Duke Energy Corporation (holding Company) · NYSE:DUK
Duke Energy Corporation (holding Company) — Q2 2018 Earnings Presentation
44 slides from Duke Energy Corporation (holding Company)'s earnings presentation, Aug 2, 2018
Slide 1: Second Quarter Earnings Review and Business Update
SECOND QUARTER EARNINGS REVIEW AND BUSINESS UPDATE AUG. 2, 2018 PRESENTED BY: LYNN GOOD | CHAIRMAN, PRESIDENT AND CEO STEVE YOUNG | EXECUTIVE VP AND CFO
Slide 2: Safe Harbor statement
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 i
Slide 3: Topics for today's call
Topics for today’s call BUSINESS UPDATE Lynn Good, Chairman, President & CEO • Execution on 2018 commitments • Update on North Carolina regulatory activity • Progress on strategic investments 4 -6% HIGHLY FINANCIAL UPDATE ACHIEVABLE EPS GROWTH Steve Young, Executive VP & CFO THROUGH 2022(4) • Second
Slide 4: Executing on our 2018 commitments
Executing on our 2018 commitments… CAROLINAS TAX BALANCE SHEET RATE CASES REFORM STRENGTH Constructive outcomes in DEP-NC Constructive outcomes in Florida, Moody’s affirms ratings and stable and DEC-NC rate cases Carolinas and Kentucky outlook at HoldCo Settlement pending in Indiana FFO/De
Slide 5: North Carolina rate cases provide clarity to inform strategy execution
North Carolina rate cases provide clarity to inform strategy execution MAJOR COMPONENTS OF DEC ORDER • Approved 9.9% ROE on 52% equity component of the capital structure • Deferred coal ash costs amortized over 5 years, with full debt and equity return • Ongoing coal ash costs to be deferred with a
Slide 6: Advancing efforts to generate cleaner energy
Advancing efforts to generate cleaner energy ELECTRIC UTILITIES & INFRASTRUCTURE • Citrus County CCGT on track for 2018 CODs (DEF) • Western Carolinas Modernization Project on track for 2019 COD (DEP) • Launched HB 589 RFP in N.C. July 10 (DEC & DEP) • First tranche is 680 MW • Bids due Sept. 11 • P
Slide 7: Making progress on natural gas infrastructure investments
Making progress on natural gas infrastructure investments GAS UTILITIES & INFRASTRUCTURE • Atlantic Coast Pipeline (ACP) • Received FERC approval for construction on mainline in W.Va. and N.C. – construction underway • Construction on compressor and metering & regulating stations in W.Va. and N.C. u
Slide 8: 2Q 2018 adjusted diluted EPS summary and primary drivers
2Q 2018 adjusted diluted EPS summary and primary drivers SEGMENT RESULTS VS. PRIOR YEAR QUARTER (1) ADJUSTED DILUTED Electric Utilities & Infrastructure, -$18 M (-$0.03 per share) EARNINGS PER SHARE ▼ Higher depreciation and amortization, primarily due to a growing asset base ▼ Higher O&M, primarily
Slide 9: Customer growth and weather-normal electric volume trends
Customer growth and weather-normal electric volume trends Rolling 12-Month Retail Electric Volume Growth RESIDENTIAL • Increase in average number of customers drives volume 1.5% growth for electric and gas utilities 0.3% 0.0% • Positive electric usage per customer in several jurisdictions Residentia
Slide 10: Continued clarity for tax reform across our state jurisdictions
Continued clarity for tax reform across our state jurisdictions ELECTRIC & GAS UTILITIES MIDWEST SERVICE TERRITORIES Indiana Riders incorporate lower tax rate as they are filed (Electric) Settlement filed June 27; awaiting Commission approval Ohio Riders incorporate lower tax rate as they are
Slide 11: Committed to the strength of the balance sheet
Committed to the strength of the balance sheet CREDIT UPDATES SUCCESSFULLY PRICED NEARLY ALL OF $2 BILLION EQUITY TARGET FOR 2018 • Increased clarity from DEC and DEP orders and regulatory treatment of tax reform drive Equity Priced Equity Issued improved credit metric forecast issuance YTD Forward?
