Good morning. Thank you for attending Duke Energy's Third Quarter Earnings Review and Business Update. My name is Matt, and I'll be your moderator for today's call. All lines are muted during the presentation portion of the call, and there will be an opportunity for questions and answers at the end. I would now like to turn the call over to our host, Abby Motsinger, Vice President of Investor Relations. Abby, please go ahead.

Thank you, Matt, and good morning, everyone. Welcome to Duke Energy's third quarter 2023 earnings review and business update. Leading our call today is Lynn Good, Chair, President and CEO; along with Brian Savoy, Executive Vice President and CFO. Today's discussion will include the use of non-GAAP financial measures and forward-looking information. Actual results may differ from forward-looking statements due to factors disclosed in today's materials and in Duke Energy's SEC filings. The appendix of today's presentation includes supplemental information, along with the reconciliation of non-GAAP financial measures. With that, let me turn the call over to Lynn.

Abby, thank you, and good morning, everyone. Today, we announced strong results for the third quarter, adjusted earnings per share of $1.94 compared to $1.78 for last year. During the quarter, we also made great progress on regulatory outcomes and simplification of the business. This momentum is underpinned by our strong fundamentals. We have a track record of operational excellence and serve growing jurisdictions with a long runway of investment opportunities. This positions us well for the future and gives us confidence in reaffirming our long-term earnings growth rate of 5% to 7%. For 2023, we continue to work on our cost structure to offset mild weather and weaker industrial volumes. Brian will talk more about load and cost agility efforts, but I want to take a moment to recognize the incredible work across the organization to mitigate pressures in 2023. Across the company, agility measures, savings opportunities, and efficiency improvements are well underway, while never compromising on our commitment to safety and customers. We expect to finish the year within our guidance range trending to the lower half of the range. Moving to Slide 5. Let me spend a moment on the meaningful progress we've made in North Carolina. In August, the North Carolina Utilities Commission approved our Duke Energy Progress rate case application and related settlements. This order is the culmination of years of work with stakeholders and represents a significant milestone, marking the first implementation of performance-based regulation, including multiyear rate plans authorized by HB951. The order approved a retail rate base of $12.2 billion, a $1.6 billion increase from our last case, along with roughly $3.5 billion in future capital investments in the multiyear rate plan. Importantly, the order also recognized the rising cost of capital, increasing the allowed ROE to 9.8% and the equity component of the capital structure to 53%. This outcome positions us well to continue delivering value to customers while supporting the cash flows of the company. New rates and residential decoupling were implemented on October 1. Turning to the Duke Energy Carolinas rate case, in late August, we reached a partial settlement with the public staff on many aspects of the case. The settlement provides clarity on a retail rate base of approximately $19.5 billion, a $2.6 billion increase from our last case and includes nearly $4.6 billion of capital investments in the multiyear rate plan. A second settlement with the public staff further narrowed the open items in the case and also addressed nuclear PTCs, which Brian will provide more detail on in a moment. We expect the NCUC to issue its decision by the end of the year and expect permanent rates to be in effect by January 2024. We're pleased with the constructive outcome at DEP and look forward to finalizing the DEC rate case in the coming weeks. North Carolina is our largest jurisdiction, so constructive outcomes are critical to supporting a strong balance sheet and de-risking our five-year plan. Turning to Slide 6, I'd like to highlight our updated Carolinas resource plan, which is driving material growth and capital investment opportunities as we lead the nation's largest energy transition. In mid-August, we filed our updated resource plan with the Public Service Commission of South Carolina and the North Carolina Utilities Commission. The single unified resource plan for the Carolinas is designed to meet the needs of this growing region, spurred by rapid population growth and significant economic development activity. The plan maintains an all-of-the-above strategy with a diverse deployment of additional resources, including renewables, battery storage, and natural gas, as well as energy efficiency and demand-side management. It also provides the opportunity to evaluate emerging technologies, pursue an early site permit for advanced nuclear, and early development activities for expanded pumped storage hydro at Bad Creek. The filing included details about our annual solar procurement, which targets over a gigawatt of new solar each year beginning in 2027. It also outlines plans to build additional natural gas generation to maintain reliability and affordability as coal plants are retired. Since the resource plan filing, we filed pre-CPCNs with NCUC for a combined cycle plant on September 1 and combustion turbines on November 1. We will make our full CPCN filings in the first quarter of 2024. Similar to previous filings, the Carolinas resource plan is based on significant stakeholder engagement and outlines multiple portfolios, each of which preserve affordability and reliability while transitioning to cleaner energy resources. Next steps will include hearings in both states in the spring of 2024. We expect an order in South Carolina in mid-2024 and an order in North Carolina by the end of 2024. Turning to Slide 7. With the closing of the commercial renewables sale last month, our portfolio repositioning is complete. We are now a fully regulated company operating in some of the fastest-growing and most attractive jurisdictions across the U.S. I just mentioned some of our progress in North Carolina, and our other utilities continue to deliver as well. At Piedmont, we recently received South Carolina Commission approval of our settlement in our RSA proceeding. We also received approval of our settlement in our ARM proceeding in Tennessee. These annual rate updates allow for efficient recovery of investments as we continue to modernize our natural gas system. And at DEC South Carolina, we've made significant investments since our last rate case in 2019 and are evaluating the timing of our next rate case application. These investments have strengthened the grid against storms, reduced outage times, and maintained a high level of reliable service our customers expect. In Florida, we're seeing some of the fastest customer growth in the state and have efficient recovery mechanisms for our grid and solar investments. Our response to Hurricane Idalia in September demonstrated the value of our grid-hardening investments. The storm caused over 200,000 outages, and we restored power to 95% of customers within 36 hours. Further, our investment in self-healing grid technologies saved more than 7 million outage minutes for customers. Shifting to the Midwest, in October, the Kentucky Public Service Commission approved the new rates in our electric rate case, which utilized a forecasted test year. The commission approved a 9.75% ROE, a 50 basis point increase from the previous case, as well as increasing the equity component of the capital structure to 52%. Across our footprint, we've built considerable momentum over the last year, and our long-term organic growth strategy has never been clearer. This past year has made our company stronger and more agile as we've responded to macroeconomic headwinds. I'm confident we're well-positioned to deliver sustainable value and 5% to 7% earnings growth over the next five years. And with that, let me turn the call to Brian.

