact Weighted avg. EPS impact Pretax impact Weighted avg. EPS impact diluted shares favorable / shares favorable / (unfavorable) (unfavorable) First Quarter ($55) 727 ($0.06) $10 701 $0.01 Second Quarte
Slide 21: Update on our regulatory activity
Update on our regulatory activity FILING DOCKET KEY STATUS TYPE NO. DRIVERS ▪ ROE 10.3%; 53% equity cap. structure ▪ Hearings scheduled Mar. ‘20 ▪ Grid investments, including AMI DUKE ENERGY NC Base Rate Case E-7 Sub 1214 ▪ Requested new rates effective ▪ Dual fuel plant upgrades CAROLINAS filed Sep
Slide 22: Weather normalized volume trends, by electric jurisdiction
Weather normalized volume trends, by electric jurisdiction Rolling Twelve Months, as of September 30, 2019 Duke Energy Duke Energy Duke Energy Duke Energy Duke Energy Electric Carolinas Progress Florida Indiana Ohio/Kentucky Utilities 1.1% 1.1% 1.2% 0.3% 0.3% 0.3% -0.2% -0.1% -0.1% -0.4% -0.4% -0.4%
Slide 23: 2019 financing plan as of September 30, 2019
2019 financing plan as of September 30, 2019 (1) ($ in millions) $2,000 Priced/ Equity Forward Common Stock Issued YTD Forward? Settlement $1,750 ATM $340 M Yes Q4 DRIP $120 M No n/a $1,500 Total Common $460 M $1,250 $1,000 $750 $500 $250 $- Holding Duke Duke Duke Duke Duke Duke Piedmont Renewables
Slide 24: 2019 long-term debt and preferred stock financing activity
2019 long-term debt and preferred stock financing activity as of September 30, 2019 Credit Ratings Amount Entity Date Issued (M/S&P/F, unless Term Type Rate ($ in millions) otherwise noted) $400 DE Ohio January 2019 A2/A 10-Year First Mortgage Bond Fixed – 3.65% $400 DE Ohio January 2019 A2/A 30-Yea
Slide 25: Liquidity summary as of September 30, 2019
Liquidity summary as of September 30, 2019 Duke Duke Duke Duke Duke Duke Piedmont Duke Energy Energy Energy Energy Energy Energy Natural ($ in millions) Energy Carolinas Progress Florida Indiana Ohio Kentucky Gas Total Master Credit Facility (1) $ 2,650 $ 1,750 $ 1,250 $ 800 $ 600 $ 300 $ 150 $ 500
Slide 26: Credit ratings (as of September 30, 2019)
Credit ratings (as of September 30, 2019) Holding Companies Operating Companies Moody's S&P Fitch Moody's S&P DUKE ENERGY CORPORATION Stable Negative Stable DUKE ENERGY CAROLINAS, LLC Stable Negative Senior Unsecured Debt Baa1 BBB+ BBB+ Senior Secured Debt Aa2 A Senior Unsecured Debt A1 A- Commercia
Slide 27: Recently launched green bond website
Recently launched green bond website www.duke-energy.com/our-company/investors/green-bonds THIRD QUARTER 2019 EARNINGS REVIEW AND BUSINESS UPDATE // 27
Slide 28: Sustainability / Environmental Social and Governance (ESG)
Sustainability / Environmental Social and Governance (ESG) THIRD QUARTER 2019 EARNINGS REVIEW AND BUSINESS UPDATE // 28
Slide 29: Sustainability / ESG: carbon and other reductions
Sustainability / Environmental Social and Governance (ESG) ▪ Targeting at least 50% reduction in carbon dioxide (CO2) emissions by 2030(1); net-zero by mid-century CARBON AND OTHER ▪ Since 2005, decreased CO2 emissions by 31%, sulfur dioxide emissions REDUCTIONS by 96% and nitrogen oxides emissions
Slide 30: Sustainability / ESG: safety, employees, governance
Sustainability / Environmental Social and Governance (ESG) SAFETY – OUR NUMBER ONE PRIORITY ▪ Total Incident Case Rate (TICR) of 0.43 in 2018; one of the industry CARBON AND OTHER leaders for 4th year in a row REDUCTIONS EMPLOYEES ▪ Targeting a companywide engagement score of 76% by 2022 ▪ Named one
Slide 31: Sustainability / ESG: industry leading disclosure
Sustainability / Environmental Social and Governance (ESG) ▪ Dow Jones Sustainability Index for 14 years in a row ▪ Over a decade of annual Sustainability reports CARBON AND OTHER ▪ Climate Report issued in 2018 analyzes 2-degree scenario REDUCTIONS ▪ Our 50% CO2 reduction goal is consistent with a
Slide 32: Other supplemental information
Other supplemental information THIRD QUARTER 2019 EARNINGS REVIEW AND BUSINESS UPDATE // 32
Slide 33: Advancing our strategic vision
Advancing our strategic vision TRANSFORM THE CUSTOMER EXPERIENCE MODERNIZE THE GENERATE EXPAND NATURAL GAS ENERGY GRID CLEANER ENERGY INFRASTRUCTURE STAKEHOLDER ENGAGEMENT EMPLOYEE ENGAGEMENT AND OPERATIONAL EXCELLENCE ARE FOUNDATIONAL TO OUR SUCCESS THIRD QUARTER 2019 EARNINGS REVIEW AND BUSINESS U
Slide 34: Renewables project announcements
