Duke Energy Corporation (holding Company) · NYSE:DUK
Duke Energy Corporation (holding Company) — Q2 2016 Earnings Presentation
45 slides from Duke Energy Corporation (holding Company)'s earnings presentation, Aug 4, 2016
Slide 1: Second Quarter 2016 Earnings Review // Business Update
Presented by Lynn Good, Chairman, President and CEO Steve Young, Executive VP and CFO August 4, 2016 SECOND 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 Second Quarter 2016 Financial Highlights Portfolio Transition and Strategic Priorities Coal Ash Progress Second Quarter 2016 Operational Accomplishments FINANCIAL UPDATE Steve Young, Executive VP & CFO Second Quar
Slide 4: Second Quarter 2016 Financial Highlights
SECOND QUARTER 2016 FINANCIAL HIGHLIGHTS Achieved 2Q 2016 adjusted diluted EPS of $1.07, compared to $0.95 in 2Q 2015 Regulated Utilities strength from favorable pricing and rider recoveries and lower O&M expense 2Q 2016 reported diluted EPS (GAAP) of $0.74, compared to $0.78 in 2Q 2015 Incr
Slide 5: Continuing Transition Towards a Domestic Infrastructure Business
CONTINUING TRANSITION TOWARDS A DOMESTIC INFRASTRUCTURE BUSINESS Duke Energy 2011(1) Duke Energy & & Progress Exit of merchant Announced plans Post Transition(1) Progress Energy Energy Merge to acquire Merge 2014 Midwest Generation Business 2Q 2015 text Piedmont Natural Gas 1Q 2016 25% ~100% 75% Duk
Slide 6: Executing on Our Strategic Priorities
EXECUTING ON OUR STRATEGIC PRIORITIES $1.4 B Indiana T&D infrastructure investment program approved Modernize the Energy Grid Generate Cleaner Energy 17 MW Crane Naval Station solar project and recovery rider approved Planning for start of construction of $1.1 B Over $1 B investment in Ohio T&D West
Slide 7: Continuing Our Efforts on Coal Ash
CONTINUING OUR EFFORTS ON COAL ASH North Carolina House Bill 630 Summary North Carolina Ash Basin Classifications In July 2016, North Carolina passed the Drinking Water Protection and Coal Ash Cleanup Act Requires access to permanent alternative drinking water supply to residents within one-half
Slide 8: Recent Operational Highlights
RECENT OPERATIONAL HIGHLIGHTS Achieved 96% nuclear capacity factor year-to-date Received EEI Emergency Recovery Award for response to Winter Storm Jonas Quickly restored 550,000 recent storm-related outages in our six-state service territory Exceeded the $687 million fuel and joint dispatch
Slide 9: 2Q 2016 Adjusted Diluted EPS Summary and Primary Drivers
2Q 2016 ADJUSTED DILUTED EPS SUMMARY AND PRIMARY DRIVERS Adjusted Diluted Earnings per Share Segment results vs. prior year quarter (1)(2) CORE BUSINESSES $2.20 $2.20 Regulated Utilities, +$86 M (+$0.13 per share) ▲ Higher pricing and riders ▲ Lower O&M expense as a result of reduced outage costs an
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%) partially offset by lower usage per customer 0.8% Single family housing starts have reached the level of 0.4% multi-family starts for the fi
Slide 11: Rate Activity Underway Across Multiple Jurisdictions
RATE ACTIVITY UNDERWAY ACROSS MULTIPLE JURISDICTIONS Duke Energy Progress – South Carolina Duke Energy Indiana – TDSIC Settlement Retail revenue increase ~$79 M (14.5%) Indiana Utility Regulatory Commission approved requested settlement without changes on June 29 Return on equity requested 10.75%
Slide 12: Key Investor Considerations
KEY INVESTOR CONSIDERATIONS Large-scale utility in the Portfolio of low-risk, U.S. with valuable high-quality geographic diversity & core businesses competitive rates Highly defined & achievable Attractive dividend yield long-term growth with growth commitment Long-term 4 – 6%(1) Core Business Annua
Slide 13: Appendix Materials
APPENDIX MATERIALS Item Slides Update on Key 2016 Assumptions 14-16 2Q 2016 Supplemental Data 17-24 Update on Brazil Operations 25-27 Financial Supplement 28-31 Other Information 32-35 13 | Second Quarter 2016 Earnings Review and Business Update
Slide 14: Update on Key 2016 Assumptions
Update on Key 2016 Assumptions 14 | Second Quarter 2016 Earnings Review and Business Update
Slide 15: Key 2016 Adjusted Earnings Guidance Assumptions
KEY 2016 ADJUSTED EARNINGS GUIDANCE ASSUMPTIONS ($ in millions) Original 2016 2016 YTD assumptions (1) (thru 6/30/2016) Adjusted segment income / (expense) (2): Regulated Utilities $3,090 $1,413 International Energy $210 $166 Commercial Portfolio $140 $41 Other ($265) ($104) Duke Energy Consolidated
