Q1 2025 Duke Energy Corp Earnings Call
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Sammy: Hello, everyone and thank you for joining the Duke energy first quarter 2025 earnings call. My name is Sammy and I'll be coordinating your call today.
Sammy: During the presentation you can rest your question by pressing star followed by one on your telephone keypad.
Sammy: If you change your mind. Please press star followed by two on your telephone keypad.
Zynga: I would like to handover show host Zynga.
Speaker Change: Investor Relations to begin please.
Debbie: Please go ahead Debbie.
Debbie: Thank you Danny and good morning, everyone and welcome to Duke Energy's first quarter 2025 earnings review and business update.
Speaker Change: Leading our call today is Harry Sudairis, President and CEO, along with Brian Savoy Executive Vice President and CFO.
Speaker Change: Today's discussion will include the use of non-GAAP financial measures and forward looking information.
Speaker Change: Actual results may differ from forward looking statements due to factors disclosed in today's materials and in Duke Energy's SEC filings.
Speaker Change: The appendix of today's presentation includes supplemental information along with a reconciliation of non-GAAP financial measures with that let me turn the call over to Harry.
Harry Sudairis: Thank you Abby and good morning, everyone before I discuss the quarter, let me start by saying how excited I am to be with you today on my first call as CEO.
Harry Sudairis: Since we announced our leadership succession in January I've had the opportunity to spend time with many stakeholders, including our customers investors regulators and Duke energy teammates.
Harry Sudairis: These constant conversation centered around the same theme the critical role Duke energy plays empowering the lives of our communities and serving the incredible power demand facing the nation.
Harry Sudairis: We are projecting load growth at levels I've never seen in my 30 year career.
Harry Sudairis: Which will drive more than a decade of record infrastructure build.
Harry Sudairis: We are ready to meet the moment with a renewed focus on speed and agility and supported by the same spirit of innovation that has been at the heart of this company for over a century.
Speaker Change: As I assumed the CEO role during this pivotal point for our company and industry.
Harry Sudairis: Duke Energy's mission remains unchanged.
Harry Sudairis: Delivering long term value for shareholders and superior service to our customers and communities by building a smarter energy future.
Harry Sudairis: Moving to the quarterly results today, we announced first quarter adjusted earnings per share of $1 76, which marks a strong start to the year.
Harry Sudairis: These results were <unk> 32 above last year, driven by topline growth across our electric and gas utilities the constructive.
Harry Sudairis: Active regulatory outcomes, we've delivered over the last several years provide line of sight to earnings growth with minimize rate case exposure in 2025 and 2026.
Harry Sudairis: We remain confident in our outlook and are reaffirming our 2025 guidance range of $6 17 to $6 42.
Harry Sudairis: And our long term EPS growth rate of 5% to 7% through 2029.
Harry Sudairis: Moving to slide five meeting, our customers' growing and evolving energy demands requires not only new generation, but where possible maintaining and enhancing our existing generation.
Harry Sudairis: In March we received approval from the nuclear regulatory commission to extend the operating license for Kony nuclear station for an additional 20 years.
Harry Sudairis: With three generating units that produce more than 2600 megawatts of kony as our first nuclear station to reach this milestone and we will now power the Carolinas into the 2015 as.
Harry Sudairis: As the operator of the largest regulated fleet in the nation nuclear is foundational to our strategy and we intend to seek similar extensions for each of our remaining reactors to extend their respective licensing periods.
Harry Sudairis: In addition to extending the life of our nuclear fleet, we continue to pursue uprate projects to efficiently increase the capacity of existing natural gas nuclear and hydro units.
Harry Sudairis: Individually. These are small less than 10 megawatts up to 75 megawatts per unit, but in aggregate they represent over one gigawatt of cost effective incremental capacity to support our growing regions.
Harry Sudairis: Turning to new generation, we've taken several important steps this year to advance our all of the above strategy to meet growing demand and replace aging infrastructure.
Harry Sudairis: In the Carolinas, we commenced early site activities for our first combined cycle unit in person County, and we filed a CPC and for the second combined cycle at the site.
Harry Sudairis: In Indiana, we filed CPC ends for two combined cycles in February.
Harry Sudairis: In Florida, we're making investments in solar and battery storage projects approved in our multi year rate plan.
Harry Sudairis: In January we joined a public private doughy grant application led by TVA to explore new nuclear technologies. The coalition has the potential to accelerate <unk> technology development and increase our access to industry learnings and best practices.
Harry Sudairis: And finally, we recently announced a strategic partnership with <unk> to secure up to 19 natural gas turbines. This agreement provides for timely David Dill.