Renewables project announcements Megawatts Site Solar Wind Fuel Cell Total COD Location Regulated: Lake Placid 45 - - 45 Q4 2019 FL Trenton 74.9 - - 74.9 Q4 2019 FL DeBary 74.5 - - 74.5 Q1 2020 FL Columbia 74.9 - - 74.9 Q1 2020 FL Catawba County(1) 69 - - 69 2020 NC (DEC) Gaston County(1) 25 - - 25
Slide 35: Coal ash closure costs
Coal ash closure costs(1) NCDEQ COAL ASH ORDER ▪ NC DEQ issued order April 1 requiring low priority sites be fully excavated ▪ Incremental cost of $4 - 5 billion vs. cap-in-place / hybrid closure methods would be spent over decades ▪ Coal ash closure costs would increase $200 – $400 million over 5-y
Slide 36: Upcoming events & other
Upcoming events & other THIRD QUARTER 2019 EARNINGS REVIEW AND BUSINESS UPDATE // 36
Slide 37: Upcoming events
Upcoming events Event Date EEI Financial Conference November 10-12, 2019 4Q 2019 Earnings Call (tentative) February 13, 2020 THIRD QUARTER 2019 EARNINGS REVIEW AND BUSINESS UPDATE // 37
Slide 38: Investor relations contact information
Investor relations contact information BRYAN BUCKLER, VICE PRESIDENT INVESTOR RELATIONS ▪ Bryan.Buckler@duke-energy.com ▪ (704) 382-2640 CINDY LEE, DIRECTOR INVESTOR RELATIONS ▪ Cynthia.Lee@duke-energy.com ▪ (980) 373-4077 ABBY MOTSINGER, MANAGER INVESTOR RELATIONS ▪ Abby.Motsinger@duke-energy.com ▪
Slide 39: Safe harbor statement
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 identified by
Slide 40: For additional information on Duke Energy, please visit duke-energy.com/investors
For additional information on Duke Energy, please visit: duke-energy.com/investors
Slide 41: Non-GAAP Reconciliations: Adjusted Diluted EPS
Duke Energy Corporation Non-GAAP Reconciliations Third Quarter Earnings Review & Business Update November 8, 2019 Adjusted Diluted Earnings per Share (EPS) The materials for Duke Energy Corporation’s (Duke Energy) Third Quarter Earnings Review and Business Update on November 8, 2019, include a discu
Slide 42: Adjusted Segment Income and Adjusted Other Net Loss
Adjusted Segment Income and Adjusted Other Net Loss The materials for Duke Energy’s Third Quarter Earnings Review and Business Update on November 8, 2019, include a discussion of adjusted segment income and adjusted other net loss for the quarter and year-to-date periods ended September 30, 2019 and
Slide 43: Core Electric and Gas Earnings per Share
Core Electric and Gas Earnings per Share The materials for Duke Energy’s Third Quarter Earnings Review and Business Update on November 8, 2019, reference Core Electric and Gas Earnings per Share for the year-to-date periods ended September 30, 2019 and 2018, and December 31, 2018 and 2017. The Core
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Slide 46: Reported to Adjusted Earnings Reconciliation, Three Months Ended September
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Slide 47: Reported to Adjusted Earnings Reconciliation, Nine Months Ended September
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Slide 48: Reported to Adjusted Earnings Reconciliation, Year Ended December 31, 2018
DUKE ENERGY CORPORATION REPORTED TO ADJUSTED EARNINGS RECONCILIATION Year Ended December 31, 2018 (Dollars in millions, except per-share amounts) Special Items Costs to Regulatory Achieve and Sale of Impacts Reported Piedmont Legislative Retired Impairment of the Discontinued Total Adjusted Earnings
Slide 49: Reported to Adjusted Earnings Reconciliation, Twelve Months Ended December 31, 2017
DUKE ENERGY CORPORATION REPORTED TO ADJUSTED EARNINGS RECONCILIATION Twelve Months Ended December 31, 2017 (Dollars in millions, except per-share amounts) Special Items Costs to Achieve Commercial Reported Piedmont Regulatory Renewables Impacts of Discontinued Total Adjusted Earnings Merger Settleme
Slide 50: Effective Tax Reconciliation
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Slide 51: Available Liquidity Reconciliation as of September 30, 2019
Duke Energy Corporation Available Liquidity Reconciliation As of September 30, 2019 (In millions) Cash and Cash Equivalents $ 379 Less: Certain Amounts Held in Foreign Jurisdictions (22) Less: Unavailable Domestic Cash (91) 266 Plus: Remaining Availability under Master Credit Facilities and other fa
Slide 52: Operations, Maintenance and Other Expense
Duke Energy Corporation Operations, Maintenance and Other Expense (In millions) Actual Actual Actual Actual Forecast December 31, 2015 December 31, 2016 December 31, 2017 December 31, 2018 December 31, 2019 Operation, maintenance and other(a) $5,539 $6,223 $5,944 $6,463 $6,035 Impact of the Adoption