Duke Energy Corporation (Holding Company)

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

Thank you, Cody. Good morning, everyone, and welcome to Duke Energy's second quarter 2021 earnings review and business update. Leading our call today is Lynn Good. Chair, President, and Chief Executive Officer, along with Steve Young, Executive Vice President and CFO. Today's discussion will include the use of non-GAAP financial measures and forward-looking information within the meaning of the securities laws. Actual results could differ materially from such forward-looking statements, and those factors are outlined herein and disclosed in Duke Energy's SEC filings. A reconciliation of non-GAAP financial measures can be found in today's materials and on dukenergy.com. Please note the appendix for today's presentation includes supplemental information and additional disclosures. So with that, let's turn the call over to Lynn.

Jack, thank you, and good morning, everyone. It's great to be with you for our second quarter 2021 earnings call. Today we announced strong results for the quarter with adjusted earnings per share of $1.15. These results, driven in part by economic recovery, also demonstrate the continued strength of our clean energy strategy. We are leading the transition to cleaner energy by adding significant amounts of renewables to our portfolio, hardening the grid through investments in our transmission and distribution assets, and collaborating with stakeholders and policymakers to advance supportive energy policy. We have positive momentum going into the second half of the year and are reaffirming our 2021 adjusted EPS guidance range of $5 to $5.30. We're also reaffirming our long-term EPS growth rate of 5% to 7% through 2025 based off of 515 midpoint for 2021. And we remain fully committed to creating value for shareholders by recently increasing our quarterly cash dividend for the 15th consecutive year. Looking ahead, we have a number of strategic milestones that we're working toward in the second half of the year. We anticipate the closing of the minority sale of Duke Energy Indiana to GIC announced earlier this year at an attractive premium to our public equity valuation. This transaction satisfies our equity needs for the next five years. We received CFIUS approval in June. FERC approval is the only remaining closing requirement and we anticipate receiving approval at any time. during the third quarter. We continue engaging with stakeholders on important work in the Carolinas on our 2020 IRPs and energy legislation, and in Indiana on our 2021 IRP. I will speak further about those in just a moment. And operationally, we have four remaining months of hurricane season, and our team is ready to respond on behalf of our customers. In July, Elsa was our first official storm of the 2021 season. While we had minimal impact in our Florida and Carolina service territories, we were prepared and restored power quickly to our customers. I'm very proud of our accomplishments to date and we're poised for a strong finish to 2021. Turning to slide five, we continue to advance our clean energy transformation powered by our five-year $59 billion growth capital plan. These investments are delivering value for our customers and communities and driving strong growth for our investors. I want to highlight a couple of recent accomplishments. Renewables are playing a major role in our path to net zero. We continue construction on approximately 250 megawatts of new solar projects in North Carolina and Florida that we expect to bring online by the end of this year. And in recent weeks, we commissioned the 144 megawatt Pflugerville Solar and 182 megawatt Mary Neal Wind projects in Texas. With the completion of these two projects, we hit a significant milestone. surpassing 10,000 megawatts of solar and wind resources. This is a testament to the hard work and dedication of our employees and strong support we receive from the communities where we operate. In addition to carbon reduction and the benefits of creating a diverse energy infrastructure, solar and wind investments foster economic development, tax revenue, and job creation in the areas we serve. This milestone reflects our leadership in clean energy, and we are on track to pass 16,000 megawatts of renewables by 2025, and approximately 24,000 megawatts by 2030. By 2050, renewables will represent 40% or more of our energy mix. Nuclear is also a foundational component of our strategy, providing the largest source of reliable carbon-free energy we have in our system. In June, we submitted our application to renew Oconee Nuclear Station's operating licenses for an additional 20 years, which was accepted by the NRC for review. This is our first subsequent license renewal application among our six nuclear sites in the Carolinas, and the review process will move forward over the next 18 months. Oconee is our largest nuclear station, with three generating units that produce more than 2,500 megawatts of carbon-free base flow generation, enough to power more than 1.9 million homes. Our nuclear fleet provided 83% of the company's carbon-free generation in 2020, and avoided the release of nearly 50 million tons of carbon dioxide. We'll pursue similar extensions for each of our remaining reactors as they approach the end of their respective licensing periods. Our ambitious climate strategy also puts us in a strong position to help other sectors, such as transportation, meet their emission reduction goals. We continue to build out electric vehicle infrastructure in our service territories, and one of our subsidiaries, E-Trans Energy, was recently