Yahoo Finance Duke Energy Corporation (NYSE:DUK) Q1 2024 Earnings Call Transcript
Duke Energy Corporation (NYSE:DUK) Q1 2024 Earnings Call Transcript May 7, 2024
Duke Energy Corporation beats earnings expectations. Reported EPS is $1.44, expectations were $1.38. DUK isn't one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).
Operator: Hello, and welcome to Duke Energy First Quarter 2024 Earnings Call. My name is Lydia, and I will be your operator today. [Operator Instructions]. I'll now hand you over to Abby Motsinger, Vice President of Investor Relations to begin.
Abby Motsinger: Thank you, Lydia, and good morning, everyone. Welcome to Duke Energy's first 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.
Lynn Good: Abby, thank you, and good morning, everyone. Today, we announced first quarter adjusted earnings per share of $1.44, delivering a strong start to the year. These results are $0.24 above last year, driven by growth from rate activity across our jurisdictions, strengthening retail volumes and improved weather. We remain confident in our outlook and are reaffirming our 2024 guidance range of $5.85 to $6.10 and our long-term EPS growth rate of 5% to 7% through 2028. We have a clear path forward as a fully regulated utility operating in some of the most attractive and fastest growing areas of the country. Our strategy will drive continued growth, underpinned by our five-year $73 billion capital plan, efficient recovery mechanisms and track record of constructive regulatory outcomes.
Moving to Slide 5. Our jurisdictions are experiencing unprecedented growth from population migration and economic development. We're committed to meeting these increasing customer demand through an all-of-the-above strategy that preserves affordability and reliability as we decarbonize. In doing so, 2024 marks an important stage in our fleet transition as we move from the planning phase to project execution. In Florida, we're on track to have 1,500 megawatts of utility-owned solar in service by year-end. And in our recently filed 10-year site plan, we expect to more than triple the amount of solar on our system by 2033. In the Carolinas, we're completing annual solar procurements that will add approximately 1,500 megawatts to the grid each year, beginning in 2027.
These investments are part of our goal to have 30,000 megawatts of regulated renewables on our system by 2035. In the Carolinas, we filed certificates of Public Convenience and Necessity in March to build more than 2 gigawatts of new, advanced class of natural gas generation. The filings with the NCUC include two simple-cycle combustion turbines and one combined cycle plant, consistent with the Carolinas resource plan. Pending regulatory approvals, construction is planned to start in 2026 with all units operational by the end of 2028. Each of these new facilities will be cited in existing coal plants and will provide needed dispatchable generation when those units retire. We recognize there's a lot of attention on natural gas in its role in achieving net zero.
We believe natural gas must be a part of not just Duke's but our nation's energy transition strategy in the face of unprecedented demand from AI data centers, chips manufacturers and other economic development, natural gas remains an essential tool to provide reliable and affordable energy for customers and complements our substantial investments in renewables and energy storage. As you know, EPA recently released rules that placed limits on certain baseload generation sources. While the state of this rule will soon be in the hands of the courts, we will continue to advocate for solutions to reliably and affordably serve the growing energy needs of our customers and communities. As we step into this period of significant infrastructure build for the company, we recently appointed Harry Sideris, President of Duke Energy.
As President, Harry has responsibility for all of our electric and gas utilities, including all aspects of operations and regulatory activities. Harry is a 28-year company veteran and has an exceptional track record of accomplishment and leadership across many functions. He began his career in generation, led environmental health and safety, served as the President of our Florida utility and most recently led transmission, distribution and customer operations, including economic development. Harry is a trusted member of the executive leadership team and in his new role, he remains committed to delivering value to our customers and our investors. I'm pleased to introduce him for the first time on an earnings call and his new role as President.
And with that, Harry, I'll turn it over to you to go through the jurisdictional highlights.
Harry Sideris: Thank you, Lynn, for the introduction. I'm excited for the new role and look forward to leading our utilities and operations through this important time in our energy transition. Turning to Slide 6. Meeting our customers' expectations requires collaboration with regulators, policymakers and other stakeholders, and we continue to make great progress across our jurisdictions. Starting with South Carolina, hearings begin May 20 in our Duke Energy Carolinas rate case. Since our last rate case in 2018, our rate base has increased by almost $2 billion, driven by investments to improve reliability and resiliency and meet the growing energy needs of our customers. We expect new rates to be implemented August 1. Shifting to Florida.
