Q1 2021 Duke Energy Corp Earnings Call
Please standby.
Good day, everyone and welcome to the Duke Energy first 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. Please go ahead.
Thank you April good morning, everyone and welcome to Duke Energy's first quarter 2021 earnings review and business update.
During our call today is Lynn good share President and Chief Executive Officer, along with Steve Young Executive Vice President and CFO.
Today's discussion will include the use of non-GAAP financial measures and forward looking information within the meaning of the securities laws actual results could differ materially from such forward looking statements and those factors are outlined here in and disclosed in Duke Energy's SEC filings.
Conciliation 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 so with that let's turn the call over to Lynn Jack. Thank you and good morning, everyone. We're pleased to be with you to share our results and the excellent progress, we're making on our strategic initiatives.
Today, we announced adjusted earnings per share of $1 26 for the quarter delivering strong results to start the year driven by growth at our electric utilities, our first quarter results demonstrate the power of our clean energy strategy and our ability to execute that strategy. We also continue to tightly manage costs and engaged stakeholders throughout our business.
As we develop and implement smart policy solutions.
But the first quarter behind us and a clear path forward, we are reaffirming our 'twenty 'twenty up 21, adjusted EPS guidance range of $5 to $5 30, with a midpoint of $5 15, and our long term EPS growth rate of five to seven per cent through 2020 five based off the 515 midpoint.
Turning to slide five just over a year ago, we launched our comprehensive response to COVID-19, and although the pandemic is not behind us I'm very proud of our response, demonstrating our commitment to health safety and customer service in the face of very difficult circumstances.
But as I reflect on the past year, we accomplished so much more we made the difficult but appropriate decision to step away from the Atlantic Coast pipeline, we hosted a successful ESG day, clearly articulating our clean energy vision and how we are pursuing the largest fleet transition in the U S.
We actively participated in stakeholder meetings in the Carolinas is focused on our clean energy transition and regulatory reforms necessary to recover those investments laying the groundwork for comprehensive energy legislation.
We announced a market leading transaction with GIC delivering $2 billion of accretive investment into our company and eliminating the need for equity over the five year period we.
We maintained a sharp focus on our cost structure operational excellence and customer service delivering industry, leading safety results and surpassing our internal customer satisfaction target by nearly 15%.
We outlined an updated five year $59 billion capital plan and raised our growth range of 5% to 7%.
Further we achieved numerous regulatory outcomes, including the successful completion of our first rate case in Indiana, and 16 years, resulting in multi year rate increases accelerated depreciation of coal plants and recovery of coal ash costs.
We reached comprehensible comprehensive settlements in our North Carolina rate cases, with a broad range of stakeholders, which have been approved by the Enc UC. We reached a comprehensive settlement on coal ash recovery, providing customers with near term benefits, while establishing recovery with a return in the years to come which was also approved and finally in Florida.
We received approval of a new multi year rate plan as well as the clean energy connection program and the first three years of our storm protection plan in La.
Light of these accomplishments, which included eliminating uncertainties and creating a clear vision for growth.
<unk> has performed well and we're poised to deliver even more in 2020 one.
Turning to slide six we're leading the way to cleaner energy and continue to make progress toward our 2030 goals and our target of net zero emissions by 2050.
Ross our jurisdictions, we're engaging with policymakers and stakeholders to accelerate the transition while keeping a sharp focus on reliability and affordability.
I wanted to provide an update on the legislative session in North Carolina.
As we discussed in February ongoing work continues to build alignment on the shared objectives that came out of the clean energy plan process.
These shared objectives include North Carolina's clean energy transition as well as the regulatory reforms that provide for timely recovery of these investments. We are now entering the middle phase of the legislative long session in the legislative process, including opportunities to introduce new legislation is expected to continue into the summer months we.
Good to see momentum from a broad range of stakeholders to make progress on these objectives in 2021 and we remain optimistic for comprehensive energy legislation. This year aligned with our share goals of generation transmission and regulatory reforms needed to enable that change.
Moving to Florida or D. E. F utility continues to enjoy robust growth deliver strong returns to support important energy infrastructure for the benefit of customers, our constructive relationship with customer and consumer groups has resulted in the advancement of critical infrastructure investments that accelerate our share to clean energy vision. This was clearly demonstrated.
With the public service Commission's approval of our multi year base rate settlement on may 4th.
It's the commission noted in their ruling the settlement was the culmination of extensive engagement with many interested parties, including the office of public counsel. We appreciate the commissioners complementary marks on Arbor robust process to reach settlement keeping the interest of all stakeholders in line and arriving at a fair and equitable rate design.
