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]

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.

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.

Shahriar Pourreza:

Obviously, you guys reaffirm that 1.5% to 2% low growth assumptions, but also kind of concurrently kind of increase the economic development activities. I mean, obviously, we've seen several of your peers raise low growth assumptions, kind of levered to that C&I customer backdrop, including large data centers coming into their states. I guess, Lynn, what's the trigger point and timing on when you will maybe reguide around load growth, which to us seems conservative, especially in the Carolinas? And could the opportunities kind of be accretive to your EPS growth guide like we heard from one of your Southeastern peers?

Shahriar Pourreza:

Got it. Okay. So as we head into February's update. I appreciate that. And then maybe just one more question for Brian. Brian, obviously, you guys have kind of a perpetual preferred, which has a dividend reset coming. I think in September, what's the plan, I guess, to refinance it? What's embedded in your numbers?

Shahriar Pourreza:

Okay. Perfect. Fantastic, guys. And Harry, congrats on your first of many earnings calls. Big congrats.

Lynn Good:

Thank you, Shar.

David Arcaro:

You could elaborate -- I'm wondering if you -- how you're thinking about the new EPA rules and how that could affect some of your IRPs, just longer-term resource plans that are in flight right now?

Brian Savoy:

No, David. This is Brian. I'll take that. It's a really good question and one we evaluate every single day here in Duke Energy. As we find a way to serve our customers in a reliable and affordable way, we know we're going to need more resources, because we're seeing more demand on the system. And it's -- to your point, it's not just generation. It's T&D investments, too. And the teams across the Duke Energy evaluate how we're going to put the loads in the best places as well as when we talk about economic development opportunities, we present customers with the places that have generation capacity and T&D capacity to support them or the modest upgrades that we need.

Lynn Good:

David, the one thing I would add. We've been really successful over the last many years in developing modern regulatory mechanisms for grid investment. And those grid investments are running in every jurisdiction to really prepare for this generation transition, and that will continue. So if you look at our next 5 years, largely reinvestments. And so we'll keep that going at a pace that makes sense.

Operator:

Our next question comes from Durgesh Chopra with Evercore.

Lynn Good:

So Harry, you want to talk about the CPCN and IRP process in the Carolinas. And Durgesh, I'll take the second question, those CPCN investments are in the capital plan.

Durgesh Chopra:

Awesome. Just quickly, Lynn, just though, are the IRPs incremental to the CPCN filings, the gigawatts that you're proposing? I'm thinking the answer is yes.

Operator:

The next question comes from Anthony Crowdell from Mizuho.

Brian Savoy:

That's a good question, Anthony. And as we've mentioned in the Q4 call, 14% FFO for 2024, 14% plus as we look out in time. So we're not going to stay put at 14%. We're going to continue to improve it over time. And guiding through that, we've got the benefit of the North Carolina rate cases this year. Next year, we'll have the benefit of all the other jurisdictions, Florida, Indiana, Piedmont, South Carolina, all these rate actions are underway that will continue to support top line growth, which also then supports the credit. And as we look out in the plan, I think the potential to earn at the higher end of the range also gives us opportunity to continue to strengthen the balance sheet. So I think we're going to take a balanced approach that provides growth for investors as well as protect a strong balance sheet over time.

Carly Davenport:

Maybe just as you think about your capital plans, both from an investment and the grid perspective and also on new generation. Have you been seeing anything -- any constraints from a supply chain perspective, whether it's in procuring kind of generation kits or transmission equipment that we should be keeping in mind?

Carly Davenport:

Got it. That's really helpful. And then maybe just a quick follow-up on the balance sheet question. Can you just update us on where you currently stand? And then just relative to the walk that you sort of laid out last quarter, are any of the buckets that bridge the gap of getting to that 14% FFO to debt level changing at all relative to what we saw last quarter?

Operator:

And our next question is from Jeremy Tonet with JPMorgan.

Lynn Good:

Jeremy, thank you. Making sure that we have adequate supply for any new source of generation is a part of the assignment. And so we have been at work over the course of 2023 and putting in place agreements that we believe will not only continue to strongly support the existing gas in our area, but also allow us to expand. And this is something that is closely monitored by the North Carolina Commission and will be by Indiana as well as we continue diversification there. But we feel like we've got a credible plan in place, and it will be executed over the number of years, fully recognizing that it takes a lot of work with stakeholders to not only build the generation, but working with our partners who are putting pipeline infrastructure in place to make sure that the stakeholder concerns and needs are being met and so we're confident we've got a plan in place we can execute.

Brian Savoy:

Jeremy, it's a good item to talk through. And on the commercial growth, we saw strength across our regions in the commercial sector. Data center growth was a key driver in that in the quarter, and we expect that to continue throughout the year. On the industrial side of things, we have some plants that are retooling for new products. So they're off-line in the first quarter. And they signaled to us that, look, this is a temporary thing, and we're going to be changing our lines and by mid-Q2, late Q2, we're coming back on in full.

Operator:

This concludes the Q&A session. So I'll hand the call back over to Lynn Good for any closing remarks.

Operator:

This concludes today's call. Thank you for joining. You may now disconnect your lines.

Operator:

Hello all, and welcome to the Duke Energy Fourth Quarter and End Year 2023 Earnings Call. My name is Lydia, and I'll be your operator today. [Operator Instructions] I'll now hand you over to Abby Motsinger, Vice President of Investor Relations to begin.

Lynn Good:

Abby, thank you, and good morning everyone. Today, we announced 2023 adjusted earnings per share of $5.56, finishing the year within our guidance range and demonstrating once again our ability to exercise agility in managing our business and meeting our commitments. We also announced 2024 guidance of $5.85 to $6.10 with the midpoint of $5.98. This represents 6% growth from our original 2023 guidance and we extended our 5% to 7% EPS growth rate through 2028 off the midpoint of our 2024 range. We entered the year with significant momentum. 2024 marks a fundamental repositioning of our investment proposition. With the commercial renewable sale, we've transformed our business to become a fully regulated utility for the first time in decades. Along with improved regulatory constructs, we're poised to deliver on our simplified 100% regulated growth plan. Our Southeast and Midwest utilities operate in some of the fastest growing and most attractive jurisdictions across the US. We expect growth in our service territories to accelerate, as we move further into the energy transition driving substantial investment. We are now projecting $73 billion in CapEx over the next five years, an $8 billion increase versus our previous plan. Turning to slide 5, 2023 marked another year of outstanding accomplishments across our business, building on our compelling growth story as we move into '24. As I mentioned, we completed our portfolio repositioning and delivered multiple constructive regulatory outcomes, while maintaining our commitment to safety and customers. We executed five rate cases and I'm proud of the constructive results the team has delivered. We received orders approving $45 billion in historic and future rate base investments that will provide growth to customers for years to come. There was also a recognition of the rising cost of capital with improving ROEs and equity ratios. And in North Carolina, we implemented forward-looking multiyear rate plans for the first time ever. The performance-based regulations authorized by HB 951, provides certainty, predictability and value to customers and the company. This milestone was accomplished through years of work with policymaker’s, legislators and other stakeholders. Shifting to operations. Our teams performed well throughout the year, serving our customers in extreme weather conditions and restoring power following historic storms in Indiana and Florida. Providing safe reliable power in all seasons and circumstances remains our mission. In fact, in 2023, Duke Energy Florida had its best reliability performance in more than a decade, largely due to our significant storm protection plan investments. These investments also aided restoration efforts in Hurricane Adalia, saving outage minutes and speeding return to service. In the Carolinas, our nuclear fleet continues to generate safe, reliable carbon-free power, achieving a capacity factor of 96%, the 25th year in a row above 90%. And underpinning all of this in a hallmark of our commitment to operational excellence, 2023 marked our best safety performance in company history, as measured by a total incident case rate of 0.31. Safety is a core value at Duke Energy and I'm proud of our employees' commitment to event-free operations. Finally, the Piedmont team continues to excel in customer service. For the second year in a row, J.D. Power ranked Piedmont number one in residential customer satisfaction for natural gas services in the Southeast. And our Carolinas electric utilities continue to achieve strong results as well, remaining in the top quartile. Moving to Slide 6, we start the year entering the next phase of our energy transition, a period of execution and record infrastructure build to meet the evolving energy needs of our customers and communities. We're working with stakeholders to develop resource plans to support the phenomenal growth in our communities. In the Carolinas, demand is already outpacing the forecast used in our August resource plan filings and we filed supplemental portfolios in January. We're committed to meeting this growth with a diverse and increasingly clean energy mix that includes renewables, natural gas, next-generation nuclear and storage resources, as well as energy efficiency and demand response tools. We're also taking steps to build new generation in North Carolina, we'll file CPCNs for over two gigawatts of new natural gas generation in 2024. We'll continue to advance annual solar procurements targeting one gigawatt per year. And in Indiana we'll file CPCNs for new generation resources around midyear. These new facilities will add to our diverse mix of resources and are critical to meeting growing customer demand as we reliably exit coal by 2035. From a regulatory perspective, we've announced two rate cases in 2024 starting with DEC South Carolina in early January. Since the last case in 2018, we've invested more than $1.5 billion to improve reliability and resiliency and meet the growing energy needs of our more than 650,000 customers. And in Florida, we notified the commission of our intent to file a rate case in April. Similar to our current multiyear rate plan, which runs through 2024, this filing will cover three years of investments beginning in 2025. Our plan will add over 1000 megawatts of new solar and include over $3 billion of grid investments to serve population growth, increased reliability and reduced storm-related outages. Finally since our last rate cases at Duke Energy Indiana and Piedmont North Carolina, we've continued to make investments to strengthen our system and we're evaluating the timing of our next filings in these jurisdictions. In closing, I'll move to Slide 7, which depicts the transition of Duke Energy over the last many years to the premier regulated utility than it is today. The strategic and financial clarity provided by optimizing our portfolio over the last decade has simplified Duke Energy to a powerful, core regulated business operating in vibrant jurisdictions, growing through population migration and strong commercial and industrial economic development. Our growth potential is the highest it's been in decades and is reflected in our $73 billion capital plan. This plan is driven by grid investments to transform the largest T&D system in the US and IRP-related generation investments to support our growing jurisdictions and fleet transition. An efficient recovery mechanisms allow us to translate these investments into customer and investor value. In closing, we have positioned Duke for long-term value creation and our path forward is clear as we navigate the coming decade of record infrastructure build. This pivotal point in our history drives a differentiated low-risk, total return proposition going forward and I'm confident we will deliver. With that let me turn the call over to Brian.

Operator:

[Operator Instructions] Our first question today comes from Shar Pourreza of Guggenheim Partners. Your line is open. Please go ahead.

Lynn Good:

Good morning, Shar.

Lynn Good:

Shar, thank you. An early estimate would say, we've begun to contemplate what the January IRP includes and I think, you've seen us demonstrate that we've not only seen an increase in megawatts, but frankly we've seen an increase in price for certain of the resources that we're adding. But we believe that capital plan is subject to continued refinement, not only as we move through regulatory process in the Carolinas, but we will introduce more around Indiana. We have a 10-year site plan that we're filing in Florida this year. So, refinement will continue with the capital plan. But what I would leave you with Shar is, we have a wealth of opportunities. I mean there is growth that is strong throughout all of our service territories and we'll be making along with our regulators the decisions on reliability, affordability, increasingly clean, as we move through these IRPs, so just a really strong growth story for Duke.

Lynn Good:

Yeah. So, a couple of things. On the transferability market, Shar, we have begun to test that market. We had a pilot transferability transaction in 2023. The discount on the transferability was right within our planning range. So very strong response to that initial test, and the treasury group and team are already working on how we might execute in 2024 as well. So we do believe the market is developing. And I think around the industry, you've seen similar transactions executed in an effective way. On a potential repeal, what I would say to you is we continue to be very engaged with policymakers at the federal and state level around the need for infrastructure as we continue to pursue growth, on-shoring of US manufacturing, leadership in artificial intelligence, battery manufacturing, EVs, et cetera. And we believe, there's a lot of support to continue to build that infrastructure, and to build it at a price that's affordable. And the point I would emphasize for us on tax credits around infrastructure, it goes directly to customers. It reduces price over time to customers dollar for dollar. So I believe both of those messages continue to resonate with policymakers and we'll continue to make them. I think it's essential that we keep moving on this infrastructure build in order to serve the growth that we're seeing in our service territories. On the impact of credit metrics, our goal, sure is to be minimum of 14%. So even in the event that, the credits could be impacted in some way over time. We still believe we'll have time to adjust. We'll look at our overall plans and continue to run our business with a commitment to our balance sheet and with a strong balance sheet to pursue the growth.

Lynn Good:

Thank you.

Julien Dumoulin-Smith:

Hi, Good morning, Lynn and team. Look, I just wanted to follow-up on the last question a little bit in the same focus on the nuclear PTCs here. Just in as much as can you discuss the reduction in the forecasted rate base? Obviously, an increase in CapEx year-to-date and obviously, there's some timing-related matters as it pertains to the nuclear PTC impact in rate base. But can you talk to, what other factors might be impacting rate base, not just in the near you're here, but through the forecast as you think about the puts and takes here?

Julien Dumoulin-Smith:

Yeah. No, that makes sense. There's just nothing else that's impacting that. And then can you discuss the revised load growth outlook, right? I get 2% is a real acceleration from the 0.5% to 1% from last year and ultimately, I get that last year had down load, if you will. So it's a new starting point. But just to reconcile a little bit of the low growth commentary, especially considering the commentary from the last call here, what has sort of reaccelerated? How do you think about both the near year and the longer term here, if you will, just a little bit more?

Brian Savoy:

Yeah. Good morning, Julien. So, when we look at 2024, the setup on load growth is really underpinned by three main points. So you start with economic development visibility we have in 2024 projects that are in late-stage construction that are coming online. And we've got that on one of our slides. And that represents a little under a 1% growth as we look into 2024. On the residential side of things, we've seen this normalization coming out of COVID of return to the office, right? During COVID, we had a lot of residential usage at homes. As return to the office, you saw this kind of lower usage at homes, more in commercial businesses. And the back part of 2023, we saw that level out. So we will start growing residential more in line with customer migration trends, which has been really strong 1.7%, 1.8% in recent years. And so residential growth, we expect to be on an upward trajectory. And then lastly, the existing C&I customers where we saw a reduction in load in 2023 and when we talked about it throughout the year. Those customers are very optimistic in 2024. They've kind of seen a rebound happening maybe mid-ish year. So those three factors give us confidence that 2% load growth in 2024 is definitely in our sights.

Julien Dumoulin-Smith:

Got it. Excellent. So it sounds like things have reaccelerated here even just quarter-over-quarter even just on the margin?

Julien Dumoulin-Smith:

Great. Thank you guys. See you soon.

Operator:

Our next question comes from Steve Fleishman of Wolfe Research. Please go ahead.

Brian Savoy:

Good morning, Steve.

Steve Fleishman:

Good morning, Lynn and Brian. Just one more on the nuclear PTC. The -- any sense on when we're actually going to get details from the treasury and setting it any update there?

Steve Fleishman:

Okay. And obviously you need that to then go do the monetization I assume?

Steve Fleishman:

Yeah. Okay. On the financing the equity plan, the DRIP and ATM, any kind of color on how much of that can be done through DRIP relative to ATM?

Steve Fleishman:

Yeah. And then just on the gas plant filing in the Carolinas what -- when would these -- when would you be roughly targeting for these plants to come online?

Steve Fleishman:

Okay. But obviously some of the capital would be hitting in AFDC hitting within the end of your?

Steve Fleishman:

Okay, great. That’s it from me. Thank you.

Operator:

Our next question comes from David Arcaro of Morgan Stanley. Please go ahead, your line is open.

David Arcaro:

As we think about the 1.5% to 2% load growth I was just curious is that concentrated in certain service territories more than others? Are you seeing certain states growing faster versus others in your footprint?

David Arcaro:

Okay, got it. Not several percentage points faster in any specific state, but fairly tightly grouped around there?

David Arcaro:

Understood. Yes, that's helpful. And I'm not sure if you gave this level of color, but just going forward, as you're thinking about all of these other CapEx opportunities to add to the plan, how are you thinking about financing that? Is there a rule of thumb for how much incremental equity you would need kind of per dollar of CapEx as you're expanding the investment going forward?

David Arcaro:

Okay, great. Appreciate the color. Thanks so much.

Operator:

The next question comes from Nicholas Campanella of Barclays. Please go ahead.

Brian Savoy:

Good morning Nick.

Lynn Good:

Yes. So Nick, pulling that all together we're very confident in our 5% to 7% growth rate. We have been building the capital plan to accomplish that as well as the regulatory mechanisms for several years. And so what we're putting in front of you we have a high degree of confidence on. And as a result of that we see the payout ratio declining over the next five years we'll be under 70% in 2024. And so as we look at our commitment to the dividend. We intend to continue growing it. We're committed to the dividend as we have been for a long period of time. But believe in this moment with the level of capital that we have, that introducing some financial flexibility in our range so that we can make good choices around dividend, capital and growth is just prudent. And so as you know we'll look at dividend every year. The Board is involved in that approval process. But given the total composition of growth in dividend, we believe a 60% to 70% payout ratio is appropriate at this point.

