Q4 2020 Duke Energy Corp Earnings Call
Once again, you are standing by for todays fourth quarter earnings call where sales.
Allowing additional participants to join the call. Please standby.
[music].
And.
Good day, everyone and thank you for standing by welcome to the Duke Energy fourth quarter Earnings Conference call. Today's conference is being recorded at this time I'd like to turn the conference over to Jack Sullivan, Vice President of Investor Relations. Please go ahead Sir.
Thank you Panna and good morning, everyone and welcome to Duke Energy's fourth quarter, 'twenty and 'twenty earnings review and business update leading our call today is Lynn good on a chair President and Chief Executive Officer, along with Steve Young Executive Vice President and CFO.
Today's discussion will include the use of non-GAAP financial measures and forward looking information within the meaning of the securities laws and.
Results could differ materially from such forward looking statements and those factors are outlined here and and disclosed and Duke Energy's SEC filings.
A reconciliation of non-GAAP financial measures can be found in today's materials and on Duke energy Dot com.
Please note the appendix for today's presentation includes supplemental information and additional disclosures.
And that lets turn the call over to Lynn.
Jack Thank you and good morning, everyone I wanted to take a non mentioned welcome Jack Julie.
His first earnings call. He has recently assumed responsibility as vice President of Investor Relations. After a very strong 15 year career, with Duke Kris and financial experience capital markets experience M&A experience and brings a wealth of background to this role as well as a deep understanding of our company and our industry.
We have put him to work over the last couple of weeks with all of our announcement and so many of you have already got a chance to meet and talk with Jack but you can look forward to more interaction with him as we go forward.
So good morning to all of you it's great to be with you for our fourth quarter 'twenty and 'twenty earnings Paul We began the year with significant momentum on strategic regulatory and sequel, and France, and I'm very optimistic about our future heading into 'twenty and 'twenty one.
Today, we announced adjusted earnings per share of 512 for the year, putting us solidly within our updated guidance range for 'twenty and 'twenty. These results reflect the strength of our regulated utilities, our commitments and generating sustainable shareholder value and our financial agility, especially in response to the unique difficulties of this past year.
And we also affirmed our 'twenty and 'twenty, one guidance range of $5 to $5 37, with a midpoint of $5 15, and our recently increased the launch on the EPS growth rate of 5% to 7% through 2025 based off the midpoint of our 'twenty 'twenty one guidance range.
Like most companies 'twenty and 'twenty presented us with new challenges and I'm extremely proud of how we responded we face those challenges head on and swiftly responding to the COVID-19 pandemic to support our customers and our work force adjusting our plans definitely moving Atlantic coast pipeline, producing $450 million and mitigation actions.
And responding to a significant storms throughout the year. All of this is made possible by our employees and showed incredible resolve and see adjusted to new working conditions identified cost savings and operational improvements and maintain reliable service for our customers and short we did more than just get through 'twenty and 'twenty we adapt.
It and deliver learning new ways of working and that will benefit us and the years ahead.
The momentum from 2020, that's continued into 'twenty and 'twenty, one and turning to slide five Duke energy has made significant progress resolving uncertainties around our company and laying a solid foundation for growth and to the future slides.
Slide slide captures the myriad accomplishment with the Duke energy team delivered all providing benefits to our customers and our investors and allowing us to turn our full attention to advancing our goal to reduce carbon emissions by 50% by 'twenty three and achieved net zero by 2050.
And North Carolina, we reached the milestone and settlement with the state Attorney General public staff and Sierra club to close the debate around coal ash cost recovery. We're pleased that this balance compromise.
He's all several outstanding issues, including the reman and of the 2017 rate cases, and the pending 2019 rate cases, and it also provides greater clarity and recovery of coal ash costs incurred through early 2030, and preserves our ability to earn and equity return on deferred and coal ash costs.
This settlement complements the previous settlement reached in the summer of 'twenty and 'twenty on the R&D and capital structure and again demonstrates our commitment to working collaboratively with stakeholders and our jurisdictions and we look forward to the Commission's order addressing these settlements and the remaining issues and the case.
We also developed innovative eye rfps and the Carolinas outlined and comprehensive proposals and offer and six portfolios to meet key carbon reduction and milestones over the next 15 years and for the past year, we've been working with stakeholder groups to help shape North Carolina clean energy plan with a common goal of reaching net zero carbon and the way that best serves our customers.
This complements the efforts underway on regulatory reform and introducing more efficient and cost recovery mechanisms.
Shifting to Florida, we worked with business and consumer groups, including the office of public counsel to me.
Opposed a new three year settlements and getting our investors and customers clear visibility through 'twenty and 'twenty four.
The settlement includes multiyear base rate increases to recover significant investments on the grid solar generation and electric vehicle infrastructure. It also allows for the accelerated depreciation of coal plants and supports innovative technology pilot programs that are important to achieving our carbon goals and clean energy future. We.