The settlement approval provides clarity through 'twenty 'twenty four and includes recovery of significant investments in the grid solar generation and electric vehicle infrastructure.
And builds on our clean energy connections solar program in storm protection plan grid program as we continue to advance our transition to net zero emissions, our Florida operation positioned well for the economic rebound continues to build momentum with investments aligned to our clean energy transition.
Shifting to Indiana, we're making progress as we move through the state's integrated resource plan process. We've hosted multiple stakeholder sessions receiving input from various interested parties as we collaborate on the path forward all while ensuring our system remains reliable as we transitioned to new energy sources.
Stakeholders have always been a part of the I R. P process in Indiana and their feedback as valuable as we evaluate a number of possible scenarios for future generation, our filing will be submitted in November of this year, continuing our progress toward the energy transition in the state.
At the federal level, we are actively engaged with policymakers on climate infrastructure and tax policy, we support policies that paved the way to net zero emissions, while ensuring customer affordability and reliability. We also support investments in research and development for new clean technologies, which will be critical to achieving net zero.
To that end, we see permitting reform as a solution to help streamline the process to build infrastructure without compromising community involvement and environmental protections.
Electrification is also entered the climate discussion represents an exciting opportunity to address transportation sector emissions.
In the months ahead, we expect more clarity on the form and content of these policies potentially an infrastructure bill tax incentive extensions and regulatory proposals among others.
We will continue to advocate for policies that support and accelerate our clean energy transition emphasizing the importance of maintaining affordability and reliability for our customers. We will keep you informed along the way. It's important at this early stage however to recognize that we see great alignment between our vision of a net zero clean energy future and the policies that are being discussed.
Shifting to slide seven it's clear our industry is transforming and the pace of change is increasing Duke energy is not only keeping pace with this change, but we are at the forefront or transition to net zero is enabled by our growing castle plant, which is the back half of the decade ranges from 65 to 75 billion. This range of investment is consistent with.
Our integrated resource plan filings that includes up to 15 to 20 gigawatt of additional renewable investment tripling the amount of renewables on our system by 2030.
We are also planning for retirement of seven Gigawatts of coal only capacity and amount that could increase as policies or regulations continues to unfold in this decade.
The ultimate pace of our clean energy transition will be shaped by a variety of factors, including state and federal clean energy regulations and policies.
We are actively engaged with policymakers and regulators on this important topic and are prepared to move as quickly as state and federal regulation and policy allow we remain confident in achieving our carbon reduction in earnings growth goals. As we continue the execution of our clean energy vision, creating value for our customers and growth for our investors.
Shifting to slide eight we've carried our momentum forward in our environmental social and governance commitments. Following our E. S. G day in fourth quarter call in February and April we released our 15th consecutive sustainability report outlining our tremendous progress during 2020 and we've reached additional milestones in just the last few months.
In March we retired the 200 and semi Mike megawatt coal unit in D. C are ahead of schedule, marking the 52nd coal unit closed across the enterprise. We also announced the accelerated closure of our Gallagher station in Indiana, bringing the retirement forward a year and a half to June of 'twenty 'twenty. One these decisions place us another.
Closer to our goal of removing all coal only units from our portfolio in the Carolinas by 2030 and advances the targets for our Midwest utilities as well.
As we retired Paul we are also adding renewables and other clean energy infrastructure across our system and our commercial renewables business. We pit placed the 350 megawatt frontier to wind farm in service in Oklahoma during the quarter and in the regulated business. We placed 220 megawatts of solar and service in the Carolinas and Florida.
Our electric vehicle strategy remains front and center as we continue to position Duke energy as a key enabler of mass electric vehicle adoption with commission approvals in the Carolinas and Florida, We're investing 100 million to implement pilot programs to support decarbonization of the electric sector across the South East and we are joined.
The electric highway coalition to help expand charging infrastructure across the nation's highways aligned with many of our peer utilities.
I'm also pleased to share that we're one of the first in the industry to release E. O diversity data as part of our sustainability report demonstrating not only our commitment to transparency, but also to moving the needle on our diversity and inclusion metrics across the enterprise.
Beyond that we are one of the first in the industry to issue a report detailing our trade association memberships and their positions on climate change.
It's these types of disclosures and transparent reporting net of earned us top rankings for investor transparency and finally last week, we announced three new directors to join our board maintaining a strong focus on diversity as well as bringing a wide range of backgrounds and skills to the table.
Each of these steps highlights our keen focus on ESG priorities and we look forward to sharing additional updates throughout the year as we make progress on our strategy.