Lynn Good:

No, Nick, what we have accomplished so far is procedurally what we need to do to provide notice and the filing would follow late March early April, as you know we have a history of engaging with intervening parties in all of our jurisdictions as part of the regulatory process and we will do – endeavor to do that in Florida as well. And we'll keep you posted every step of the way. It's a very constructive jurisdiction in Florida, understanding the need for infrastructure to balance the growth that the state is maintaining or achieving. And also maintaining critical infrastructure investment for reliability storm response, et cetera. So we'll look forward to keeping you updated on the rate case.

Lynn Good:

Thank you.

Durgesh Chopra:

Hey, guys. Good morning. Thank you for…

Durgesh Chopra:

Good morning, Lynn. Maybe just I think the equity $500 million to have a year total for the plan versus the CapEx raises towards the low end? I think you might have said 30% to 50% funded those equity in the past. So maybe just a little bit more color kind of what puts you at that low end of the range since sort of we discussed this in November last year?

Durgesh Chopra:

That's helpful. And thank you. And then the rate base is when I look at year-over-year growth rate in rate base it's pretty healthy. It's within your 5% to 7% EPS, long-term EPS growth guidance. Do we think about annual EPS growth rates within that range as well in that 5% to 7% range? Or is that more kind of a CAGR approach and back-end weighted?

Durgesh Chopra:

That's very clear. Thank you, Lynn. Appreciate the time.

Operator:

And our next question is from Ross Fowler of UBS. Please go ahead.

Lynn Good:

Hi, Ross.

Ross Fowler:

So first one maybe to follow-up on Nick's question, just shifting back to Indiana. How are you thinking about the timing and what consideration should we be thinking about for the Indiana rate case?

Ross Fowler:

Appreciate that very much. And then maybe one for you, Brian. But -- as I look at the bridge to 2024, over 40% of that is coming from this $0.12 of other. And I think I get the higher interest rates impact and maybe can you scale the -- or scope the other things in there for me, there's a lower tax rate and then there's return from investments. And I think that's probably coming from either Bison the insurance side or the NMC stuff in Saudi Arab around Petrochem? Or how do I think about that as I look at by 2024?

Ross Fowler:

Okay. Okay. I got you. Thank you, Brian for that clarity. Appreciate it very much.

Operator:

This concludes our Q&A session for today. So I'll turn the call back over to Lynn Good for any closing comments.

Operator:

This concludes today's call. Thank you for joining. You may now disconnect your lines.

Operator:

Good morning. Thank you for attending the Duke Energy's Third Quarter Earnings Review and Business Update. My name is Matt, and I'll be your moderator for today's call. All lines being muted during the presentation portion of the call upon opportunity for questions and answers at the end. [Operator Instructions] I would now like to turn the call over to our host, Abby Motsinger, Vice President of Investor Relations. Abby, please go ahead.

Lynn Good:

Abby, thank you, and good morning, everyone. Today, we announced strong results for the third quarter, adjusted earnings per share of $1.94 compared to $1.78 for last year. During the quarter, we also made great progress on regulatory outcomes and simplification of the business. This momentum is underpinned by our strong fundamentals. We have a track record of operational excellence and serve growing jurisdictions with a long runway of investment opportunities. This positions us well for the future and gives us confidence in reaffirming our long-term earnings growth rate of 5% to 7%. For 2023, we continue to work on cost structure to offset mild weather and weaker industrial volumes. Brian will talk more about load and cost agility efforts, but I want to take a moment to recognize the incredible work across the organization to mitigate pressures in 2023. Across the Company, agility measures, savings opportunities and efficiency improvements are well underway, while never compromising on our commitment to safety and customers. We expect to finish the year within our guidance range trending to the lower half of the range. Moving to Slide 5. Let me spend a moment on the meaningful progress we've made in North Carolina. In August, the North Carolina Utilities Commission approved our Duke Energy Progress rate case application and related settlements. This order is the culmination of years of work with stakeholders and represents a significant milestone, the first implementation of performance-based regulation, including multiyear rate plans authorized by HB951. The order approved a retail rate base of $12.2 billion, a $1.6 billion increase from our last case, along with roughly $3.5 billion in future capital investments in the multiyear rate plan. Importantly, the order also recognized the rising cost of capital increasing the allowed ROE to 9.8% and the equity component of the capital structure to 53%. This outcome positions us well to continue delivering value to customers while supporting the cash flows of the Company. New rates and residential decoupling were implemented on October 1. Turning to the Duke Energy Carolinas rate case, in late August, we reached a partial settlement with the public staff on many aspects of the case. The settlement provides clarity on retail rate base of approximately $19.5 billion, a $2.6 billion increase from our last case and includes nearly $4.6 billion of capital investments in the multiyear rate plan. A second settlement with the public staff further narrowed the open items in the case and also addressed nuclear PTCs, which Brian will provide more detail on in a moment. We expect the NCUC to issue its decision by the end of the year and expect permanent rates to be in effect by January 2024. We're pleased with the constructive outcome at DEP and look forward to finalizing the DEC rate case in the coming weeks. North Carolina is our largest jurisdiction so constructive outcomes are critical to supporting a strong balance sheet and de-risking our five-year plan. Turning to Slide 6, I'd like to highlight our updated Carolinas resource plan, which is driving material growth and capital investment opportunities as we lead the nation's largest energy transition. In mid-August, we filed our updated resource plan with the Public Service Commission of South Carolina and the North Carolina Utilities Commission. The single unified resource plan for the Carolinas is designed to meet the needs of this growing region, spurred by rapid population growth and significant economic development activity. The plan maintains an all of the above strategy with a diverse deployment of additional resources, including renewables, battery storage, and natural gas as well as energy efficiency and demand side management. It also provides the opportunity to evaluate emerging technologies, pursue an early site permit for advanced nuclear and early development activities for expanded pumped storage hydro at Bad Creek. The filing included details about our annual solar procurement, which targets over a gigawatt of new solar each year beginning in 2027. It also outlines plans to build additional natural gas generation to maintain reliability and affordability as coal plants are retired. Since the resource plan filing, we filed pre-CPCNs with NCUC, for a combined cycle plant on September 1 and combustion turbines on November 1. We will make our full CPCN filings in the first quarter of 2024. Similar to previous filings, the Carolinas resource plan is based on significant stakeholder engagement and outlines multiple portfolios, each of which preserve affordability and reliability while transitioning to cleaner energy resources. Next steps will include hearings in both states in the spring of 2024. We expect an order in South Carolina in mid-'24 and an order in North Carolina by the end of '24. Turning to Slide 7. With the closing of the commercial renewables sale last month, our portfolio repositioning is complete. We are now a fully regulated company, operating in some of the fastest-growing and most attractive jurisdictions across the U.S. I just mentioned some of our progress in North Carolina and our other utilities continue to deliver as well. At Piedmont, we recently received South Carolina Commission approval of our settlement in our RSA proceeding. We also received approval of our settlement in our ARM proceeding in Tennessee. These annual rate updates allow for efficient recovery of investments as we continue to modernize our natural gas system. And at DEC South Carolina, we've made significant investments since our last rate case in 2019 and are evaluating the timing of our next rate case application. These investments have strengthened the grid against storms, reduced outage times and maintained a high level of reliable service our customers expect. In Florida, we're seeing some of the fastest customer growth in the state and have efficient recovery mechanisms for our grid and solar investments. Our response to Hurricane Idalia in September, yet again demonstrated the value of our grid-hardening investments. The storm caused over 200,000 outages, and we restored power to 95% of customers within 36 hours. Further, our investment in self-healing grid technologies saved more than 7 million outage minutes for customers. Shifting to the Midwest, in October, the Kentucky Public Service Commission approved the new rates in our electric rate case, which utilized a forecasted test year. And the commission approved a 9.75% ROE, a 50 basis point increase from the previous case as well as increasing the equity component of the capital structure to 52%. Across our footprint, we've built considerable momentum over the last year, and our long-term organic growth strategy has never been more clear. This past year has made our company stronger and more agile as we've responded to macroeconomic headwinds. I'm confident we're well positioned to deliver sustainable value and 5% to 7% earnings growth over the next five years. And with that, let me turn the call to Brian.

Operator:

[Operator Instructions] The first question is from the line Shahriar Pourreza with Guggenheim. Your line is now open.

Lynn Good:

Sure. And Shar, the capital is really underpinned by the integrated resource plans that we have filed. And so, if you look at the Carolinas alone, the filing that we made in August compared to where we were in 2022, we see load growth and we also see the need to raise the reserve margin as a result of all of the growth going on in this region and the winter peaking nature. And so, if you look across all of the types of megawatts from solar to battery, natural gas, et cetera, you see an increase there, and that will become reflected more fully in our capital plan, of course, working through that process with the commission in '24, but we see a need for additional megawatts in the Carolinas really driven in large measure by population growth, economic development and reserve margin. We're also moving deeper into generation transition in Indiana. So as we have filed integrated resource plans and we've accelerated our thinking around the timing of coal retirements, we see natural gas coming into the picture in Indiana as well as renewables. And so, CPCNs will be filed in the next several months, really setting the cadence for Indiana. And then I think you know on our regular schedule in Florida, we will be updating the multi-rate plan effective 1/1/25 and so expectations for capital spending there will be updated. And then the gas business continues to see not only extraordinary growth for a number of customers, but integrity management continues as capital. So, we are in an extraordinary period of growth in all of our jurisdictions. It's transparent. It's filed with our commissions in the form of integrated resource plans on the electric side and clear on the gas side as well. So, we're anxious to provide that update to you in February and have a chance to talk further about it at that point.

Lynn Good:

And Shar, I would think about balanced approach kind of in the 30% to 50% range. And when I think about equity, we've talked about shareholder-friendly equity. You have seen us accomplish that with our transaction in Indiana. I don't know how much potential exists for that given present cost of capital, but we would, of course, explore that and then evaluating the role of dividend reinvestment and at-the-market programs as well. I would also say that the other couple of things that we're watching, we have yet to finalize the DEC case. So, we'll have more visibility on that in December. And then waiting for treasury guidance on these nuclear PTCs and the transferability market, those are also very consequential from cash flow standpoint. So, I feel like we have just a number of levers available to us, and we will exercise them in a way that maintains our growth rate, but also underpins the strength of the balance sheet.

Julien Dumoulin-Smith:

Just coming back at the same direction as Shar here, just in terms of balance sheet, obviously, has been a source of continued conversation as illustrated by the first couple of questions here. How do you think about maybe shoring up the balance sheet incrementally in addition to funding these incremental upside here? I just want to make sure that we're clear about how you think about that piece of it, right? Obviously, coming into a position of strength here with the rate case resolution that you already -- or resolutions that you alluded to by 4Q here, but how do you think about kind of getting to that next step where perhaps conversation's a little less focused therein.

Operator:

The next question is from the line of Steve Fleishman with Wolfe Research. Your line is now open.

Lynn Good:

Sure. And Steve, I'll give it a start, and then I know Brian will have something to add to it. So we've seen some weakness in '23. And I think you saw us early in the year trying to figure out do we have volume weakness or is it weather because we had such extraordinarily weak weather in the first and second quarter. But the weakness has continued into the third quarter. I would mention textiles. I would mention paper as two industries that have been impacted. And then outside of those industries, we're hearing from our customers, supply chain, labor, interest rates being an impact to them that they're adjusting to. They also -- many of them have inventory they're working through, so they've dialed back production. And production, of course, hits us in terms of lower volumes. But I would say there's optimism in that same industrial group about a rebound later in '24 and into '25. And what I would further say is, we have evaluated this. Residential, of course, return to work, but we think we're probably where that return to work trend is situated. Meaning no more impact from return to work, I think we've pretty well worked ourselves through that transition. And then for our largest jurisdiction, we go to a decoupled environment in 2024, and customer growth continues to be very strong and it's customer growth that will drive revenue. And then on the industrial side, the rebound is positive on existing customers, but this economic development has been extraordinary. And we've given you a sense of what that can look like. It starts to layer in as early as '24. And so that gives us some confidence around our longer-term growth rate that we've got customers sort of working through the macro trends here in the short term. But over the long term, we continue to see this economic development being incredibly strong. And I'm sure you saw yesterday in the Journal, that Toyota battery plant is expanding further, also sitting here in the North Carolina territory. So that's what I would share. And Brian, what would you add?

Steve Fleishman:

Great. That's helpful. One other separate question. Just on when you're doing your plan and your growth rate from the standpoint of interest rates, are you generally just kind of using whatever the forward curve is of rates for what -- for financings or refinancings and the like?

Operator:

The next question is from the line of Nick Campanella with Barclays. Your line is now open.

Lynn Good:

So Nick, I would confirm that it does underpin our confidence in 5% to 7% growth. This modernized construct in the Carolinas is consequential. It's kind of a first in the history of the utility that we will have multiyear rate plans, the ability to set price as we go forward, of course, delivering value to customers every step of the way, but also more closely matching the expenditure of capital with return. And I would add to that, our confidence in the capital underpinning that 5% to 7% growth, very transparent, integrated resource plans, the outline what it's going to be necessary to serve this growing state. So the Carolinas are very well positioned for the future. And as Brian mentioned a moment ago, continue to see extraordinary growth in Florida. And we have strong capital in Florida and grid and solar will be updating our multiyear rate plan, and our investment in the Midwest continues well along both generation and grid in Ohio, for example. So, I feel like we've got all of the elements to underpin our confidence in the growth and the jurisdictions are constructive jurisdictions that find the right balance between benefits to customers and investors, and we're confident in the future.

Lynn Good:

Yes. And Nick, I really appreciate that question because we have two different $300 million that I think as I look at some of the commentary has been confusing to you all. So let me step through it for you. You may recall that we entered '23 with a cost initiative identified at driving out $300 million of cost, primarily in the corporate center. And we said to you at that time we thought 75% of that $300 million would be sustainable. We have executed on that throughout 2023 and have been confident that the 75% is going to 100% that we'll be able to sustain all of it into 2024. And then further, we have developed mitigation plans based on weak weather and volume in 2023, which is including not only O&M, but other levers, including tax ideas, those total $300 million as well. And we think 50% of those are sustainable into 2024. And we also highlighted on our drivers schedule that we will continue to look for cost savings ideas, part of the continuous improvement structure. That's what we're talking about on Slide 10. So, we believe we have various elements in place to continue to drive O&M lower. We think '24 will be lower than '23, and that's just part of our conviction to continue to drive productivity and efficiency in our operations.

Durgesh Chopra:

All my questions have been answered. I just had a -- all my questions have been answered. Just a quick clarification, Lynn, I think in response to the first question, you mentioned 30% to 50%. I believe you were referring to the equity content of any incremental CapEx. Could you just clarify if that -- if my understanding is correct there?

Operator:

Next question is from the line of Carly Davenport with Goldman Sachs. Your line is now open.

Lynn Good:

John, I appreciate that question. And I'd start by saying these integrated resource plans are informed by a very robust stakeholder process. And as you imagine pulling stakeholders together, there are different points of view across the spectrum from renewables to batteries to natural gas to nuclear some pro, some con. But we believe what we've put forward is a very balanced all of the above strategy that provides the right balance between reliability, affordability and increasingly clean, which is our commitment to the state. So, we think all of those elements will be closely reviewed and evaluated as part of the process in front of the commission. And we believe we'll work through this in a very constructive way, consistent with the way we've moved forward in the previous plans, and we'll keep you posted every step of the way.

Lynn Good:

We're going to make 50% sustainable.

Operator:

Thank you for your question. There are no additional questions waiting at this time. So, I'll pass the call back to Lynn Good for any closing remarks.

Operator:

That concludes the conference call. Thank you for your participation. You may now disconnect your lines.

Operator:

Ladies and gentlemen, welcome to the Duke Energy Second Quarter 2023 Earnings Call. My name is Brian, I will be the operator for today’s call. [Operator Instructions] I will now hand over to your host, Abby Motsinger, Vice President of Investor Relations to begin.