And order from the Florida Commission by the end of the second quarter with rates effective in January of 'twenty and 'twenty two.
Beyond the multi year rate plan. We also received approval of the first three years of our storm protection plan Mike.
Are we setting a 6 billion dollar investment and grid hardening projects over the next 10 years.
And Indiana, we recently announced the G I see a global and push investment firm with significant experience investing and U S infrastructure companies.
Come on minority Investor and Duke Energy, Indiana for 2.05 billion GIC will acquire a 19, 9% ownership stake with governance rights commensurate with their equity ownership GIC highlight itself proven track record of high performance and clear commitment to a clean energy transition makes us and attractive partnership for that.
The transaction values are D E, our utility and at attractive multiples of our current stock valuation.
And the fish and source of financing for our business and allowing us to eliminate all common equity from our five year plan.
The structure of the investment also allows us to better match for D&C with capital needs.
One billing and into our company in 'twenty and 'twenty, one and the second tranche no later than January of 'twenty and 'twenty three.
This investment is a strong endorsement of our company and Duke energy, Indiana, our operations employees and opportunities for growth it.
It is also a strong endorsement of our overall strategy to be a leader and clean energy transformation.
We also significantly expanded our renewable footprint and our regulated and commercial businesses announcing more than 700 megawatts of solar and wind energy projects and we built momentum around electric vehicle pilot program, which was further amplified by our Unpledged to electric electrified the Duke energy fleet.
And trying to Tennessee, we reached it and start to settlement and our Piedmont natural gas rate case with the attorney generals consumer Advocate Division. This is our first general rate case, and Tennessee, and almost nine years, allowing us to recover needed infrastructure investments.
And our growing customer base in and around Nashville.
This is an impressive list of accomplishments and we will keep going with a clear clean energy vision and growth and the five to seven per cent range underpinned by our robust capital plan and constructive jurisdictions operational excellence and a diverse committed workforce.
Shifting to slide six we began 2021 with a clear vision for the future to lead the clean energy transition and our communities. Our goal is to capture and clearly in our climate strategy at least 50 per cent carbon reduction by 2030, and that's do whereby 2050, we crossed a major milestone in 'twenty and 'twenty, surpassing 40 per cent carbon reduction.
From 2005 levels, and we're poised to hit more milestones and the years to come.
And what not to success involve close collaboration with key stakeholders and accelerated move from coal and to cleaner forms of generation, including renewables and battery storage and the modernization of our grid to enable more clean energy and and unwavering commitment to reliability and affordability.
'twenty 'twenty, one and is an important year on this journey and North Carolina stakeholder discussions initiated by the Governor has played out and to play and are beginning to wrap up these conversations have been very helpful and <unk>.
Creating a common understanding them on the interested parties on clean energy principles and the regulatory changes needed to effectuate a generation transition.
That's a 'twenty 'twenty one legislative session begins we believe both stakeholders and policymakers will benefit from this work as well as the information found in the comprehensive ire piece, we filed last summer those resource plans and present several pathways that illustrates the tradeoffs between the pace and transition and cost implications, we look forward and working with.
Legislators and stakeholders over the next several weeks and months to evaluate the very thoughtfully and.
And we are optimistic about the policies that can be created from shared objectives around north Carolina's clean energy transition and it's also regulatory reforms that provides for timely recovery of these investments and.
And Indiana, we will continue on critical Britt and improvement projects and further our clean energy transition as we file our 'twenty 'twenty one I R. P. This November and Florida, a recent settlement and outlines the clear path for further renewable on the EV investment on this day through 'twenty and 'twenty four and the accelerated retirement of coal plants.
And that's a funnel a lot of we work will work closely with policymakers and the buying and administration reenter as the Paris agreement and so that's a national policy that advances our country's transition to clean energy, we look forward to adding our voice to this important discussion on ensuring that the policies strategically integrate and emissions reductions cost considerations.
And the promotion of a broad range of technology development.
Our objectives are clear and will create value for all of our stakeholders. Our climate strategy is our growth strategy and our relentless commitment to our bold climate targets news, we are leading the transition to clean energy, our Augusta and $59 billion capital plan is among the largest and the industry, placing us at the forefront of clean energy upscale.
We're confident this capital will generate value for our growing constructive jurisdiction and provide clean affordable energy for the more than 25 million customers. We serve every day there's cash.
Capital plan positions, Duke to achieve earnings growth of 5% to 7% based off the 'twenty 'twenty, one and midpoint of 515 and I'm very proud of our resolved and excited about Duke Energy's path forward.
And with that let me turn the call over to Steve.
Thanks, Lynn and good morning, everyone 2020 was a year or more agility and transformation and <unk>.
Liberty results within our guidance range overcame headwinds and leveraged our size and scale to position the company for significant growth and new year's Eve.
As shown on slide seven and our full year reported and adjusted earnings per share per dollar.
72, and $5.12 as compared to $5 six says Paul.
