Hello, everyone, and welcome to Duke Energy's Second Quarter 2024 Earnings Call. My name is Felicia, and I'll be your operator today. I will now hand you over to your host, Abby Motsinger, Vice President of Investor Relations at Duke Energy. Please go ahead, Abby.

Thank you, Felicia, and good morning, everyone. Welcome to Duke Energy's Second Quarter 2024 Earnings Review and Business Update. Leading our call today is Lynn Good, Chair and CEO; along with Harry Sideris, President; and Brian Savoy, 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. Before I begin, I'd like to take a moment to recognize the work of our team responding to Hurricane Debby. The storm made landfall in Florida yesterday morning and caused outages for about 330,000 customers. We had crews in position over the weekend, and our teams are working around the clock to restore power. As of this morning, we've restored 90% of our impacted customers. Based on its current track, we expect the storm to impact the Eastern and Central parts of the Carolinas later this week. Along with tropical storm-force winds, the system is bringing heavy rains. We're staging crews and implementing flood mitigation plans to be able to safely and quickly respond to expected customer outages. Now let me turn to our second quarter results and the significant progress we're making across the company. Our simplified fully regulated portfolio of Southeast and Midwestern utilities, combined with our strong track record of constructive regulatory outcomes, positions us well to deliver long-term value for shareholders. We have clear growth visibility driven by our $73 billion capital plan, which is focused on grid and generation investments to support the growing communities we serve. In a moment, Harry will provide an update on recent regulatory activity and operational highlights from across the business; and later in the call, Brian will walk through detailed financial results and our long-term sales outlook. But let me begin with the results for the quarter. Turning to Slide 5. Today, we announced adjusted earnings per share of $1.18, building on our strong start to the year. These results were $0.27 above last year, driven by growth across our electric utilities and improved weather. We continue to deliver consistent outcomes, carrying positive momentum into the back half of the year. We are reaffirming our 2024 guidance range of $5.85 to $6.10. We are also reaffirming our long-term EPS growth rate of 5% to 7% through 2028 based off of a $5.98 midpoint for 2024. With that, I'd like to hand the call over to Harry.

Thank you, Lynn. Starting on Slide 6. We have a long history of working with stakeholders to achieve constructive regulatory outcomes that benefit our customers and deliver returns for our shareholders. Since the start of 2023, we've continued to build on this track record with approximately $75 billion of rate base investments approved or settled across 7 rate cases. I'm proud of the teams across the company that contributed to these impressive results. The outcomes support essential critical infrastructure investments acknowledging the rising cost of capital through higher ROEs and allow us to meet our customers' demands for affordable, reliable, and increasingly clean energy now and into the future. Just last month, we received a final order in our DEC South Carolina rate case and rates were updated August 1. The order supports our efforts to increase system diversity and reliability and enhance the customer experience. We also filed a comprehensive settlement in our Florida rate case in July. The Florida settlement reflects a 3-year multiyear rate plan with rates effective in January. It focuses on continued grid modernization to serve population growth and harden the system as well as investments in renewables. Hearings are scheduled to begin later this month and an order is expected by the end of the year. Importantly, the outcomes in South Carolina and Florida demonstrate our commitment to affordability and continued focus on finding creative solutions to maintain low rates, including utilizing tax benefits to moderate increases. With solutions like these, we expect customer rates to remain below the national average. Turning to Slide 7. We continue to collaborate with stakeholders across our jurisdictions. In the Carolinas, the IRP process is advancing in both states. Our plans call for a diverse and increasingly clean energy mix that serves our growing customer base while preserving reliability and affordability. In mid-July, we were pleased to reach a constructive settlement in North Carolina with the Public Staff, Walmart, and CCBA. Importantly, the settlement adopts our near-term action plan including renewables and natural gas investments as well as early development activities for long lead time resources. Hearings concluded in North Carolina yesterday and South Carolina hearings will start in mid-September. We expect orders in both states by year-end. CPCN hearings will begin today in North Carolina on our request to construct more than 2 gigawatts of natural gas generation. These advanced class units will be located at existing coal plants slated for retirement, ensuring continued reliability in complementing our significant investments in renewables. We expect CPCN orders from the NCUC by the year-end and pending approvals, construction is planned to start in 2026 with all units operational by 2028. Moving to Florida, we placed 3 new solar facilities in service through June. This keeps us on track to have 1,500 megawatts of solar on the Florida system by the end of the year. Looking ahead, we plan to build 12 solar plants between 2025 and 2027, adding another 900 megawatts of clean energy to the Florida grid. We also have 2 additional rate case hearings this quarter. In Indiana, hearings begin later this month; and in North Carolina, our Piedmont Natural Gas hearing begins in mid-September. Both cases are based on investments we've made to serve our customers and strengthen our system over the last several years. Before I turn it over to Brian, I wanted to commend all our teammates for their unwavering focus on operational excellence, ensuring reliable and affordable energy to our customers every day. As Lynn mentioned, many of our teammates are actively working to restore power to our Florida customers impacted by Hurricane Debby. Restoration efforts are well underway, and we are committed to restoring power to all customers as quickly and safely as possible. In addition to responding to storms, this summer, we experienced extreme heat across our jurisdictions. In fact, the Carolinas reached 2 new record summer peaks in a matter of weeks. Our team showed incredible preparation and collaboration across the company. I'm pleased to share that the grid and fleet performed well, and our employees met the needs of our customers and communities during these critical times. With that, let me turn the call over to Brian.