Thanks, Lynn, and good morning, everyone. I'll start with a discussion on quarterly results. As shown on Slide 8, our third quarter reported earnings per share were $1.59, and our adjusted earnings per share were $1.94. This compares to reported and adjusted earnings per share of $1.81 and $1.78 last year. Please see the non-GAAP reconciliation in today's materials for additional details. Within the operating segments, Electric Utilities and Infrastructure results were down $0.01 per share compared to last year. We experienced earnings growth from rate cases and riders, favorable weather, and lower O&M from our cost mitigation initiatives, which I will discuss further in a moment. These positive items were offset by lower weather-normalized volumes, higher storm costs, and higher interest expense. Shifting to Gas Utilities and Infrastructure, results were up $0.01 due to riders and customer growth. And within the Other segment, we were up $0.16 over the prior year, primarily due to a lower effective tax rate which reflects the ongoing tax efficiency efforts in the company. We expect our full year 2023 effective tax rate to be at the low end of our 11% to 13% guidance range. As Lynn mentioned, we are tightening our full year 2023 guidance range to $5.55 to $5.65. We entered the year with one of the mildest winters on record, and although weather improved in the third quarter, we remain $0.20 below normal. We also continued to see weakness in volumes estimated at approximately $0.20 year-to-date, some of which may be attributable to weather, but also to a softening of industrial load and return to work for residential customers. To mitigate the impact, we have increased our 2023 agility target to $0.30, which includes tactical O&M savings, a lower effective tax rate, and other levers. As we look to the fourth quarter, we expect a strong finish to the year, targeting $1.50 to $1.60 per share. Our original plan was back-end loaded due to growth from rate cases and riders. We will also see the benefit of our ongoing cost management efforts. We are closely monitoring volume trends and have included fourth quarter drivers in the appendix. Turning to Slide 9. Let me discuss more specifics on volume trends. Volumes are down 1.2% on a rolling 12-month basis. Many of our industrial customers are acknowledging a near-term pullback, managing inventory levels and costs in a disciplined way due to uncertainty in the broader economy. Most are describing the pullback as temporary, and there is optimism about a turnaround in mid- to late 2024 and into 2025. We continue to see strong customer growth from population migration and robust economic development, giving us confidence in growth over the long term. Based on recent success in economic development efforts in key sectors such as battery, EVs, semiconductors, and data centers, we see meaningful load growth over the next several years as outlined on Slide 9. For example, in 2024, we expect economic development projects coming online will add between 1,000 and 2,000 gigawatt hours. As we look further out, we have line of sight to 7,000 to 9,000 gigawatt hours by the end of 2027, giving us confidence in our 0.5 to 1% growth rate. Turning to Slide 10. Let me spend a few minutes on 2024. Consistent with historical practice, we will provide 2024 earnings guidance and our detailed capital and financing plans in our February update. Today, we have provided growth drivers for 2024. We've executed an active regulatory calendar this year that has yielded constructive outcomes as we head into next year. The multiyear rate plan in DEP will be in effect for a full year, and we expect permanent rates under the DEC multiyear rate plan to be effective in January. In Florida, we will see the impact of the third year of our multiyear rate plan and growth from storm protection plan investments. In the Midwest, we'll see the impact of our Kentucky rate case and grid riders in Indiana and Ohio. In the gas segment, we will see robust growth from rate cases, integrity management investments, and customer additions. From a load perspective, we project a pickup in 2024 from a return to normal weather. Additionally, while we continue to closely monitor customer usage trends, we expect higher weather-normalized volumes driven by economic development activity and residential customer growth. Recall, residential decoupling will be in place in 2024 in North Carolina, so both DEC and DEP revenue growth will be based on customer increases, which have been robust. We expect interest rates to be higher for longer, resulting in increased financing costs in 2024. For O&M, we have aggressive efforts underway to sustain all cost savings identified in 2022 for 2023 as well as about half of the agility efforts we identified during the course of 2023 to mitigate weather and volumes. As we continue to pursue a technology-enabled, best-in-class cost structure, we expect our culture of continuous improvement to drive 2024 O&M to be lower than 2023 and significantly below our spending level in 2022. Moving to Slide 11. Let me highlight some of the credit-supportive actions we've taken to maintain balance sheet strength. We continue to collect deferred fuel balances and have filed for recovery of all remaining uncollected 2022 fuel costs with about 90% approved and in rates. We're on pace to recover $1.7 billion of deferred fuel costs in 2023 and expect our deferred fuel balance to be back in line with our historical average by the end of 2024. As Lynn mentioned, we completed the sale of our commercial renewables business in October. With that, about $1.5 billion of commercial renewable debt will come off the balance sheet, further supporting our credit metrics. In August, as part of our ongoing DEC North Carolina rate case, we reached a settlement with the public staff on the treatment of nuclear PTCs related to the Inflation Reduction Act. The settlement provides for the flowback of annual PTCs to customers over a four-year amortization period. If approved by the commission, this settlement would provide savings for customers and be supportive of our credit metrics. We intend to utilize the transferability provisions of the IRA and have engaged an external advisor to run a formal auction-style process, providing access to a broad range of qualified buyers. With these positive developments, we are targeting FFO to debt between 13% and 14% in 2023 and 14% in 2024 through 2027. Finally, as I mentioned, we will provide an update in February on our financing plan, along with a comprehensive refresh and roll forward of our five-year capital plan. We expect our capital plan to increase as we move further into the energy transition. We will take a balanced approach to funding the incremental capital, supporting our growth rate and balance sheet strength. As part of this balanced approach, we will evaluate modest funding through our dividend reinvestment plan and at-the-market program. The growth potential in our business is at a level we haven't seen in decades. For customers, we will achieve the right balance of affordability, reliability, and increasing clean energy. And for investors, we will achieve growth while maintaining balance sheet strength. Moving to Slide 12, we're executing on our priorities and are excited about the path ahead as a fully regulated company. We operate in constructive growing jurisdictions, which combined with our $65 billion five-year capital plan, strong operations, and cost efficiency capabilities give us confidence in our 5% to 7% growth rate through 2027. Our attractive dividend yield, coupled with long-term earnings growth from investments in our regulated utilities, provide a compelling risk-adjusted return for shareholders.