named a preferred provider by GM. to help its fleet customers transition to electric vehicles. Electrifying vehicles is a win-win approach to reducing carbon emissions from both the electric and the transportation sectors. Turning to slide six, we're actively engaging policymakers and stakeholders across our jurisdictions and at the federal level. In North Carolina, the House of Representatives recently passed House Bill 951. This legislation directs an orderly clean energy transition for North Carolina, including mandates to retire 12 coal units at five locations and replace them with cleaner forms of generation, renewed solar programs, and modern rate-making tools to better align clean energy investments with customer needs. We support House Bill 951 and will continue to monitor its progress through the legislative process. North Carolina has a long history of constructive energy policy that was developed by finding common ground, which has helped position the state as a leader in clean energy and in economic development. Advancing this clean energy transition continues to be a priority for the state and its leaders. We also continue to work with the commissions in both North and South Carolina to advance our integrated resource plans. Regulators have been complementary of the extensive stakeholder feedback process and comprehensive data incorporated into the IRPs. In South Carolina, we received an order from the Commission requesting additional analyses and modeling, which will be filed later this month. And in North Carolina, the Commission plans to hold additional proceedings and will be providing guidance on next steps. This is the first time we've presented multiple generation scenarios in the IRPs, and we welcome the opportunity to provide our regulators with more input. In Florida, we received the final order from the Commission in June approving the new multi-year rate plan settlement. The significant agreement includes the continued expansion of utility-scale solar, energy storage, new electric vehicle charging station programs, and provides rate certainty to benefit customers. Among other things, our investments include 10 new solar power plants across the state that will deliver 750 megawatts of cost-effective renewable energy to customers. This multi-year rate plan is in addition to our storm protection plan, which entails $6.2 billion in grid investments through 2029 to harden and strengthen the grid, protecting it against significant weather events and improving reliability for customers. In Indiana, the Commission approved Step 2 from our 2019 rate case, which updates rate base through year-end 2020 and trues up carrying costs back to January 1, 2021. As we prepare to submit our Indiana IRP in November, we continue to engage business customers, consumer advocates, and environmental groups to solicit input on transitioning to cleaner generation sources while keeping a sharp focus on reliability and affordability for customers. We took an important step in our last rate case by reducing the depreciable lives for our coal capacity and looked to the IRP to continue this progress. We'll collaborate with stakeholders and policymakers to find the best path forward for the state's clean energy transition. Shifting to the LDCs, we filed rate cases in two jurisdictions this year. Across our gas segment, we've worked to keep O&M costs relatively flat during a period of strong customer growth and capital additions. Our Piedmont natural gas rate request continues to move through the regulatory process in North Carolina. This request includes construction costs related to our new natural gas storage facility in Robeson County. A hearing is scheduled for September, and if approved, rates would be affected by year end. In Kentucky, we've made strategic investments to improve the reliability and integrity of our natural gas delivery system and filed a request with the Public Service Commission to recover those costs. We've invested nearly $190 million in a variety of capital projects across Northern Kentucky since we last sought a natural gas base rate increase in 2018. We will present our case to the Commission in October. And finally, let me comment on the work in D.C. We're engaged with Congress and the administration on a wide range of issues, including infrastructure, tax, and climate policy. The bipartisan infrastructure framework is the subject of much discussion and could serve as a powerful catalyst to modernize our nation's infrastructure. It includes funding for large-scale expansion of charging infrastructure to prepare for and further drive adoption of electric vehicles. And as charging infrastructure grows, so will the need for grid investments. Innovation will also be a critical part of the journey to net zero because with our existing technologies, We can make important progress, but cannot close the gap. We're pleased to see the framework includes funding to accelerate the development of next-generation clean energy technologies such as hydrogen, carbon capture, and advanced nuclear. Robust and sustained government support is vital to ensure the commercialization of these advanced technologies. It's critical for us to tackle this issue today so the technologies are scalable when we need them. In closing, our continued growth and strong second quarter results were driven by solid execution across all our jurisdictions as we lead the largest clean energy transition in our industry. I'm confident we will continue to build on this momentum to deliver sustainable value and grow earnings 5% to 7% over the next five years. With that, let me turn it over to Steve.

