Duke Energy Corporation (Holding Company)

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

Thank you, Derek. Good morning, everyone, and thank you for joining Duke Energy's third 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. Steve will then provide an overview of third quarter financial results and insight about economic and load 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.

Ryan, thank you, and good morning, everyone. Today we announced strong results for the quarter with adjusted earnings per share of $1.79 compared to $1.65 in the prior year. This represents 7% growth through the first three quarters, giving us confidence that we will look to the rest of the year. We have narrowed our 2019 EPS guidance range to 495 to 515, raising the midpoint into the upper half of our original range. We also reaffirmed our long-term earnings growth rate of 4% to 6% through 2023 off the midpoint of our original 2019 guidance range. 2019 has proven to be a solid year of growth for Duke Energy as we transform the customer experience and deliver value for our shareholders. We continue executing our strategy, making significant investments in the energy grid, cleaner generation, and natural gas infrastructure. And the fundamentals of our business remain strong. Let me highlight several operational accomplishments in the quarter on slide four. First, in early September, Hurricane Dorian, a historic Category 5 storm with an unpredictable path, devastated the Bahamas before sweeping across the East Coast. Our thoughts remain with the people of the Bahamas as they continue the long journey to rebuild their communities. In the days leading up to Dorian's potential landfall, our weather forecasts and models projected significant outages to our Florida and Carolina service territories. In response, we mobilized nearly 8,000 resources in Florida and over 10,000 resources in the Carolinas as we braced for the storm. While Dorian's track shifted, it caused nearly 300,000 outages in our service territories. Our team's preparation, commitment to our customers, and focus on operational excellence enabled us to restore more than 95% of the outages within 24 hours. Also, our systems and employees performed well in the face of some of the hottest days on record in September and early October. Despite these temperatures, our fleet performed well and served customers with the energy they demand. In the quarter, Duke Energy was named one of the top sustainable companies in North America by Dow Jones for the 14th consecutive year. This is a testament to our climate strategy, sustainable practices, and ongoing investments in cleaner generations. In addition, Duke Energy received a U.S. Transparency Award, which recognizes the quality and transparency of information that U.S. companies make available to investors. Duke Energy was awarded Best Corporate Disclosure for the utility industry. I'm proud of our employees and our operational execution during the quarter. From storm preparation to industry recognitions, we continue to demonstrate the strength of our business and excel in our operations, which is fundamental to achieving our long-term strategy. Turning to slide five, in September, we announced a more aggressive, comprehensive strategy to reduce carbon emissions. By 2030, we will cut carbon emissions by at least 50% from 2005 levels and aspire to attain net zero carbon emissions by 2050. Our commitment for 2030 includes plant retirements, operating our existing carbon-free resources, and investing in natural gas infrastructure, renewables, and our energy delivery system. Our recent rate case filings in Indiana and the Carolinas are consistent with this accelerated approach. As we look beyond 2030, we will need additional tools to continue our progress. We will work actively to advocate for research and development of carbon-free dispatchable resources. That includes longer-term energy storage, advanced nuclear technologies, carbon capture, and zero-carbon fuels. We will also pursue second license renewal for all of our nuclear assets to maintain this low-cost, carbon-free source of generation. The journey and timeline for achieving our targets will be different in each state, and we're committed to working with our regulators and other stakeholders to design the right path for our customers and communities. Making our energy system cleaner and more sustainable means we must transform the way we operate, and we're facing that challenge head-on. We've made great progress, and our acceleration in this area will position the company to provide customers with a cleaner, smarter energy future. The investments shown on slide six are also consistent with our climate strategy. Our Asheville combined cycle plant is on track to be completed by the end of the year. This plant is part of our $1.1 billion Western Carolinas modernization project that supports this growing region. Also in North Carolina, the second renewable energy RFP under House Bill 589 launched in mid-October. The RFP seeks another 680 megawatts of solar project, which would bring the total renewables under the program to almost 1,200 megawatts. We look forward to participating in this next phase of the process. As a reminder, in Florida, we will be installing 700 megawatts of solar by 2022, It's part of our multi-year settlement agreement. To date, the Commission has approved the recovery of 344 megawatts under the solar base rate adjustment mechanism. Focusing on our commercial renewables business, we had another impressive quarter. So far this year, we've announced over 1,500 megawatts of new wind and solar projects, including nearly 400 megawatts announced in the third quarter. Given our pipeline of investments, we have line of sight, nearly all of our growth prospects for 2019 and 2020, and 70% over the five-year plan. Shifting to our gas business on slide seven, let me update you on the status of the Atlantic Coast pipeline. In early October, the U.S. Supreme Court accepted our petition to review the Fourth Circuit Court of Appeals Appalachian Trail crossing decision. This is a very encouraging sign and provides a path forward to resolve this important issue. We expect the Supreme Court will schedule arguments for early next year with a final decision no later than mid-2020. As a reminder, the Solicitor General has joined our appeal, and we are supported by a broad coalition of stakeholders, including 16 state attorneys general. We believe the law and facts are on our side and look forward to moving toward a final resolution. We also continue