And adjusted earnings per share and 2019.
Swift and decisive actions and mitigate the challenges we faced this year, we did not allow COVID-19, and mild weather and storms and the loss of ACP early and supervised our path forward and this commitment and dexterity and enabled us to deliver solidly within our narrowed and 'twenty 'twenty earnings guidance range for 'twenty and 'twenty results were due.
And by strong execution across each of our operating segments weighted from a rate case execution, and Indiana, and Kentucky interim rates and North Carolina and continued growth from our Florida operations to their multiyear rate plan and sober mechanisms produce positive results and electric utilities and infrastructure. We also saw growth.
And our Carolinas wholesale business due to the new formula rate contract that was effective. This year. These factors were offset by regulatory lag on our growing asset base and milder weather and dilution from equity issuances.
Shifting to gas utilities and infrastructure and we saw higher results on our LDC businesses, primarily due to piedmont's rate case, and North Carolina and contributions from rider mechanisms the GAAP.
And so we Bill D. C continued to provide strong earnings growth, adding 11 sales driven by customer additions and investments and integrity management, but offset by the cancellation of ACP and July.
Results are commercial renewables were higher than 20, and Nike and driven by new projects placed in service, including Palmer Holstein and why it works.
Which together total 460 megawatts going forward and we continue to play and for this segment to deliver between 200 and $250 million of net income per year over the five year plan with a potential for upside projects and meet our return expectations.
Accomplished a lot and 2020 returns and 'twenty 'twenty, one and well positioned to achieve our adjusted EPS guidance range of $5 to $5 and 30 ships with a $5 15, so at the midpoint.
On to slide eight our financial outlook for 'twenty, and 'twenty, one and beyond as strong and rooted and our increased capital investment plan.
Our core utilities continue to generate solid growth driving our earnings results upward for the foreseeable future we.
The electric utilities and infrastructure growth in 'twenty and 'twenty, one will come from our customer additions and infrastructure investments across our franchises and Mike.
Carolinas, we will experience growth and revised rates and our current pending rate case.
Florida, We expect strong earnings contributions as we move into the final year of the multiyear rate plan, coupled with growth and so the episodes on mechanism.
And 'twenty and 'twenty, one will continue to benefit and the steady growth of our T&D infrastructure investments and the Midwest, along with new effective rates, and Indiana and Kentucky as the economy continues to rebound from the pandemic, we forecast or 'twenty, 'twenty, one and load growth and the one to two per cent range across our entire footprint driven by some of them.
The strongest customer growth we've seen in recent years.
Our gas utilities and infrastructure segment provides consistent and steady growth largely driven by our organic customer additions and integrity management and Brussels. These investments will translate to revenues to riders and base rate adjustment mechanisms that are old and shoes, such as the recent rate settlement filed and Tennessee.
And commercial renewables in 'twenty and 'twenty, one and we will deliver landlord and solidly and the 200 to 250 million range and throughout the five year reported.
We expect the other segment to be lower year over year. This is primarily due to favorable tax optimization in 'twenty and 'twenty not producing the same level of contributions in 'twenty and 'twenty, one and the expectation of lower market returns and our captive insurance program and grantor trusts and finally, we have adjusted our plans to reflect the canceled.
And with ACP and the full year impact with the two 5 billion equity forward transaction that closed in December 2020.
Including this we expect growth in our core.
Businesses of 6% in 'twenty and 'twenty one.
Turning to slide and though let.
Let me touch on electric volumes and economic trends, we operate and constructive and growing jurisdictions, that's it and like most retailers, we saw decline and retail loads for 'twenty and 'twenty given the impacts of the pandemic.
Residential volumes were up three per cent for the year that did not offset the lower volumes from commercial and industrial customers.
We look at customer growth.
Spirit is very positive trade it was closing out 'twenty and 'twenty with one 8% growth for the year.
This was favorable to the projections.
Total shared and May of last year, and our firms, we operate and high growth states and fast or franchises. So for the top eight states in terms of positive population migration.
We project, an overall increase of electricity consumption and in 'twenty, and 'twenty, 1% to 2% over 'twenty and 'twenty given many of our commercial and industrial customers continue to return to normal operations. We expect the metrics for residential may declare it a bit as people begin to return to the workplace falling and the mass distribution because of the black Sea.
Five year play out and we project load growth or Paul.
The 1% as the economy returns to pre Covid status.
On slide 10, and you will see the transformative work underway to lower our cost structure and bolster our good consensual, Duke energy and what we do and the industry. When it comes to cost and litigation driven by digital capabilities data analytics, and retraining and reskilling employees with surge, which drives a more versatile work force.
Taken together these factors resulted in meaningful and sustainable savings.
And 2020 began with weaker weather and storms, we initiated tactical business.
Difficult, we reduce our O&M costs.
And in response to the pandemic and the first quarter, we accelerated these mitigation to offset projected and pets.