Thanks, Lynn, and good morning, everyone. I'll start with a brief discussion on our quarterly results, highlighting a few of the key variances to the prior year. For more detailed information on variance drivers and a reconciliation of reported to adjusted results, please refer to the supporting materials that accompany today's press release and presentation. As shown on slide seven, our second quarter reported earnings per share was 96 cents, and our adjusted earnings per share was $1.15. This is compared to a reported loss of $1.13 and an adjusted earnings per share gain of $1.08 last year. The difference between second quarter reported and adjusted earnings per share is due to the one-time impacts of the initiative to redefine workspace usage in light of what we have learned from COVID. This effort involves consolidation of corporate office space and accommodating a hybrid work environment, resulting in a 60% reduction in square footage and annual savings of approximately $25 to $30 million. The adjusted earnings per share growth in the quarter continues to be strong, led by electric utilities and infrastructure, which was up 24 cents compared to the prior year. Results were favorable due to benefits from base rate increases, favorable volumes, riders, and weather. Partially offsetting these items were higher O&M costs due to COVID-19 mitigation efforts in 2020. Shifting to gas utilities and infrastructure, results were down 3 cents, primarily due to the cancellation of ACP last year. In our commercial renewables segment, results were down 6 cents for the quarter, driven by lower investments in new renewables projects compared to prior year. This is consistent with our guidance in February, and we expect full year 2021 earnings to be within our $200 to $250 million range. Other was unfavorable, 4 cents for the quarter. principally due to less favorable market returns on certain benefit plans and higher income tax expense, partially offset by lower financing costs. Finally, segment results are impacted by 4 cents of share dilution related to the $2.5 billion equity issuance that closed in December 2020. Overall, we had strong results compared to last year, supported by our continued execution and the rebounding economy. We remain confident in our ability to consistently grow our adjusted EPS at 5% to 7% throughout the five-year period off the 2021 base year. Turning to slide 8, let me provide an overview of electric volumes and economic trends. Our results for the second quarter were up approximately 6.5% year over year. Keep in mind, we are comparing sales data to Q2 of last year. which experienced the largest impact from COVID-19. Residential volumes were down 6%. However, given stay-at-home orders during the same period last year, the modest decrease indicates many people continue to work from home on at least a part-time basis. In fact, this quarter's results are more than 4% above the second quarter of 2019, highlighting the continued strength of the residential class, which is supported by customer growth across our service territories. As reported on our first quarter earnings call, nearly all large commercial and industrial customers have resumed operations in the sector, and the sector is showing signs of optimism. The commercial class has rebounded considerably from prior year, with an increase of 11.7 percent. Retail, dining, and recreation are all driving positive year-over-year comparison as most COVID restrictions have been lifted. Similarly, industrial volumes have increased 11.8% for the quarter, whereas volumes had declined 15% last year. We expect improvement in the commercial and industrial classes as employment recovers and supply chain bottlenecks are resolved. As we progress to the back half of the year, we are monitoring the pace of economic recovery and potential impacts of the Delta variant. At the same time, we are encouraged by the sales trend so far this year, along with strong customer growth across our service territories. With Q2 overall retail volumes returning to Q2 2019 levels, we remain confident in our full year expectation of 1% to 2% load growth for 2021 and are trending towards the top half of that range. On slide 9, I'd like to share an update on where we are with our financing plan and dividend growth. We remain on track with the financing plan we outlined on the fourth quarter call. The proceeds from the GIC minority interest sale, along with our overall financing plan, allow us to maintain a strong credit profile without the need for common equity issuances throughout our five-year plan. We are on track to complete the North Carolina storm securitization this fall. And we recently issued $3 billion of holding company debt at low attractive rates. Finally, we understand the value of our dividend to our investors. This year marks the 95th consecutive year of paying a quarterly cash dividend and the 15th consecutive annual increase. Moving to slide 10, I want to provide some perspective on timing considerations for the second half of the year and an update on our cost management efforts. We expect volumes will continue to recover over the balance of the year, but as we saw in the second quarter, we expect O&M to be unfavorable in the third quarter when compared to 2020. This is due to the actions we took to significantly reduce O&M during the pandemic, such as deferred outages at our generating stations. Overall, we reduced O&M $320 million in 2020, equivalent to more than 6% of our non-rider recoverable O&M. On our February call, we shared that we plan to sustain 65% or $200 million of those savings and carry them forward into 2021. We are on track to achieve those savings. This is consistent with our cost management track record since 2016. On a consolidated basis, over the past five years, our net regulated electric and gas O&M has declined approximately 1% per year, and we expect this trend to continue. Before we open it up for questions, let me close with slide 11. We remain confident in our 2021 adjusted earnings per share guidance of $5 to $5.30 with a midpoint of $5.15. Our year-to-date results position us well to achieve full-year results within this range as we continue to invest in important energy infrastructure to benefit our customers and communities. Our attractive dividend yield coupled with our long-term earnings growth profile of 5% to 7% provide a compelling risk-adjusted return for our shareholders. As Lynn discussed, we continue to advance our clean energy strategy, adding new renewable generation and taking steps to extend the lives of our carbon-free nuclear fleet. We continue to engage with state and federal leaders as they work to pave the way for a clean energy future. We're executing our capital plan to support those efforts by investing in our energy grid, all while employing financing solutions that save customers money and add value for shareholders. Duke Energy is well positioned to lead as the pace of change in our industry accelerates, delivering sustainable value to our customers and investors. With that, we'll open the line for your questions.