The first question is from Shahriar Pourreza with Guggenheim. Your line is now open.

I know you mentioned in your prepared remarks that you'll be obviously updating the capital plan in February, as you always do. And directionally, you're talking about some upside bias with CapEx, but maybe you can help at least frame the potential magnitude. So, is it kind of supportive of the 5% to 7% or potentially more? And where do you see the increases coming from? So sort of the various buckets in which states as we think about CapEx upside?

Sure. Shar, the capital is really underpinned by the integrated resource plans that we have filed. If you look at the Carolinas alone, the filing that we made in August compared to where we were in 2022, we see load growth and we also see the need to raise the reserve margin as a result of all the growth going on in this region and the winter peaking nature. Across all the types of megawatts from solar to battery, natural gas, etc., you see an increase there, and that will be reflected more fully in our capital plan, of course, working through that process with the commission in 2024. But we see a need for additional megawatts in the Carolinas really driven by population growth, economic development, and reserve margin. We're also moving deeper into generation transition in Indiana. As we filed integrated resource plans and accelerated our thinking around the timing of coal retirements, we see natural gas coming into the picture in Indiana as well as renewables. CPCNs will be filed in the next several months, really setting the cadence for Indiana. You know the regular schedule in Florida, we will be updating the multi-rate plan effective January 1, 2025, and expectations for capital spending there will be updated. The gas business continues to see extraordinary growth for a number of customers, but integrity management continues as capital. We're in an extraordinary period of growth in all our jurisdictions. It's transparent, it's filed with our commissions in the form of integrated resource plans on the electric side and clear on the gas side as well. We're anxious to provide that update to you in February and have a chance to talk further about it at that point.