Slide 12: Our investor value proposition
Our investor value proposition A SOLID LONG-TERM HOLDING 4.5% ~8-10% 4 -6% DIVIDEND YIELD(1) zzz ATTRACTIVE HIGHLY WITH DIVIDEND RISK-ADJUSTED ACHIEVABLE GROWTH TOTAL SHAREHOLDER EPS GROWTH COMMITMENT(2) RETURN(3) THROUGH 2022(4) CONSTRUCTIVE JURISDICTIONS, LOW-RISK REGULATED INVESTMENTS AND BALANCE
Slide 13: Appendix materials
Appendix materials Item Slide(s) Update on key 2018 assumptions 14 – 16 2Q 2018 supplemental data 17 – 21 Financial supplement 22 – 25 Regulatory overview 26 – 28 Tax reform summary 29 – 30 Other information 31 - 35 SECOND QUARTER 2018 EARNINGS REVIEW AND BUSINESS UPDATE 13
Slide 14: Update on key 2018 assumptions
Update on key 2018 assumptions SECOND QUARTER 2018 EARNINGS REVIEW AND BUSINESS UPDATE 14
Slide 15: Key 2018 adjusted earnings guidance assumptions
Key 2018 adjusted earnings guidance assumptions ($ in millions) Original 2018 2018 YTD Assumptions (1) (thru 6/30/2018) Adjusted segment income/(loss) (2): Electric Utilities & Infrastructure $3,304 $1,527 Gas Utilities & Infrastructure $319 $186 Commercial Renewables $117 $58 Other ($383) ($216) Du
Slide 16: Key 2018 earnings sensitivities
Key 2018 earnings sensitivities Driver EPS Impact 1% change in earned return on equity +/- $0.45 Electric Utilities & $1 billion change in rate base +/- $0.07 Infrastructure 1% change in Electric Utilities volumes +/- $0.12 1% change in earned return on equity +/- $0.05 Gas Utilities & $200 million
Slide 17: 2Q 2018 supplemental data
2Q 2018 supplemental data SECOND QUARTER 2018 EARNINGS REVIEW AND BUSINESS UPDATE 17
Slide 18: 2Q 2017 - 2Q 2018 adjusted diluted EPS waterfall
2Q 2017 - 2Q 2018 adjusted diluted EPS waterfall Electric Utilities & Gas Utilities Commercial 2Q Weather Impact Other Infrastructure & Infrastructure Renewables $0.07 ($0.10) $0.02 $0.00 $1.01 ($0.07) $0.98 ▼ Higher D&A, primarily $0.98 $0.98 ▲ Favorable due to a growing asset $0.93 $0.93 settlemen
Slide 19: YTD 2017 - YTD 2018 adjusted diluted EPS waterfall
YTD 2017 - YTD 2018 adjusted diluted EPS waterfall YTD 2018 Electric Utilities & Gas Utilities Commercial Other Weather Impact Infrastructure & Infrastructure Renewables $0.04 $0.01 $0.00 $2.32 ($0.11) $2.28revenues ▲ Higher retail $2.28 ▲ Favorable $0.23 from pricing and riders ▲ Customer growth se
Slide 20: Electric utilities quarterly weather impacts
Electric utilities quarterly weather impacts Weather segment 2018 2017 income to normal: Pretax impact Weighted avg. EPS impact(1) Pretax impact Weighted avg. EPS impact(1) diluted shares favorable / shares favorable / (unfavorable) (unfavorable) First Quarter $10 701 $0.01 ($175) 700 ($0.15) Second
Slide 21: Weather normalized volume trends, by electric jurisdiction
Weather normalized volume trends, by electric jurisdiction Rolling Twelve Months, as of Jun. 30, 2018 Duke Energy Duke Energy Duke Energy Duke Energy Duke Energy Electric Carolinas Progress Florida Indiana Ohio/Kentucky Utilities 2.8% 1.3% 1.5% 0.9% 1.1% 0.6% 0.8% 0.8% 0.8% 0.1% 0.3% 0.0% -0.3% -0.3
Slide 22: Financial supplement
Financial supplement SECOND QUARTER 2018 EARNINGS REVIEW AND BUSINESS UPDATE 22
Slide 23: 2018 financing plan as of June 30, 2018
2018 financing plan as of June 30, 2018 (1)(2) ($ in millions) $2,500 $2,000 $1,500 $1,000 $500 $- Duke Duke Duke Duke Duke Piedmont Commercial Energy Energy Energy Energy Energy Natural Gas Renewables Corporation Carolinas Progress Florida Kentucky 2018 Maturities and Debt Reduction / Expected/Comp
Slide 24: 2018 long-term debt financing activity as of June 30, 2018
2018 long-term debt financing activity as of June 30, 2018 Credit Ratings Amount Entity Date Issued (M/S&P/F, unless Term Type Rate ($ in millions) otherwise noted) $500 DE Carolinas March 2018 Aa2/A 5-Year First Mortgage Bond Fixed – 3.05% $500 DE Carolinas March 2018 Aa2/A 30-Year First Mortgage B
Slide 25: Liquidity summary as of June 30, 2018
Liquidity summary as of June 30, 2018 ($ in millions) Duke Duke Duke Duke Duke Duke Duke Piedmont Energy Energy Energy Energy Energy Energy Energy Natural Corp. 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: Regulatory overview
Regulatory overview SECOND QUARTER 2018 EARNINGS REVIEW AND BUSINESS UPDATE 26
Slide 27: Update on regulatory activity
Update on regulatory activity STATUS UPDATE KEY OUTCOMES Resolved coal ash recovery Deferred coal ash costs amortized over 5 years, DUKE ENERGY with full debt and equity return PROGRESS Complete NORTH CAROLINA Ongoing coal ash costs deferred with a full return(1) for consideration in future
Slide 28: Current electric rate information by jurisdiction