Thank you. If you'd like to ask a question, please signal by pressing star 1 on your telephone keypad. If you are using a speakerphone, please make sure that your mute function is turned off to allow your signal to reach our equipment. Once again, that is star 1 if you would like to ask a question. We'll take our first question from Char Peruzza with Guggenheim Partners. Please go ahead.

Hey, good morning, guys. Hi, Char. Good morning. So appreciate your prepared remarks around, you know, House Bill 951, Lynn. Where are we in the process as it stands today? Are you still optimistic? I mean, couldn't help but notice some of the lack of bipartisanship going on. Should we be sort of concerned here at this stage?

Sure. The bill is moving and we are encouraged by what we're seeing. I think you know that it passed the House. We've seen support from Senate leadership that the energy legislation remains a priority, and the governor has been clear for some time about his strong commitment to carbon reduction and to renewable investment in the state. So we're encouraged that the legislative branch, executive branch, and all of the broad stakeholders involved in this process will find common ground, and that has been the long history in North Carolina of bringing diverse parties together and advancing energy policy.

I want to just elaborate a little bit around sort of the common ground. And I know this isn't obviously a Duke energy bill, and there's a lot of stakeholders involved. But passage of it is going to obviously impact your clean energy transition, right, in the state. Investors kind of want to know if there is a possibility of compromise, i.e. between the draft bill versus legislators versus the governor's very vocal comments, right? It's not really your call, but could we see a faster coal retirement outlook, maybe a little less dependency on gas, a bit more solar? I mean, the governor wants more. So do you see a path forward to kind of maybe bridge this sort of bid ask that's out there?