to work with project partners and the Fish and Wildlife Service on the biological opinion and incidental take statement to resolve the issues identified by the Fourth Circuit. Based on early discussions, we now expect the permits to be issued in the first half of 2020. While this is later than previously anticipated, all parties are keenly focused on delivering reissued permits that are robust enough to minimize the potential for further appeals. This timing also aligns more closely with the expected Supreme Court decision, providing more clarity before we pursue full construction activities. Given this timeline for the resolution of the Appalachian Trail crossing and the biological opinion, we are no longer pursuing a phased approach, but are now planning for mechanical completion of the project in late 2021 with full in service in the first half of 2022. On the customer front, the ACP project partners have advanced discussions on the project status and costs, and we expect to reach an agreement in principle by the end of this year, balancing price and project returns. We believe this pipeline remains the best option to meet our customers' needs. We remain committed to the Atlantic Coast Pipeline and the significant benefits it will bring to our customers and our region. It will provide much-needed natural gas to an underserved area of the southeast and will allow us to retire coal units and replace them with cleaner-burning natural gas-fired plants to help meet our carbon reduction targets. In addition, it supports critical resiliency needs for some of the country's most important military outputs. At the same time, as we execute on our $37 billion growth capital plan that underlies our 4% to 6% earnings growth rate, we have consistently stated our commitment to a strong balance sheet. Given ACP progress and clarity on important milestones, which includes a delay in project revenues until early to mid-2022, we are increasing the amount of equity in our plan. We plan to monitor market conditions and issue approximately $2.5 billion opportunistically by the end of 2020. This additional equity allows us to absorb a wide range of outcomes associated with ACP while also offering greater financial flexibility to the company. For instance, after ACP comes online, we will have the ability to moderate our current assumptions of $500 million per year in drip and ATM issuances. Additionally, we see emerging infrastructure needs for our expansive energy delivery system, which may require incremental investments and which would drive additional growth beyond our existing $37 billion growth capital plan. We believe this issuance keeps us moving forward as we deliver value to our customers and results for our shareholders. We remain confident in our ability to achieve 4% to 6% earnings growth through 2023, given our healthy franchises and strong investment growth profile. Steve will discuss more details about our growth drivers in a moment. Circling back to ACP, I'm pleased with the progress we've made to advance this important infrastructure project. While this is a lengthy process, we're committed to the project and its completion, and we will continue to share details as we learn more. Moving to slide eight, let me share a few updates about recent legislative developments. Earlier this week, Senate Bill 559 was enacted into law in North Carolina, enabling the Utilities Commission to approve storm cost securitization. This important mechanism will save customers 15 to 20 percent on storm costs and support our balance sheet. We are pleased with the General Assembly's unanimous vote on securitization. and also the bipartisan support for other cost recovery mechanisms that we advocated for, such as multi-year rate plans and ROE bans. While the final bill does not include these other provisions, Governor Cooper's Clean Energy Plan speaks to the potential for modernized recovery mechanisms for the state. We are encouraged that these important reforms are part of the broader energy policy dialogue, and we will actively participate in the 2020 stakeholder engagement process related to the Clean Energy Plan. Changes to the regulatory construct are a vital part of achieving North Carolina's energy objectives in the long term. We are focused on advancing modern mechanisms and the customer benefits they provide. In the near term, our attention will be on the execution of frequent rate cases and pursuing solutions to reduce regulatory lag. Both are important to delivering customer benefits and meeting our earnings objectives. We have operated in North Carolina for more than a century, providing our customers with safe and reliable power. The state is thriving with a strong economy and increasing demand for new energy infrastructure. As we look ahead, we share many of the state's objectives and will partner with stakeholders to develop innovative solutions and thoughtful energy policy. Energy policy discussions are also advancing in many of our other states, and stakeholders are embracing the value of improving the grid. In Ohio, House Bill 247 is progressing through the legislature. This bill would further grid modernization, distributed generation, and other investments that benefit customers. And in Florida, recently enacted legislation promotes grid-hardening investments that will improve the resiliency of the grid against extreme weather events while establishing rider recovery for the investments. The Florida Public Service Commission is finalizing rulemaking, and we expect to file our storm protection plans in 2020. With over 300,000 line miles across our utilities, our transmission and distribution network is the largest in the nation, and the demands on our energy delivery system have never been greater. This requires significant capital investment to ensure our communities keep pace with the energy transformation occurring across the nation. We are excited to work with stakeholders across all of our electric and gas service territories to ensure the pace and scale of our investments align with customer needs. Before turning it over to Steve, I want to reiterate our strong confidence in our long-term strategy and our continued ability to deliver on our commitments. We're taking necessary steps to maintain the strength of our balance sheet, advocating for solutions across our jurisdictions, and making progress as we advance our investment priorities to benefit our customers and shareholders. As we move into the fourth quarter, we look forward to closing out a very strong year. With that, I'll turn it over to Steve.