Thanks, Harry, and good morning, everyone. Turning to Slide 8. We had a strong second quarter with reported and adjusted earnings per share of $1.13 and $1.18, respectively. This is up from adjusted earnings per share of $0.91 in the second quarter last year. Within the segments, Electric Utilities & Infrastructure was up $0.34. Growth was driven by rate increases in riders, higher sales volumes, and warmer-than-normal weather across our service territories, which is a complete reversal of the extremely mild weather in the second quarter of 2023. Partially offsetting these items were higher interest expense and depreciation. Moving to Gas Utilities & Infrastructure. Results were down $0.02 compared to last year as favorable rider revenue was offset by higher interest expense and depreciation. And finally, the Other segment was down $0.05, primarily due to higher interest expense. Turning to Slide 9. I'd like to take a moment to discuss our earnings profile for the remainder of the year. As a reminder, last year had an atypical earnings shape with record mild weather in the first half of the year, which was mitigated with agility measures in the second half. With that in mind, the strong performance we've demonstrated so far this year is aligned with our planning assumptions. I'm incredibly proud of the team for delivering an impressive first half, and we are on track to achieve full-year results within our guidance range. Turning to Slide 10. We were pleased to see weather normal volumes increased 1.9% versus last year, in line with our full year projection. Customer growth remains robust, led by the Carolinas and Florida, which grew 2.4% through the first half of the year. We're also encouraged to see improving residential usage across our jurisdictions. Commercial and industrial volumes were up over 1% versus last year, driven by strength in the commercial sector. Commercial sales volumes have exceeded our projections through the first half, offsetting a slower rebound in industrial sales. As economic development projects continue to come online throughout the second half of the year, we expect C&I load growth to accelerate. We operate in some of the most attractive jurisdictions for both economic development and customer migration, which provide conviction in our 2% load growth forecast in 2024, and 1.5% to 2% load growth CAGR over the 5-year planning horizon. Turning to Slide 11. We are forecasting unprecedented growth in power demand from advanced manufacturing projects across multiple sectors as well as data centers. As we evaluate which economic development opportunities to include in our forecast, it's important to remember that we take a risk-adjusted approach. We utilize discrete project-level analysis to evaluate and probability-weight potential opportunities, resulting in a subset of projects being included in our current projections. We have a robust pipeline of projects that continue to progress and will be reflected in our plans when the projects mature. This pipeline provides a runway for growth well into the future. We are committed to serving this new load in a way that prioritizes reliability and affordability for all our customers. To that end, we recently executed MoUs with Google, Microsoft, Nucor, and Amazon to explore tailored solutions to meet large-scale energy needs and develop rate structures to lower the long-term cost of investing in clean energy technologies. These voluntary programs, which are subject to commission approval, would be open to any large customer and would include protections for non-participating customers. We look forward to continued collaboration with all stakeholders as we work to meet the accelerating demand in our service territories. Turning to Slide 12. We recognize the importance of a strong balance sheet as we advance our strategic priorities and fund investments that will be foundational to our growth. We are on track to achieve 14% FFO to debt by the end of this year, which represents 100 basis points of cushion to our Moody's downgrade threshold. Our constructive regulatory outcomes, combined with the collection of remaining deferred fuel balances, monetization of tax credits, and programmatic equity issuances, provide clear line of sight to achieving our target. As disclosed in February, we expect to issue $500 million of common equity annually over the 5-year plan via our DRIP and ATM programs. We've completed over half of our $500 million target, having priced $285 million year-to-date. We've also completed approximately 80% of our planned long-term debt issuances for 2024. As we've demonstrated over many years, our commitment to our current credit ratings and a strong balance sheet is unwavering and will continue to be a top priority as we execute our growth objectives. Moving to Slide 13. We remain confident in delivering our 2024 earnings guidance range of $5.85 to $6.10 and growth of 5% to 7% through 2028. We operate in constructive growing jurisdictions and the fundamentals of our business are stronger than ever. We are well positioned to achieve our growth targets, which, combined with our attractive dividend yield, provide a compelling risk-adjusted return for shareholders. With that, we'll open the line for your questions.