By the end of the year, we delivered $450 million and mitigation.
This included $320 million of O&M savings equivalent to more than six per cent of our 2020 non light or would be preferable.
Recoverable on it.
And this was done with a keen focus on minimizing the impact to employee jobs.
While certain cost savings in 2020 were onetime opportunities, we've identified and many others that are sustainable which will ultimately benefit our customers and shareholders over the long term.
And the sustainable savings of approximately 200 million are underpinned by our versatile work force, who continue to adopt and advanced technologies to perform work with increased efficiencies, allowing us to take advantage of attrition and reduce employee expenses and minimize facility and stuff.
For the past five years, our net regulated electric and gas odor and has a good cause lots of one per cent per year, even with the acquisition of Piedmont natural gas and we just.
This downward trend and to contribute.
Moving to slide 11, as Lynn discussed we have a robust capital plan and 59 billion.
Five year planning period about 70% of this capital and growth will be geared towards investments in clean energy and the grid infrastructure that supports it we expect to clean energy transformation to wrap up with a five year period and grow even further to $65 billion to $75 billion. When we entered the back half of the decade.
This will be largely driven by more coal plant retirements and the acceleration of renewables and we expect to gain more clarity or on those projects and those are states make important carbon policy decisions.
Investments across our electric and L. D C franchises position us for a five year day rate base CAGR of approximately $6 five per cent.
For the next five year period, ending in 'twenty, and 'twenty learned and we see that growth accelerating to seven per se based on all of our growth capital needs. During this transition and transformation.
Turning to slide 12, our growth capital plan and vibrant franchise service area growth and proven capability to control cost and worked constructively with stakeholders to move through regulatory processes give us confidence and our ability to consistently grow our adjusted earnings per share at five to seven per cent.
And throughout the five year period, they rely on this capital plan assumes the Lola and carbon reduction scenarios and material orders.
Moving to slide 14, although we need to execute on a robust capital program is underpinned by healthy balance sheet and solid credit ratings.
We announced a 2.05 billion minority investment and our Indiana utility, where we will remain the majority owner and so on.
Private equity investment by reputable infrastructure investor demonstrates the premium valuation of our regulated utilities addresses all equity needs for the next five years and supports our strong balance sheet that allows access to low cost capital.
The equity from the Indiana transaction, along with our overall financing plan allows us and maintain a healthy credit profile targeting a consolidated.
On the debt ratio of 14 per se.
Before we open it up for questions what May close with slide 14.
We're positioned to deliver results for shareholders and a carpet and the 'twenty 'twenty one base your EPS guidance and robust capital plan, we have laid out for you.
Focus on the future sound investment strategy and demonstrated dexterity position us to consistently deliver within our increased five to seven per cent, Walter and EPS growth rate through 2020, Paul.
Our commitment to the dividend remains unchanged, we understand how important it is to our shareholders and that's why in 'twenty and 'twenty War robots and 95th consecutive year of paying a quarterly cash dividend.
And intend to keep growing the Duke energy dividend and balancing our desire to offer investors a strong payout with our need to fund all capital players.
And as I said in her opening remarks, 'twenty and 'twenty. The early part of 2021 had been transformed it for Duke energy and we lean into the next decade with anticipation and resolve to achieve our goals for our customers and our shareholders with that well open the line for your questions.
Thank you and if he would like to ask a question. Please signal by pressing star followed by the one on your telephone keypad. If you are using a speaker phone. Please make sure your mute function and turned off to allow your signal to retire and Clinton at once again that is star one to ask a question.
Yeah.
Okay.
And we'll go first to sharp per restaurant with Guggenheim partners.
Hey, good morning, guys.
Good morning.
So a couple of quick questions here and obviously you highlight some factors that would provide upside to the base plan, Mike through acceleration on clean energy federal legislation. So to the extent that these items require incremental capex would you kind of consider manav.
[noise] ties and additional stakes that your op codes like Indiana similar to the GIC deal versus maybe tapping traditional financing like equity obviously the demand is there for these and these strategies and and the transaction multiple would certainly help you versus where your stock trades.
Yeah. So sure. Thank you for that question and as we looked at 60 billion and $59 $60 billion of capital in front of us.
And we saw this transaction as an attractive investment and gave us an opportunity to eliminate common stock and.
And she said at a valuation that was attractive to our investors and frankly recognize the valuable and we operate in Indiana.
You know I I would say if we look at this five year period, we feel like we've got a pretty strong capital plan there may be some upside and the back part of the planned share, but I, but I look at you know the clean energy transaction and that's underway. We have some work to do and 2021 and 2022 to lay the groundwork and Savannah.
Alkylation will be towards the end of the five year continuing over the rest of the decade, we will always look for attractive ways to finance growth and I think we've demonstrated that with this transaction, but don't have anything in the near term that I would point to just reinforce that finding attractive low cost capital.
To.