Lynn Good:

Abby, thank you, and good morning, everyone. Today we announced adjusted earnings per share of $0.91 for the quarter. For the second quarter in a row mild weather impacted results. For perspective in the Carolinas January and February were the mildest in the last 30 years. And May and June were in the top five. Through June we're facing a weather headwind of nearly $0.30. Agility measures have been put in place which add to the $300 million O&M reduction that was targeted and in place coming into 2023. Our cost initiatives are grounded in our culture of safety and serving our customers with excellence while maintaining our assets for the future. Brian will provide more on cost management in a moment. We've had an early look at July and as you would expect July whether is positive consistent with the trend across the U.S. and August and September are in front of us. With our largest quarter ahead, we are reaffirming our guidance range for 2023 and we'll have more to say on projected results for the year on the third quarter call. As we look ahead, the fundamentals of our business are strong, and we are reaffirming our 5% to 7% growth rate. Turning to Slide five, you'll see highlights of the strategic portfolio repositioning we've executed over the last decade. With the announcement of the commercial renewable sale which we expect to close by the end of the year, we're a fully regulated company operating in constructive and growing jurisdictions with a wealth of clean energy investments driving growth for years to come. The regulatory constructs in our states have also meaningfully improved over this time, including landmark bipartisan energy legislation passed in North Carolina in 2021. Modern constructs like those in HB951 allow us to invest for the benefit of our customers, while preserving returns for our investors. We are pleased that today 90% of our electric utility investments are eligible for modern recovery mechanisms that mitigate regulatory lag. Our growth story is an organic one, with over 145 billion of clean energy grid and LDC investments over the next decade. With the portfolio repositioning complete our sole focus is on our regulated businesses, and the work we have underway to pursue the largest energy transition in our industry. Let me now turn to Slide six, to provide an update on our progress in each jurisdiction. In North Carolina, we continue to work toward resolution of the Duke Energy progress rate case. We implemented interim rates June 1, subject to refund, with rates for typical residential customers increasing about 5%. We expect the commission to issue an order later this month for the final DEP rates going into effect October 1. We're also preparing for the Duke Energy Carolinas hearing which is scheduled to begin August 28. Our energy transition in the Carolinas remains a top strategic priority and we're working diligently on updated resource plans to be filed with the Public Service Commission of South Carolina and the North Carolina Utilities Commission respectively in mid-August. Similar to previous filings, the plans are based on significant stakeholder engagement, and will outline multiple portfolios, each of which preserve affordability and reliability while transitioning to cleaner energy resources. IRA benefits will be incorporated into the analysis for the first time, as well as increasing load from numerous economic development announcements, and continued strong population migration into the Carolinas. Our modeling will also reflect higher reserve margins as a result of our continuous evaluation of resource adequacy. Later this year, we will begin the CPCN Process in North Carolina for replacement gas generation. At the same time, solar procurement will continue on an annual basis. In fact, our 2022 solar procurement was recently finalized, with nearly 1000 megawatts to be placed in service by 2027. And our 2023 Solar RFP targeting 1400 megawatts was recently approved by the NCUC, with bids to be received later this year. Following the resource plan filings, each commission will hear from interested parties through a transparent regulatory process as they consider our proposals. We expect an order from the South Carolina Commission in mid ‘24, and an order from the North Carolina Commission by the end of ‘24. Turning to Florida, we're executing us on our investment plan to benefit customers. We've added 300 megawatts of new solar this year and now operate 1200 megawatts in the state, with plans to continue adding about 300 megawatts per year over the next decade. We’re hardening the grid through our storm protection plan and already seeing benefits from improved reliability. With robust customer growth and timely recovery of investments, our Florida utility continues to deliver strong returns. In Kentucky we've partnered with Amazon to install a two megawatt solar plant on top of their fulfillment center in Northern Kentucky, the largest rooftop solar site in the state. This partnership supports the carbon reduction goals of both Duke Energy and Amazon. And it's just one example of how we're working with our customers to meet their energy needs. Turning to Indiana, I'd like to take a moment to thank the nearly 2000 crew members that work tirelessly over the July 4 Holiday following multiple storms. The widespread storm systems extended across our entire service territory, and led to a multi-day effort to restore over 370,000 outages. And in fact today in the Carolinas, our crews are also working to restore outages that resulted from the strong storms in the eastern seaboard and are doing so safely timely, and in close communication with our customers and stakeholders. As with all operations, the safety of our employee’s environment and communities remain front and center and I'm proud to say that for the eighth consecutive year, we've led the industry in safety as measured by total incident case rate. On the federal side, we're taking advantage of multiple incentives and other opportunities to benefit our customers. We're incorporating IRA tax benefits and resource plans and rate adjustments across our jurisdictions to lower costs for customers and federal funding from the infrastructure investment and Jobs Act creates opportunity to advance new resources and spur economic development. We have put forward multiple proposals through the IIJA, including for methane reduction, carbon capture long duration storage, hydrogen and grid modernization. And we'll continue to evaluate opportunities as funding is announced. We continue to advocate for federal and state support that recognizes the importance of a responsible energy transition. And in fact, later today, we will file comments on EPAs proposed 111 rule. While we support EPAs commitment to a cleaner energy future. We believe an orderly transition requires a diverse mix of energy resources, and must align with the pace of technology development. We will continue to actively work with policymakers, industry peers, state partners and others in support of a reliable affordable energy transition. In closing, we've navigated the first half of the year with agility taking swift action in the face of record mild weather while maintaining our focus on our strategic priorities. With our portfolio repositioning complete we offer an attractive fully regulated organic growth proposition. We have a clear strategy ahead of us as we invest to satisfy increasing demand for clean, affordable and reliable energy across our growing regions. Our long term fundamentals remain as strong as ever, and we're well positioned to deliver sustainable value and 5% to 7% earnings growth over the next five years. And with that, let me turn the call over to Brian.

Operator:

[Operator Instructions] Our first question comes from Mrs. Shar Pourreza with Guggenheim Partners. The line is now open.

Lynn Good:

Shar, thanks for the question. No question, it's been a mild weather year and I -- so I look around the industry there are other utilities have experienced a trend similar to ours, Midwest and some in the Southeast. We have put in mitigation plans in place as Brian talked about, Shars, the deferring non-critical work, third-party spend, all of those things that you would expect us to attack tactically in 2023, and we see those progressing. We also are on pace with the $300 million of O&M that we targeted to take out of the business coming into '23. So I look at all of that and the fact that we have the third quarter ahead of us, and we believe the range -- we can reaffirm the range. The range still represents the potential we have for 2023, and we'll update within that range at the end of the third quarter. We did highlight that July, we had a peak of July. So weather was strong in July, and we've got August, September in front of us. I think what's important to recognize here is that we are working every possible lever, including any contingencies that set in the plan at the time we developed it. And I would just point to the strategic progress also, Shar, that we've made because the fundamentals of this company remain unchanged. Strong capital growth, strong jurisdictions and I think that represents a really solid investment thesis for the future.

Lynn Good :

There's a lot on that one, Shar. Let me start by saying what I would like you to take away and really investors to take away is that our growth story is an organic one. And I look at all the progress we've made in simplifying the portfolio has brought us to this moment where we're fully regulated with transparent, robust capital that will unfold over the next decade in constructive jurisdictions, growing jurisdictions. And at the same time, we've also put in place and work through energy policy, modernization of regulations, so that gives us a high degree of confidence that we can execute those plans and deliver returns to investors. And so when I think about growth for Duke, our sole focus is on this organic plan that's in front of us. And so any idea about M&A has to beat what we have in front of us, and it is an increasingly high hurdle because of the confidence we have in our plan. So this notion that we're going to over equitize something to chase an asset and strengthen the balance sheet is just not a narrative that is supported by anything that we're focused on here to do.

Julien Dumoulin-Smith:

Good morning. Thank you very much. Just wanted to go back to Shar's question on just back half trends, et cetera. Can you elaborate a little bit more on just how you're trending on versus rates? And then also specifically, even quarter-to-date, if you will. July, I mean, it seems like weather may have been pressured again here. Just chiming in a little bit on where we stand even through the summer.

Brian Savoy:

No, thank you. You got it covered.

Lynn Good :

Julien, I would leave you with our sole focus is on organic growth. Sole focus is on organic growth. Because when we look at what we have in front of us and our ability to drive growth with the capital plans that sit in our jurisdictions, we believe that we'll deliver the greatest value to shareholders.

Operator:

We have our next question comes from David Arcaro from Morgan Stanley. Your line is now open.

Lynn Good :

David, I would say the primary pressure in '23 centers around deferred fuel, and we've given you a sense of how that is tracking. So we're expecting to collect about $1.7 billion of that in '23, which will strengthen the balance sheet. We also have the commercial renewables sale, where we'll see proceeds of about $800 million before the end of the year. That is also credit positive. But as you indicated, weak weather goes the other way. And so stronger weather in July and hopefully a stronger third quarter will be an offset to that. So we feel like the 13% to 14% range remains an appropriate consideration for '23 strengthening into '24. Would you add anything to that, Brian?

David Arcaro:

Okay. Understood. That's helpful. And then secondarily, with interest rates rising again, I'm wondering if that's representing an incremental headwind to your plan? Just how you're managing that exposure on some of your short-term debt outstanding and also refinancing’s and new debt issuances as they come up.

David Arcaro:

Got it. Thanks so much.

Jeremy Tonet :

Hi, good morning. Just wanted to come back to the drivers to this year, if I could. And as you noted, weather, inflationary pressure, higher interest rates, all represent headwinds, but I wanted to go to the load a little bit more. At the beginning of the year, you assumed 12-month retail load growth would be about 0.5%. I think in weather normal retail growth right now is down 2.7% year-to-date, and you expect to H2 '23 low growth to be flat to 0.5%. So just wondering for -- what trends you're seeing in load that are different than expectations? Do you expect those to correct over time? And just any color that you could provide there would be helpful.

Brian Savoy:

Yes, I would say in the industrial sector, Jeremy that we're in regular dialogue with our large customers. We talk to them. We understand that with the uncertain economic backdrop, there's some prudent inventory management going on. We've gotten through a lot of the supply chain challenges over the past several years and inventory levels are in a healthier spot. So they're like, well, as we're -- looking forward, there could be some clouds coming. So let's just be prudent. So we've seen a slight dial down in usage, but we don't see that persisting into the long term in the future. So I would just take it at that. And the bottom line is that the economic development investment in our territories is strong, and it's going to produce increasing levels of demand for large customers as we look through the middle of the 20s and into the 30s.

Lynn Good :

Jeremy, I don't think it's appropriate for me to comment on another company's process. But what I would like to emphasize and have you take away is that our sole focus at Duke is on our organic growth plan.

Operator:

Our next question comes from Steve Fleishman from Wolfe Research. Steve, your line is now open.

Lynn Good :

Yes, Steve, we're scheduled to be on the stand August 28. Rebuttal testimony was filed at the end of last week. So this is the time frame for discussions. And also in that time frame, we're expecting an order on the DEP case. So a lot of activity here in August, and we'll keep you informed every step of the way.

Operator:

We have no further questions on the line. I will now hand back to Lynn Good for closing remarks.

Operator:

Thank you. Ladies and gentlemen, this concludes today's call. Thank you for joining. You may now disconnect the lines.

Operator:

Hello everyone. And welcome to the Duke Energy First Quarter 2023 Earnings Call. My name is Nadia and I will co-ordinating the call today. [Operator Instructions] I would now hand over to your host, Abby Motsinger, VP of Investor Relations to begin. Abby please go ahead.

Lynn Good:

Abby. Thank you, and good morning, everyone. Today, we announced adjusted earnings per share of $1.20 for the first quarter. These results reflect a $0.22 headwind from weather with January and February ranking among the warmest winter months on record across our service territories. In fact, DEP had its warmest January and February in the last 32 years. In response, we've already taken action activating agility measures across the enterprise, which Brian will walk through with you in just a moment. With three quarters remaining, including our strongest quarters still ahead, we are reaffirming our 2023 guidance range of $5.55 to $5.75 with a midpoint of $5.65. We're also on track to deliver our long-term EPS growth rate of 5% to 7% through 2027 off the midpoint of the 2023 range. Before I turn to our regulated utilities, I would like to provide an update on the sale of our commercial renewables business. As you know, we have separate sales processes underway for the utility scale business and the distributed energy business. We are in the late stage of the process for both transactions and we'll look to update you in the near future. We continue to anticipate proceeds in the second half of the year. Moving to Slide 5, we're making meaningful progress in our strategic initiatives in each of our jurisdictions. In North Carolina, we recently reached a partial settlement with public staff [indiscernible], who represents DEP's industrial customers and the Duke Energy Progress rate case. With agreement on approximately $3.5 billion of forward-looking capital investments in the multi-year rate plan, the settlement represents a significant milestone on our journey to modernize recovery mechanisms in North Carolina. It positions us well to continue delivering value to customers, while supporting the cash flows of the company. The settlement also provides clarity on retail rate base of approximately $12.2 billion for the historic base case and depreciation rates that largely align with DEP's proposal. Further, we reached agreement on performance incentive metrics and residential decoupling. We were pleased to be able to work with public staff in [indiscernible] to narrow the open items in the case. These settlements are subject to approval by the North Carolina Utilities Commission. Evidentiary hearings began May 4 and are expected to conclude later this month. Interim rates will be implemented in June subject to refund, and we expect permanent rates to be effective October 1. The Duke Energy Carolina's rate case is about three months behind the DEP case and hearings scheduled to begin on August 21. Moving to South Carolina, the commission approved a comprehensive settlement in our Duke Energy progress rate case in February. Revised rates went into effect in April. We also recently received commission approval to securitize approximately $170 million of past storm costs at Duke Energy Progress. In Florida, the commission approved our fuel capacity and storm cost request in March. Rates were updated in April and reflect recovery of deferred fuel costs over 21 months with a debt return. We’ll recover storm costs associated with hurricanes Ian and Nicole, as well as replenish the storm reserve over 12 months. We also continue to expand our renewable fleet in the study and responsible manner, adding four solar projects in March and April, totalling 300 megawatts. With these additions, we now operate 1200 megawatts of solar in Florida with plans to continuing adding approximately 300 megawatts a year going forward. In Indiana, we've had an active legislative session. The legislature passed several energy bills, including House Bill 1421, which was signed into law and allows quip and rate base for natural gas generation. These bills support our ability to execute our energy transition in Indiana while maintaining reliable and affordable power for customers. We are in the process of finalizing CPCNs, which we expect to begin filing with the Indiana Commission later this quarter. In Ohio, we reached a comprehensive settlement with the PUCO staff and multiple other parties in our natural gas rate case. The settlement, which is subject to commission approval, includes agreement on expanded revenue caps for the Capital Expenditure Program Rider. An evidentiary hearing is scheduled to begin on May 23. And in Kentucky, the commission is conducting an evidentiary hearing today on the electric rate case filed in December. If approved, new rates are anticipated to go into effect in July. We are making great progress on our strategy across our entire service territory, meeting our commitments, and advancing investments in a balanced way to better serve our customers. Our strong track record is reflected in our impact report, Duke Energy's 17th Annual Disclosure on Sustainability Topics. This comprehensive report was published in April and includes our goals and progress on a broad range of topics, including the energy transition. It also outlines our corporate citizenship and the value we're creating for employees, customers, and communities from economic development to environmental justice and to rescaling and redeploying workers. Before I turn the call over to Brian, let me take a moment to talk about our grid investment plan, which is $36 billion accounts for over half of our five-year capital plan. The grid is a critical part of our energy transition and with more than 320,000 line miles. We operate the largest transmission and distribution system in the nation. The foundation of our grid plan is focused on improving reliability and resiliency, preparing the grid for renewables, and enabling electrification. Our reliability and resiliency investments are centered on strengthening the grid against storms and security trusts and improving the ability to rapidly restore power when there's an outage. We're making targeted investments across a variety of programs, including self-optimize growth technologies targeted undergrounding, physical and cybersecurity upgrades, and upgrading lines and substations. Our investments are already making a difference as evidenced by our response to Hurricane Ian last fall, where we restored power in less than half the time of our Hurricane Irma restoration efforts in 2017. As highlighted on the slide, we've made great progress in establishing constructive recovery mechanisms across our jurisdictions. These mechanisms will also assist in recovering growth investments in a timely manner, mitigating lag and supporting balance sheet strength while delivering benefits to our customers. From grid improvements to installing renewables to advancing policy, we're taking collective action to transform and ready the system for the future. We have a clear path forward and are confident our investment plan will deliver sustainable value and 5% to 7% earnings growth. With that, let me turn the call over to Brian.

Operator:

Thank you. [Operator Instructions] Our first question today goes to Shar Pourreza of Guggenheim Partners. Shar, please go ahead. Your line is open.

Lynn Good:

Good morning, Shah.

Lynn Good:

The answer to that is yes, Shar and let me talk about the various cost initiatives that are underway. The $300 million that we identified for last year, I would call largely structural. When we talk about 75% of it being achievable, it’s because we’re making fundamental changes and the way we’re completing work, staffing work, prioritizing work, et cetera. When we talk about the actions we’re taking in response to weak weather, I would call those more tactical. This is deferral, this is reducing non-critical work, third-party spend, expenses, those types of things that we have done so many times, as you know. And so the combination of all of these activities as well as the fact we enter any given year expecting a range of outcomes and establishing contingencies that are planning in case something doesn’t work out exactly as planned, we are confident in reaffirming the range of $5.55 to $5.75. And so we’ll continue to update you as the year progresses, but our [indiscernible] reaffirming at this point.

Lynn Good:

Yes, sure. I appreciate the question. And we are continuing strong progress. We’re in the late stages and expect to be able to provide more information shortly on where we are. Given the fact that we have placed the business into discontinued operations, we continue to evaluate whether we have the right recognition of net book value on the financial statements and did take an additional impairment charge representing further progression of the process. I would say to you, though, that the estimated value that we see in this process remains within our planning assumptions. So there is nothing here that I would point to as a surprise for us as we move through the process. As we have continued the negotiations and marketing is complete, we’re in discussions with select bidders. And we have made a decision to separate the process involving, for example, two projects that we are a minority owner of and concluded that the natural owner is the majority owner based on discussions and negotiations that progressed. So you should look at all of this as a demonstration that we’re nearing the end of the process and we’ll be anxious to announce and give you further feedback as soon as that’s appropriate.

Lynn Good:

Thank you.