Current electric rate information by jurisdiction North South Ohio Kentucky Florida Indiana Carolina Carolina (Electric) (Electric) $13.5 B (1) (DEC) $4.2 B (1) (DEC) Retail Rate Base $11.5B (2) $7.0 B (3) $1.3 B (4) $650 M (5) $8.2 B (1) (DEP) $1.3 B (1) (DEP) $1.7 B (DEC) 1Q 2018 $0.5 B Wholesale
Slide 29: Tax reform summary
Tax reform summary SECOND QUARTER 2018 EARNINGS REVIEW AND BUSINESS UPDATE 29
Slide 30: Tax reform: regulatory activity and timeline
Tax reform: regulatory activity and timeline Riders in all jurisdictions include the lower federal income tax rate as they are updated/filed Proposed/Approved Treatment of: Amortization period for Status Docket Lower tax rate EDIT Unprotected EDIT Utilizing tax reform to offset Hurricane Irma costs,
Slide 31: Other information
Other information SECOND QUARTER 2018 EARNINGS REVIEW AND BUSINESS UPDATE 31
Slide 32: Upcoming events
Upcoming events Event Date 3Q 2018 earnings call (tentative) November 2, 2018 EEI Financial Conference November 11-13, 2018 SECOND QUARTER 2018 EARNINGS REVIEW AND BUSINESS UPDATE 32
Slide 33: 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 ABBY MOTSINGER, MANAGER INVESTOR RELATIONS Abby.Motsinger@duke-energ
Slide 34: Safe Harbor statement
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 o
Slide 35: For additional information on Duke Energy
For additional information on Duke Energy, please visit: www.duke-energy.com/investors SECOND QUARTER 2018 EARNINGS REVIEW AND BUSINESS UPDATE 35
Slide 36: Non-GAAP Reconciliations: Adjusted Diluted EPS
Duke Energy Corporation Non-GAAP Reconciliations Second Quarter Earnings Review & Business Update August 2, 2018 Adjusted Diluted Earnings per Share (EPS) The materials for Duke Energy Corporation’s (Duke Energy) Second Quarter Earnings Review and Business Update on August 2, 2018, include a discuss
Slide 37: Adjusted Segment Income and Adjusted Other Net Loss
Adjusted Segment Income and Adjusted Other Net Loss The materials for Duke Energy’s Second Quarter Earnings Review and Business Update on August 2, 2018, include a discussion of adjusted segment income and adjusted other net loss for the quarters and year-to-date periods ended June 30, 2018 and 2017
Slide 38: Available Liquidity
Available Liquidity The materials for Duke Energy’s Second Quarter Earnings Review and Business Update on August 2, 2018 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 39: Reported to adjusted earnings reconciliation, three months ended June 30, 2018
DUKE ENERGY CORPORATION REPORTED TO ADJUSTED EARNINGS RECONCILIATION Three Months Ended June 30, 2018 (Dollars in millions, except per-share amounts) Special Items Regulatory and Reported Costs to Achieve Legislative Discontinued Total Adjusted Earnings Piedmont Merger Impacts Operations Adjustments
Slide 40: Reported to adjusted earnings reconciliation, six months ended June 30, 2018
DUKE ENERGY CORPORATION REPORTED TO ADJUSTED EARNINGS RECONCILIATION Six Months Ended June 30, 2018 (Dollars in millions, except per-share amounts) Special Items Costs to Regulatory Impairment Achieve and Sale of of Equity Impacts Reported Piedmont Legislative Retired Method of the Discontinued Tota
Slide 41: Reported to adjusted earnings reconciliation, three months ended June 30, 2017
DUKE ENERGY CORPORATION REPORTED TO ADJUSTED EARNINGS RECONCILIATION Three Months Ended June 30, 2017 (Dollars in millions, except per-share amounts) Special Items Reported Costs to Achieve Discontinued Total Adjusted Earnings Piedmont Merger Operations Adjustments Earnings SEGMENT INCOME Electric U
Slide 42: Reported to adjusted earnings reconciliation, six months ended June 30, 2017
DUKE ENERGY CORPORATION REPORTED TO ADJUSTED EARNINGS RECONCILIATION Six Months Ended June 30, 2017 (Dollars in millions, except per-share amounts) Special Item Reported Costs to Achieve Discontinued Total Adjusted Earnings Piedmont Merger Operations Adjustments Earnings SEGMENT INCOME Electric Util
Slide 43: Adjusted effective tax reconciliation, June 2018
DUKE ENERGY CORPORATION ADJUSTED EFFECTIVE TAX RECONCILIATION June 2018 (Dollars in millions) Three Months Ended Six Months Ended June 30, 2018 June 30, 2018 Balance Effective Tax Rate Balance Effective Tax Rate Reported Income From Continuing Operations Before Income Taxes $ 607 $ 1,410 Costs to Ac
Slide 44: Available Liquidity Reconciliation as of June 30, 2018
Duke Energy Corporation Available Liquidity Reconciliation As of June 30, 2018 (In millions) Cash and Cash Equivalents $ 304 Less: Certain Amounts Held in Foreign Jurisdictions (6) Less: Unavailable Domestic Cash (76) 222 Plus: Remaining Availability under Master Credit Facilities and other faciliti