The first question comes from Shar Pourreza from Guggenheim Partners.

It's actually Constantine here for Shar. You highlighted the economic development and growth in the geography, which is obviously favorable for data center activities, but you're still running on that 1.5% to 2% load growth projections. At what point do you feel you can reassess these assumptions? And what could that mean to the capital plan, just can see some out-of-cycle updates going towards the tail end of the year?

Thanks, Constantine. It's a great question, and one that we continue to be encouraged about. So if we dial the clock back, a year ago, we were projecting 0.5% load growth CAGR over our planning horizon. Economic development opportunities began to surface and continue to show up, and we moved to 1.5% to 2%. On a base of sales of over 200,000 gigawatt hours a year at Duke Energy, that 1.5% to 2% CAGR is quite impressive, and we're very pleased to see that kind of growth. I would say that with the economic development pipeline we're looking at today, we're trending to the high end of that 1.5% to 2%. As we look at our plans, we're forecasting to update the full financial plan with the load growth and the capital supported along with the earnings per share outcome from those elements in February, which is our normal cadence. We will definitely keep you updated along the way as the economic development pipeline progresses. I will say that we continue to be encouraged. And every time we look at our load update, it deepens as far as the load growth outlook, and most of that growth is later in the decade. It coincides with as we roll the plan to 2029, and it will make more sense to show that load growth over time.

Constantine, this is Lynn. The only thing I would just emphasize that Brian touched upon is we have continued to see economic development growth. I know the chart that we've shared with you is consistent with the first quarter, but we are continuing to see growth in that economic development pipeline. And so our thought is that we will provide a comprehensive update on both load and capital in February, but continue to give you a sense of economic development progress over the balance of the year. The bottom line is we have a wealth of growth opportunities and feel like we're really well positioned to take advantage of them.

Yes. Sounds great. Totally understood. And maybe separately, can we get an update on nuclear PTCs from just a timing and monetization perspective, given some of the importance that they play towards our credit metric targets and any other pieces we should be mindful of?

Thanks, Constantine, I'll take that as well. This is Brian. On the nuclear PTCs, we were hoping to see guidance by midyear, and that obviously has not transpired. The treasury continues to actively issue guidance on elements of the IRA. We see that week in and week out. We still expect the formal guidance for the nuclear PTCs by the end of this year. But I will say that we operate 11 very low-cost nuclear plants that have delivered extremely well over the first half of the year. These plants have earned about $250 million of nuclear PTCs through June. That's recorded in our financial statements. Our plans are to test the market on monetizing these PTCs in the third quarter. You could expect us to report on that later in the year, but we don't feel like the delay in the guidance from our early expectations will have any impact on our credit in 2024.

The next question comes from Nick Campanella from Barclays.