Julien Dumoulin Smith:

Hey, good morning, team. Thank you guys very much appreciate it. Look…

Julien Dumoulin Smith:

Hey, good morning, Lynn. Brian, I wanted to go back to some of your comments, and you specifically said credit is at the forefront of many people’s minds. In the last question, it was brought up about expectations evolving on the renewable sale here. Just want to be crystal clear about this, I mean, especially following the affirmation, barring any changes in CapEx here, which you obviously do in a fairly annual cadence, can you just elaborate a little bit on how you’re thinking about the balance sheet. It seems like you got a target here to get back to 14%. You talked about the 50 basis points to 75 basis points. But very specifically here, your comfort level with the plan and the need to address any further equity or equity-like considerations to expedite getting to that long-term target?

Julien Dumoulin Smith:

Excellent. Thank you for hitting that clearly, and good progress on the fuel. And then separately, Lynn if you can comment here, I mean, obviously a lot of different utility assets moving around, potentially changing hands here. Would love to hear your thoughts more specifically therein as you think about the options. You’ve got obviously a full plate in some respects on a lot of novel angles, especially in the Carolinas here, but can you elaborate at least your latest thinking around perhaps evaluating further assets here?

Julien Dumoulin Smith:

Excellent. And then if I could clarify earlier, just super quickly, with respect to the Indiana, obviously you've got this IRP out there, I'm just curious, a) if that could change your CapEx entry year, and b) if you have any further thoughts about what that could look like here?

Julien Dumoulin Smith:

Excellent. Thank you guys. Talk soon.

Brian Savoy:

Thank you.

Steve Fleishman:

Hey, good morning. Thanks Lynn.

Steve Fleishman:

So just on the North Carolina settlement agreement, is there any other parties in the case? Are they opposed to it or are they are they just not taking a position? Where's kind of other parties if at all?

Steve Fleishman:

Okay.

Steve Fleishman:

Okay. Good. And then just in terms of thinking about a lot of the issue North Carolina over the years was just dealing with lag and the multi-year plans kind of helped hopefully deal with lag. Obviously ROE cap structures still need to be finalized, but is it fair to say the parts that you agreed upon here are kind of the pieces that would address kind of lag – regulatory lag in North Carolina in this settlement?

Steve Fleishman:

Okay, great. Thank you.

Brian Savoy:

Thanks, Steve.

David Arcaro:

Hi, thanks for taking my question.

David Arcaro:

Morning. Let's see, I wanted to check in just on the Florida 10-year site plan, I just wanted to confirm whether there could be upside to the CapEx outlook now that you've got in that filed.

David Arcaro:

Okay. Got it. Thanks. And then also just wanted to follow-up on the Carolinas settlement. I was just wondering what your current thoughts are about potentially achieving a settlement at the Duke Energy Carolinas rate case now that you've been successful in getting the partial settlement at progress?

David Arcaro:

Okay, great. Thanks very much.

Operator:

Thank you. The next question goes to Bill Appicelli of UBS. Bill, please go ahead. Your line is open.

Lynn Good:

Brian, you want to…

Bill Appicelli:

Okay, great. Thank you. And then just one other quick follow-up, on the corporate and other, there was an $0.08 pickup year-over-year. I know you cited some investment gains. Can you just provide some color around that?

Bill Appicelli:

Okay, great. Thank you so much.

Lynn Good:

Thank you.

Lynn Good:

Well, thank you and thanks to all of you who joined today and for your interest and investment in Duke. We're available for follow-on questions after this call and look forward to talking soon. Thanks so much.

Operator:

Good morning. Thank you for attending today's Duke Energy Fourth Quarter and Year-end 2022 Earnings Call. [Operator Instructions]. I would now like to pass the conference over to your host, Abby Motsinger, Vice President of Investor Relations. Thank you. You may proceed.

Lynn Good:

Abby. Thank you, and good morning, everyone. Today, we announced adjusted earnings per share of $5.27, closing out a successful 2022. We achieved results solidly within our updated guidance range while making significant progress on our strategic goals, responding to external pressures and delivering constructive outcomes across our jurisdictions. As a result, today, we're reaffirming our 2023 guidance range of $5.55 to $5.75 with a midpoint of $5.65. We're also reaffirming our 5% to 7% growth rate through 2027 off the midpoint of our 2023 range. This reflects the strength of our regulated businesses, our disciplined approach to cost management and a robust $65 billion capital plan that supports our thriving jurisdictions. Before I turn to our regulated utilities, let me provide a brief update on the sale of our Commercial Renewables business. The sales process continues to progress. But as with the sale of any large-scale business, the timing tends to evolve. We remain on track to exit both the utility scale and the distributed energy businesses and now anticipate proceeds in the second half of the year. We will continue to keep you updated along the way. Turning to Slide 5. We've reached a significant milestone in our clean energy transition. On December 30, the North Carolina Utilities Commission issued an order adopting an initial carbon plan. This constructive order is the culmination of years of work with policymakers and stakeholders to chart a responsible path for the energy transition. The order recognizes the value of an all-of-the-above approach to achieving carbon reduction targets in a manner that balances affordability and reliability for customers. The near-term action plan provides approval of 3,100 megawatts of solar and 1,600 megawatts of storage as well as transmission upgrades to support the integration of these renewable resources. The commission also approved limited development activities associated with longer lead time investments, including small modular nuclear reactors, pumped hydro and transmission related to offshore wind. And as part of an orderly transition out of coal by 2035, the commission supported planning for approximately 2,000 megawatts of new natural gas generation to maintain reliability. Through its order, the commission reinforced the importance of maintaining a diverse generation mix while conducting an orderly clean energy transition and was clear that ensuring replacement generation is available and online prior to the retirement of existing coal units is a shared priority. The carbon plant provides a constructive road map that delivers on our strategic priorities and supports the needs of our customers and communities today and into the future. It supports our capital plan and provides the clarity we need to advance critical near-term investments. We look forward to continuing our progress through our updated carbon plant filing in North Carolina later this year. Moving to Slide 6. We're making meaningful progress on our strategic initiatives in each of our jurisdictions. In North Carolina, we filed our first performance-based rate application for our Duke Energy Carolinas utility on January 19, which followed a similar filing for our DEP utility last fall. The request includes a multiyear rate plan to fund system improvements to meet the growing needs of our customer base, including $4.7 billion of capital projects that are expected to go into service over the 3-year period. These investments are primarily T&D-related projects that support the security and reliability of the grid as well as approximately $300 million of solar and storage investments consistent with the carbon plan order. Our request is mitigated by a reduction in operating costs since our last rate case, evidence of our continued ability to manage costs to keep customer rate increases down. Evidentiary hearings are expected to begin in the third quarter and consistent with past practice, we intend to implement temporary rates in September, subject to refund. If approved, we expect year 1 revised rates to be effective by early 2024. In South Carolina, we were very pleased to reach a comprehensive settlement in January with all parties in our Duke Energy Progress rate case. The settlement, which is subject to commission review and approval includes a 9.6% ROE, the continuation of deferrals for grid and coal ash spend and supports accelerated retirement dates for certain coal units. In fact, the settlement is on the commission's agenda for this afternoon. And if approved, new rates are expected to be implemented in April. We also plan to file an updated IRP in South Carolina later this year, which will take into account the carbon plan and the Inflation Reduction Act. Turning to Florida. On January 23, we filed a petition to adjust customer rates for deferred 2022 fuel costs, less the impact of lower forecasted fuel prices in 2023. We are also flowing back IRA tax savings to our Florida customers as of January 1. In Indiana, we're updating our IRP to reflect results of the 2022 RFP process, regional transmission operator requirements and the Inflation Reduction Act. We expect to begin filing for certificates of need for new power generation in the second quarter. In Ohio, the commission approved in full our electric rate case settlement in December, which supports the recovery of grid investments to improve reliability and service for our customers. In December, we also filed an electric rate case in Kentucky. The request reflects more than $300 million in investments we've made to strengthen the generation and delivery systems as well as updated retirement dates for our Kentucky fleet. As we advance our regulatory strategy, affordability remains top of mind. Brian will go into more detail on steps we're taking across our jurisdictions to lower costs for customers. Finally, I want to highlight a well-deserved recognition for our Piedmont Natural Gas team. In December, J.D. Power ranked Piedmont #1 in residential customer satisfaction for natural gas service in the Southeast. This is the first time Piedmont has received the #1 ranking and is a testament to the commitment to our customers. In summary, 2022 was an extraordinary year for Duke Energy as we made strong progress executing our strategy, responding to difficult external pressures and advancing our clean energy transformation. Our path forward remains clear. As we continue to navigate our energy transition, we will do so responsibly, preserving affordability and reliability for our customers and remaining good students -- stewards of communities. I'm confident that our strategy will continue to deliver consistent and lasting benefits to our customers, communities and investors. With that, let me turn the call over to Brian.

Operator:

[Operator Instructions]. The first question is from the line of Shar Pourreza with Guggenheim Partners.

Lynn Good:

Sure, we're continuing to target $5.65 and feel very confident with that. As you can expect, as we entered the year, we had a range of expectations around both timing and proceeds from the sale. And what I see now as being kind of a modest delay from midyear to later in the year, I don't see an impact. I think it's important to recognize that the growth is primarily driven by our regulated outcomes and the cost mitigation that's offsetting some of the external headwinds and those are on track as we expected and shared with you third quarter. So confident in the $5.65.

Lynn Good:

Shar, I appreciate the question. I also appreciate how closely you all read the slides. We weren't intending to signal anything with the word robust. We feel good about the process. There's strong interest in the portfolio and we're moving forward. I think the thing to recognize on an impairment charge, is this an accounting adjustment that's really driven by the earnings profile of renewables, where a lot of the profit that's in the early part of the life, you then depreciate it over a longer period of time. So when you make a decision to exit before the end of the useful life, you've kind of set yourself up for an impairment. So I would look at it that way. The takeaway is the strategic decision around asset remains unchanged, and we're on track for proceeds later this year.

Brian Savoy:

We'll definitely hit that, Shar, and thanks for the question. We're working through the deferred fuel balances, through the regulatory mechanisms in place. And that's what the agencies are looking for. Looking to see, are you filing in line with the regulatory recovery that is established. Or are you making exceptions spreading that recovery longer. We've had really good success so far in North Carolina and South Carolina, and we have a couple more filings in front of us, both in Florida and Duke Energy Carolinas, North Carolina. But these are working. The regulators understand our need to recover this in a timely manner from a credit position and the rating agencies are liking what they're seeing in how we're executing these plans in accordance with the tools in place.

Operator:

The next question is from the line of Julien Dumoulin-Smith with Bank of America.

Lynn Good:

Sure. And thanks, Julien, for that. I regard the carbon plan order is a very constructive one that has given us real clarity on the near-term investments. So when you think about 3,100 megawatts of solar, 1,600 megawatts of battery storage, that capital plan is pretty well locked in for the Carolinas. We may see some marginal changes, but I would think about those as later in the 5-year period and really in connection with the next update. So I feel really good about the Carolinas. Florida is also on track with the 10-year site plan and SPP and grid modernization. I think where we have potential and even potential upside is in Indiana, where we are earlier in the clean energy transition, moving through that process. We have estimates in the capital plan, but we'll be filing for CPCN later this year, and have more advanced dialogue about timing and approach. So I'm very comfortable with the capital plan and if anything, see a bit of upside in Indiana as we continue our clean energy transition.

Lynn Good:

Yes. We have an estimate. That's exactly right. We put an estimate in there, Julien, but we're filing an updated IRP later this month into March, then we're filing for CPCNs. So that will crystallize more specifically toward the end of this year into 2024, much in the way that the Carolinas has matured as we go through IRP filings. Now we have an order on the carbon plant. So that's the way I would characterize it. And if anything, I would say our estimate has been on the conservative side.

Lynn Good:

Well, it's a good question, Julien. And I guess I'd like to step back and just point for a moment to a very constructive and comprehensive settlement that we were able to reach on the South Carolina rate case. I think that's an indication of just the incredible work that we have been doing with the stake -- with the stakeholders to continue constructive dialogue about where the company is going and what we're trying to accomplish. And I appreciate your sensitivity on the word alignment because what we are trying to accomplish is giving both states the flexibility to put their fingerprints on an energy plan going forward. And we believe we're making progress on this. We actually had testimony in the carbon plan that laid out a structure that would allow states to opt in or opt out depending on their energy policy, and that is beginning to take some discussion in South Carolina, but that will progress over time. We believe we operate in an incredibly valuable system, and we'll work with both states on how to add resources to meet their needs, customer and policy needs going forward.

Steven Fleishman:

So just a follow-up question on the Commercial Renewables impairment. The -- I think you announced it was for sale in the Q3 call. So is there a reason the impairment was not taken then and is being taken now? Is that because you have more information? Is that something else?

Steven Fleishman:

Okay. Okay. That's helpful. And -- but it does sound like the impairment -- the value that you have on now is consistent with the ranges that you've been expecting for the sale process.

Steven Fleishman:

So nothing's really changed in your planning range. Okay.

Steven Fleishman:

My other question is on the rate cases in North Carolina under the new law, the new multiyear rate plan, how are you thinking about whether you'd be able to settle those cases or that they likely need to -- because they are kind of the first under the law and need to go through a full litigated process most likely?

Steven Fleishman:

I guess one last thing. The $300 million of O&M reductions, I know that's, I think, a number that you've had before, the 75% sustained. Can you just remind me, is that the same that you said before? Or does that number get [indiscernible]

Operator:

The next question is from the line of David Arcaro with Morgan Stanley.

Brian Savoy:

That's a good question, David. This is Brian. When we looked at the opportunities across the board last year to really position 2023 in a good spot, we identified areas in our corporate costs and business support that we felt like we could really align service levels with work prioritization. And we did this across the board, but a good example is in IT, right? We have about 1,300 IT systems. Well, not all are mission-critical don't need to be -- have the same level of support as others. So we really stratified our support levels. And we did that across IT, HR, legal, finance, we looked at across the corporate areas and found really structural opportunities that will remain for the long term. And that's why we feel like a lot of the 75% of the $300 million is sustainable. And another area that was also very important to the cost reductions was our real estate footprint. In Uptown Charlotte, we're moving from 4 buildings into 1 new tower. That's reducing service costs on those assets as well as lease cost and depreciation. So inflationary pressures are not impacting our ability to hit that $300 million target. We've contemplated inflation in certain pockets in the portfolio as we look into the spin in 2023 in our planning horizon and feel good about the $5.65 target we have.

Lynn Good:

David, as we come to capital planning every year, we take into account where we are with regulatory approval, where we are with integrated resource plans, et cetera. And so we have seen an increase in transmission and distribution investment. If you look at the carbon plant in particular, there's transmission that's been approved in order to open up more potential for renewables. And as we get out into '26, '27, those numbers also reflect what we expect to mature in subsequent IRP updates and subsequent regulatory approvals. So that's how I would answer. I don't know, Brian, would you add anything further?

Lynn Good:

And I think that's an important point. As we were talking -- thinking back to the generation transition day kind of showing those charts about the 10 years. As we get deeper into the plan, more generation investment begins to show up earlier in the plan, more transmission and distribution. So you're beginning to see that and you'll see more of it in '28, '29, '30.

Nicholas Campanella:

A lot of good questions so far. So I guess conceptually, Brian, when you updated this plan in the third quarter, we were kind of at the height of inflation, interest costs, gas costs, et cetera. And now we've obviously seen some of those things roll over here since you've given the 5% to 7%. Does that put you in a better spot in the range now, given that dynamic? I'm just thinking long term through the plan here? Any comment that you could give on that?

Lynn Good:

I think the commodity price is coming down, Nick is a real positive for customers because you think about we still have deferred fuel to collect, but our estimates for cost of fuel in 2023 is coming off and that's a good thing. So we're pleased to see that. It's good for customers. It also takes a little pressure off of interest in financing. So we'll continue to take advantage of every bit of that.

Lynn Good:

We feel very comfortable. The fact that we've absorbed $4 billion of deferred fuel and $0.5 billion of hurricane in 2022 alone, I think, is a strong testament to where we are, our scale, our ability to manage resources, et cetera. So we feel comfortable with it. We care deeply about maintaining these credit ratings. We think they're important and at the right level for the degree of risk in the business, but this is an opportunity that presents itself with the size and scale of our company where we can manage our way through blips of this type. More than a blip actually, $4 billion.

Jeremy Tonet:

I just want to round out the Commercial Renewables conversation a little bit, if I could. If there's any additional color you could provide on the sale such as where book value stands right now, portfolio tax equity position, asset level debt. Just trying to fuse together more on our side. I appreciate that it's a sensitive time given that you're selling the assets, but wondering if you could share any more details, particularly as it relates to book value.

Brian Savoy:

Yes. Jeremy, we referenced a $3 billion book value excluding the tax attributes mid-year and we had some projects we continue to invest in for the balance of the year and then took the $1.3 million write-down at the end of the year. So you can kind of walk it down that way if you want to think about book value.