You know, sure we do. And I think your comments around, you know, it's comprehensive. There are many elements to it. You have a broad range of stakeholders. It is natural. and expected that there are going to be different points of view in that conversation. And what HB 951 does is it outlines a path to a clean energy transition. And the discussion is centering around that pace, the cost, maintaining reliability. And we would expect that legislators and the administration will evaluate all portions of this draft bill to find the right balance. So I think advancing clean energy transition remains a priority for the state and its leaders, as well as this broad range of stakeholders. and we will keep you informed as the bill continues to move.

Okay, perfect. Thank you very much. Congrats on the quarter.

Thank you. Thank you, Char.

Thank you. We'll take our next question from Julian DeMullion-Smith with Bank of America.

Hi, Julian. Hey, good morning. Can you hear me? Hey, thank you for the time. We can. Sure. Absolutely. So at risk of asking more on the legislation, perhaps I can pivot a little bit more strategically, or if you don't mind. And I'd love to hear if you have any latest thoughts with regards to undertaking any further review of the company. I know that there's been a lot of, shall we say, noise out there, and would love to hear your latest thoughts therein. I'll leave it as open-ended as you'd like to comment.

Sure. And, you know, Julie and I assume that's a comment about Elliott Management and And so let me just answer it in that context, and then we can take it any place you want to go. We regularly engage with our shareholders. We regularly review our portfolio, our operations and business strategy. And our approach around engagement has been similar with Elliott, and we have been in discussions with them for over a year, comprehensively reviewing all of the ideas, engaging advisors when we need to, discussing with our board, all of these ideas. And it's not appropriate for me to comment any further on the specifics, but I would confirm to you that we remain open to constructive engagement. We'll evaluate all proposals, act on those we believe delivers value to our stakeholders. And I would also say that we remain focused on the serving of customers, maintaining our assets, advancing the strategic priorities, around our clean energy transition, and that remains unchanged as well.

Got it. Excellent. Thank you for the thoughts. Perhaps if I can pivot a little bit differently here, as you think about the non-utility side of the business, can you comment at all on just thoughts on scaling that or not? Obviously, it's not been too core of a focus of late, but given some of the pressures across the wider renewable businesses out there, We'd be curious what you're seeing, if that's impacting any of your timelines and or aspirations in business, but all together.

And Julian, we just crossed an important milestone of renewables, so 10,000 megawatts of renewables, which includes both regulated and non-regulated investment. And we see the growth of renewable energy is important to the clean energy transition. Our commercial team continues to deliver. They are forecasting to achieve 200 to 250 million per year and have been consistent in accomplishing that. So it remains an important part of the company. It remains an important part of our commitment around carbon reduction, our ESG story in general. And the team is on track to deliver in 2021, 2022, and beyond.

Right. Excellent. And just to clarify, to the extent to which you would get this legislation done, I know it's always difficult to say, but any updated thoughts at the end of the forecast period, how that might change as you've refined your planning? It might be a little bit early, and I know it's transient what could ultimately be included, but I figure I'd be remiss if I didn't ask.

Sure. No, and, you know, Julian, the plan that we've put in front of you, 2021 to 2025, is not dependent on legislation. We have a high degree of confidence in the ability to achieve our 5% to 7% growth rate. But as we talked about, you know, in October of last year, and we opened the horizon to what the back half of the decade could look like, we do see acceleration of capital, not only in pursuit of, you know, retirement of assets and building replacement generation, but also our grid investment as well. So we'll continue to update this in the ordinary course, giving you a view in February of what we think 2026 looks like. But we continue to expect acceleration of capital in the back half of the decade.

Okay. All right. We'll clarify that later. Thank you so much, and best of luck here. Thanks so much.

Thank you. We'll now take our next question from Jonathan Arnold with Vertical Research.

Hi. Good morning, guys. Hi, Jonathan. Good morning. Just on the North Carolina process, I know last quarter, Lynn, you sort of dissuaded us from being overly concerned about any particular dates, but could you just remind us sort of what the timing in the legislature is through the rest of the year and just anything we should be looking out for procedurally, or is it essentially open-ended?