Good to see the settlement in Florida. I was just wondering on DEI with evidentiary hearing at the end of this month, do you think you can settle that case ahead of those hearings, and how should we think about that potential?

Thanks for that question, Nick. This is Harry. We're always open to settlement discussions. That hearing is later this month, and we'll continue to look for opportunities to have those discussions. We also feel very strong about the case that we've put together, strong customer benefits, the investments for the growth in Indiana and the economic development in Indiana. So we feel comfortable with either path on a constructive outcome.

So we'll keep you informed, Nick, obviously as we get closer to the hearing. But as Harry indicated, a strong case and anxious to move through this process in Indiana.

That's great. We'll be watching it. And then I guess, just when I think about your roll forward, which I know is not until the fourth quarter, just kind of wondering how you're kind of tracking within this kind of 5% to 7% EPS guide path. When I try to kind of conceptualize some of your sensitivities that you laid out on Slide 22, interest rates are down, you did mention some pressure higher on the 1% to 2% load growth assumption, and the stock is also up, which helps the accretion of your equity program. Just where are you tracking in the 5% to 7%? And then like what headwinds should we be kind of considering versus what I outlined right there?

No, thanks, Nick. This is Brian again. As we review our 5-year plan, we clearly see more positive factors than negative ones. The increasing load growth, which is anticipated more towards the end of the plan, provides a positive boost. Additionally, our ongoing investments in essential infrastructure, which are backed by multi-year rate plans or grid riders for several years, ensure transparent growth along with a stabilizing interest rate environment. Together, these factors give us strong confidence in achieving at least a 5% to 7% growth rate, with the potential to reach the higher end of that range later on. However, we need to be mindful of economic downturns, as they can impact any utility, affect the communities we serve, and influence customer demand. We are actively monitoring our customers' situations and the pressures they face. Lynn, do you have anything to add?

Nick, I would say we are comfortably positioned within the 5% to 7% and feel like it's strongly positioned when you look at this economic development for a sustained period of giving you 5% to 7% through '28. As Brian indicated, we see a lot of growth in that '27-'28 period with the economic development pipeline. So that gives us the opportunity to earn at the higher end of the range if those projects mature at the pace we expect. If we continue to add them, which has certainly been our experience here in 2024. So we'll continue to update you every step of the way and are anxious to provide an update in February that will not only capture this economic development we've seen in '24 but also give us a chance to update capital. We've produced a lot of cash flow. The balance sheet is strengthening in 2024 as well. So we're very optimistic about the future.

The next question comes from Julien Dumoulin-Smith from Jefferies.

Maybe just following up on this focus on industrial growth. I mean, you guys outlined these MoUs here, can you comment to the extent of which that is incremental versus reflected in that projection on load growth in '27-'28? I imagine it's very substantively excluded. And then how do you think about the remaining timeline on reaching this MoU finality, if you will? And how do you think about the risk sharing within that, right? I know you mentioned Nucor here, presumably, there's some sort of ability to leverage an SMR directly with some of these counterparties. How do you think about what that structure would look like for you guys? Just to clarify that ahead of time, on your risk dollars relative to ensuring that there's appropriate risk sharing?

Julien, thanks. Let me take a shot. I'm sure Harry and Brian will have something to add to it. So as we think about this economic development pipeline over the period that we've shared with you through '28, data centers represent about 25% of that pipeline. But as we get out to 2030 and beyond, that 25% grows. Our hope is that those customers will have an interest in expanding in our service territories as we find a way to continue to meet their needs on sustainability, but also bringing resources on. The discussions are early. I think there's a clear understanding that we are trying to do a couple of things here. We're trying to meet the load. We're trying to meet their sustainability goals, and we're trying to do so in a way that protects retail customers while meeting their timelines. I'm pleased to share that the MoU has amped up the constructiveness of our discussions with these customers and brings a lot of excitement on their end for these clean energy pieces.

I would just add, Julien, the MoU has really amped up the constructiveness of our discussions with these customers and there's a lot of excitement on their end for these clean energy pieces. So I think this is going to pay dividends as we work with them closer into the future.

Got it. And the idea here being selecting either some kind of SMR offtake or some kind of clean energy offtake that would specifically not impact the customers, just when you think about what the MoU comprises?