Lynn Good:

Jeremy, it's a really good question. It's a really good question. And one of the reasons we are involved in so many different things is the obstacle for full-scale adoption has a lot to do with which technology can reach commercial scale with a supply chain that will support how much of it we need. I think about our path or climate report through 2050 has us a need of somewhere between 10,000 and 15,000 megawatts of what we call 0 emitting load following resources kind of in that late . So that could be hydrogen. It could be small modular reactors. It could be CCUS, it could be longer duration storage. So the key being, again, though, we're not going to invest until they're affordable for our customers, and we can invest at the commercial scale necessary to make a difference. The small module reactor is something we're spending time on, and you would expect us to. We are the largest regulated nuclear operator in the U.S. sitting in a part of the world that embraces nuclear as part of the solution. But we also joined with a collection of Southeastern utilities to pursue a hydrogen hub. Because with all that carbon-free generation and all the solar we're going to have in this area, we think that's something worth investing in, really, as part of maintaining and preserving the natural gas infrastructure that has been so important to this region. So I know it's a roundabout answer to the question, but we're not ready to put our finger on any specific technology as the solution, but we are advancing our work, piloting, advising, working as actively as we can to make sure these technologies are developing at pace so that when we do need them and are ready to invest, there will be something that makes sense for our customers.

Durgesh Chopra:

Just all my other questions have been answered. If I may, I just had a quick clarification on the tax leakage portion of the commercial renewables sale, Brian, does -- so the message on the Q3 call was tax leakage is manageable given your other tax losses. I'm thinking about with this write-down, does that impact your sort of tax basis? And are you still saying that -- is the message still that the tax leakage is manageable? Or does that -- does the impairment charge change that dynamic?

Operator:

Thank you. That's all the time we have for questions today. I would like to turn the call back over to Lynn Good for concluding remarks.

Operator:

That concludes today's conference call. Thank you for your participation. Please enjoy the rest of your day.

Operator:

Hello, all and welcome. My name is Brica and I will be your conference operator today. At this time, I would like to welcome everyone to the Duke Energy Third Quarter 2022 Earnings Conference Call. [Operator Instructions] Thank you. Jack Sullivan, Vice President of Investor Relations, you may begin your conference.

Lynn Good:

Jack, thank you and good morning everyone. Before I begin, I’d like to take a moment and recognize the work of our team in responding to Hurricane Ian, one of the most powerful and destructive storms in U.S. history. Duke Energy mobilized 20,000 people working day and night to restore power to over 2 million customers across Florida and the Carolinas. And what’s more impressive is the speed in which we did it, with 99% of our customers restored within 72 hours. This is an amazing accomplishment and a testament to our strong corporation, the tireless effort of our restoration teams and the value of our grid-hardening investments. Moving to our financial results today, we announced adjusted earnings per share of $1.78 for the third quarter. We continue to see strong volumes from the electric utilities offset by lower contributions from commercial renewables due to fewer projects placed in service compared to 2021. Turning to the commercial renewables business, we have completed the strategic review and our Board has authorized the sale of this business. I will provide more context about this decision in a moment, but first, I’d like to address what this means for our 2022 earnings guidance. Beginning in the fourth quarter, we will move commercial renewables to discontinued operations and remove it from guidance going forward. Bringing focus to our core regulated businesses, we are updating full year 2022 adjusted earnings guidance to a range of $5.20 to $5.30. The $5.25 midpoint of this updated range represents our original guidance midpoint of $5.45, less the $0.20 contribution we originally forecasted for commercial renewables. The regulated utilities remain on track for 2022 with strong operating results offsetting rising financing costs giving us confidence in achieving earnings within this tighter range. Turning to Slide 5, in August, we announced a strategic review of the commercial renewables business, which includes our utility scale renewables platform in a smaller distributed generation business. As part of this review, we have worked with advisers to evaluate the strategic fit of these businesses and to test the market on valuation. We have received indications of interest for the utility scale business at attractive valuations and this process will continue through year end. We expect to announce a definitive transaction in Q1 2023 and close as early as midyear. We are preparing the sale process for the distributed generation business, which includes REC Solar and expect this transaction will follow a similar timeline to closing. The majority of proceeds from both transactions will be used to reduce holding company debt. This will strengthen the balance sheet and allow us to fund our clean energy transition with our common equity issuances through at least 2027. I am very proud of our commercial team who has remained focused on maximizing the value of the portfolio, continuing to expand our robust development pipeline and operating a renewables fleet with excellence. With this pending change in our business mix, I’d like to walk you through our earnings trajectory over the next 2 years. For 2023, we are introducing a guidance range of $5.55 to $5.75, with a midpoint of $5.65. This reflects 5% to 7% growth of the updated 2022 EPS midpoint of 5.25%. It also includes a partial year benefit from lower interest expense after reducing holdco debt with sales proceeds. Turning to 2024 and beyond, we expect to grow 5% to 7% off the $5.65 midpoint of our 2023 guidance range through 2027. The 2023 guidance range reflects what we know today, including the present interest rate environment, inflation, supply chain constraints and an economic forecast that continues to support positive GDP growth in 2023. But the economic outlook remains uncertain and we will continue to closely monitor trends. Consistent with past practices, we will do all we can to control costs to match challenges in our business while maintaining excellent service to our customers. As a result, we have increased our 2023 cost mitigation target from $200 million to $300 million. We expect about 75% of these savings to be sustainable over the long-term. We will keep you apprised along the way and look forward to sharing our traditional guidance package on the year end earnings call in February. Brian will provide more on our 2023 earnings drivers, but I want to underscore the strength of our underlying core utility business. We operate premier regulated franchises in growing service territories with constructive regulatory jurisdictions and robust customer-focused investment opportunities. They have always been the lifeblood of our company. And this portfolio transition will fully highlight the strong, predictable, transparent earnings and cash flows from our premier regulated utilities and strengthen our overall investor value proposition. Next, I’d like to take a few minutes to highlight some of the important strategic work underway throughout our jurisdictions. Moving to Slide 6, in October, we filed our first performance-based regulation application under HB 951. We filed with the North Carolina Utilities Commission requesting a review of the significant investments we are making for our 1.5 million Duke Energy Progress customers served in North Carolina. The rate increase would cover upgrades we have made to improve grid reliability and resiliency and to facilitate a clean secure energy future. Our application contains a traditional base rate case based on historical investments and known in measurable changes projected through April of 2023. Our request is mitigated by a reduction in annual operating costs of over $100 million since our last rate case. In addition to historic investments, our application includes gradual customer rate step-ups over the next 3 years to recover future investments we will make through the multiyear rate plan. This consists of roughly $3.8 billion of capital projects that are projected to go into service by 2025. Approximately 75% of which is related to transmission and distribution investments. Evidentiary hearings are expected to begin in the May 2023 timeframe. Consistent with past practice, we intend to implement temporary rates in June for the historic base case subject to refund. If approved, we expect year one revised rates to be effective by October 1, 2023. Turning to Slide 7, our focus on providing customers with affordable, reliable and cleaner energy continues to advance across each of our jurisdictions. In North Carolina, carbon plan hearings concluded in late September after almost 3 weeks and we submitted our proposed order at the end of October. During the hearing, we presented strong testament that confirms the need for our near-term development activities. The MCU team will make a final decision on the carbon plan by the end of this year. We expect to file a Duke Energy Carolinas rate case with the NCUC in early 2023. In South Carolina, we filed a rate case for Duke Energy Progress in September, as we continue to work on increasing system reliability and resiliency and enhancing the customer experience. To ease the impact of these investments on customers, proposed rates would go into effect over 2 years beginning in the first half of 2023. In Florida, the Public Service Commission approved our storm protection plan update in October. Over the next 10 years, we expect to deploy $7 billion in capital investments through this rider. Shifting to the Midwest and Indiana, we are updating our integrated resource plan. We have held the first of three public information sessions with stakeholders to share information about plans under consideration and we anticipate filing CPCNs for new generation resource needs with the Commission beginning in early 2023. And in Ohio, we completed a hearing in October for our electric distribution rate case. We expect to receive a final order by the end of 2022 or early 2023. Moving to Slide 8, I’d like to update you on our ongoing review of the clean energy provisions under the IRA legislation. High energy costs are top of mind for our customers and the IRA’s clean energy tax credits present an opportunity to help address those issues. We expect to qualify for a variety of PTCs and ITCs that will generate billions of dollars in tax credits over the next decade. These tax credits will be returned to our customers, lowering our overall cost of service and providing for a more affordable energy transition. We will continue to evaluate the impact of the corporate minimum tax as new information and guidance from treasury becomes available. Because of the credits generated by our substantial clean energy infrastructure investments, we do not expect this to have a material impact on our cash flows. In closing, we are advancing our strategy across our jurisdictions, balancing the progress of our clean energy transition while preserving affordability and reliability for our customers and communities. I am confident in our long-term earnings growth and ability to execute our strategy moving forward. As I look ahead, we are well positioned to deliver exceptional value to our customers, stakeholders and investors. And with that, let me turn the call over to Brian.

Operator:

Thank you. [Operator Instructions] We have the first question on the phone lines from Shar Pourreza from Guggenheim Partners. Your line is now open.

Lynn Good:

Hi, Shar.

Shar Pourreza:

Good morning. So when you guys put out a ‘23 guidance figure out there without a commercial deal actually being announced. I know obviously, you see robust interest but the ultimate transaction multiple here matters a lot. And can you maybe touch a little bit on your sort of level of confidence here ahead of selecting a better – do you have some firm offers that’s giving you this kind of visibility into ‘23 and to have this type of an EPS range or recent deals in New York, a good proxy? Have you narrowed down the bidders? I guess, – just some more visibility on this pending deal that’s kind of embedded in your ‘23 guide would be really helpful and if there is any conservative bend here? Thanks.

Shar Pourreza:

Got it. And then just tax leakage, I guess you guys have enough in plan to offset any kind of leakage there from the sale?

Shar Pourreza:

Okay. Perfect. And then lastly, when turning to the carbon plan. Obviously, the commission has been very clear at hearings and then filings that intends to meet that December 31 deadline to have a fine to order and an initial plan in place? I mean, obviously, you guys highlighted last week, you filed the proposed order in the docket supporting a real wide range of different technologies. But everyone seems to be kind of in different directions. It doesn’t appear we have a lot of consensus, more over a dozen parties that are involved. So it’s a little bit more contentious than we would have thought. I guess how does the commission bridge these gaps, it seems to be a little bit of a tight time frame by year end? Thanks.

Shar Pourreza:

Got it. Terrific, guys. Thanks so much and we will see about a week. Appreciate it.

Operator:

Your next question comes from the line of Julien Dumoulin-Smith of Bank of America. Please go ahead, Julien Dumoulin.

Lynn Good:

Hi, Julien.

Lynn Good:

Sure. And Julien, I think for planning purposes, we are thinking about the commercial renewables transaction is being mid-year. And we will know more as we get into the final round, bidding, etcetera, and hope to be able to give you more feedback in the February call. But I think midyear is the partial year would be the right planning assumption. And on the cost reduction, I think you’ll recall that back in the second quarter, we had undertaken something that we call the work reduction initiative, really focused on ways we can simplify work, use digital technologies in order to streamline our governance processes, our reporting processes, etcetera, and we were targeting $200 million. We were also, at the same time, looking at supply chain and looking at other things that we could do to potentially more tactically move O&M out of ‘23. And we were able to increase that $200 million target to $300 million. We have sized that, Julien, to give us confidence around the macroeconomic trends. So when I look at interest rates, for example, we are in a position with the work that we’ve done to be able to hit this guidance range despite the headwind of interest rates. And as we look ahead beyond 2023, we have modest amounts of maturities in ‘24. And we also see the benefit of the IRA showing up more materially in 2024. I think we’ve talked about the nuclear PTCs being consequential for us. We see IRA is not only benefiting customers but being credit positive, cash flow positive to the utility. So we feel like we’ve got good plans in place here and are really pleased that we got after cost reduction. As you know, we always do early enough in 2022 that we have a high degree of confidence for 2023 and beyond. We think that the $300 million, 75% of it is sustainable.

Lynn Good:

Julien, I haven’t thought about it that specifically because the way I approach every year is looking for a way to save money. So we may come up with some new ideas in 2023 for 2024. The continuous improvement mindset at Duke runs pretty deep, and we’re always trying to some ways to reduce costs.

Lynn Good:

Julien, it’s several hundred million dollars, we believe. We believe our regulated fleet qualifies and we operate very low cost, very low cost nuclear units. And so we will be working with our regulators on the appropriate way to recognize those benefits. And those scenarios could have a range of passing it back over 2 years, 3 years, 5 years. And in the meantime, we have the opportunity to strengthen the balance sheet or the cash flows, if you will, from those credits.

Lynn Good:

Thank you.

Steve Fleishman:

Hi, good morning.

Steve Fleishman:

Hi, Lynn. So just I think you just answered this on Julien’s question, but just to maybe ask again a little differently. So obviously, the cost cutting offsets a lot of pressures in ‘23 in ‘24 and beyond. As you mentioned, the cost cutting moderates, and it goes through regulated rates also and – but the holdco debt refinancing and stuff continues, assuming rates stay high. But it sounds like what you’re thinking is that the improved cash flow and performance at the utilities kind of could sustain the offset? Is that how to think about beyond ‘23?

Steve Fleishman:

Okay. Great. And then just in terms of thinking about kind of dividend growth, should we – given that there is some kind of reset a little bit on the earnings, just should we assume you continue at kind of a rate below the earnings growth for another couple of years before you move it up into the earnings growth range?

Steve Fleishman:

Okay, great. Thanks so much.

Operator:

Thank you, Steve. We now have David Arcaro of Morgan Stanley.

Lynn Good:

Good morning.

Lynn Good:

And David, I’ll make a couple of comments and then turn it over to Brian. We use a conservative load growth assumption in our planning. We size our cost structure to be consistent with that. We – but when I look at the strength of the economy that we are enjoying right now and the volumes that are coming through, we have – we’re very well positioned. And Brian made a comment in his remarks that we’re already 2% above pre-pandemic levels, which I think is quite an extraordinary rebound. But Brian, how would you add to that and maybe talk a little bit about the industrial.

Lynn Good:

No, David, some of the statistics we shared with you on economic development are also noteworthy. And that’s not even a complete list of what’s happened in 2022. North Carolina was rated number one for business for a reason, which low tax environment and a good workforce, great university system, and we have had an extraordinary year from an economic development standpoint. And we expect that to show up over the 5-year period.

Lynn Good:

We do see some inflationary pressures. I would point to materials. I would point to labor, but all of that, David was a part of the analysis that went into our cost reduction efforts. So, I don’t see anything happening in the inflation environment that’s impacting our commitment to drive these costs out of the business. And the other thing I would point to, a lot of the material inflation is showing up in our capital plan. And so we are monitoring that as well to make sure that we are spending capital in a prudent way to benefit customers.

Lynn Good:

Thank you.

Lynn Good:

Hi Nick.

Lynn Good:

Yes. Nick, thanks for that question. Let me start by saying we believe our regulated business with this clean energy transition, $125 billion of capital over the 10 years has the potential to achieve at the high end of the range. But given the dynamic economic environment that we are in right now, we believe 5% to 7% is the right range to use for the planning assumption and know that we will work every year to be as well positioned within that range as we possibly can. And we have talked about many of those puts and takes, IRA benefits, reducing O&M, all of these things represent opportunities as the plan unfolds and then further this very meaningful regulatory activity that’s underway is another key ingredient. The first all-year rate plan filing for DEP occurred this year. We are expecting another one – another filing for DEC in the coming year. So, we are putting pieces in place and trying to address the macroeconomic environment at the same time. And we believe all of this given the premier regulating utilities that we offer is a very strong value proposition for investors.

Lynn Good:

Nick, thank you for that. And I think as we have talked over the last year with some of the challenges in the supply chain. We have always leaned to our regulatory – regulated business and make sure we have adequate supply. And we have extended our purchasing relationship with our suppliers to extend on a multiyear period so that we have confidence around supply into ‘26 and beyond with options to continue. We are putting similar arrangements in place for battery storage. So, we are confident in our ability to execute the regulated plan and have just so many opportunities as we pursue this clean energy transition. We are working to make sure we have got the supply chain, the labor, etcetera, and have been successful so far and see that continuing.

Lynn Good:

Thank you.

Lynn Good:

Good morning.

Lynn Good:

Durgesh, the sensitivity of 100 basis points, representing about $0.12 is probably the best and cleanest without getting into specific detail on commercial paper and long-term debt, recognizing the tenor can fluctuate. I think that’s a really good proxy for you, and I would point you there.

Lynn Good:

Thank you.

Sophie Karp:

Hi. Good morning. Thank you for taking my questions. So, a couple of questions here, if I may. First, with the sale of renewable business, does that present an opportunity for you to have conversations with rating agencies about reviewing and maybe improving your corporate trading? And what impact could it have on your borrowing costs?

Sophie Karp:

Got it. Thank you. And then on the cost-cutting initiatives you are talking about the total project that you are talking about the relieving [ph] process, especially given the inflationary environment that we are in and how some of your peers are struggling to control costs right now. So, could you just maybe share some, for example, I don’t know about what you are planning to do there. So, we can get a better sense of what the initiatives are with the cost controls, some of those…

Brian Savoy:

Yes. Certainly, Sophie and good morning. So, we really took a fresh look at the entire corporation and said, how are we going to get the work done, we need to get done. We prioritized certain roles over others. So, we said some roles had more purpose 5 years ago, and now they need to be repositioned. We looked at our real estate footprint and said, how can we optimize the real estate in this post-COVID world. So, there was an opportunity there to really reduce the amount of corporate real estate we operate. And we just looked at governance across the company and making sure that we maintain our controls, but will run a leaner organization. And it was really a grassroots effort where we got input from all of our teammates to try to figure out what are the best areas to execute on. We have over 200 initiatives. So, it isn’t a one-shot thing. It’s many, many small singles and bunt singles that are going to add up to this $200 million and that we have upsized to $300 million as we have looked at the opportunity set.