With the first quarter behind us and a clearly defined strategy ahead of us I'm confident Duke energy strong growth trajectory and believe our investment plan will deliver sustainable value in 5% to 7% growth over the next five years.
And with that let me turn it over to Steve.
Thanks, Lynn and good morning, everyone I'll start with a brief discussion on our quarterly results highlighting a few of the key variances to the prior year for a more detailed information on variance drivers and a reconciliation of reported to adjusted results. Please refer to the supporting materials that accompany today's press release and <unk>.
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As shown on slide nine our first quarter reported earnings per share were $1 25, and our adjusted earnings per share were $1 26. This is compared to reported and adjusted earnings per share of $1 24 in a dollars 14 last year.
Please see our non-GAAP reconciliation, including in the earnings release for more details within the segments electric utilities and infrastructure was up 15 cents compared to the prior year results were favorable due to benefits from base rate increases in North Carolina, Florida, Indiana and Kentucky.
Weather year over year and timing of O&M expenses, partially offsetting these items were lower retail and wholesale volumes and higher depreciation cost on our growing investment base.
Shifting to gas utilities and infrastructure results were flat year over year results were primarily driven by continued margin growth at the L. D CS and new retail rates in Tennessee, offset by the cancellation of a C. P last year.
And our commercial renewables segment results were down four cents for the quarter largely driven by the impact of the Texas weather event.
The other was favorable six cents for the quarter, principally due to higher market returns and certain benefit plans as well as lower holding company financing costs.
Segment results are impacted by the allocation of the pollution related to the $2 5 billion equity forward that settled in December 2020, which total five cents for the quarter. Overall, we were pleased with the strong results compared to last year further illustrating how we continue to execute on our business and regulatory strategies.
Yes. These excellent results are a strong start to the year that ensure we were well positioned to meet the 2021 guidance. We shared in February we remain confident in our ability to consistently grow our adjusted earnings per share at 5% to 7% throughout the five year period off of the 2021 base.
Sure.
Turning to slide 10, let me provide an overview of electric volumes in economic trends our results for the first quarter were down approximately 1% year over year keeping.
Keep in mind that we are comparing sales David it to a quarter last year that had little impact from COVID-19.
Residential volumes were up 2.6 over last year, driven by continued strong customer growth in our service territories and ongoing remote learning and work from home policies. The.
The winter surge in COVID-19 cases impacted our commercial class, which was down five per cent for the quarter as vaccination rates continue to climb and restrictions ease we expect a strong improvement in the commercial class through the rest of the year.
While industrial volumes were down 2% for the quarter nearly all of our large commercial and industrial customers have resumed operations in the sector is showing signs of optimism.
The I S M manufacturing index, a key indicator of economic activity was 64.7 in March its highest reading since 1983.
As we look back we continue to expect 1% to 2% load growth in 2021.
This was supported by our early look at April volumes, which showed strong sales across all customer classes.
Our service territories are well positioned for sustained growth over the long term we operate in four of the top eight states for population migration, a testament to the attractive business environments of our service territories and electricity rates well below the national average in.
In fact, Apple recently announced a $1 billion investment in North Carolina that will bring 3000 jobs to the research triangle area, highlighting the governor's commitment to economic development in the state.
Turning to slide 11, we remain active in the regulatory arena.
<unk> engaging stakeholders as we see constructive outcomes in smart solutions for our customers.
In North Carolina, we received orders in our D C and D E P rate cases, which approved key settlements we reached with intervenors. These.
These settlements incorporate significant infrastructure investment.
<unk> benefits to our customers. The orders include approval of a nine 6% ROE and 52 per cent equity capital structure deferral treatment for approximately $1 2 billion in grid improvement plan projects and.
And resolution of coal ash recovery through early 2030.
We've also mitigated customer rate increases with E. B I T flow back from the 2018 tax rate change and storm cost securitization.
We're all we are very pleased with the outcomes in these rate cases.
As Lynn noted our settlement in Florida was approved last week.
The settlement includes investments in renewables in the grid the approval of an ROE band of 885 to 10.85 per cent and a 53% equity capital structure importantly, the euro ebay and also includes a trigger mechanism that protects against rising interest rates.
Additionally, it approves accelerated depreciation for coal plants, and the vision, Florida program, which funds 100 million in emerging technologies.
Turning to our LDC business, our Tennessee gas rate case settlement was approved.
Looking forward, we expect to complete two rate filings this year be mothballed in North Carolina rate case in March which includes investments in our Robinson LNG facility pipeline integrity management and system infrastructure growth to support our rapidly growing customer base, we expect an evidentiary hearing.