Got it. And then, obviously, you highlighted that the current base plan assumes no equity through 2027, which is consistent. But you're leaving it open for potential equity to fund spending above the current base plan. As we think about your balance sheet capacity, should we be assuming that every dollar of incremental CapEx is funded with a balanced cap structure, so 50-50 debt equity? Or is that too simplistic and we should also factor in other sources of equity funding above straight equity? So just, I guess, help us bridge 'balanced approach' with balance sheet strength.

Shar, I would think about balanced approach kind of in the 30% to 50% range. When I think about equity, we've talked about shareholder-friendly equity. You've seen us accomplish that with our transaction in Indiana. I don't know how much potential exists for that given the present cost of capital, but we would explore that and evaluate the role of dividend reinvestment and at-the-market programs as well. I'm watching a couple of other things; we haven't finalized the DEC case, so we'll have more visibility on that in December. We're waiting for treasury guidance on these nuclear PTCs and the transferability market, which are consequential from a cash flow standpoint. I feel like we have several levers available to us, and we will exercise them in a way that maintains our growth rate but also underpins the strength of the balance sheet.

Next question is from the line of Julien Dumoulin-Smith with Bank of America. Your line is now open.

Just to follow up on what Shar mentioned regarding the balance sheet, it's clearly been a topic of ongoing discussion, as seen in the initial questions today. How do you plan to strengthen the balance sheet incrementally while also supporting these additional growth opportunities? I want to ensure we have a clear understanding of your approach to this aspect. It’s important to enter into a strong position with the resolutions you’ve mentioned for the fourth quarter, but how do you envision taking the next step where this discussion may be less prominent?

Yes, Julien, thanks for that. As we lay out what we discussed today, you're seeing us strengthen the balance sheet; $1.7 billion of deferred fuel is to be collected in '23 and another $1.7 billion of deferred fuel to be collected in '24. The multiyear rate plans not only give us an opportunity to reset rate base from historic spending but also prepare and put into effect rates for future, which will be credit positive. The transferability that I mentioned on IRA will also be credit positive. As we bring you a financing plan and consider future growth from capital investment, we will be targeting a minimum of 14% moving forward and feel like we have the tools to accomplish that.

The next question is from the line of Steve Fleishman with Wolfe Research. Your line is now open.

You mentioned monitoring the sales trends a couple of times and provided some insight into the return to work. Could you elaborate further on the situation with sales in your territories and any recent weaknesses?

Sure. Steve, I'll give it a start, and then I know Brian will have something to add to it. We've seen some weakness in '23. In early the year, we tried to figure out if we had volume weakness or if it was weather because we had such extraordinarily weak weather in the first and second quarters. But the weakness has continued into the third quarter. I would mention textiles and paper as two industries that have been impacted. Outside of those industries, we're hearing from our customers that supply chain, labor, and interest rates have impacted how they're adjusting. Many have inventory they're working through, so they've dialed back production. That impacts us in terms of lower volumes. However, there's optimism in that same industrial group about a rebound later in '24 and into '25. Residential returns to work, but we think we're probably where that trend is situated. We believe we've worked through that transition. For our largest jurisdiction, we go to a decoupled environment in 2024, and customer growth continues to be strong. It's customer growth that will drive revenue. We foresee positive trends with existing customers and extraordinary economic development, which provides confidence around our longer-term growth rate. For instance, the Toyota battery plant is expanding further in the North Carolina territory. That's what I would share. Brian, what would you add?

I would add, Steve, that North Carolina residential has contributed a significant amount to the weakness this year, over half. Going to decoupling is vital, it's going to mitigate risk and volatility going forward. Our Florida jurisdiction has seen strong growth in the residential space; it's been a hot year in Florida, with strong population migration, the strongest in the state. We see positive developments, and we anticipate industrial load in the Carolinas to improve as we engage with customers through mid to late next year.

That's helpful. I have a separate question. When you're planning and considering your growth rate in relation to interest rates, do you typically rely on the forward curve of rates for financing or refinancing?