Sophie Karp:

Thank you so much for the color there.

Operator:

Thank you. We have our next question from the line of Mike Lapides of Goldman Sachs. Please go ahead when you are ready.

Mike Lapides:

Hey Lynn. Thank you for taking my questions and Brian. I think this is your first earnings call, leading as CFO. Congrats. I may be wrong. I may be getting so on…

Lynn Good:

Well, everybody remembers their first call, Michael. It’s true.

Lynn Good:

Yes. Michael, thank you. And let me – I will do first rate cases. So, Duke Energy Carolinas, North Carolina will be filed in early 2023. You may recall that the sequence of these things, you host a technical conference to talk about the capital in the multiyear rate plan that occurred this week or last week recently. And then the rate case will follow. We have not yet announced timing or plans for a DEC case in South Carolina. So, more to come on that, and we will keep you updated along the way. Offshore wind is something that we believe is an option over this 2030, 2040, 2050 periods here in the Carolinas. It represents diversity of supply. It is a renewable resource system. But as I say all of that, we also recognize it’s expensive. It has transmission requirements, particularly here in the Carolinas, where you have got to get the power to the load centers that are further west than the coast. And so the approach that we are taking is one of studying and learning more and also allowing the commission and stakeholders and the communities that could be impacted by both the offshore and the onshore transmission to be involved as well. We will not move first and we will not move outside of the regulated business. So, the risk reward for investors and customers has to be appropriate in order for us to move forward. And so I would say we are in evaluation mode. We think it’s an important resource. We think it is important over this clean energy transition, but we are being deliberate and thoughtful and cautious as we move into it.

Lynn Good:

Michael, it’s a really good question. And what I would say to you is as we contemplated the various scenarios we presented in the carbon plan, as we contemplated the integrated resource plan in Indiana. And in fact, we are updating that integrated resource plan in India to include the new planning assumptions that MISO requires consistent with those reliability concerns. We will not present a plan that does not maintain reliability. And we will not retire assets that are needed to maintain reliability. And so that’s something that is being closely monitored. Our regulators completely understand and support that. And so I think we just have to work our way through it, making sure that we have replacement generation, transmission ready to go. The combination of resources ready to go so that when we retire, our customers can expect reliability. That is our commitment, and that’s the way we are planning and executing these transition plans.

Lynn Good:

Alright. Thank you, Michael.

Operator:

Thank you. That does conclude today’s conference call. Thank you all again for joining. You may now disconnect your lines.

Operator:

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's Second Quarter 2022 Earnings Call [Operator Instructions]. I would now like to introduce Jack Sullivan, Vice President of Investor Relations. You may begin your conference.

Lynn Good:

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 $5.30 to $5.60 with a midpoint of $5.45. We're also reaffirming our long term earnings growth rate of 5% to 7% through 2026, up a midpoint of our original 2021 guidance range. Turning to Slide 5, I'd like to offer context on our announcement 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 US 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 US 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 6, 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 road map 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 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 Slide 7. 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 multiyear rate plans, performance incentive measures and residential decoupling. The NCUC hosted a T&D Technical Conference in late July. DEP presented to the commission and stakeholders and discussed key transmission and distribution investments that enhanced grid resiliency and 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 Store 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 TDSIC plan, which includes grid modernization investments and improved reliability and resiliency. We will begin executing in 2023 following the completion of our initial TDSIC 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 CPCN filings 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 8, 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 transition. Furthermore, the transferability provisions can 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 US 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.

Operator:

[Operator Instructions] Your first question comes from the line of Shar Pourreza with Guggenheim Partners.

Lynn Good:

And you know Shar, what I would say on timing is we have been looking at this for some time. I think you have known us to review our portfolio and make strategic decisions about the future a number of times in our history, and this is no exception to that. As we look at the pipeline of regulated investment that is in front of us, over the next many years, we believe this is the right time to step back and really look at the strategic fit of the Commercial business, because there's going to be competition for capital at Duke. And we think we operate a very strong Commercial business that can grow and grow well in the future, and we want to take the opportunity to evaluate as they're a better strategic owner at this moment. And as I think about other portfolios in the market, I believe there will be a robust market for these assets, given that it's not only operating assets, but also a development pipeline, a platform, a team of very capable developers and operators that I think have the potential to add a great deal of value. And if I focus just a moment on the pipeline, we have 1 gig to 1.5 gigs of near term projects that could be quite valuable in 2024, 2025, in addition to what we had planned for 2023. So when we think about our timing for execution, we commented that we'll be completing the strategic review by the end of '22 into early '23. We will move quickly to get information into the market. There is an interest in these types of assets from a broad range of buyers and would hope, Shar, to have more to share as we think about third quarter EEI and then moving into February of next year.

Lynn Good:

And as we look at our potential to accelerate and what we believe the potential from this transaction represents, we do think it would postpone equity into the future. But I think we're getting a little bit ahead, because I don't want to comment on value. We have given you an indication that we think the right bias right now is to use the proceeds to avoid debt. It's a high interest rate environment, inflation, a variety of other uncertainties around the economy. But I do think it strengthens the balance sheet in a moment when we see accelerated capital, and that would lead to a period in which we can delay any further equity issuances. On tax leakage, let me turn to Steve just to make a comment on that.

Shar Pourreza:

And then just one last one for me, and I'll jump back in the queue. Steve, there's a viewpoint that you may need to rebase. I mean is that a scenario or do you feel that just given the robust nature of the process and the demand for renewables that you could more than sort of offset sort of that lost earnings and maintain the current trajectory?

Operator:

Your next question comes from the line of Julien Dumoulin-Smith with Bank of America.

Lynn Good:

And Julien, I'm not going to comment on value. I think we're too early in the process. We're testing the market. But we do believe we have a very strong set of operating assets, development pipeline, et cetera. We've given you an indication of use of proceeds, so I'd like to leave the comments there. And as the process progresses, we'll move forward and give you more information. The second part of your question, I lost the train…

Lynn Good:

So use of proceeds, as I said in my comments to Shar, our bias right now would be to use the proceeds to avoid debt. But Julien, as the review progresses, we get a better sense of the market, we're sometime in '23 likely, we will finalize that decision and keep you informed every step of the way. And as I think about the way this will work, when we reach a decision, we will likely move the business to discontinued operations. So the Commercial business would come out. We would give you very clear guidance on the regulated business, and we'll give you a sense of use of proceeds, so we can put all of those various pieces together. And we will do that when we have progressed far enough in the strategic process to have a sense of how to guide you into 2023. But I would point again too, this gives us an opportunity to really draw a great focus and attention on the Regulated business, which is poised to continue to grow at a very healthy pace.

Lynn Good:

Julien, we feel very confident in our ability to execute on cost mitigation. And I think if you track back, COVID and even prior to that, dating back to '15 and '16, we have consistently managed our O&M trajectory in a way that's not only been helpful to investors, but helpful to our customers. It's been part of keeping our prices low in all of our jurisdictions. We are looking at the Inflation Reduction Act, and we see meaningful benefits to customers from the renewable tax credits, the recognition of nuclear, the incentives around critical infrastructure. We will be impacted by the corporate minimum tax but we will also benefit from the credits, which we will pass through our customers. So we're in the early analysis of this, as I know so many others, and we'll be tracking it closely as you would expect us to.

Operator:

Your next question comes from the line of Nicholas Campanella with Credit Suisse.

Lynn Good:

Our target for 2022 is around $150 million of net income, which we kind of stepped down the contribution at the end of last year as we saw some of the challenges in supply chain and panel availability, et cetera. We also, in the last call, said we see a trending more in line with that for '23, because despite the favorable executive action, the delay and uncertainty that was created during that period of time really pushed execution of projects from '23 into '24. And so I'll leave it there. I don't know, Steve, if you would add anything to that.

Nicholas Campanella:

So just run with the $150 million. And then do you have EBITDA for that business that you're willing to disclose or…

Operator:

Your next question comes from the line of Jeremy Tonet with JP Morgan Chase.

Lynn Good:

Jeremy, we're really looking forward to ESG Day, because we've had, over the course of this year, a chance to give you some visibility into new targets. So we added Scope 2 and Scope 3 emissions. So you can expect to hear more from that. We've also filed our carbon plan. We've also continued to progress our integrated resource plan in Indiana and have continued to build solar in Florida. So we will give you an update on what all of that could mean. You can expect ranges of capital to be discussed as we kind of take all of these plans into a more financial perspective at ESG Day. And then, of course, we'll comment on some of the social issues around environmental [justice, adjust] transition, affordability which is increasingly important, and then, of course, governance. You can expect to have a member of our Board join the conversation. So I think it will be a great day to really hone in on the clean energy transition story that we have here at Duke. We're not only making good progress but we have good plans and targets in place in all of our jurisdictions to continue that work.

Lynn Good:

Jeremy, it's been a robust stakeholder process. And I would say to you, as we have been engaged in so many meetings and discussions, there are a wide range of topics being discussed but it's nothing that we would say is surprising. And one of the reasons that we put together multiple pathways is really to get all of the topics on the table, so that we could have the kind of discussion, the commission can have the kind of information they need to make decisions. So if I were to just comment briefly on the types of things that are under discussion, there's a lot of agreement on retirement of coal, there's a lot of agreement on near-term actions, particularly solar, storage, wind, a lot of agreement on energy efficiency, demand response being a part of the conversation, a lot of agreement on the need to accelerate integration of renewables, because it's not just a matter of naming megawatts, it's a matter of getting them interconnected. And then I think if I were to talk a little bit about areas of differing points of view, some are more aggressive on how quickly solar comes in. Some are more optimistic on the pricing of storage and pricing of offshore wind. Some believe we could do more onshore wind than what we consider. And then, of course, a lot of discussion on the attributes of natural gas, the assumptions on price and the role that natural gas should play. So in price, I put price as a top of mind consideration on the minds of our industrials as well as customers in general. So I think this just provides a fruitful menu of items and discussions that will result in a thoughtful plan. I think as you know, we have asked for authority to move on the no-regrets elements of the plan. Not to lock into any specific one, allow things to continue to mature, prices on certain technologies to continue to decline. And I think there will be just a really good discussion. Hearings are scheduled for mid-September. We will be filing testimony in late August. So there will be more data points along the way that we can share with you as this process continues.

Lynn Good:

You know Jeremy, we're digesting what we know about the Inflation Reduction Act at this point. We believe regulated plans are included in that consideration. And frankly, we're really pleased to see nuclear being recognized as a critical part of the clean energy transition. We're a believer of that at Duke. And as we look at the credits, we believe there's value for those, who are low cost producers, and Duke certainly is. So we'll learn more as this law progresses and have an opportunity to share more with you as we know more. And of course, the bill has to pass before we can give you any true specifics. On the SMRs and advanced nuclear, we are working on both technologies, I would say, an advisory capacity and a capacity to understand more to lend our operating expertise. We do not have an intention of being version one of anything, first of a kind. We would like to see a broader adoption of the technologies, a broader understanding of not only operating characteristics, but the commercial attributes of price, ability to construct them within a time frame that we're comfortable with. And so we see this decade of the 2020s as an important one to continue that work. And if it progresses as we all hope it does, we would be in a position to potentially invest in one to come into service in the early 2030s. So more to come on that. This will be a fruitful area of discussion in front of the commission. I think you know that we operate in the Carolinas for 50% of the power today comes from nuclear, so it's an important part of the equation in the Carolinas. And if there's a way to add to it in an economic way that's affordable to our customers and fits with the expectations of our regulators, we would welcome the opportunity to do that.

Durgesh Chopra:

Steve, congrats and thank you for your very patient CFO. Thank you for answering all of our very detailed annoying questions over the years. I appreciate it. Maybe just really quickly, is there any debt on the renewable assets that we are pursuing a strategic review on?

Durgesh Chopra:

And that's included in the $4 billion number that you gave us, the value I wasn't sure that was the equity value or the enterprise value.

Durgesh Chopra:

And then Lynn, just wanted to get your thoughts on the -- conceptually on this transferability topic. Obviously, this version of the plan doesn't have direct pay, but it has transferability. How would you compare and contrast this versus tax equity? And as a concept what's the market for these credits? Just any color you could share there would be appreciated.

Operator:

Your next question comes from the line of Michael Lapides with Goldman Sachs.

Lynn Good:

Michael, what I would say to you on regulated spend, I'm going to focus on the Carolinas just for a moment. We used one of the 2020 IRP scenarios to develop that capital plan, recognizing that we were going to put a carbon plan in front of the Commission, it needed to be reviewed. And so there will be a fine tuning of Carolina capital coming out of carbon plan. We also were on the technical conference on the multiyear rate plan and put forward recommended range of transmission and distribution that will be filed in connection with the cases that are upcoming. So there could be some fine tuning there. And then I think about just around the corner, we'll be opening up 27, when we come to the Street in February. And I think we've talked to you about the fact that we see an acceleration of capital in the back half of the year as we get deeper into the multiyear rate plan, deeper into coal retirements, deeper into replacement generation. So we do see that capital trending up and we'll have an opportunity to give you some perspective on that at ESG Day.

Lynn Good:

Yes, I would think about it as post 2025, because honestly, Michael, 2025 is tomorrow for us, when you think about large infrastructure build. The other thing I would point to is there will be some fine tuning of capital in Indiana as a result of the Integrated Resource Plan, the CPCN process that we plan to file later this year. So that's another update that you can expect from us. Again, it will be more in the back half of the decade as we move more deeply into our clean energy transition in Indiana.

Lynn Good:

Michael, it's a good question, because there are puts and takes on that question from every direction. And what I mean by that, you've highlighted supply chain issues on the replacement side, you also highlighted fuel prices for natural gas generation. But frankly, coal, the supply of coal, the logistics of getting coal from point A to point B are also a challenge. And so we cannot assume that there is some steady-state perfect situation here. We have to manage all of this. And so trying to find the right balance between timing of coal retirement and replacement generation is something that we're spending a lot of time and attention to and also trying to ensure for the period of time that the coal assets are with us that we have a reliable supply. There have been labor shortages in the railroads, labor shortages in the mining community, the global market has impacted coal and pricing. So I would just raise that as another dimension to your question that we're also working on.

Anthony Crowdell:

Congrats on the new position, Brian and Steve, wish you best of luck. Just two quick questions. Lynn, one, I understand the size of the Renewal business relative to Duke. But do you think the sale of the Renewable business will have any impact to like ESG ratings that Duke Energy has such as, hey, maybe they're not as focused on ESG as previously?

Anthony Crowdell:

And just lastly, on load trends, it looks like you're coming in maybe above your original 2022 guidance of 1.5%. I'm curious, what do you see long term? It seems that maybe the electrification of the economy is accelerating than maybe we previously thought. Maybe a couple of years ago, we were talking about flat as the new up. Do you think going forward, 1% or 2% may be the new norm as we -- hybrid work and all these other things come to benefit the electric utility?

Lynn Good:

And Anthony, what I would add to that is we believe that discipline around cost management is really grounded in the fact we're not putting in overly optimistic assumptions on loads. So we manage our cost structure consistent with sort of a flat expectation on load growth. But when I look at some of the trends around in migration in the Southeast, I look at these economic development numbers and the business ratings of our states, we do have some tailwinds on growth, that I think we will enjoy for a period of time. But we continue to believe this flat to 0.5% is the best way to manage the business and always hope to be surprised to the upside.

Steve Young:

Well, we'll continue to monitor that. We do see a desire to increase energy efficiency as part of carbon reduction plans. You'll see that as an increasing area, for example, in our North Carolina plan. And one of the things that's helpful to us as we move forward is we're also going to have residential unbundling as part of our multiyear rate plan. And that takes away that volatility for that large customer class on usage, whether it's weather or just growth as well. So I think we've got protection there if we saw economic issues or energy efficiency coming along to affect the top line demand.

Operator:

There are no further questions at this time. We'll now turn it over to Lynn Good to conclude the call.

Operator:

This concludes today's conference call. You may now disconnect.

Operator:

Good morning. Thank you for attending today's Duke Energy Quarter 1, 2022 Conference Call. My name is Amber, and I will be your moderator for today's call. All lines have been muted during the presentation portion of the call, with an opportunity for questions-and-answers at the end. [Operator Instructions]. I now have the pleasure of handing the conference over to our host, Jack Sullivan, Vice President of Investor Relations with Duke Energy. Mr. Sullivan, please proceed.