Sure. You know, Jonathan, what I would say is that the timing is difficult to predict in these processes. It is within the hands of the legislative leadership, and we will know more as the bill progresses through the Senate. There was, in fact, a hearing this morning in the Senate, so we'll continue to keep you updated. I think you know that the long session in North Carolina does not have a statutory end date, so, you know, we will continue to monitor as it moves through the Senate process.

Okay. Thank you for that. And then just, I noticed the comment on feeling, yeah, that you're trending towards the top half of the sales or load forecast for this year. Does that sort of translate into how you feel you're tracking on earnings as well, or are there other things sort of weighing on the other side?

You know, Jonathan, we will reset and give you a finer look at where we're trending in the guidance range after third quarter. I mean, there's just so much weather volatility here in the southeast. We have hurricane season underway. So we will, you know, continue to monitor that and give you an update third quarter. But I would say we're off to a strong start, a strong start on the economic rebound, strong start on maintaining our focus on O&M, delivering on our key milestones around regulatory approvals, etc., So I'm pleased with where we are and also pleased to see the economic recovery. Those strong results in commercial and industrial are indicative of the economy opening up, and I think that's a good thing.

Great. Thank you. Just one very quick one. On the annual savings you talked about for the office reconfiguration, is that a pre-tax or after-tax number, the $25 million to $30 million?

That's a pre-tax number, Jonathan. Great.

Thank you, Steve.

Thank you.

Thank you. We'll take our next question from Steve Fleischman with Wolf Research.

Thanks. Good morning. Hi, Steve. Good morning. Hi, Lynn and Steve. So I think this may have been asked a little bit, but just wanted to better clarify the As we're watching the IRP and the different scenarios that come out, how should we think about what's embedded in your current capital plan versus what might be incremental? Or is it just mainly focused on beyond the current capital plan?

So, Steve, the capital plan is basically the base of the IRP plan. And so you should think about it that way. You know, the six scenarios as you move further to the right and you introduce additional technologies in the timeframe, that's where the legislation begins to come in, giving us some flexibility to move more rapidly on some of the retirements, et cetera. So when we talk about the implications of how IRP fits with the legislation, We've got a clear line of sight, 2021 to 2025, based on present law, based on the present processes, present regulatory processes. And the opportunity really exists in the back half of the decade. So that's how I would respond. I don't know, Steve, if you'd add anything to that.

Yes, I think as you move towards a more rapid decarbonization number, then the capital increases, I think within our current five-year plan, the upside would be at the back end of things, I would give that texture to it.

Okay. Great. Thank you.

Thank you.

Thank you. We'll hear next from Durgesh Chopra from Evercore ISI. Excuse me.

Hey, good morning, Steve. Good morning. Good morning. Most of my questions have been answered. Good morning, Steve. Just maybe big picture, Lynn, sort of what are you and some of the other utility leaders doing Looking at Washington, infrastructure bill sort of is being debated today, and then the reconciliation bill going into year-end. Maybe sort of what are sort of the top two or three things that you see coming out between now and year-end, you know, which impacts the sector?

Yeah, you know, Durgesh, I would say the infrastructure bill will continue to make its path. You know, we're supportive of a bipartisan approach, I think, As an infrastructure builder, our success over many years has been in a bipartisan framework. We're encouraged by the focus on electric vehicles and electric vehicle infrastructure. As you know, that's been a priority for Duke. We have about $100 million targeted on that investment, and there's certainly potential to expand it. The president today also has been advocating for 40% to 50% of electric vehicles by 2030. We are also pleased to see investment in zero and low carbon technologies like advanced nuclear, hydrogen, carbon capture, because we believe those technologies are important for a net zero world. So, you know, that's what I would say around infrastructure. I think on the remaining, the reconciliation process, you know, tax policy, climate legislation are all being discussed. I think it's too early to tell. how those shape up, but we are engaged with the administration and with Congress really talking about the tools that would be helpful for us to pursue our clean energy strategy and see a lot of alignment over time. But as you know, in a tight Senate and House, it can be challenging at times to find the right path, but we remain engaged.