In April, we filed our next three-year multiyear rate plan that will begin in 2025. The plan includes grid investments to enhance reliability, decrease outages and shorten restoration times, building on Duke Energy's Florida's best reliability year in over a decade in 2023. The filing also covers investments to add new solar and battery as well as improve the efficiency of our current generation assets. Even with the requested base rate increases, we expect overall customer bills to decrease in 2025 as fuel under recovery, storm restoration costs and legacy purchase power contracts expire at the end of the year. In Indiana, we filed our first rate case in four years in April. Since our last case, we've invested more than $1.6 billion to support the state's growing population and increase the resiliency and security of the grid.
The case includes a forward test year and two rate step-ups starting in the first quarter of 2025, smoothing the impact to customers. And finally, Piedmont Natural Gas also filed a rate case in North Carolina in April. The request covers significant infrastructure investments to comply with federal safety regulations, enhance the customer experience and provide safe, reliable natural gas service. As part of the filing, Piedmont is also requesting concurrent rate reductions for pass-through natural gas costs, which will help mitigate the impacts to the customer bill. We plan to implement interim rates November 1 with the final order expected in January. We've made great progress in the first quarter, advancing rate cases and fleet transition projects across our footprint.
As we embark on this period of significant infrastructure build, we have confidence that our investment plan will deliver sustainable value to shareholders and 5% to 7% earnings growth. With that, let me turn the call over to Brian.
Brian Savoy: Thanks, Harry, and good morning, everyone. Turning to Slide 7. Our first quarter reported and adjusted earnings per share were $1.44. This compares to reported and adjusted earnings per share of $1.01 and $1.20 last year. Within the segments, Electric Utilities & Infrastructure was up $0.29 compared to last year. Growth was driven by rate increases, higher volumes and improved weather. Partially offsetting these items were higher interest expense and depreciation on a growing asset base. As a reminder, residential decoupling was in effect for both of our North Carolina utilities this quarter, which moderated the impact of a mild winter in the Carolinas. Moving to Gas Utilities & Infrastructure, results were flat compared to last year.
And finally, the other segment was down $0.05, primarily due to higher interest expense. With a strong start to the year, we're on track to deliver on our 2024 EPS guidance range. Turning to Slide 8. We were pleased to see solid growth in weather-normal volumes this quarter versus last year. Customer growth remains robust in our jurisdictions, led by the Carolinas and Florida, which both grew 2.4%. 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. We are closely monitoring economic trends and remain in regular conversations with our largest customers. Notably, these customers continue to convey expectations for growing power needs in the second half of the year.
Combined with new economic development projects coming online, we expect growth to accelerate throughout the year. Turning to Slide 9. The impact of economic development activity in our jurisdictions cannot be overstated. We are gearing up to serve up to 18,000 gigawatt hours of additional load from these projects in 2028. This is up 2,000 gigawatt hours from the projection we just shared in February, demonstrating the strength of our economic development pipeline. As a reminder, we take a risk-adjusted approach to our forecast and generally only include the most mature and committed projects. We've included a few photos that showcased the impressive size and scale of the construction activity underway. Pictured at the top of the slide is a substation that will serve Wolfspeed's $5 billion semiconductor manufacturing facility in North Carolina.
The new factory will bring about 1,800 jobs to the state. We've recently energized the initial transformer bank in the substation, and Wolfspeed expects the facility to begin production by early next year. This project and others across many sectors, including batteries, data centers, EVs and pharmaceuticals to name a few, are making tangible progress and will provide meaningful load growth in our service territories. We operate in some of the most attractive jurisdictions for both economic development and customer migration, which underpins our confidence in our 2% volume growth forecast in 2024 and 1.5% to 2% growth rate over the 5-year planning horizon. Turning to Slide 10. We recognize the importance of a strong balance sheet as we execute one of the sector's largest capital programs.
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. The biggest driver of our FFO improvement is the implementation of the North Carolina rate cases, which add nearly 700 million of annual revenues. Combined with the collection of remaining deferred fuel balances, monetization of tax credits and programmatic equity issuances, we have 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're off to a great start, having priced just over 100 million year-to-date. We also completed approximately 65% of our planned, long-term debt issuances for 2024 in the first quarter, which helps to derisk our plan.
We've raised 4.6 billion in long-term debt with an average interest rate of 5.9% and an average tenure of 13 years. We've been strategic in our approach, reducing floating rate exposure amid a rising rate environment and further diversifying our investor base with the euro offering in April. As we have demonstrated this quarter and over many years, we are committed to our credit ratings and a strong balance sheet as we execute our growth objectives. Moving to Slide 11. 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 for the year, which combined with our attractive dividend yields provide a compelling risk-adjusted return for shareholders.
With that, we'll open the line for your questions.
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