Lynn Good :

Jack, thank you. And good morning, everyone. Today, we announced adjusted earnings per share of $1.30 for the quarter, delivering strong results to start the year, driven by continued growth in electric volumes. That growth was partially offset by $0.07 of higher expense from severe winter storms. I'd like to take a moment to thank approximately 19,000 restoration workers, who worked tirelessly to restore power to over 1 million customers across a series of winter storms, the most we've seen in eight years. Despite the Q1 storms, we remain on track to deliver within our original guidance range and are reaffirming our full year earnings guidance range of $5.30 to $5.60, with a midpoint of $5.45. We're also reaffirming our long-term EPS growth rate of 5% to 7% through 2026, at the midpoint of our original 2021 guidance range. We're monitoring economic trends and will take action if necessary as we continue to execute the important strategic work we have underway in the Carolinas, Indiana and Florida. I will touch on this more in just a moment. Turning to Slide 5. We published our first ESG report in late-April that expands our historic sustainability themes and adds more insight on social and governance topics. We've included some highlights and key accomplishments on this slide. We've got a strong track record in each of these areas and have established ambitious targets for the future. Our work has been recognized across the ESG community, including by MSCI, which upgraded our ESG rating to AA in February. We're also laying the groundwork for even more progress with our proposed carbon plan in North Carolina, our IRP in Indiana and our ongoing solar and grid investments in Florida. We look forward to sharing additional updates throughout the year and during our ESG Day on October 4. Moving to Slide 6. Let me spend a few minutes on North Carolina. There's a meaningful progress in the state implementing the framework set forth in House Bill 951. As a reminder, this landmark bipartisan legislation provides for a clean energy transition as well as modernize performance-based rate-making provisions, including multiyear rate plans, performance incentive measures and residential decoupling. We've been working closely with stakeholders on the development of our proposed carbon plan, which we will file with the commission on May 16. The plan will outline multiple portfolios to achieve the 70% carbon reduction target, including proposals around timing of coal plant retirements and resource additions. We expect substantial solar and battery additions, demand side management and energy efficiency opportunities in every pathway. Onshore and offshore wind will be presented for consideration as well as small modular nuclear reactors. Each portfolio has been rigorously tested for reliability and affordability for our customers. Following the May 16 filing of our proposed carbon plan, the commission will gather additional stakeholder input, make adjustments and approve a final plan by the end of the year. The plan will be updated every two years thereafter. In February, the North Carolina Utilities Commission issued its order on rulemaking for performance-based regulation. And in April, the Commission issued its order on rule making for coal plant securitization. This allows our North Carolina utilities to securitize half of the remaining carrying value of certain coal plants upon their early retirement. Both orders were constructive, establishing processes that are fair, balanced and consistent with the policy objectives of HB 951. Another strategic priority for 2022 is to file a rate case, introducing the modernized rate-making tools approved in HB 951. The NCUC has established a process for these filings that include technical conferences on the multiyear rate plans prior to filing. We currently expect to file a DEP North Carolina rate case in the fourth quarter and likely a DEC North Carolina rate case early next year. Turning to Slide 7. I'd like to touch on the key initiatives across our service territories. In South Carolina storm cost securitization legislation continues to move forward. The proposed legislation has passed in the Senate and is now being heard in the House. If enacted, this legislation would provide an additional tool to recover prior and future storm restoration costs, creating significant savings for our customers as compared to traditional recovery mechanisms. Moving to Florida, we're making investments to harden the grid under our storm protection plan. We recently filed our updated plan, which includes $7 billion of capital investments over the next 10 years. In Indiana, we filed request for proposals for up to 2,400 megawatts of new generation through 2027, which includes both intermittent and dispatchable resources to support our transition from coal. We're pleased with the response to our intermittent RFP, having received bids from 13 developers on more than 30 different projects totaling over 7,000 megawatts. On May 2, we received the bids for the dispatchable portion of the RFP and are reviewing them now. We expect to file CPCNs with the Indiana Utility Regulatory Commission later this year. In November, we filed our second TDSIC plan in Indiana. The six-year, $2 billion plan includes investments to improve customer reliability, harden the grid and prepare for distributed generation. A hearing was held in March, and we expect to receive a decision from the commission in July. If approved, the program would begin in 2023. Shifting to the LDCs, we continue to make investments to build needed infrastructure, improve reliability and to comply with federal regulations. In South Carolina, we filed a general rate case in April. If approved, we anticipate revised customer rates will be effective by October. And in Tennessee, legislation was recently passed that will allow natural gas utilities to invest in low to zero emission capital projects. This legislation will help enable our decarbonization vision for our natural gas business unit and could serve as a blueprint for legislation in other states across the country. In closing, we're making progress on all fronts across our jurisdictions, meeting our commitments and executing our clean energy strategy. We have a clear path forward for 2022, and believe our investment plan will deliver sustainable value to shareholders and 5% to 7% earnings growth over the next five years. And with that, let me turn the call over to Steve.

Operator:

Thank you. [Operator Instructions] Our first question comes from Julien Dumoulin-Smith of Bank of America. Julien, your line is now open.

Lynn Good :

Good morning.

Lynn Good :

Sure. And, Julien, I'll take a shot, and I'm sure Steve will have some things to add. I think the headline that I'd like to leave with you is we are on track in 2022 for both commercial and regulated renewables. So the earnings that we have been talking about, the adjustment that we made to 2022, we are tracking exactly to both of those. For 2023, we continue to prioritize our regulated renewables and they are on track. As we look at ‘23 for commercial, there is some uncertainty that's been created by this investigation really around price and how that price is going to ultimately impact project economics. So we are planning for a range of outcomes. And what Steve shared with you is that range could include something comparable to 2022 if the delays persist, or we have the potential to do better than that if clarity occurs soon enough so that we can keep projects on track. I think it's important to recognize that this is a minor amount of capital in the construct of Duke Energy. And so as we think about 2023, we are confident in our 5% to 7% growth rate. So on income recognition, I'll turn it to Steve to talk a little bit about that, Julien, and then we can circle back and see if we resolve these questions.

Julien Dumoulin-Smith :

Got it. Okay. Fair enough. And just to clarify there, so how much of that would be shifting? You have shifted, I don't know, half of your portfolio. How much of that impact that 23, just to maybe clarify that? And then a second question, if I can. -- go forward, Lynn, please.

Julien Dumoulin-Smith :

Yeah. Got it. Yeah. Forget the permutation is focused on the [Indiscernible].

Julien Dumoulin-Smith :

Right. Yeah. Clearly, and evidently, this time-related issue, so I very much appreciate that. Just a super quick second question. Just treasuries. You guys have the sensitivity in the slides, et cetera. Can you comment about the impact to your business today from the move in rates that we've seen? Against, lots of different ways to take that, Lynn, where would you go with it? I know you got this $0.12 [Indiscernible] out there?

Steve Young:

That's right. We gave a sensitivity based on variable rate securities in the portfolio. But we -- some things that we've done to mitigate that very significantly have -- we've increased hedging over the past year and half on some of the securities that we knew we were going to be issuing in '22. We've got about 30% of the securities hedged for '22. And we've hedged even some in '23 that we know are going to occur. So utilization of that, we've been opportunistically going into the market, working with tenure and timing, which, given our scope and scale, we can do pretty well. So we have significantly knocked down of the $0.12 impact to the plan that you might see through those techniques.

Lynn Good :

Thank you, Julien.

Jonathan Arnold :

Hi. And good morning, guys.

Steve Young:

Good morning.

Lynn Good :

Hey, Jonathan, it's the latter. We're going to present a range of options on the 70% reduction and then that will be the subject of public hearings and review by the commission. And ultimately, it would be the commission's decision on pace, technologies, price implications, et cetera. And those portfolios reflect the input from stakeholders. So we've had three robust stakeholder meetings. We've also had a series of technical conferences to dig more deeply into topics that are relevant to the carbon plan. So when we file this on Monday, Jonathan, we will come -- provide information to all of you on what's in there. And then, of course, this will be a centerpiece of our discussion over the balance of the year.

Lynn Good :

No. No.

Lynn Good :

Jonathan, I would say we continue to experience very strong growth in the Carolinas and in Florida and that shows up with customers, it shows up with economic development. And our results reflect that strength. But we're also monitoring what's going on in the broader economy with inflation and GDP growth expectations. And so that has kept us at our planned level of 1.5% for the full year. And I don't know, Steve, if you would add to that?

Jonathan Arnold :

Great. It's been good, but it's enabling you to be a little more conservative as you think about the rest of the year.

Jonathan Arnold :

Great. Thanks so much.

Operator:

Thank you, Jonathan. Our next question comes from Jeremy Tonet with JPMorgan. Jeremy, your line is now open.

Lynn Good :

Sure. A couple of things I would note there. Well over 50% of the multiyear rate planning capital will be transmission and distribution investment. We will include some level of renewables and battery storage consistent with the carbon plan, really targeted for the end of the three-year period. So think about projects that would come in service '25-'26. And the way the rate cases work here in the Carolinas is we do have an opportunity to continue to update capital beyond filing through the date of the hearing. So that will give us an opportunity to fully understand the approved carbon plan and to the extent that the adjustment needs to be made in capital, we would do so at that time. So I would think about these things running in -- a bit in parallel, Ryan. But given that the majority of the capital is T&D, we don't expect a material impact on the multiyear rate plan from the carbon plant in this three-year cycle. A lot of impact in the next one.

Lynn Good :

We continue to see what you're hearing throughout the industry, whether it's raw materials, labor, of course, fuel costs have been front and center. But as Steve, indicated, we are addressing those risks with improved planning, with our long-term contracts, our scale, inventory, substitution, additional suppliers, just a variety of considerations. And as we look at O&M in particular, we're confident in our trajectory that we had planned for 2022, and maybe a little background there, Ryan. We had originally been planning for a negative 1%. We raised that to flat, giving us some headroom. And so the combination of all the things I mentioned give us confidence that we're on track for O&M in 2022. And we have yet to see any impact to our overall capital plan as a result of these changes. We've been able to address even delays in supply chain, make substitutions in our projects and keep executing for our customers.

Lynn Good :

Thank you.

Michael Lapides :

Hey, guys. Thank you for taking my ---

Michael Lapides :

Congrats on a good -- hey, Lynn. And congrats on a good start of the year. I actually have a couple. First of all, O&M. O&M, ex-storms, was up year-over-year. And if I understood Steve's comments correctly, you'll have some O&M pressure in the second quarter with outage schedules, I would assume. How should we think about what that means for the cadence and trajectory of O&M in 2022 ex-storms? Flat, up, down? And if it's down, is it more backend loaded?

Michael Lapides :

Got it. And I know you've got the RFPs coming in Indiana. And I'm just curious of the 2.4 gigawatts. Can you remind me how much of that is renewable versus conventional? And how do you think about what is potentially utility or cell phone versus kind of just under traditional PPA?

Michael Lapides :

Got it. And then last one. You mentioned quickly in the remarks today that you updated the storm protection plan in filings in Florida. Can you remind me how much of a material -- how material of a change relative to the original filing did that make to your capital spend plan and the revenue requirement for this year and the next couple of years in Florida?

Michael Lapides :

But $1 billion over 10 years, $1 billion over two years? Just can you put some cadence and timing around that for me, please?

Steve Young:

That's right. It was a 10-year filing. So Lynn is right, it would probably be in the back part of the year. We'll catch some of that in the latter part of our five-year plan, but the bulk of it is going to be after that.

Lynn Good :

It is.

Lynn Good :

And Michael, I would suggest that we look at all of these things. The multiyear rate plan, the storm protection plan is a part of an integrated approach to serving customers in Florida and really thinking about how the impact to price and schedule and our construction activities and our capital. So we plan them in a coordinated way.

Lynn Good :

Thank you.

Operator:

Thank you, Michael. Our next question comes from Anthony Crowdell with Mizuho. Anthony, your line is now open.

Steve Young:

Thank you.

Lynn Good :

Anthony, I would maybe pull up just a little bit to talk about the alignment between the two states that has existed over decades, whether you think about nuclear or even work around economic development to make sure that we've got investment going in both states. South Carolina has a strong interest in renewable generation. You may remember Act 62 set out some parameters around renewable construction. And we will continue to work with the state on how the clean energy transition should occur so that both states are able to meet their objectives. And I would think about energy policy as being important to both states. The language may be slightly different. The approach, we believe, will be aligned and coordinated in a way that makes sense for our customers and for our investors. So I'll leave it at that at this point, Anthony. But a lot of work going on to make sure South Carolina is completely up to date on all that is occurring. And I should indicate that they have been very active stakeholders in the carbon plan in the stakeholder meetings here in North Carolina.

Lynn Good :

Yeah. Anthony, I would think about that. I would also think about acceleration of capital in other places in the business. So the types of agility levers we have pulled time and time again to maintain our trajectory. And, Steve, I'll look to you to see if you'd add anything?

Anthony Crowdell :

Great. Thanks for taking my questions.

Operator:

Thank you, Anthony. Our next question comes from David Paz with Wolfe Research. David, your line is now open.

David Paz:

Good morning, Lynn. How are you doing? Can you hear me okay?

David Paz:

Great. So I appreciate the comments you made on the solar CapEx relatively modest in your current plan. Just curious, how should we think about solar post your current plans. So I think you've given us a range in the back half of the decade. Would you say it's going to be in a similar percentage points? Or was -- are we going to talk materially higher?

David Paz:

Okay. Is it fair to say that whatever projection you have for solar in the Carolinas or at least North Carolina, your plan reflects the ownership level that you -- under the law, that I think is 45% of 50%?

David Paz:

Great. And if I can ask a general question, maybe specific to Duke. But just can you talk in about the efforts that you and Duke and maybe the industry generally are conducting really to inform the administration about the DoC solar investigation and maybe just clean energy incentives generally?

David Paz:

Okay. Thank you.

Operator:

Thank you, David. This concludes the Q&A portion of today's call. I will now pass the conference back over to Lynn Good for any closing remarks.

Operator:

That concludes today's Duke Energy Quarter 1, 2022 conference call. Thank you for your participation. You may now disconnect your lines.

Operator:

Good day, and welcome to the Duke Energy fourth quarter earnings call. Today's conference is being recorded. At this time, I would like to turn the conference over to Jack Sullivan, Vice President of Investor Relations. Please go ahead.

Lynn Good:

Jack, thank you, and good morning, everyone. During our call this morning, we're pleased to share our 2021 results and our outlook for 2022 and beyond, including progress on our clean energy transition. The fourth quarter capped off a strong finish to a very productive 2021 where we made great progress against our strategic and financial goals. As a result, today, we announced 2021 adjusted earnings per share of $5.24, putting us above the midpoint of our updated guidance range. We also announced our 2022 guidance range of $5.30 to $5.60 with a midpoint of $5.45, extending our 5% to 7% earnings growth rate through 2026, off the midpoint of our original 2021 guidance range. Our Clean Energy strategy requires significant investment, and we're now budgeting $63 billion in CapEx over the next 5 years, 80% of which represents investments toward our clean energy transition. This growing investment base in constructive and thriving jurisdictions give us confidence in our ability to earn within our 5% to 7% earnings guidance range throughout the next 5 years and in the top half of the range as our plan progresses. Steve will go into more details on our 2021 results and our updated 5-year financial plan. But before I turn the call over to him, I'd like to highlight some of the important strategic work underway. 2021 was a transformative year for our company. And in each of our 3 regions, we made meaningful progress, and we enter 2022 on strong footing. In North Carolina, leaders came together to pass House Bill 951. This landmark bipartisan legislation defines the state's clean energy transition and work is underway to implement it. The North Carolina Utilities Commission is developing rules on the performance-based rate-making provisions in the legislation. We're confident the commission will adopt a balanced set of rules that provide flexibility to implement performance-based rates in a way that achieves policy goals and aligns with customer interest. We expect an order later this week. The North Carolina Commission is also developing rules related to the securitization of 50% of subcritical coal plants upon their early retirements. We proposed a set of rules consistent with the North Carolina storm securitization bonds we issued last fall. Those bonds will save customers approximately 35% or $300 million over the next 20 years. We expect an order on securitization by mid-April. We plan to file our carbon plan in May after gathering stakeholder input over the next several months. HB 951 provides a framework to reach 70% carbon reduction by 2030 and the carbon plan will be a roadmap to achieve this objective. The plan we submit will have multiple portfolios, the way the costs and benefits, including reliability and affordability of various resource types. We will also evaluate with stakeholders and our regulators the full range of potential risks and opportunities related to new clean energy technologies. We expect an order on the carbon plan by the end of this year. In Indiana, we submitted an IRP in December after extensive stakeholder engagement. As the largest generator in the state of Indiana, we are retiring more coal and adding more renewables than any other Indiana utility. Our preferred scenario reduces carbon emissions from our Indiana fleet by 63% by 2030 and 88% by 2040 compared to 2005 levels. It adds over 7 gigawatts of renewables over the 20-year horizon and accelerates the retirement of coal generation with a targeted exit from coal by 2035. This plan also includes natural gas and a prudent amount of market purchases for capacity and energy requirements. As is the case in all jurisdictions, we expect a robust review of all planned resource additions to achieve the environmental, reliability and affordability goals of the state. We will issue a request for proposal for new generation later this month. And following the RFP process, we will file CPCNs with the Indiana Commission later this year. In Florida, we received approval of the $1 billion Clean Energy Connection solar program, which calls for 750 megawatts over the next 3 years. We'll begin the first year of that program in 2022, along with completing the final solar projects under the sulfur liner. To date, we've put approximately 600 megawatts of solar generation in service in Florida with another 150 megawatts currently under construction. Let me close by putting our progress and our plans for the future in the context of our climate strategy. Given the scale of our company, we're leading the industry's most ambitious clean energy transformation. This demands active engagement with regulators, policymakers, customers and stakeholders to make the vision a reality. It requires candid discussions about the appropriate energy policy for each state, recognizing the unique differences of existing resources, customer bases and policy objectives. It also requires a focus on keeping customer bills affordable, a critical variable as we pursue this transformation. We continue to make progress and are strongly positioned to achieve our Clean Energy vision. Slide 6 captures our progress and the work underway. Let me share a few important highlights. We're executing the largest planned coal fleet retirement in our industry, targeting energy from coal to represent less than 5% by 2030 and a full exit by 2035. Embedded within Duke Energy is the top 10 U.S. renewable energy company, we now own, operate or purchase more than 10,000 megawatts of solar and wind energy. We plan to reach 16,000 megawatts by 2025 and 24,000 megawatts by 2030. We've reduced our carbon emissions by 44% from 2005 levels, and we're on track to exceed 50% by 2030 and net 0 by 2050. We're actively engaged with policymakers and advocating for and piloting new clean energy technologies necessary to meet our net 0 goal. We're also stepping back and evaluating our climate goals more broadly as we engage with our shareholders and discuss the growing importance of Scope 2 and 3 emissions. And just yesterday, we announced we're expanding our net 0 goals to now include Scope 2 and certain Scope 3 emissions, such as upstream emissions related to procurement of fossil resources and downstream emissions for our natural gas customers' consumption. These initiatives will be a key focus area for our management team and across the entire company in 2022 and beyond. We look forward to sharing more details about what it will take and the ways we're building upon our success to advance our long-term business strategy at our next ESG Day planned for October 4. I encourage you to join us for this interactive live streamed event. We accomplished a great deal in 2021. We delivered on our commitments while also strategically positioning the company for the future, derisking investments, simplifying our business and modernizing our regulatory frameworks. We have a clear vision to meet the needs of our customers and communities while remaining a strong steward of the environment. We believe this strategy will deliver strong, consistent and enduring benefits to our customers, communities and investors. And with that, let me turn the call over to Steve.