Got it. Thanks so much. Appreciate the time.

Thank you.

Thank you. We'll hear next from Jeremy Tonant with J.P. Morgan.

Hi, good morning. Hi, Jeremy. Good morning. Hi. I just want to start off here. When thinking about the energy transition kind of from a different perspective, I know Duke has some irons in the fire with regards to R&G investments, but do you see any potential to kind of upsize this, increase this over time? Are there policies out there at the federal and state level that could be helpful in these efforts?

We are getting started, I would say, Jeremy, on RNG. It's consistent with our overall climate targets, certainly our goals, 100% methane goal, et cetera, and are working actively to learn more about the technology, learn more about how it impacts our system, and have made some very strategic investments. And so I do think there's an opportunity for it to develop over time. And the team is working actively with policymakers, with the communities, suppliers that would be relevant to this. And I think it'll be a bigger story as we move forward.

Got it. That's helpful. And then could you give any more color, just kind of pivoting here, on what we should be looking for with the IRP filing in Indiana later this year? What are some of the considerations versus maybe what we saw coming out of the Carolinas last year?

It's a really good question, Jeremy, because we are in the midst of stakeholder engagement in Indiana as well, engagement with the environmental community, with our large customers, certainly the regulators and other policymakers who are relevant to that process. The goal is decarbonizing. The goal is diversifying. And if you look at our last IRP, that we filed in Indiana, we had about 2,300, 2,400 megawatts of solar starting in 2023. We would expect that to grow. And so, you know, we've got a couple of more months here in working through the stakeholder process, but we see this as a next step where we, you know, in the right case, we accelerated retirement dates of coal plants. The IRP gives us a chance to expand that discussion on the clean energy transition over the next 20 years. And I think it's an important part of the ongoing conversation in Indiana on how the state will position itself for growth in the clean energy transition. So more to come on that. And as we look forward to November, third quarter call, EEI, et cetera, we'll have more that we can share around Indiana.

Got it. That's very helpful. Just a real quick last one for me. We've very recently seen some utility peers beef up their corporate governance with certain actions. I was just wondering if Duke has considered taking actions like this.

You know, I think Duke has a strong track record on governance, Jeremy. If you were to look back at the feedback we've received from shareholders and the additional disclosures and adoption of certain practices that we've followed, we have been very open-minded about these and will continue to do so. So that becomes a key focus here in the fall as we engage with shareholders, specifically focused on ESG topics. Our Corporate Governance Committee is very involved in that. The board is very involved in some of the conversations with shareholders as well. So you can expect us to continue to be responsive to our shareholders in this regard.

Got it. I'll leave it there. Thank you.

All right. Thank you.

Thank you. We'll hear next from Michael Lapidus with Goldman Sachs.

Hey, guys. Hey, Lynn. Hi, Michael. Thank you guys for taking my question. Just curious, how are you all thinking about the commercial power business and what the growth profile of that business looks like over the next couple of years relative to investing in renewables in the regulated business? I guess to simplify – What's a better return on capital investing in renewables outside of the regulated utility or within the regulated utility if you could allocate capital only to one of those alternatives?

Michael, it's a really good question because we do a lot of work around capital allocation. Of course, what meets the needs of our customers, what fits the policy of our state, what delivers the highest return, those are all key considerations. And our commercial renewables business has performed well against our benchmarks of what we expect from that business in terms of returns. But what you're suggesting is as we see more opportunity in the regulated business, how will that impact commercial? And I would say that will be very closely reviewed as part of our capital allocation plan going forward. I think you also know that we entered a joint venture project With John Hancock on the commercial renewable business, recycling that capital in a way that has been quite effective, and those are the types of transactions we will also evaluate over time. We like the business in the context of our ongoing ESG story and our pursuit of carbon reduction, but we'll closely scrutinize how capital is allocated.

