Duke Energy Corporation (Holding Company)

Good morning. My name is Joanne, and I will be your conference operator today. At this time, I would like to welcome everyone to the Duke Energy second quarter 2022 earnings call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, again, press star. I would now like to introduce Jack Sullivan, Vice President of Investor Relations. You may begin your conference.

Well, thank you, Joanne, and good morning, everyone. Welcome to Duke Energy's second quarter 2022 earnings review and business update. Leading our call today is Len Good, Chair, President, and CEO, 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 securities laws. Actual results may be different than forward-looking statements, and those factors are outlined herein and disclosed in Duke Energy's SEC filings. The appendix of today's presentation includes supplemental information and disclosures, along with a reconciliation of non-GAAP financial measures. So with that, let's turn the call over to Lynn.

Jack, thank you, and good morning, everyone. Today we announced adjusted earnings per share of $1.14 for the quarter, delivering strong results driven by continued growth in electric volumes and favorable weather. We remain on track to deliver within our original guidance range and are reaffirming our full-year guidance range of 530 to 560 with a midpoint of 545. We're also reaffirming our long-term earnings growth rate of 5% to 7% through 2026, up the midpoint of our original 2021 guidance range. Turning to slide five, I'd like to offer context on our announcements this morning to perform a strategic review of our commercial renewables business, which has been an integral part of Duke Energy's renewable energy platform over the past 15 years. Since 2007, we've built a portfolio of approximately 5,000 megawatts of commercial wind, solar, and battery projects across the U.S. and established a robust development pipeline. While it represents less than 5% of Duke Energy's earnings, we're proud of the fact it's among the top 10 largest U.S. renewable companies. But as we look forward to the remainder of this decade and beyond, we have line of sight to significant renewable grid and other investment opportunities within our faster-growing regulated operations as we execute the industry's largest clean energy transition. We believe this is the appropriate time to review the ongoing strategic fit of commercial operations as we prepare for an acceleration in capital spending within our regulated businesses. Our strategic review will be thorough yet timely. We expect to conclude the review later this year or early next, and we'll update you along the way. Today, our regulated utility operations represent over 95% of Duke Energy's earnings profile and have long been the growth engine of our company. We operate premier regulated franchises in growing service territories with constructive regulatory jurisdictions and robust customer-focused investment opportunities. Our regulated businesses are strongly positioned to grow within our earnings guidance range of 5% to 7%, providing consistent earnings and cash flow and supporting our attractive dividend. Turning to slide six, let me share an overview of the proposed carbon plan we filed with the North Carolina Utilities Commission on May 16th. We've already made significant progress in the Carolinas, and this plan continues our transition to lower carbon resources while maintaining affordability and reliability. Our plan contains four portfolios that achieve the interim 70% carbon reduction target and carbon neutrality by 2050. Each portfolio presents a roadmap to lower emissions through an orderly retirement of coal, replacing it with a diverse set of carbon-free and dispatchable resources. The primary difference among the portfolios relates to the pace of deployment and availability of replacement resources. As part of the filing, we've requested the approval of a defined set of near-term activities related to replacement resources needed regardless of the path selected. This includes new solar, battery storage, onshore wind, and hydrogen-capable natural gas. We also requested to begin early development of long lead time zero carbon resources, which are needed in the early 2030s, including offshore wind, small modular nuclear, and pumped storage. These activities help us preserve option value for a broader set of resources. The results of these development activities will be filed in 2024 with an updated carbon plan, providing the Commission with more information as they consider resource selections required to meet carbon reduction targets. We look forward to continued engagement with stakeholders as the NCUC finalizes the carbon plan by year end. Our proposed plan has also been shared with the Public Service Commission of South Carolina, and the final plan will be foundational to the next comprehensive South Carolina IRP in 2023. Moving to point seven, we have a robust regulatory and legislative plan that is underway in the vibrant economies we serve. Our thriving jurisdictions were highlighted recently in CNBC's annual list of America's top states for business, which ranked five of the