Operator:

[Operator Instructions] And we'll take our first question from Shar Pourreza with Guggenheim Partners.

Lynn Good:

Well, James, and thank you for that question, and the work is already underway to develop the plan. We had our first stakeholder meeting just a week-or-so ago and there are additional meetings planned. And I would share with you that it will be a review of the full range of existing and potential resources to achieve the objective. We envision putting forward multiple scenarios as we did in the 2020 IRP so that we have a good discussion of weighing cost and benefits of the various resource types. And it's also going to have good discussions about reliability and affordability, coupled with environmental achievement. So I would expect it to be somewhat similar in concept to what we produced in 2020, James, because it will be a variety of portfolios but is always well informed by our stakeholders and directed toward achieving what the legislature has set out for us, which is 70% carbon by -- reduction by 2030.

Lynn Good:

Yes. It's a good question because it's a dynamic area. And I would say generally that the scope and scale of our company has positioned us really well on supply chain considerations. We've done a very good job of expanding our horizon to look at demand, leveraging long-term contracts, leveraging what we maintain in inventory. So we have not seen an impact on the majority, if -- significantly of the capital plans that we have in place. But we have experienced some impact from solar panels, and you'll see us. We talked a little bit about this in the third quarter call, evaluating what it might mean, we're pushing some projects in commercial renewables in particular, to 2023, we've been able to achieve all of our dates of regulated renewables, however. So I would leave you with the fact that it's a dynamic area. There are areas where lead times are increasing, but we feel well positioned given the scale of the company and the approach that we're taking to manage what our customers require.

Julien Dumoulin-Smith:

So maybe, if I can, maybe the first question is perhaps 2 parts. First, ’22 guidance, you have a lot of interesting tailwinds here. O&M load growth accelerating, obviously, disappointing on the renewables, but that seems to be pervasive. Can you talk about maybe latitude within this guidance range, certainly considering that accelerating growth really is a meaningful driver? And then secondly, just related to that, and I suspect this is perhaps part of the reason for the guidance range. Can you talk about your confidence on the ability to cut $100 million in cost with the backdrop of inflation admittedly elsewhere in the sector?

Steve Young:

I might add a couple of things. On the cost side, we took $200 million out sustainable as we had promised, and we've delivered on that. We've got 2,000 less employees at Duke Energy than we did a year ago. We retired 5 coal units, and that takes out some O&M there. But we're going to keep moving forward. Our scope and scale allows us to do this. We've completely redone our real estate footprint and taking advantage of COVID immediately on the real estate savings. We're going to continue to drive out efficiencies and utilize technology to displace the need for other costs. And we've had success for the past 5 years of doing that of driving O&M down. We put flat O&M into our trajectory in response to what is inflation there. But we're going to continue to hammer our way at it. And we've got the tools to do that. We'll see where that goes, but out of respect for the trends we see on cost, we flattened it out, we're going to be driving hard at it, Julien.

Julien Dumoulin-Smith:

I hear you loud and clear on that last comment. And in fact, if I can ask you this little bit in reverse. I mean, clearly, you're hitting these '22 numbers considering commercial renewals being a little lower and some of that being delayed, does that actually conversely mean that '23 and '24 could actually be sort of a bumper crop year with respect to some of the renewable contributions, especially relative to historic $200 million to $250 million guidance?

Operator:

And we'll take our next question from Stephen Byrd with Morgan Stanley.

Lynn Good:

Stephen, it's hard to handicap because we don't have a vehicle yet. There are a variety of other topics being discussed within that construct of what the administration would like to move. But it is our conviction that the clean energy tax provisions would be very helpful not only to support the transformation that's underway at Duke, but throughout the industry, and also allow us to lower the price of that transformation. For a regulated company, those tax incentives have a direct impact on our price to customers. So we are strong advocates for it. We actually believe that nuclear is a great recognition of that resource, some of the modernization around solar to introduce PTCs, the opportunity to have direct pay. All of these things, we believe, could be helpful in this transformation that we're pursuing so aggressively.

Lynn Good:

And Stephen, I would point to availability as the first and most gating item because of some of the restrictions around trade and other things, there has been an issue around availability and certain suppliers have said we can't meet the time frame. And as a result of that, you then begin looking for alternatives, and those alternatives can be more expensive. So we have made a decision to push some of our projects into '23. We're very confident in our projects that we have identified for '23, but we have appropriate supply and are ready to go. But that's what I would share with you. The gating issue has been availability. And then as you pursue alternatives, price can become an issue.

Lynn Good:

Stephen, as I look at what we have put forward as guidance, we're at $150 million for the commercial business, we have been targeting $200 million to $250 million. So I would think about a couple of projects that are being pushed from '22 to '23.

Lynn Good:

And Stephen, a moment ago, I also noted, we were able to complete all of the regulated renewable projects and have secured supply for them for 2022. So we're doing some balancing here and believe that the net result of all of this puts us in a strong position to achieve our objectives.

Steve Fleishman:

Just -- can you just confirm whether you're still expecting to get the multiyear rate plan proposal out today, the performance-based ratemaking? And just what are the key items that we should be watching in that?

Steve Fleishman:

Okay. So we’ll just see what it has to say.

Steve Fleishman:

Great. And then in terms of when you kind of referenced both, in the upside drivers for the long-term plan and I think Steve's comments on things that could lead you to look at equity needs, the tax policy. Could you just kind of give a little more sense on what you're referring to there? Is it that if we get favorable renewable tax policy, you might invest a lot more capital, and thus, with that also have some equity needs? Or is it something beyond that?

Steve Fleishman:

Makes sense. So then when you talk about tax policy as something that may have equity, is that more of the corporate tax changes?

Steve Young:

Yes. We were looking at cash flow changes as well as capital changes and the tax policy is very beneficial from a tax --

Lynn Good:

I'm glad we had a chance to clear that up.

Jonathan Arnold:

Last quarter, you were talking about 2% to 2.5% sales growth for the full year. And it felt like you were sounding more confident towards the upper end perhaps and came in at 2%. And then looking at the release, if I'm reading it correctly, you actually had well, the normal sales go down in the fourth quarter and industrial tick off about 5%. So just can you give us a little color on what was behind that? I wasn't necessarily expecting to see a down fourth quarter in industrial, at least quite yet.

Jonathan Arnold:

Management stuff, can you talk a little bit about how the pathway to sort of integrating North and South Carolina around the carbon plan, given some of the recent developments in the South? And I guess you were trying to pull -- have a joint proceeding, but that looks like it may not happen now. So just what -- how do we bring this forward on a fuel track?

Jonathan Arnold:

Okay. What would be the next data point in South Carolina, what's the path there?

Operator:

And we'll take our next question from Durgesh Chopra with Evercore ISI India.

Steve Young:

We've assumed flat O&M in '22 compared to 2021. The $200 million was taken out in '21 and is sustainable, so it will be in there. But we're assuming it's flat in '22 and throughout our plan. But what I would point to is we have a strong track record of finding O&M savings across our footprint, and none of that has stopped. And we've got inflationary issues that everybody's heard about. So we flattened it out, but we're certainly continuing to drive to find the opportunities to utilize capital technology to take out variable O&M, and that goes on every day.

Lynn Good:

I would think about the work that's underway in 2022, Durgesh, around the Carolinas. So we have -- legislation has been passed, but we have regulatory proceedings underway to set the course on the performance-based rate making and on the plan. That, of course, will begin to be executed in '23 and '24. So there's going to be a sort of back half approach around the capital and the regulatory modernization in the Carolinas. And then further in Indiana, the IRP was filed in December. We're anticipating RFPs and potentially CPCNs to be filed in 2022 that will begin the execution of the next phase of the transition in Indiana as well. So those are a couple of things that I would point to that are important as you think about the end of this 5-year plan, but the remaining years in this decade.

Jeremy Tonet:

I just wanted to touch on financing a bit more, if I could here. And just wondering, if you could provide a bit more color on the 2022 hybrid security funding. What kind of -- what could that look like? What type of size could that part be? And then separately, looking forward, we've talked about the robust capital opportunities that you've highlighted throughout the call. How should we think about equity needs over the course of the 5-year plan and beyond? And I know you talked in the script about alternatives and just looking for a little bit more color what the alternatives could be, could this be other DI type transactions? Or maybe monetizing commercial renewables? Just trying to see what possibilities are out there.

Jeremy Tonet:

Got it. That's helpful there. And then kind of pivoting here. You talked about carbon capture, hydrogen nuclear. Just wondering how far are these technologies from being widely adopted in your view here? And are these items that can drive upside to the 10-year outlook? Or are they kind of longer dated? And then specifically with CCUS, just wondering what stakeholder views are like there? And what discussions have been like with the regulators on CCUS in your jurisdictions?

Operator:

And our next question comes from James Thalacker with BMO Capital Markets.

Lynn Good:

In the back half of this 5-year plan, Jim, but certainly continuing in the back part of the decade.

Lynn Good:

Thank you, and thanks, everyone, for joining. I know these calls in February are always full of information, not only in what we have achieved, but where we're going. And so we're available to answer any follow-on questions and look forward to talking with many of you in the weeks to come. So thanks again for your interest in Duke Energy.

Operator:

Good day, everyone and welcome to the Duke Energy Third Quarter Earnings Call. Today's call is being recorded. And now at this time, I'd like to turn the call over to Jack Sullivan, Vice President Investor Relations. Please go ahead.

Lynn Good:

Jack, thank you. And good morning, everyone. It's great to be with you for our third quarter 2021 earnings call. Today, we announced strong results for the quarter with adjusted earnings per share of a $1.88 driven by growth at our electric utilities. We're well-positioned, for a solid finish to the year and are narrowing our full-year guidance range to 515 to 530, raising the midpoint into the upper half of our original range. We're also reaffirming our long-term EPS growth rate of 5% to 7% through 2025 based off our original 2021 guidance range. Before I hand it over to Steve for a financial update, I'd like to discuss the important progress we've made on our climate goals, and highlight reasons and critical accomplishments that help advance our clean energy transformation. Turning to Slide 5, we've been actively engaged with policymakers and stakeholders across the Carolinas, for several years, to chart a path toward cleaner energy. Our 2020 IRPs,filed in both states, reflects our goal to pursue an orderly energy transition. aggressive carbon reduction while maintaining affordability and reliability. These filings and ongoing conversations in both states have been informed by robust stakeholder engagement and feedback. In October, North Carolina took an additional step, consisting with -- consistent with their longstanding history of proactively tackling complex energy issues. When state leaders came together to pass a landmark bipartisan law, House Bill 951, that accelerates the clean energy transition. House Bill 951 provides the framework to achieve 70% carbon reduction by '23 while continuing to prioritize affordability and reliability for customers. It also sets into law our corporate goal of net 0 carbon emissions by 2050. The road map to achieve these goals will come in the form of a carbon reduction plan, which will be approved by the North Carolina Utilities Commission by the end of 2022. We anticipate the active involvement of South Carolina in this process as they have been over the decades in developing and retiring assets that serve both states. The plan will also be informed by stakeholders, a continuation of the conversations that have been ongoing over the last several years, Consistent with the vertically integrated utility model, House Bill 951 calls for utilities to own new-generation or other resources selected by the commission, with the exception of solar generation, which contemplates 55% utility ownership and the remaining procured through PPAs. Throughout our history, we have offered rate protections for low income customers and House Bill 951 takes further steps to prioritize affordability. The legislation calls for securitization of 50% of sub-critical coal plants upon their early retirement, which will lower customer rates. Additionally, we've initiated a low income collaborative to propose new low income programs to further help our customers. The legislation also adopts modern regulatory mechanisms in North Carolina, including multi-year rate plans, performance-based rate making, and residential decoupling, all designed to better align utility investments with customer needs and improve rate certainty. As we look ahead our pace of change will accelerate, as we work toward our carbon reduction goals and the broad er clean energy transformation, across all of our jurisdictions. With this in mind, we expect our enterprise capital plan for the next 5 years, through 2026, to increase to the $60 and $65 billion range. And then moving into the back -half of the decade, we estimate to be in the top-half Of our $65 to $75 billion range. And we will provide more details on our updated capital and financing plans on our fourth quarter call in February. Turning to Slide 6, it's been one year since we hosted our first ESG Investor Day, where we laid out several targets and our path to net 0 carbon and methane emissions. We're making meaningful progress across these goals while also advancing social responsibility and corporate governance work. We exceeded 40% carbon reduction across the enterprise in 2020, and we continue to accelerate coal retirements and add significant amounts of renewables to our system. Our path to net-zero is underpinned by strong governance, collaboration with stakeholders, and a culture rooted in diversity, equity, and inclusion. Our long-term investment strategy also provides societal benefits, as demonstrated by our commitment to environmental justice. Earlier this week, we launched a new sustainable financing framework to help fund investments in eligible green and social projects. This framework provides additional transparency around our investments and clearly defines projects aligned with our ESG priorities. And as a testament to our strong culture of governance and accountability, we were recognized by Labrador's 2021 Transparency Awards as the number one utility for overall transparency. While there is more to do, we are proud of our progress and are poised for more in the years ahead. We look forward to holding another ESG day with you in 2022 to dive deeper into our commitments and our accomplishments. Turning to slide seven, we continue to work with stakeholders at federal, state, and local levels to make this clean energy vision possible while maintaining reliability and affordability for customers. In South Carolina we filed a modified IRP, at the end of August, incorporating feedback from the Public Service Commission and demonstrating further progress toward cleaner energy. The plan includes the balanced resource [Indiscernible] expanding renewable generation storage, retiring coal, and achieving significant carbon reductions. We expect an order from the commission later this year, and believe this filing is an important foundational element to the continued conversation on the pace and approach to the clean energy transition in the Carolinas. Strategic progress continues in Florida as well. We announced four new solar projects in the third quarter as part of our Clean Energy Connection program. And we continue to harden the grid through our Storm Protection Plan Writer. As we prepare to submit our Indiana IRP later this month, we've gathered input from business customers, consumer advocates, and environmental groups on transitioning to cleaner generation, while keeping a sharp focus on reliability and affordability. The IRP will continue to advance efforts to shift away from coal, and we remain engaged with stakeholders and policymakers to find the best path forward for the state. Finally, we're engaging with Congress and the administration on a wide range of issues, including infrastructure, tax, and climate policy. We support new federal policies that align with our clean-energy transition by modernizing and investing in the nation's infrastructure and helping to fund the development of advanced Clean Energy Technologies. From a regulatory point of view, we are pleased that FERC has accepted the application filed by Duke and the other members of the Southeast Energy Exchange Market known as SEEM. This allows the members to proceed with the development of the trading platform. SEEM is a low-cost, low-risk way to provide immediate customer benefits to our shared market structure while advancing more renewables throughout the Southeast. In closing, the fundamentals of our business are strong and we're meeting our financial and strategic objectives while continuing to focus on operational excellence. We operate in constructive jurisdictions that continue to draw new customers at growth rates above national averages. Our climate goals are driving our investment strategy and long-term planning, and we continue to make progress on all fronts. We have a clear line of sight to achieving our 2030 goals. Over this decade, we will deploy one of the largest capital investment plans in the country, focused on building clean-energy infrastructure. Investments that will benefit the environment, our customers and communities, and our investors. With this positive momentum, we are highly confident in our 5% to 7% EPS growth range, and see the potential over time to earn in the top half of this range. With that, let me turn it over to Steve.

Operator:

Thank you. [Operator Instructions] Also, if you're using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. Once again, star one at this time and we will first hear from Shahriar Pourreza of Guggenheim Partners.