Duke Energy Corporation (Holding Company)

Please stand by, we're about to begin. Good day and welcome to the Duke Energy second quarter earnings call. Today's conference is being recorded, and at this time I'd like to turn the conference over to Mr. Mike Callahan, Vice President of Investor Relations. Please go ahead, sir.

Thank you, Derek. Good morning, everyone, and thank you for joining Duke Energy's second quarter 2019 earnings review and business update. Leading our call today is Lynn Good. Chairman, President, and CEO, along with Steve Young, Executive Vice President and Chief Financial Officer. Today's discussion will include forward-looking information and the use of non-GAAP financial measures. Slide two presents the Safe Harbor Statement, which accompanies our presentation materials. A reconciliation of non-GAAP financial measures can be found on dukenergy.com and in today's materials. Please note the appendix for today's presentation includes supplemental information and additional disclosures. As summarized on slide three, during today's call, Lynn will provide an update on the quarter and progress on our strategic initiatives. She will also discuss legislative and regulatory activity in North Carolina. Steve will then provide an overview of our second quarter financial results and insight about economic and low growth trends. He will also provide an update on our regulatory and financing activities this year before closing with key investor considerations. With that, let me turn the call over to Lynn.

Mike, thank you, and good morning, everyone. Today we announced strong results for the quarter with reported and adjusted earnings per share of $1.12, compared to 93 cents in the prior year. Our results today represent 6% growth over last year and give us confidence as we reaffirm our 2019 adjusted EPS guidance range of $4.80 to $5.20. We also reaffirmed our long-term earnings growth target of 4% to 6% through 2023. With solid growth across all three operating segments, we are executing our long-term strategy to transform the customer experience and deliver value for our shareholders. Our investments in the energy grid, cleaner generation, and natural gas infrastructure ensure Duke Energy is well positioned to build a smarter, low-carbon energy future. In addition, we remain committed to the dividends, and for the 13th consecutive year, we increased our quarterly dividend to shareholders. Shifting to operations, let me highlight several noteworthy accomplishments on slide four. First, Piedmont Natural Gas was recognized as one of America's most trusted brands among utilities, continuing to prove the franchise's value as well as its unwavering dedication to safety and impressive customer service. And we also remain steadfast in our focus on operational excellence, and I'm very proud of our employees' commitment to providing reliable, affordable, and increasingly clean energy to our customers every day. This was exemplified by the strong performance of our system during the recent sustained heat wave. Our teams demonstrated exceptional preparation and collaboration across the company, and the fleet performed well while serving near-record load in the Carolinas, the Midwest, and Florida. Turning to slide five, let me provide an update on how we are advancing our strategic initiative to generate cleaner energy. In our electric business, the $1.1 billion Western Carolina's modernization project in Asheville remains on track. On August 5th, the combined cycle plan successfully achieved first fire, an important milestone in the process to bring the unit online in late 2019. As a reminder, our comprehensive plan for this region includes retiring an older coal plant, building new natural gas combined cycle units, installing renewables, and upgrading transmission and distribution infrastructure. We've also engaged the community to increase energy efficiency, demand response adoption, and our products and services offerings as we better serve this growing region. In Indiana, we filed our integrated resource plan and rate case in early July. Consistent with our cleaner generation strategy, key components of our plan include accelerating coal plant retirements and replacing them with natural gas units and renewables. Steve will discuss the elements of the rate case filing in more detail in a moment. We also continue to advance innovative solutions across the southeast, including renewables, battery, and EV infrastructure. In Florida, we are executing on the investment plan that underpins our multi-year settlement agreement. The Florida Commission has approved the recovery of 344 megawatts of previously announced solar projects under the solar base rate adjustment mechanism. This represents nearly half of the 700 megawatts we will be installing through 2021. We also announced 22 megawatts of battery storage projects in the state this quarter, kicking off the first wave of our planned 50 megawatt pilot program. In the Carolinas, we continue to engage stakeholders in our proposed electric vehicle pilot programs. Electrification is an important part of a low-carbon future, and we look forward to spurring EV adoption in our communities with this infrastructure. Also in North Carolina, the first RFP for solar energy under House Bill 589 is complete. The second RFP is expected to launch this October, and we look forward to participating in the next round of bidding. In our commercial business, we expanded our portfolio of projects during the quarter. In June, the 150-megawatt North Rosamond Solar Facility began delivering energy to customers in California. This is the largest solar project in our renewable fleet to date, and the energy generated from the project will be sold to Southern California Edison under a 15-year PPA. We also announced 650 megawatts of new projects this quarter, including the acquisition of 37 megawatts of Bloom Energy's distributed fuel cell technology, which will come online over the next 18 months. We continue to bring