In September and new rates to be effective later this year.
In Kentucky, we submitted our pre filing notice on April 30, indicating our intention to file a natural gas rate case in June.
Our ability to execute on our robust capital plan and grow our investment base is underpinned by a healthy balance sheet and solid credit ratings. So far this year. We have raised approximately $1 4 billion of long term debt for D. E. C M Piedmont with both transactions pricing at very attractive rates and we expect to close the first tranche of that.
Minority sale of Duke energy, Indiana to GIC by the Middle of this year and are on track to complete the North Carolina stores securitization in 2021 the per.
<unk> from the GIC transaction, along with our overall financing plan allow us to maintain a strong credit profile without the need for common equity issuances throughout the five year plan.
Looking ahead to the second quarter and beyond I want to provide some perspective on timing considerations for the balance of the year.
Our expectations are that volumes will recover over the balance of the year with a 1% to 2% increase over 2020, having said that our second quarter will reflect the cancellation of ACP.
And as we discussed in the year end call, we expect O&M to be unfavorable in the second and third quarters due to the significant COVID-19 mitigation actions, we took in the spring and summer of 'twenty 'twenty.
Before we open it up for questions. Let me close with Slide 13, we remain confident in our 2021 adjusted earnings per share guidance of $5 to $5 30 says with a midpoint of $5 15 sales.
Our first quarter results position us well to achieve full year results within this range as we continue to invest in important energy infrastructure that our communities value.
Our attractive dividend yield coupled with our long term earnings growth from investments in our regulated utilities provide a compelling risk adjusted return for shareholders as Lynn discussed in her opening remarks, we continue to advance our clean energy strategy with a keen focus on affordability and reliability keeping.
Customers at the center of all we do Duke energy is well positioned to lead as the pace of change in our industry accelerates delivering sustainable value to our customers and investors with that we'll open the line for your questions.
Thank you if you'd like to ask a question from good press. The star came from up by that does it one on your telephone keypad.
So if you're using a speaker phone. Please Mike for your mute function is turned off two layers signal treats our equipment.
Once again star one at this time to ask a question or make a comment well pause for a moment.
Yeah.
Yeah.
And we'll first hear from Shar <unk> of Guggenheim partners.
Good morning, Steve.
Good morning share Arnie.
So just touching on the North Carolina Legislative process from maybe just following up a little bit on your prepared remarks Lynn.
Obviously, recognizing you guys are in the middle of a lengthy and comprehensive legislative process and we know you can't get into too. Many details here, but you see them, obviously, you're optimistic which is good.
We are coming up on the.
<unk> filing deadline and the crossover dates and everyone is hyper focused on sort of these timelines can you maybe just elaborate why you're still optimistic given a very tight window will sort of giving you the sense of optimism.
Sure sure. Thanks for the question our optimism is really centered on the broad support for comprehension comprehensive energy legislation that exists within the state you know we've been talking for some time about the robust process that occurred in 2020 and under the Governor's clean energy plan. So.
The administration and the environmental community solar developers industrial customers, Duke energy others had been at the table and there is broad support to move forward in 2020. One I think the other thing that's important to note, which I tried to emphasize in our remarks is we are in the middle of the session.
But that legislative process, which includes the opportunity to introduce bills will continue and is expected to continue well into the summer. So one thing I would just point out is if we think back to 2017 when house Bill 589 was moving.
It was actually introduced in June which was well past crossover day, and then became law at the end of July.
So the timing and approach to advance the bill is in the hands of Legislative leadership, and we remain will remain patient as they work through their process, but as I said, we have optimism based on the broad support for this legislation.
Got it so just to so basically sometime in the summer when do you expect in the introduction.
You know I don't want to point to a specific time frame a share but I do think we'll have data points to talk about the summer Ah, including you know we'll be back in front of all of you in early August the timing is really in the hands of Legislative leadership, which is where it belongs and not to advance the bill.
And so we'll continue to keep you updated them, but the optimism as I said before really centers on the broad support.
Got it and then just lastly from me remind US you know what some of the key priorities.
There are around the legislation and may be potential treatment, we could see come about from it. So if we're thinking about performance based ratemaking are we bans formula rates might be from renewables.
Is everything on the table right now or some facts, it's not how tolerable. So just a bit of a sense from some of the pushes and takes that you're seeing.
Sure.
Sure I think all of the things you mentioned kind of fit under the broad objectives, where there's alignment so transition away from coal advancing renewables regulatory and ratemaking reforms and so when I you know when we use the word comprehensive and you list all of those things underneath you can see that there are none.