states we serve in the top 15, including North Carolina, which ranked number one for the first time. I'd like to touch on the progress we're making in each of our jurisdictions to continue providing affordable and reliable energy for our customers. In North Carolina, we expect to file a DEP rate case in the fourth quarter, and likely a DEC rate case early next year. Both cases will introduce the modernized rate-making tools approved in HB 951, including multi-year rate plans, performance incentive measures, and residential decoupling. The NCUC hosted a T&D technical conference in late July. DEP presented to the Commission stakeholders and discussed key transmission and distribution investments, that enhance grid resiliency, flexibility, and expand the use of renewables and distributed energy resources on our system. In South Carolina, storm securitization legislation was signed into law in June. This creates a valuable tool to recover prior and future storm restoration costs while saving customers millions of dollars compared to traditional recovery mechanisms. We expect to file an initial application with the Public Service Commission of South Carolina in August and expect to issue storm bonds in late 2023 or early 2024. Earlier this week, we gave notice of an upcoming DEP South Carolina rate case, our first case to be filed in South Carolina since 2018. We expect to file the case in September and anticipate rates to go into effect in the first half of 2023. In Florida, we have placed three out of four solar projects planned for 2022 online, and we remain on track to install a total of 300 megawatts of solar by the end of this year. Shifting to Indiana, the Commission approved our $2 billion TDIS plan, which includes grid modernization investments and improved reliability and resiliency. We'll begin executing in 2023, following the completion of our initial TDIS plan this year. In May, we received a robust response to our request for proposals for generation resources in Indiana. We're evaluating the proposals now, and we'll incorporate the results into our CCCN filing later this year. And turning to Ohio, our electric distribution rate case continues to move forward, and the hearing is scheduled to begin in mid-September. In June, we filed an Ohio gas rate case, which is our first detailed review of gas base rates since 2012. Moving to slide eight, I'd like to touch on the Inflation Reduction Act that was announced this week. Duke Energy has always advocated for policies aligned with our mission to deliver affordable, reliable, and increasingly clean energy to our customers. And the clean energy tax provisions of this draft legislation do just that. If passed, the clean energy tax credits will lower our cost of service, which in turn reduces the cost to customers of our energy transitions. Furthermore, the transferability provisions could help direct the intended value of these credits to our customers more efficiently. The bill also recognizes the important role that existing nuclear plays, with nuclear PTCs awarded to operators of highly efficient nuclear stations. Duke Energy operates the largest regulated nuclear fleet in the U.S., with some of the highest efficiency measures. As such, we would likely qualify for significant nuclear production tax credits also to the benefit of our customers in the Carolinas. We're pleased to see the strong support of the clean energy provisions in this draft legislation, and we look forward to tracking the bill's progress, and we'll keep you informed along the way. In closing, we have a clear path ahead of us as we execute our energy transition, and I'm confident in our ability to continue to deliver value to customers and shareholders. Before I hand the call over to Steve, I'd like to comment on some important organizational changes we announced earlier this week. Effective September 1st, Brian Savoy, currently Executive Vice President and Chief Strategy and Commercial Officer, will become Executive Vice President and Chief Financial Officer, succeeding Steve. Brian's deep financial acumen and broad business experience have prepared him well for this role, allowing for a seamless transition. Steve will become Executive Vice President and Chief Commercial Officer. One of Steve's main priorities will be to oversee the strategic review of our commercial renewables portfolio that we announced this morning. Steve is an exceptional leader, and during his 40-year career has played an instrumental role in transforming Duke Energy into the strong company it is today. He has been an extraordinary partner of mine and a trusted counselor, and his commitment to our company, customers, communities, and employees is deeply appreciated and recognized by all of our stakeholders. Brian also shares this commitment and will play a critical role in advancing our strategy while delivering sustainable value to our customers and shareholders. The depth of leadership at this company is impressive. I would say it's second to none. And these changes will further position us for success as we execute the industry's largest clean energy transition. And so with that, thanks to Steve, and let me turn the call over to him.