more visibility to our growth prospects in this segment and are evaluating a modest level of investment to safe harbor several solar projects, preserving the full investment tax credits through our five-year plan. We now have line of sight to substantially all of our growth targets for 2019 and 2020 and approximately 70% over the five-year plan. Shifting to our gas business on slide six, ACP Project Partners filed a petition on June 25th seeking a Supreme Court review of the Appalachian Trail decision. We're pleased to have the Solicitor General join the petition in support of the case, and we expect the court to decide later this fall if it will agree to hear the appeal. We also recently received an order from the Fourth Circuit Court of Appeals vacating the project's biological opinion and incidental take statement. We are evaluating this order and will work with the Fish and Wildlife Service to resolve any deficiencies. In anticipation of this ruling, work has been underway, including survey work, to address certain issues identified at the May 9th hearing and confirmed in the vacature order. Our current expectation is that construction could resume by year end, recognizing there are several steps that need to take place before we move forward. We continue to target in service for the first phase of the project by late 2020 and full pipeline in service in 2021. Our cost estimate of $7 to $7.8 billion remains unchanged. Finally, we are moving ahead with the construction of our 250 million Robeson LNG facility in North Carolina. This infrastructure will help Piedmont continue providing customers with the most affordable, reliable supply of natural gas during peak usage days. protecting customers from price spikes and volatility when extremely low temperatures create higher than normal demand for natural gas. We expect this facility to be in service during 2021. Each of these projects aligns with our strategy to expand natural gas infrastructure as we bring much needed gas supply to the underserved Southeast. Moving to slide seven, let me share an overview of recent developments in North Carolina. Senate Bill 559 is pending before the North Carolina General Assembly. As a reminder, this bipartisan legislation was introduced in both chambers in early April. As written, it would allow the Commission to consider alternative cost recovery mechanisms, including storm cost securitization, multi-year rate plans, and ROE bans. Importantly, the Commission would retain its authority to review investments and the prudency of incurred costs, just as it does today. If enacted into law, North Carolina would join 35 states that already have alternative cost recovery frameworks in place, which generate significant customer benefits and incent investments necessary to transform our energy infrastructure. A multi-year rate plan in North Carolina would provide bill predictability, and through investments in the energy delivery system, result in fewer and shorter outages for customers while enabling more solar and battery installations. Further, storm cost securitization would save customers 15% to 20% on storm costs. Stakeholders have provided useful input throughout the legislative process, strengthening the bill by creating additional consumer protections. The current version of the bill also provides for utility investments that support low-income communities. The bill, which is sponsored by leading members of the House and Senate, has passed the Senate and moved through three required House committees. The bill currently remains in the Rules Committee of the House as the General Assembly addresses other priorities, specifically the 2019 budget. The next step for the bill is a vote by the full House before moving to the Senate and ultimately the Governor for his consideration. Given there is no set end date for this session, we will monitor developments and continue our advocacy work in support of the legislation. The bill's sponsors remain committed to Senate Bill 559 and the substantial benefits it offers to our customers and our state. Shifting to coal ash, I'm extraordinarily proud of the work underway to meet our commitments in North Carolina. We successfully closed all three high-priority sites ahead of their 2019 compliance deadlines, despite hurricanes and other severe weather of the last few years. We are also advancing work at the remaining sites, The legal process to appeal the North Carolina Department of Environmental Quality's order to excavate all remaining low risk and low priority basins is also underway. While we share the same goals of permanently and safely closing all basins, we disagree with DEQ's position and filed an appeal in April outlining our case. Last week, the Office of Administrative Hearings heard arguments on a partial motion to dismiss filed by DEQ. The judge dismissed claims related to the procedure DEQ used in reaching a decision, while allowing the substantive claim on the decision to excavate to move forward. We plan to proceed with the appeal, standing firm that the DEQ decision is not in the best interest of our customers and communities. We estimate full excavation would cost an incremental $4 to $5 billion versus the cap-and-place or hybrid closure methods proposed by our utilities. imposing significant costs on customers without measurable benefit to the environment. We expect the appeal process could take 9 to 12 months, and we'll keep you informed as we reach milestones during the process. Before turning it over to Steve, I want to reiterate our confidence in our long-term strategy and our continued ability to deliver on our commitments. As the past quarter shows, we're making strides, improving the energy grid, transitioning our generation fleet, and increasing natural gas infrastructure. With significant investments in renewables, progress on regulatory and legislative fronts, and ongoing stakeholder engagement, we're advancing our long-term vision for Duke Energy. And with that, I'll turn it over to Steve.