<unk> of key issues that'll be addressed Ah and so yeah, we'll have more to say as this progresses. The other point I would emphasize is the five year plan, the 5% to 7% the 2021 guidance that we've put in front of you is not predicated on a specific outcome of this legislation it has some more.
<unk> impact on the back part of the decade as we accelerate the transition into 'twenty 30. So you know we.
We think good progress is being made.
And we'll continue to update you.
Terrific Congrats on the results. Thanks, guys. Thank you shar.
<unk>.
And next we'll hear from Julien Dumoulin Smith of Bank of America.
Hey, good morning, Jim Congratulations Mike Julianna. Good morning, Hey, Thank you, perhaps just to pick up where that last one was lessor did you burn.
A little bit more color on how you allegedly legislatures are thinking about customer bill implications here, how do you how do you make of legislators comfortable with the rate increases.
Or how do you think about compromise there and you mentioned a number of different specific pieces that constitute this just can you elaborate a little bit more.
Sure and you know Julian reliability and affordability have been front and center really dating back into 2020 are in the stakeholder process. So all of the things that we're talking about here around transition around renewables around regulatory reforms will be looked at within the construct of reliability and affordability.
Stability and that's appropriate.
If you think about the growing economy here in the Carolinas. So that those topics are are being discussed and should be discussed.
Okay.
And just to clarify I think I suppose in your remarks, but.
The introduction of <unk>.
<unk> agenda any bill here the crossover day seemingly doesn't necessarily matter here its really as he said earlier to emphasize this summer time line matters. Most as you think about a 22 rate case timing right.
You know 22 rate case, I don't know about that Julian we don't have specific plans around a rate case in 'twenty to 'twenty two.
But I would your point around the summer you know the legislative process continues into the summer and you know as as the calendar lays out in the Carolinas. The long session doesn't have a required indeed.
So you know we'll continue to keep you apprised of the developments in the summer and Ah you know again remain optimistic.
Right fair enough.
Good point was there was a broad latitude quickly Steve.
I can ask you to elaborate your comments were intriguing here with respect to low trend.
How are you thinking about the one to two per cent increase as you've contemplated formerly vs. You're seeming acceleration commentary into April here.
We've reconciled with you just a tad.
Well, we've got a good bit more of a learn as we move through the second quarter, but the April results look looks solid for us. That's one month I think as vaccinations roll out and stimulus funding comes into play and so forth.
We are seeing the economy pick up and we're seeing activities at.
At our customer base pick up as well, so whether the the 1% 1% to 2% growth as a light or in the ballpark correct. We feel confident with it we'll update that as we move forward into the next quarter and have a bit more data, but we are encouraged.
By what we're seeing across our footprints and we are encouraged by the customer growth, which continues to be high and that underpins it.
And Julie you might've seen on the front page of the journal today. They were highlighting communities that have been benefiting from migration Greenville, South Carolina is on Melissa.
So you know we've continued to see good customer growth and hope to be surprised to the upside, but you know the 1% to two per cent I think is a good planning assumption we've sized our cost structure to be consistent with that so we're continuing to manage the business really tightly.
Excellent congratulations pretty good.
Thank you Julien.
Steve Fleishman of Wolfe Research has our next question.
Yeah, Hey, good morning, Steve Hi, Thanks, Good morning.
Hi, So just apologies for beating a dead horse here, but just.
Just the legislative process is there anything to read into that.
The fact that the.
These utility related bills or clean energy related bills were not addressed early in the session, where there are certain other priorities that.
Kind of came of head or just.
And if any thing to read and kind of why that happened.
Yeah, I wouldn't read anything into it.
You know its comprehensive energy legislation with a broad group of stakeholders and you know one of the reasons I pointed to H B 589 being introduced in June of 17 is because you may not remember that bill specifically, but it included PURPA reforms.
It also included a pathway for renewables over a multiyear period so.
You know the timeline how to advance the bill timeframe always within the hands of the Legislative leadership, and we continue to work with the broad range of stakeholders, but I don't think there's anything specific that I would point to on the timing we remain optimistic that it will move forward.
Great.
Okay, Great and then how about an update on the approvals of the Indiana transaction interest I know you said mid year has there been any day.
Intervention any process to kind of monitor there.
Sure sure. So two things remain Steve if he has approval and <unk> approval.
There have been some filings and the FERC docket is back and forth Sierra club see a see others you know in our view the issues that are being raised are not really relevant to what FERC is evaluating and further there have been strong support from our wholesale customers and so we still believe kind of middle of the year is appropriate timing for that.
Uh huh.
Has recently notified that they're moving to another phase of which is quite common.