Slide 16: 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 17: 2Q 2016 Supplemental Data
2Q 2016 Supplemental Data 17 | Second Quarter 2016 Earnings Review and Business Update
Slide 18: 2Q 2015 – 2Q 2016 Adjusted Diluted EPS Waterfall
2Q 2015 – 2Q 2016 ADJUSTED DILUTED EPS WATERFALL Less favorable Regulated Commercial 2016 Other International Utilities Portfolio Weather $0.17 Flat $1.09 $0.01 $1.08 $1.07 ($0.02) $1.07 ▲ Change in ▲ Increased effective tax ▲ Improved investments rate hydrology in in ACP and +$0.02 Brazil offset Sa
Slide 19: YTD 2015 – YTD 2016 Adjusted Diluted EPS Waterfall
YTD 2015 – YTD 2016 ADJUSTED DILUTED EPS WATERFALL Less favorable Accelerated Regulated Commercial 2016 Other International Stock Utilities Portfolio Weather Repurchase $0.03 $2.20 ($0.14) $0.15 ($0.10) $2.20 $0.11 $2.17 ▼ Q1$2.11 2015 ($0.05) earnings from $2.06 $2.06 ▲ Higher pricing $2.06 ▼ Highe
Slide 20: Regulated Utilities Quarterly Weather Impacts
REGULATED UTILITIES QUARTERLY WEATHER IMPACTS Weather segment 2016 2015 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 $0.10
Slide 21: Weather Normalized Volume Trends, by Jurisdiction
WEATHER NORMALIZED VOLUME TRENDS, BY JURISDICTION Rolling Twelve Months, as of 6/30/2016 Duke Energy Duke Energy Duke Energy Duke Energy Duke Energy Regulated Carolinas Progress Florida Indiana Ohio/Kentucky Utilities 2.7% 1.9% 1.6% 1.1% 0.9% 0.8% 0.7% 0.4% 0.3% 0.2% 0.0% -0.2% -0.3% -0.3% -0.3% -0.
Slide 22: North Carolina Coal Ash Supplement
NORTH CAROLINA COAL ASH SUPPLEMENT Site Ranking Compliance Tons of Ash(1) Date In Millions HB 630: Key Elements Riverbend(2) High 2019 3.6 Requirement to provide access to permanent, alternative water Dan River(2) High 2019 1.6 supplies to plant neighbors within a half-mile of N.C. coal plants Sut
Slide 23: Key Settlements Reached in Proposed Piedmont Acquisition
KEY SETTLEMENTS REACHED IN PROPOSED PIEDMONT ACQUISITION Public Staff of the North Carolina Utilities Commission Piedmont customer bills to collectively decrease by $10 million in 2016 Duke Energy Carolinas, Duke Energy Progress and Piedmont to maintain charitable contributions totaling $17.5 mi
Slide 24: Achieved Guaranteed Fuel and Joint Dispatch Savings
ACHIEVED GUARANTEED FUEL AND JOINT DISPATCH SAVINGS Fuel and Joint Dispatch (JDA) Savings Quarterly Savings Results ($ in millions) • Guaranteed $687 million in fuel and $50 $800 joint dispatch savings to Carolinas $700 customers through mid-2017(1) $40 $600 $500 • Achieved cumulative savings of ~$6
Slide 25: Update on Brazil Operations
Update on Brazil Operations 25 | Second Quarter 2016 Earnings Review and Business Update
Slide 26: Brazil's Reservoir Levels – SE Region
BRAZIL’S RESERVOIR LEVELS – SE REGION 70 62.5 62.9 63.8 60.8 58.3 Reservoir Level (% Maximum Volume) 60 55.1 50.9 57.6 56.7 54.1 56.0 48.7 50 45.1 44.4 51.3 43.2 41.6 40 45.5 37.4 29.8 34.1 37.5 36.1 32.3 29.8 36.0 27.6 27.5 30 33.5 28.9 28.5 20 19.4 20.6 16.8 10 0 Dec Jan Feb Mar Apr May Jun Jul Au
Slide 27: Brazil Spot (PLD) Prices
BRAZIL SPOT (PLD) PRICES 450 400 388.5 388.5 388.5 388.5 387.2 372.2 350 300 Avg. Spot Price (R$/MWh) 250 240.1 202.9 200 227.0 212.3 150 145.1 100 116.1 50 75.9 83.4 49.4 61.3 35.7 30.4 37.7 0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2015 PLD CAP 2015 2016 Increased water inflows and lower d
Slide 28: Financial Supplement
Financial Supplement 28 | Second Quarter 2016 Earnings Review and Business Update
Slide 29: 2016 Financing Plan (as of June 30, 2016)
2016 FINANCING PLAN (AS OF JUNE 30, 2016) (1) ($ in millions) $2,000 $1,800 $1,600 $1,400 Represents CR3 $1,200 securitization of ~$1.3 B $1,000 $800 $600 $400 $200 $- Holding Duke Duke Duke Duke Duke Duke Renewables International Company Energy Energy Energy Energy Energy Energy Carolinas Progress
Slide 30: Access to Capital – 2016 Long-Term Debt Financing Activity
ACCESS TO CAPITAL – 2016 LONG-TERM DEBT FINANCING ACTIVITY (AS OF JUNE 30, 2016) Amount Credit Ratings ($ in Entity Date Issued Term Type Rate (F/M/S&P) millions) $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% $50
Slide 31: Liquidity Summary (as of June 30, 2016)