Yes. So Julien, when you talk about nuclear, there are a number of structures that we're considering. They have an interest, obviously, in carbon-free generation and nuclear represents an around-the-clock option. We're in the early stages of development, so is there a structure? Is there some method of equity investment? Is there some structure that would encourage faster development because of the partnership? That element of the discussion is going well as well. I'm also confident that every element of the agreements we would reach with the tech companies or Nucor would go through a commission process to make sure that they're comfortable with the structure. They've been very positive about the fact that we're exploring these discussions, as it's a win-win for economic development and bringing clean energy to the states while protecting retail customers.

The next question comes from Jeremy Tonet from JPMorgan.

Just wanted to dive back in, I guess, on the load trends as you laid out in the prepared remarks and how commercial and industrial are tracking versus expectations here today and just what you're seeing on the ground as far as that trends over the back half of the year?

Yes, Jeremy. So we guided to 2% load growth in 2024, and we're tracking on top of that. The residential growth has been robust. We've added more customers in the first half than in any first half we've looked at in recent years, about 80,000 retail customers added to our system in the first half of the year, which is putting residential kind of right in line with our 1.5% to 2% growth for 2024. Commercial has been higher than our expectations. We came into the year thinking a modest growth in commercial, but we've seen much more in the commercial sector. This is a combination of data center usage, healthcare, universities, just a broad mix of commercial companies that have higher demands and largely support this higher population that are in our regions. The industrial sector has not rebounded as fast as we anticipated. We continue to be in dialogue with our industrial customers, and they're taking a cautious stance. The fear of recession is out there, and you don't want to get overextended. The labor market has been tight. Some of our customers have taken the opportunity just to pull back a little bit. They're still signaling a rebound later in '24 or maybe early '25, but we feel like the mix might be a little different. Overall, the growth for '24 is better than our expectations.

Jeremy, the only thing I would add to that is this industrial rebound pushing into later '24 or '25 has also been influenced by interest rates. It's what we're hearing from customers. Primarily, our legacy industries of textile and paper are feeling the pressure. But overall, we're tracking to the growth for the year and feel bullish on the economic development pipeline.

Got it. That's helpful there. And then just wanted to go to November here. We have elections coming up, North Carolina has a significant race and just wondering any thoughts you could share with regards to if different outcomes could impact the IRP or just there's a lot of stakeholder agreement here and so you wouldn't expect too much change?

Jeremy, no matter what happens in November, our objective is the same, which is to keep serving our customers well with reliable, affordable, and increasingly clean energy. We don't expect that election to have an impact on the rulings we would receive in the Carolinas or in Indiana or Piedmont case. We believe a bipartisan approach working on both sides of the aisle for energy policy has served our companies well, and that will continue to be our posture as we move into this election.

Yes. We wrapped up the Carolinas IRP yesterday. In July, we entered into a very constructive settlement with Public Staff and some other intervening parties. I think that helped speed the process up. It was very efficient. The commission was very engaged in providing this energy transition affordably and reliably to our customers, which aligns to what we're doing. We feel like our plan meets the needs of our customers in North Carolina, and we'll work to see an order later this year on that.

The next question comes from Anthony Crowdell from Mizuho.

I have a couple of questions. You presented the information well on Slide 6. Harry discussed the regulatory execution, and I'm quite impressed. Has there been any change in the company's regulatory strategy over the past five years, considering the strong outcomes we've seen in the last two years? Or is it simply a matter of having an excellent track record? I'll leave it at that.

Anthony, thank you for appreciating that. When I think about regulatory outcomes, they are an everyday assignment at Duke Energy, which includes operational excellence that we serve our customers well and reliably and affordably. It also includes work in the legislature to make sure that energy policy is clear and that we have an expectation of how to go in the future. It's stakeholder engagement that includes customers, policymakers, and community leaders. You saw us undergo a bit of an organizational change a few years ago where we put CEOs of the Carolinas and CEOs of the Midwest and Florida in place to continue to fine-tune our approach around stakeholder engagement and clarity around roles and responsibilities in the regulatory area. It's been a long-standing history at Duke Energy, but appreciating this complex and polarized environment, we think that additional focus has been helpful to us. We take the responsibility of serving customers very seriously, and that is the first job at Duke Energy. If we do that well, we believe the company will be treated fairly and constructively in the regulatory environment.