With the case load that they have to you know reach agreement within 45 days or approval is increasingly uncommon. So again, we think mid year is the right time line for both of those approvals and we'll continue to keep you updated.
Okay.
I guess the last question just.
Could you give us a sense of the ERP schedule, just since it kind of could interact with legislation.
Sure sure what is the latest on the ERP schedule.
Yeah. So the IOP is moving in two ways, Stephen North Carolina, There had been public hearings are underway.
The North Carolina Commission does not approve the IOP, but rather provide feedback and so we are on pace to hear from them, we believe likely in the fall.
In North Carolina, and then in South Carolina. There was a hearing that began on April 26. It is wrapped up South Carolina does approve this is part of <unk> 62 that you may remember from a couple of years ago, We expect an order from them by June 28.
And I think what's important in South Carolina is the office of regulatory staff is supportive in fact was complementary of the work that we accomplished with the I R. P M.
We believe we will get good feedback from the South Carolina condition as well.
June energy for that timeframe.
Okay, great Okay.
Okay. Thank you.
Thank you Steve.
And we will hear from Stephen Byrd of Morgan Stanley.
Hi, good morning.
Hi, good morning.
I wanted to just discuss the Indiana, our P. I guess, a little bit more broadly and I was interested in trying to compare the dynamics in Indiana versus say in the Carolinas and I'm thinking about things like you know different renewables costs are different generation cost structures feedback you received you know.
So far in terms of priorities are in Indiana, how would you at a high level sort of characterize some of that may be differences and similarities as you compare sort of the resource mix in and where you may had in Indiana versus say in the Carolinas.
Yeah, So Steve a heavier coal mix in Indiana as you know.
Some wind availability in terms of resource capability in Indiana, more so than in the Carolinas.
Solar is available, but would have a slightly different capacity profile than in the southeast as you can imagine.
And so we have been in active conversations in Indiana on the appropriate transition for some time you may recall that in the rate case that was.
Approved in July we actually accelerated depreciation shortening the lives of the.
And the legislature in Indiana has also undertaken a review in our clean energy Task force of how the state can keep making progress and so we see this <unk> filing is a way for us to continue discussions with all the parties how can we accelerate how can indiana maintain control of their destiny, how can we bring in renewables.
In a cost effective way is there a role for natural gas as.
As we move away from coal and good conversations are underway and I expect to have more to say as we get closer to that filing Stephen but I I would share with you that we're building on conversations that have been underway in the state for some time.
Well that's really helpful.
Maybe just focusing on renewables and I'm, just curious what data points, you're seeing in terms of cost of equipment availability of equipment. You know a common theme among investor discussions is just sort of availability of a renewable equipment sort of supply chain sort of stresses along the way.
Are you all seen any sort of data points, along those lines or is it broadly the equipment is available cost continued to be fairly fairly low.
Yes, I'll take that Steven we have.
In our commercial renewables business pretty extensive input.
Inputs to the supply chain and so we have a good diverse set of vendors that we utilize for the various services there.
We haven't seen any anomalies or stress is at this point that interfere with our projects and moving them on line. We saw some challenges in 2020 related to COVID-19.
Worker availability, along the supply chain, but as that has been relieved.
That has helped move along we're keeping an eye on increasing our price pressures.
As we are across our entire footprint not just the renewables standpoint at this point, we haven't seen anything.
What I would call dramatic you know.
Stephen the one thing I would add to that I think is you know.
We monitor the acceleration of policy discussions at the federal level.
And we also see how our states and customers are moving we continue to keep our eye on are what size of supply chain or are we going to need in order to accomplish all of these objectives and I think that is going to be something that every utility is looking at and the near term there could be some pricing pressures as we all try to.
To figure out how to get on our front foot, but I suspect. If there is a lot of support for this growth in supply chain. We will continue to expand our and we'll look for ways. We can find the lowest cost for customers. So it is a front of mind issue for us broadly not only for the coming year and projects on the docket, but over the long term as we look at the size.
So these capital spending plans that we have in front of us.
No that's extremely helpful and maybe just one last one at a high level at the federal legislative level.
Level I'm just curious your take on the prospects for a clean energy support is sort of broader legislation that may pass what is what is your sense as to the prospects for getting further support for for clean energy and you know, perhaps for transmission and other asset classes as well.
Yeah, Steven I think it's early and there are a lot of things being discussed as you know infrastructure clean energy policies tax policy and so I do think.
We are encouraged by the conversations around clean Tech R&D electric vehicles, some discussion around permitting.