Got it. Also, one follow-up, a number of your peers, some of the other large caps, think Exelon or AEP, have made investments in – they're almost like venture capital-like investments in various clean energy-related companies, some of which have gone public in the last six to 12 months. Just curious, does Duke have similar type of investments, and have you ever made any disclosure or any of them material or something that would show up in kind of the income statement over time?

So, Michael, we are active in this area and do make investments. Let me ask Steve to comment. You know, we look at it from a couple of perspectives. Certainly, there's an opportunity to earn a return, but as importantly, there's an opportunity to learn about what's going on in various technology development and various methods of technologies to serve customers, technologies that could advance carbon reduction. And as part of our Treasury Corporate Development Organization, we are focused on investment in that area in a way that complements our business.

Yes, I would add that we have made investments in various venture funds, and we work closely with the fund managers to understand what the investment profile is. And as Lynn said, it's aligned with our strategy. It looks at things like EVs and new technologies. And we also ensure that there is communication among our operating folks with the funds and the companies that we invest in so we can transfer learnings there. And we've had some good success there. It's not been material, but we're certainly learning a lot from it.

Got it. Thank you, guys. Thanks, Michael.

Thank you. And we'll take our final question from Anthony Crowdwell with Mizzou Health.

Good morning, Lynn. Good morning, Steve. Thanks for taking my question. Good morning. Sure. Just, I guess, a quick question. Earlier in the year, Duke had been able to resolve Ray Case in North Carolina. Florida, I think, last year resolved Indiana. But just are there any other Duke properties or Duke utilities under-earning you're allowed and maybe creating more of a headwind than you thought versus when you went in the year? I think you provide some disclosure on the fourth quarter slide deck of maybe adjusted book ROEs going into the year. Just is everyone on target, or is some of them maybe performing better than you thought or less than you thought?

You know, Anthony, they're performing well. We do look over time at our allowed returns, and we've got a good history across our footprint of earning at or even above our allowed returns. And they'll move around a bit as you're building a rate base for an upcoming rate case. So you'll see some movement around a return based upon some of those profiles. But we feel good about our regulatory cadence and our investments around that cadence. And the execution's been good. The Indiana case, and the Carolinas case are coming through nicely, and we're preparing for the future cases that Lynn was discussing, and we think that process is working well.

And, Anthony, I would just add that Steve runs a tight process around optimizing capital to make sure it's getting spent at a time that matches with that regulatory calendar. So we do all that we know to do to minimize lag, and the result of that is that we have a good track record of earning our returns.

Great. And just a last one for me. You may have touched on it earlier, Lynn, in a question I think on maybe some stuff going on in Washington. There's talk of maybe nuclear legislation or some maybe subsidy for nuclear plants. You're talking about license extension on Oconee. Just any thoughts to maybe your view on nuclear legislation that may be part of the infrastructure bill and would it impact Duke?

So, you know, Anthony, we are strong supporters of nuclear, as you know. And I think as you look here in the Carolinas in particular, 50% of the power comes from nuclear. Across the entire enterprise, 80% of our carbon-free generation is from nuclear. So we are very active. We intend to pursue second license renewal, as you indicated. And the discussion in Washington has really centered more around the plants that are exposed to markets commercial markets. So think about plants in PJM and otherwise. But we have had discussions with a number of people about the importance of nuclear in the transition, and I do believe it is being recognized by the administration and by Congress. And so that's an important area of advocacy for us, not only in existing plants, but on new technologies that would keep nuclear is part of the solution set for the clean energy transition.

Great. Thanks for taking my question and congrats on a solid quarter.

Thanks so much. Thank you.

Thank you. And that does conclude today's question and answer session. We'll turn the conference back over to Lynn Good for closing remarks.

Well, thank you, Cody, and thanks to all of you who participated today for your interest and investment in Duke Energy. And as always, we're available for further discussion, the IR team, Steve and I as well. So thanks again for participating.

Thank you. And that does conclude today's conference. We do thank you all for your participation. You may now disconnect.