Underpin growth as always and objective and we're really pleased with what we were able to accomplish with this transaction.
Got it and then obviously you highlight the higher growth rate and you know the movement, you're seeing and North Carolina, and obviously theres been recommendations provided by working groups and the state I'm wondering how sort of the North Carolina clean energy legislation could impact sort of this Paul.
David growth trajectory as it should investors sort of look at it as simply as and extend the runway scenario, where it could actually be accretive to that growth through may be accelerated spending opportunities less regulatory lag I mean, obviously, we're assuming you get some are we bands P. B ours, good gets approved but so how do we.
We sort of thinking about the legislation in light of the updated growth.
Sure and you know share the first thing I'd like to do is expressed the confidence we have and achieving 5% to 7%. It has been grounded and not only strong franchise growth and the regulatory certainty, we've been able to achieve and including a recent settlement with the H E B.
Investment opportunities, we talked about on Decarbonising, and then our ability to control costs, coupled with the transaction with GIC, eliminating equity gives us a really solid foundation for 5% to 7% and <unk>.
So I look at what we've put in front of you is a capital plan and our strategy with a high degree of confidence to achieve 5% to 7%.
The ability to reach that top and it keeps going would include.
Faster.
Celebration and generation transmission.
Haps faster economic recovery I'd put on that list also shar, we're saying such incredible customer growth and the areas that we serve because of population migration.
And that could be another item that would be a surprise to the upside.
And a good way sustainable cost savings as we continue the digital transformation and continued grid modernization and continue retirement of our coal fleet all of those things will give us an opportunity to continue to drive that went on and off and I do think regulatory lag. If we can find a way to last night.
The growth is going to be strengthened and so I I come to this discussion with a lot of confidence and we have a plan a total achieved a five to seven per cent and will continue to work on the legislation.
And regulatory reform and away, but it'll complement the growth and perhaps and handset if it moves more quickly.
Terrific and then just lastly for me when and I Hope you and your discussions with stakeholders are you finding sort of and alignment with the governor and and T. Legislators here and what's kind of the next data point and we should be watching out for.
We have been at work on this chart and we talked about.
For some time and had been engaged actively with stakeholders really building alignment around a common goal and objective and.
And there was a justice and food moving away from Paul carbon reductions.
Regulatory mechanism to sit and sent that move and then of course increased investment and renewable all within the construct of maintaining reliability and affordability.
So I think you know the the common objectives really provide a really strong foundation to move forward and so we're working to advance those objectives.
And we will continue to provide updates along the way the.
And as the session that is underway right now.
There will be some milestones and April around potential introduction of bill, but what I would point to is with common objectives and then what.
The desire to create momentum on carbon reduction and I think that alignment and provides a great foundation for moving forward.
Terrific. Thank you very much and congrats and ill jump back on the queue.
Thank you Sean Thank you.
Yeah.
Yeah.
And we'll go next to Stephen Byrd with Morgan Stanley.
Hi, Good morning Hope you all are doing well.
Yeah that'd be what.
Thanks I am.
And I wanted to.
Talk about the prospects for further federal legislation and supporting clean energy I guess, where we're growing more optimistic that we may see kind of a round two of a legislative support the summer into the fall where Congress might further extend the duration of tax credits for wind and solar and potentially at a new tax credit.
For energy storage and as you think about that those kinds of elements to support how do you think about that in terms of your your longer term resource planning and could that have an impact in terms of just kind of thinking through the economic cost of renewable energy.
Steven I think it will.
And I think all of that to the benefit of our customers and our regulated jurisdictions and so as you look at you know and even the integrated resource plans that we share than the fall those were predicated on the tax policy that exists is that time and so extensions could be valuable I think credits around battery storage electric vehicles.
It's all of those represent opportunities to continue the clean energy transition.
So I would I would say we'll watch it closely.
Okay very good and then may be just and think about our offshore wind you know if the decision was made and.
And the state level to start to sort of at least explore pursue offshore wind how do you sort of think about next steps and I'm just not familiar enough with sort of the technical feasibility of offshore wind.
And what kind of early steps you might take if the decision was made that the state wants to go and that direction.
And Stephen we've been working on the potential for offshore wind for some time not.
Not only in terms of you know a day.
Obvious issues around leases and location of leases, but also transmission infrastructure that they need to accompany that.
We're in the Carolinas and particular the load centers are further west than the coast, so finding and appropriate transmission half would be important I think there's been more conversation and the Carolinas. The governor has joined with other mid Atlantic Governors, signing an Mou to say, let's spend more time and figuring this out.
There's a study underway to look at the impact to economic development and so I would say we're monitoring all of this closely I would think about it is you know may be a late 'twenty and 'twenty, 'twenty 30 opportunity and the Carolinas, but.
But nonetheless, you know.
We are supportive of finding ways to bring wound into the state as a complement to the solar and nuclear.
And resources, but we have that are carbon free so I think more to come on that Stephen and some of these exploratory processes.