Reform our tax policy, we expect to have some incentives around clean energy investment, which will be to the benefit of our customers. So yeah. We remain engaged Ah and we'll know more about how these things take shape over the course of the summer and continue to be encouraged that there might be.
A bipartisan way to approach infrastructure I think there's an upcoming bipartisan infrastructure week in early June.
Because I think that could be a needed investment in the economy and certainly great for Duke if that were to move forward.
Very good thank you so much.
Thank you.
Next we'll hear from Jonathan Arnold with vertical research partners.
Good morning, guys and.
Thank you Mike.
Extra color it was real.
Paul did a while back Lynn.
It was sort of a venue that would seem to be taking the lead on legislation in North Carolina is is that the case or is that sort of.
And it's something that's moving around here.
So the house is taking the lead Jonathan.
And you know all the comments I've made you know us.
Continue remain where are working our way through it.
Okay.
And as you know we've talked about greater flexibility on day should we be looking for them to sort of formally move any of these days or is that just is this more the process is fluid and a long session.
I wouldn't expect the day that you're referencing like crossover and so on to move Jonathan I think the bigger point is that legislation and introduction of bills and amendment of bills and other things can move throughout the legislative session. So it's not dependent on the specific dates. Thank you.
And then just a couple of other things.
The the 1% to 2% sales growth Michael.
Correct about the full year number or rather than the open the balance of year number.
That's a full year number Jonathan and that takes into account what we expected to see in the first quarter of 2021, knowing that there was still some carryforward in winter surge and so forth, but are the one to two per cent is the entire year.
How does what you did see in the schools.
Marry up with what you were expecting to see.
You know given the winter surge it was not surprising to see the drop there.
And so we expected that to.
To occur compared to 2020, so I think it was fairly well in line. What we're encouraged by is the early signs from April now that's just one month.
Quite strong.
Some of the other indices are so.
We would feel confident in the 1% to two per cent, we'll see if there's upside to that as we move to the next quarter.
Thank you that does it.
Finally.
You said it in the 10-K that usual winter storm Euro was gonna be a 75 to 100 million and pretax event for you and you and I think the slide showed growth in here within the quarter. So.
That seems to be quite a bit less than you. Originally thought could you just talk about what went on between one day than the other.
You know Jonathan that filing was an early estimate.
And as we learned more and got more information on how the transactions actually settled and came through the four sentences. What we experience C would you add anything yeah. That's right. It was a it was a quick and fast look what we needed to get some information out about that on that early estimate, but as we work with the.
Our individual customers and off takers and tax equity partners.
There was a different allocations of our events and that resulted in less of a loss.
Great. Thanks for that and thank you Jonathan.
And Michael Weinstein of credit Suisse.
Hi, good morning.
Yeah, Hi, Michael.
Could you also comment Lynn on the AR on the recent headlines of the bite administration has support for nuclear may be talking about nuclear P. T. C. I'm just wondering how that affects the calculus.
Regulated context, you know in terms of you know as you as you apply for license renewals going forward do you see the plants you see federal support is.
Helping or maybe no change from before.
I'm not sure yeah.
I I I think any support federal support other support for nuclear is important Michael we are big proponents of nuclear power of Duke Energy. If you think about the Carolinas 50 per cent of the energy comes from carbon free nuclear and so we are on path to seek second license renewal for all of our plants and we're off.
Also engaged on some new technologies from the standpoint of providing operating experience for the advanced nuclear that we believe will be helpful to get to net zero and so when I listen to incentives around nuclear that that you were referencing I think that could be quite important for technology development and for encouraging further expansion of <unk>.
Power as part of the net zero plan.
I mean do you think it changes of the discussion a lot around the ERP, though going forward how much nuclear will be enough in the future 2000 thirteen's with young.
It could I don't think at this early stage it will Michael one of the things that were in discussions with the commissions about on the IR piece all of them are based on historic tax policy. So any incentives around extended renewables nuclear offshore wind transmission all of those would be.
Updates and generally more cost effective for customers. So we'll continue to update these I or P. Plans as we go forward and you know as I said a couple of times. This support for new technologies. We think is really important because as we get kind of day to that 70 to 80 per cent carbon reduction working toward net.
Zero, we need technologies, we don't have today, and that's where the advanced nuclear could show up carbon capture hydrogen and other things. So we're big advocates of keeping our attention on that and funding in a way that'll help us technologies get to commercial scale.
And we're on the same line. So RMG renewable natural gas is there are there plans to blend that into Piedmont system, and where do you see the how do you see that developing over the next 20 years.
Sure. So we have made some investments Michael and sustain our N G.
Which makes advanced methane.
[noise] generally uses advanced methane generation technology.