We are indeed focused on that area, which is quite dynamic. We consider a variety of outcomes. We did this in 2023, and we plan to do it again in 2024. Our goal is to mitigate the effects of interest rates in 2024 by managing our cost structure.

The next question is from the line of Nick Campanella with Barclays. Your line is now open.

I just wanted to ask, there's been some pretty significant changes in the Carolinas in terms of just rate structure with these NYRP and I know that you're a little lower in the range for fiscal '23, but could you just help frame EPS volatility '23 versus '24? The residential decoupling stands out to us, if you could just frame how that informs your confidence to hit the 5% to 7% implied EPS growth for '24 specifically?

Nick, I would confirm that it does underpin our confidence in 5% to 7% growth. This modernized construct in the Carolinas is significant. It's a first in the history of the utility with multiyear rate plans, allowing us to set prices as we go while delivering value to customers. This closely matches our capital expenditure with returns. Additionally, our confidence in capital underpinning that 5% to 7% growth is robust, outlined in integrated resource plans that detail what will be necessary to serve this growing state. The Carolinas are very well positioned for the future, and as Brian mentioned earlier, you're seeing extraordinary growth in Florida. We continue to have strong capital in Florida, and our investments in the Midwest are progressing in generation and grid management, particularly in Ohio. We have all the elements in place to assure confidence in future growth. The jurisdictions are constructive and maintain the right equilibrium between customer and investor benefits, and we're optimistic about the future.

Okay. Great. And what about just on O&M? I know in slides where you kind of talked about 50% sustainable after '23. Looking back at prior calls, I think we've discussed 75%. This may be different buckets, and I may be mischaracterizing it, but could you help reconcile that view? And how do you think about 2024?

Yes. Nick, I appreciate that question because we have two different $300 million that I think may have been confusing. Let me clarify. You may recall that we began 2023 with a cost initiative targeting $300 million of cost reduction, primarily in the corporate center. We stated that 75% of that $300 million would be sustainable. We have executed throughout 2023 and are confident that 100% of that will be sustained into 2024. Further, we developed mitigation plans due to weak weather and volumes in 2023, including O&M and other levers, totaling an additional $300 million as well. We estimate that 50% of these new initiatives are sustainable into 2024. We will continue to seek cost-saving opportunities as part of our continuous improvement efforts. We anticipate that 2024 O&M will be lower than 2023 due to increased productivity and efficiency in our operations.

The next question is from the line of Durgesh Chopra with Evercore. Your line is now open.

All my questions have been answered. Just a quick clarification, Lynn, I think in response to the first question, you mentioned 30% to 50%. I believe you were referring to the equity content of any incremental CapEx. Could you just clarify if my understanding is correct?

That's correct, Durgesh. It was in response to what does balanced mean. That's the range to consider for incremental equity matched with incremental capital for growth.

Next question is from the line of Carly Davenport with Goldman Sachs. Your line is now open.

You've got John Miller on for Carly. Maybe just to start with the North Carolina resource plan, just curious if there's any areas where you expect, if any, to get some pushback. Obviously, a healthy chunk of renewables is in there with the wind and solar, but also a share of natural gas as well. So curious if you're expecting the focus on reliability with that to outweigh any ESG concerns with the natural gas?

John, I appreciate that question. These integrated resource plans are informed by a robust stakeholder process. As you can imagine, pulling stakeholders together leads to a spectrum of views, from renewables to traditional sources like natural gas. However, we believe that our proposed balanced all-of-the-above strategy offers the right equilibrium between reliability, affordability, and an increasing commitment to clean energy, which we take seriously. We expect to work through the review process constructively and consistent with previous plans, and we will keep you informed.

Got it. That's helpful. And then maybe just one follow-up to the O&M discussion. I know that some of the business agility savings will come in 4Q, but as we are now in November, just curious if you have indications of where you're trending towards that target of 50% being sustainable.

We're going to make 50% sustainable.

That's right. Yes. We're there, John. We have line of sight to the Q4 efforts because a lot of it was tied to the fall outage season as well as just a culmination of work that takes a couple of months to implement, and we've evaluated the ability to keep those going into 2024 and beyond, and we've confirmed that.

Thank you for your question. There are no additional questions waiting at this time. So, I'll pass the call back to Lynn Good for any closing remarks.

Well, thank you all. Appreciate your engagement today investment at Duke, and we're looking forward to seeing all of you at EEI. We'll continue the conversation then. Of course, IR and Brian and I are always available. So, thanks so much.

That concludes the conference call. Thank you for your participation. You may now disconnect your lines.