Bear fruit.
And it's well taken it's a long lead time to kind of think through these these issues for offshore wind maybe the last question just on the commercial renewables business I was just curious your latest thinking in terms of the competitive dynamics and and renewables are you seen any sort of trends in terms of increased competition.
Anecdotally hearing some some degree of increased competition, but I'm just kind of curious what what you all are seeing on on that side of the business.
And Stephen we see it as a competitive it is.
And then competitive for some time and it's hard to delineate.
And a little bit more competitive so you know from our standpoint, we stay very disciplined on the cost of capital and the returns that we want them and have a combination of development around the U S. But also really focus on how we can grow renewables without our own jurisdictions.
But I think it's a fair comment there's a lot of interest and investment moving into renewable energy and that price nature will create competition.
Very good that's all I had thank you very much.
Good.
Yeah.
We'll go next to Steve Fleishman with Wolfe Research.
Hi, good morning, Stephen.
And I land on.
And Steve.
So just wanted to go back to a prior question, which I'm not sure was answered on the North Carolina Governors are kind of discussions and the like and just next steps.
Is there still going to be kind of a report that comes out on that.
And then when would we likely see legislation.
Post.
Sure and Steve on the specific question of the report there were two processes and so the regulatory reform reports is out.
This is the one that talks about multiyear rate plans performance and son of a really a strong endorsement and regulatory reform is important too and fronting movement. So that one is.
Is is out and you know discussions of course continue on that the carbon policy report, which is the one that's been led.
Led by the Nichols Institute shouldn't be coming anytime.
And I would think about it Steve as a data point that'll be considered and the legislative session along with our IR piece frankly that has garnered a lot of stakeholder discussion, we don't expect that call carbon policy reports on the third specific recommendations.
But we believe it'll be a discussion on retirement of coal carbon pricing, you know clean energy standards et cetera.
And the stakeholders that have been involved and all of these processes integrated resource plan clean energy policy.
Policy discussions are that the governor sponsored the regulatory reform all of the stakeholders have been working together quite well.
And of course, and a year and when I talked about common objective, but I was really speaking to is the common objectives and it's come out of all of that you know common objectives around retirement of Qualcomm and Jeff said, it's around increasing renewable regulatory reform et cetera, So it's that and bringing together of those common objectives.
And is being worked on to try to advance our where we go from here.
And no I'm optimistic that we have a number of very informed and a stakeholder groups that have common views and positioning North Carolina for the future and I think our progress will come from that there's also a keen focus on that group on reliability and affordability, which we also strong.
And we endorse and come to the conversation with very low prices and against National averages and we'll be working actively to make sure we make progress within that construct as well.
Okay. Good.
That's good and.
And then.
Just on the.
But ignoring.
And there are no more passes and it worked.
And kind of doing regulation and the <unk>.
Carolinas as we have it now.
Could you just give a sense of just how you would manage through this kind of and may be increasing spend on the regulatory side is it.
It's just the annual rate cases or.
Okay.
Yeah, Steve I think it's important to maybe step back from them and.
When we put forward the integrated resource plan and the Carolinas, there were six and areas the base and area of the one that's on the far left.
And it's one that can be accomplished without any changes and regulation or legislation et cetera.
And the capital plan that we've put in front of you is really predicated on that base plan.
So we believe the great investments the investment and generation. That's included in our and our plan for the Carolinas can be executed.
You could think about the overlay of legislation and perhaps new tools and may be acceleration.
Being incrementals and what we've put in front of you.
We thought it was prudent to.
To put together a plan that we have a high degree of confidence to achieve under a variety of scenarios.
But we'll work actively as we have over the last year and a half with stakeholders to find a way to meet those objectives.
Great One last quick one just the.
I think I heard Steve theory, the five when you look at the 5% to 7% growth rate, it's kind of consistent over the period.
On a roughly right because that's fair that's right and that's good.
That's correct.
Okay. Thank.
Thank you.
Thanks, Steve.
Yeah.
And we'll go next to Julien Dumoulin Smith with Bank of America.
Hey, good morning, congratulations and good morning.
Good.
Morning.
And perhaps just to follow up on this because I want to understand it.
You talk about.
Just what are you seeing and having worked for years to try and get the snake was up the curve, but at the same time you talked about this RFP and then before the commission can you talk about how those two processes work as best you understand and right now and let's say for instance, and don't get legislation. How do you proceed in that case and perhaps the overlapping.
I may and critically and you'd think about April versus young.
And we're ready to go on here.
Good.
And your password.
And you know Julie I would think as these things as being complementary.
Bob.
The stakeholder group has been involved and the IR piece and stakeholder group, that's been involved and the clean energy policy.
Policy discussions.
Or there's a high degree of overlap.
And so let's talk a little bit about the IOP, because we havent business and about that on this call and.
North Carolina will review the IOP comments are due at the end of April.