To produce renewable natural gas from dairy farms and so we're really working with the technology today with the hope that we can introduce that are in our Piedmont system or our system in the Midwest in Tennessee, as we go forward and that coupled with our commitment to net zero methane by 2030 makes a strong statement about our commitment to lowering carbon.
And our LDC business.
Okay, great. Thank you very much.
Thank you.
Next we'll hear from Jeremy Tonet.
J P Morgan.
Hi, good morning.
Hi, Jeremy.
I just wanted to turn it over to the commercial renewables segment, if I could here.
And just want to see it doesn't Duke energy sustainable solutions rebranding signal, what kind of an interest to potentially expand this business or even.
If the biding administration, if the plants come through with kind of greater tax incentives on this side with Duke look to ramp up growth in commercial renewables.
You got the the branding Jeremy I would I would characterize as us being responsive to the market. We have a lot of work going on with large industrial and commercial customers looking for customized solutions as they.
Work to achieve their own sustainability goals it could take the form of commercial renewables that could take the form of micro grids that could take the form of.
You know supporting electrification of industrial processes are transportation and so are we have been working with these large customers for some time and thought this would be a helpful way just to bring a comprehensive set of solutions to those customers as we go forward and I believe that customization is gonna be an.
And part of the Decarbonization journey for you know large industrial commercial customers as we move forward.
Got it that makes sense and maybe just touching a bit on slide 16, advancing EV infrastructure here just wondering if you could.
Talk us through how you think the complete opportunity set is here could this represent upside to capex as you see it over the next 10 years.
We do see opportunities for more Capex and frankly, we see opportunities from our load growth as we as customers adopt the technology and we see increasing utilization on the part of our communities and municipalities et cetera. So we have been very active in this Jeremy with converse.
Patients around all of our jurisdictions trying to get a base level of infrastructure in place to encourage adoption and then working directly with you know like the city of Charlotte, we're partnering with them on electrification of municipal buses I'm working with school districts anything that we can do to bring our expertise around electrification to this important.
Transition I think represents an incredible opportunity for us all of these all these individuals' have sustainability goals. All these communities many of them have sustainability goals and then I think as you've seen the auto manufacturers and others transitioning to electric we want to have the infrastructure in place to serve those customers.
So I think it represents an incredible opportunity.
Got it makes sense I'll leave it there. Thank you.
Thanks, so much.
And we'll hear from Michael if he does support Goldman Sachs.
Hey, guys. Thank you for taking my question My Mike one.
Can you remind us what's the in 2021 guidance for the change in O&M.
Companywide relative to 2020, and then how youre thinking about kind of 2022 and beyond O&M growth.
Yes, the Michael on for 2021 of the O&M was gonna go up compared to 2020.
Keep in mind in 2020, we reduced O&M by $320 million roughly.
From two various efforts $200 million of that is sustainable, but a chunk of that is not sustainable so you're going to see an absolute increase in 'twenty, one over 'twenty and O&M, but the broad trend line.
The O&M continues to decrease Oh, we've taken it down a 1%.
Since roughly 2015 2016 timeframe on a consistent basis.
Goal is to certainly keep it flat to declining as we go forward and I have confidence in our ability to do that we've learned a lot from COVID-19.
An entirely new set of efficiencies that we've learned from that that we're going to try to carry forward and broaden but on the absolute basis, you'll see it go up in 'twenty or 'twenty. One is we have to.
Catch up a few things compared to 2020.
Got it and then longer term do you still see opportunities from material cost synergy or savings or is the goal just to keep it flattish on a 2021 levels.
Yeah, Michael I think there continues to be opportunities you know Steve talked about some of the learnings from COVID-19, we're aggressively moving on real estate.
As we continue to invest in the grid with new technologies, we're finding O&M savings and if you think about the clean energy transition moving out of coal there's a natural reduction in O&M that could come there as well. So we continue to find ideas continue to find ways to really focus on this and we also see it.
As a strategic priority for our company to maintain affordable prices for customers. We put this capital to work. So our our focus on this is not going to lessen their we're not at the at the end of anything we're just.
<unk> to find ways, we can drive efficiencies.
Got it. Thank you guys much appreciate it.
Thank you Michael.
And that does conclude the question and answer session for today at this time I would like to turn the call back over to Lynn good for any additional or closing comments.
Thank you April and thanks to all of you for joining today for your interest in Duke your investment in Duke and the IR team is available as always for further questions. Following this call. So thanks, so much have a good afternoon.
That does conclude today's conference. Thank you all for your participation you may now disconnect.
Yeah.
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Yes.
Yeah.