Great. And then on load growth, I mean, obviously, you guys talk about it and I appreciate the language, Brian, you said of moving it, given the Duke footprint of 1.5% to 2%. Given the load growth in the long-lived asset and planning cycle that's required, does the company believe you'll start seeing more frequent IRP filings that whether on a 2- or 3-year cycle that might have to condense given the changes that the system is seeing right now?

It's a good question, Anthony. We have a pretty frequent cadence already on IRPs, which in the Carolinas is every other year; Florida, every year; and a 10-year site plan. In the Midwest, there are various time horizons that are pretty frequent as well. What we did like in Carolinas this year, we had an August filing. We updated it in January, because we saw increasing load growth and we felt the commissions needed to see this in real-time. So maybe not a full IRP filing each and every year, but we could see more frequent updates as we learn more about load growth over time to plan the appropriate resources. You do need plenty of lead time to gear up these generation plans and execute them.

Yes, the only other thing I would add on that notion of updating the IRP is we work very closely with the states on economic development. So it's a partnership between Duke Energy and the economic development engines of each state, and there's a lot of understanding on the part of the state of what's coming. This gives us an opportunity to have on-the-ground discussions about what's needed with transmission and generation and then the IRP, so like the regulatory filings that follow that. We intend to continue to stay really closely linked with our states as we go forward.

The next question comes from Carly Davenport from Goldman Sachs.

Just wanted to quickly follow up on a couple of the previous comments on the Carolinas IRP. Appreciate all the color on the North Carolina process. I guess just as you look towards the South Carolina piece with hearings starting next month, is there any potential for a settlement there as well?

Carly, I appreciate that question. I think it's a little early to tell. We're still in the middle of a procedural schedule in South Carolina, where rebuttal testimony is due in a week or so, there's a surrebuttal process that goes on in South Carolina, and then hearings occur in mid-September. As Harry indicated, we believe the plan that we've put forward in both states meet the requirements of the objectives that both states have set out. We aim to give both states the opportunity to put their fingerprints on this plan in a way that serves their needs while delivering the benefits of scale that Duke Energy has offered to customers over a long period. We'll keep you informed as we get deeper into the procedural process, but South Carolina is lagging a bit.

Got it. Okay. I appreciate that. And then the follow-up was just on the nuclear side. I know you guys made some comments on nuclear before, but could you just refresh us sort of on your latest thoughts on the technology and the timing for new nuclear to potentially have a place in the resource planning process?

Carly, the SMR is included. Harry, do you want to talk a little bit about how we approached it with the IRP?

Yes, absolutely. In North Carolina, we have included that in our near-term action plans for these long lead item projects like SMRs. We have it slated in our IRP to come online 600 megawatts in 2035 at our Belews Creek station. We're waiting for approval from the commission to move forward with those actions, to continue the development as we work through technology selection as well as other construction needs. The IRP filing has all that in there, and the Public Staff and the settlement have agreed to those items.

And Carly, I would just add, Duke has a long-standing nuclear history here in the Carolinas, 11 units. Customers in both states are interested in a sustainable future. We have states that appreciate the economic development that nuclear investment has represented for the communities. We will work through this in a thoughtful way, but I do believe that continued expansion of nuclear here in the Carolinas could make sense as we get into the 2030s and beyond. Frankly, we're hearing some conversation in Indiana as well on whether nuclear at some point could fit into that program. That, I would say, is probably lagging a little bit on timing, but there's a recognition that nuclear could be a part of the future, and we'll manage it in a very disciplined way.

We have no further questions. So I'll turn the call back to Lynn Good for closing remarks.

Well, thank you, and thanks, everyone, for your questions today and for your investment in Duke Energy. We're available, Investor Relations and members of the team for questions if there's any follow-up that we can provide. We really appreciate the engagement today and appreciate, as I said, your investment in Duke Energy. Thanks so much.

This concludes today's call. Thank you all for attending. You may now disconnect your lines.