And we would expect and the order from the North Carolina Commission, yet this year, probably in the fall and.
And the North Carolina Commission doesn't approve but rather provide comments perspectives on what they've seen.
And so it becomes a data point right not only for the legislative process, but also for the commission on how we're thinking about the future and stakeholder parties will have an opportunity the way and and discuss.
And South Carolina, the IRT will be approved or reviewed and and order will be issued by the commission. This is consistent with <unk> 62, which you may remember a being a requirement and South Carolina, we believe our IR P conforms with those requirements extensive sacred.
For engagement and analysis of coal retirements and analysis of rate impact. So we should expect to hear from the South Carolina Commission in June.
On the legislative session. The bills are would be introduced and this legislative session in April.
Crossover data on May seven.
Legislative session is also running a julie in the first half of the year.
And so I just think about all of these things as complementary the same people who table talk to you about the same objectives lowering carbon and building renewables grid investment regulatory reform and we will keep you informed along the way as milestones are achieved and feedback is received.
But I'm I'm optimistic about our you know and foreign purpose stakeholders coming together with share objectives.
Got it back on thank you and <unk>.
Thank you all up on on.
On the consistency of the 5% to 7%.
And quickly I'm sure I won't comment about on.
And the earned our re trend across three years I'm Big on Caroline's. Obviously, you guys have arranged established this year is that range broadly the same range through the forecast period or how would you characterize that.
Yeah, I think broadly it's it's it's gonna be similar.
We have.
Our settlement proposal over the line and six are we but we've got a long track record and the.
Caroline and across our entire footprint.
And being able to earn at.
After some years certainly above our allowed returns and through cost management and through working on.
Wholesale type transactions as well so I think there are a number of mechanisms that are going to allow us to earn and similar to what we've heard in the past on our regulated jurisdictions.
Okay excellent. Thank you.
Thank you.
Yeah.
And we'll go next to Michael Weinstein with credit Suisse.
Hi, guys good morning.
Hey, good morning.
Yeah.
And on the same on topic could you comment on Robert about the ROE.
And you guys have and there for 'twenty, 'twenty, one for Indiana, and Ohio, and Kentucky as well.
Both looking pretty pretty low trending towards lower numbers going forward, so 9% some papers on Kentucky.
A couple of comments there.
You know and Indiana, we we just filed the we got a rate order in August and Indiana and that was a catch up rate case. So what you see when you've got on a big base rate case, that's built up and in India. We Havent had a base rate case and quite a while so you're building up a lot of investments there and.
Prior to that buildup.
Youre going to see the always drop a bit and then you have the ketchup and and we got the solid ROE V and Indiana going forward, we'll be able to optimize around that and an old and.
And very well there.
Ohio is a similar situation when you have a base rate case will you build up investments up to that point and then the new rates will all work on the return so you'll see some movements around the rate case like that but over a broad per period as you've seen when you open culture and flip to.
So we bid on.
Very capable at early on.
Paul allowed returns on the on the growth rate base, and we've done that through periods, where we've had more frequent rate cases and periods, where we've had less frequent rate cases, and that's where you utilize your capital optimization between rate cases and cost control to keep the returns solid and will continue to have those capabilities.
Are you planning on having a base rate case in Indiana and then.
I didn't see that good.
No not in the near net backhaul and they're trying to kind of lose investments most of our growth will be cut in Q T disc and the environmental rider. So it's a very efficient jurisdiction going forward here.
And you think.
Do you think it will improve after 'twenty 'twenty, one basically the rovs and that's great.
Yes.
And how is the 5% to 7% growth CAGR weighted is that the is that a steady growth rate throughout the series of 2025 or is it back I would think about it and steady growth rate and I guess.
And dividend growth I know that you know, we're still on that slower than EPS growth periods and stuff.
And to continue given the high degree day.
Capex per month yeah.
I think certainly in the near term Michael and then we'll evaluate it as we get deeper into the five year plan will growth shows up the payout ratio comes down a bit so we understand the importance of a growing dividend and.
And we'll continue to look at that right balance between growth of capital and growth of the dividend.
Great. Okay. Thank you very much guys.
Alright, thank you.
We'll go next to Jonathan Arnold with basketball.
Oh, good morning, guys.
Hi, Tony Hi, just to revisit this.
Question of what's in the plan and are used to.
And that's pretty clearly.
And though and the lepton and the Carolinas transition IOP proposals as well and New York.
On your Capex does that apply to.
How would you sort of tie that to the second half of the decade, where you've got 65% to 75 billion.
Hmm.
And for 25 through 29, and just curious if that's still the case or where is that starting to sort of defend huh.
Acceleration.
Well, what we reflected and that second half of the decade.
The range of 65 to 75 represented.
And the low and scenarios of carbon reduction versus the higher and more aggressive carbon reduction.
So as we learn more.
More about the pacing of what the state wants to go through.
I would project and we'd be somewhere in that range, depending on that facing up to 65 to 75 billion as you move into that second five year period and.