LIQUIDITY SUMMARY (AS OF JUNE 30, 2016) ($ 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) $ 3,475 $ 800 $ 1,000 $ 1,200 $ 600 $ 300 $ 125 $ 7,500 Less: Notes payable an
Slide 32: Other Information
Other Information 32 | Second Quarter 2016 Earnings Review and Business Update
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 Chris Bauer, Manager Investor Relations − Chris.Bauer@duke-energy.com
Slide 34: Upcoming Events
UPCOMING EVENTS Event Date 3Q 2016 earnings call (tentative) November 3, 2016 EEI Financial Conference (Phoenix, AZ) November 6-8, 2016 34 | Second Quarter 2016 Earnings Review and Business Update
Slide 35: For additional information visit duke-energy.com/investors
For additional information on Duke Energy, please visit: www.duke-energy.com/investors 35 | Second Quarter 2016 Earnings Review and Business Update
Slide 36: Non-GAAP Reconciliations
Duke Energy Corporation Non-GAAP Reconciliations Second Quarter Earnings Review & Business Update August 4, 2016 Adjusted Diluted Earnings per Share (EPS) The materials for Duke Energy Corporation’s (Duke Energy) Second Quarter Earnings Review and Business Update on August 4, 2016, include a discuss
Slide 37: Adjusted Segment Income and Adjusted Other Net Expense
segment earnings within adjusted diluted EPS and adjusted segment income. Management does not expect to complete a sale transaction during 2016. Adjusted Segment Income and Adjusted Other Net Expense, and Forecasted Adjusted Segment Income and Forecasted Adjusted Other Net Expense The materials for
Slide 38: Business Mix Percentages
Business Mix Percentages The materials for Duke Energy’s Second Quarter Earnings Review and Business Update on August 4, 2016, reference the historical approximate 75% regulated adjusted net income as a percentage of total adjusted net income (i.e. business mix) prior to the Progress Energy merger b
Slide 39: Reported to Adjusted Earnings Reconciliation – Three Months Ended June 30, 2016
DUKE ENERGY CORPORTATION REPORTED TO ADJUSTED EARNINGS RECONCILIATION Three Months Ended June 30, 2016 (Dollars in millions, except per-share amounts) Special Items Costs to Reported Achieve, International Cost Savings Discontinued Total Adjusted Earnings Mergers Impairment Initiatives Operations Ad
Slide 40: Reported to Adjusted Earnings Reconciliation – Six Months Ended June 30, 2016
DUKE ENERGY CORPORATION REPORTED TO ADJUSTED EARNINGS RECONCILIATION Six Months Ended June 30, 2016 (Dollars in millions, except per-share amounts) Special Items Costs to Reported Achieve, International Cost Savings Discontinued Total Adjusted Earnings Mergers Impairment Initiatives Operations Adjus
Slide 41: Reported to Adjusted Earnings Reconciliation – Three Months Ended June 30, 2015
DUKE ENERGY CORPORATION REPORTED TO ADJUSTED EARNINGS RECONCILIATION Three Months Ended June 30, 2015 (Dollars in millions, except per-share amounts) Special Items Costs to Achieve, Reported Progress Discontinued Total Adjusted Earnings Merger Operations Adjustments Earnings SEGMENT INCOME Regulated
Slide 42: Reported to Adjusted Earnings Reconciliation – Six Months Ended June 30, 2015
DUKE ENERGY CORPORATION REPORTED TO ADJUSTED EARNINGS RECONCILIATION Six Months Ended June 30, 2015 (Dollars in millions, except per-share amounts) Special Items Costs to Achieve, Midwest Reported Progress Generation Discontinued Total Adjusted Earnings Merger Operations Operations Adjustments Earni
Slide 43: Adjusted to Reported Earnings Reconciliation – Twelve Months Ended December 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 44: Adjusted Effective Tax Reconciliation
DUKE ENERGY CORPORATION ADJUSTED EFFECTIVE TAX RECONCILIATION Three and Six Months Ended June 30, 2016 (Dollars in Millions) Three Months Ended Six Months Ended June 30, 2016 June 30, 2016 Balance Effective Tax Rate Balance Effective Tax Rate Reported Income From Continuing Operations Before Income
Slide 45: Available Liquidity Reconciliation
Duke Energy Corporation Available Liquidity Reconciliation As of June 30, 2016 (In millions) Cash and Cash Equivalents $ 676 Less: Certain Amounts Held in Foreign Jurisdictions (437) Less: Unavailable Domestic Cash (46) 193 Plus: Remaining Availability under Master Credit Facility 5,134 Total Availa