Jonathan on the.
Even the basic plan of the Iot and close over 50% carbon reduction and.
And and cold quite a bit of transmission and generation retirement of coal and renewables and so as Steve indicated we will learn more around pace and particular as we go through the next few months and share from commissions et cetera, and the 75 billion would be the more.
Aggressive you know kind of to the 70% type range, but even the day plan has a very healthy growth rate.
Within that range.
Okay, great. Thank you for clarifying that and then obviously 25, you already have a number of alcohol sales.
And there are about 65 to 75 implies quite a material step up and really in the back very closely to the backend of the decade is that right way to think about it or is it a 25 young.
And number that there could be could be and play if if if the things besides can move faster I guess.
I think 25 could be and play.
Jonathan and I think about it and this way.
And it takes a little bit of time to develop site on net generation.
But as we think about this as 'twenty 'twenty, one and by the time 'twenty and 'twenty five holes around and we will have a clearer picture on that and coal retirements go along with us and so we'll be into a deeper amount of coal being retired and that back part of the decade, and so you'll be building.
Generation to replace and that way, so oh, well, we'll know more and of course uptake who's our expectations all along the way okay.
Thank you and then just maybe one other thing and it looked like there was a step up and what Youre categorizing as maintenance Capex and the five year plan and a couple of billion versus last year.
Is that a categorization issue or is it different spend or with what's going on.
And nothing of CIT.
Singular there I just think we're looking at all of the maintenance of the nuclear facilities and the grid facilities as we modernize the grid.
And there's more capex and maintenance nature and in those areas and those two specific areas and Jonathan we did do a little bit of.
Changing our profile around maintenance outages and other things in 'twenty and 'twenty because of Covid.
And so I believe some of that will also be movement of outage and investment that goes with it into 'twenty, one consistent with the challenges on beer.
Okay. Thanks, a lot.
Thank you.
We'll go next to <unk> Chopra with Evercore ISI.
Good morning.
Good morning. Thank you for taking my question and I Hope we can do two quick questions one Steve just can.
Can you remind us the tax optimization and 'twenty and 'twenty you mentioned this and your drivers when you want over 'twenty, what is that docs optimization and color on dot com.
But you know what we have done and in 'twenty and 'twenty we've had.
<unk> worked on various efforts.
That lowered the effective tax rate a bit.
And and that flows through.
And it was part of the mitigation that was put in place.
And it was probably.
Around.
I have a percentage on the effective tax rate reduction right a bit and the range of.
For four to five cents or so.
And mitigation that we got out of income taxes.
Yes, Sean I would share with you that our tax team is always looking for ways to optimize taxes, whether at the state level property taxes federal tax.
No tax credits for research and development et cetera, and so they were quite effective and 'twenty and 'twenty and with a variety of projects, but we are always looking for you know effective tax planning ideas.
Okay.
Got it sorry, it wasn't even understood. So it's more like a 2020 events and we're not modeling that going into 'twenty and 'twenty, one, but there may be opportunities right is that there are opportunities in 'twenty and 'twenty, one, but we expect them to be a bit less and what they were on 'twenty and 'twenty growth.
Understood Perfect and then just maybe quickly on BSA total debt metric if I if I have this correct on.
2020.
Your password targeting 15% and.
Now, it's going to 14% for the next five years and you mentioned, there's some question versus.
On sort of where agencies thresholds are kind of predicted right and can you just provide us a little bit of where's the floor. So how much cushion do you actually have.
Versus the credit rating agency metrics.
So I'll I'll jump in and Steve can can.
Follow on you know the SFO and see.
And the impact of Covid, we also see the impact of our KOL last several months with some near term benefits and we offered to customers.
And so as we look ahead and speaking to S&P and particular the range is.
It was 12% to 16% and there's a whole will be very solidly within that range and.
Continue to believe a strong balance sheet and our commitment to the balance sheet is important and you see that with the recent GIC transaction.
So I would talk about some of those near term items that I referenced there and sees how would you add.
And I think that's exactly right we.
Certainly.
As we look forward and we've got Covid impacts that will continue into 'twenty and 'twenty one.
On the topline revenues on the coal Ash settlement was structured in a fashion and to help customers there but.
But we think we can operate very comfortably within this range and <unk>.
And the rating and.
We will get very adequate access to capital.
Excellent. Thank you so much recall it thank you.
Thank you.
And that concludes today's conference I would like to.
Turn it back over to Lynn good for any additional or closing remarks.
Okay and then thank you and thanks to all of you who joined the call. We've had a lot of news here in 'twenty and 'twenty. One all directed and is building a strong foundation for growth and the future and look forward to your engagement with you and the weeks and months ahead and of course. The IR team is always available. This afternoon. If there are further questions. So thanks for your.
And our interest and investment and Duke energy.
And that concludes today's call. Thank you for your participation you may now disconnect.
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