Delivery of critical infrastructure to meet our enterprise wide resource plans and serve the growing needs of our customers into the 'twenty threes.
Harry Sudairis: Moving to slide six we continue to work closely with regulators policymakers and other stakeholders to advance regulatory and legislative priorities across our jurisdictions.
Harry Sudairis: In the Carolinas, we've had ongoing discussions with stakeholders in both states around merging our D C and D. P. Utilities, we are on track to file our merger application later this year with North Carolina, and South Carolina commissions as well as the federal Energy Regulatory Commission.
Harry Sudairis: The proposed merger would create significant customer savings simplify operations and regulatory processes and add operational flexibility to our system.
Harry Sudairis: We expect the application process to take about a year and are targeting January 2027% for the effective date of the merger.
Harry Sudairis: We also continue to advance storm securitization in North and South Carolina, and we are on track to issue securitization bonds in both states by the end of this year.
Harry Sudairis: Turning to Florida in March we began recovering 2024 hurricane costs over 12 months the timely.
Harry Sudairis: Recovery of storm costs was a key objective into the year.
Harry Sudairis: And this constructive outcome supports our commitment to a strong balance sheet.
Harry Sudairis: Finally, our Kentucky electric rate case is progressing with hearings scheduled for later this month and we expect to implement new rates later this year.
Harry Sudairis: I am incredibly proud of our strong performance in the first quarter, which is a result of continued operational excellence and the constructive outcomes. The team has delivered the fundamentals of the company are stronger than ever and provide visibility.
Harry Sudairis: For years to come.
Brian Savoy: With that let me turn the call over to Brian.
Brian Savoy: Thanks, Harry and good morning, everyone.
Brian Savoy: Moving to slide seven we delivered a strong first quarter with reported and adjusted earnings per share of $1, 76% to 22% increase over the first quarter of 2024.
Brian Savoy: Within the segments electric utilities and infrastructure was up 33 compared to last year.
Brian Savoy: Growth was driven by higher sales volumes improved weather and the implementation of new rates.
Brian Savoy: Partially offsetting these items were higher interest expense and depreciation.
Brian Savoy: Moving to gas utilities and infrastructure results were up <unk> <unk> compared to last year, driven by new rates at Piedmont North Carolina.
Brian Savoy: And finally, the other segment was down eight.
Brian Savoy: Primarily due to higher interest expense.
Brian Savoy: Overall, we are very pleased with our first quarter results, which were in line with our expectations and reflect the strength of the regulatory outcomes and operational performance we have consistently delivered.
Brian Savoy: Turning to slide eight whether normal volumes increased one 8% versus last year in line with our full year projection of one 5% to 2%.
Brian Savoy: Residential volumes were up over 3% in the quarter.
Brian Savoy: Reflecting both customer growth and higher usage.
Brian Savoy: We continued to see robust customer growth through the first quarter concentrated in the southeast and Indiana.
Brian Savoy: As we look ahead, we continue to expect load growth to.
Brian Savoy: To accelerate beginning in 2027 as economic development projects come online.
Brian Savoy: Our economic development pipeline continues to grow and includes advanced manufacturing projects across multiple sectors as well as data centers.
Brian Savoy: We're streamlining processes across the organization to accelerate projects through the pipeline, which is yielding results.
Brian Savoy: In April we signed new letter agreement for nearly one gigawatt of data center projects and advanced manufacturing projects continue to ramp.
Brian Savoy: The pipeline remains robust and.
Brian Savoy: And we continue to take a risk adjusted approach as we evaluate which projects to include in our forecast.
Brian Savoy: Turning to slide nine as we've demonstrated over many years, our commitment to our current credit ratings and a strong balance sheet will remain a top priority as we execute our growth objectives.
Brian Savoy: We are delivering on all credit supported of initiatives and are firmly on track to achieve 14% <unk> to debt this year and.
Brian Savoy: And we expect to improve above 14% over the five year plan.
Brian Savoy: This provides over 100 basis points of cushion above our Moody's downgrade threshold and over 200 basis points above our S&P downgrade threshold.
Brian Savoy: As we disclosed in February we expect to issue 1 billion of common equity this year via our drip and ATM programs in the first quarter. We took advantage of a strong market pricing just over $530 million more than half of our annual target.
Brian Savoy: We've also completed close to 40% of our planned long term debt issuances for 2025 and are on track to receive receive storm securitization proceeds by the end of the year in the Carolinas.
Brian Savoy: Before I close let me take a moment to talk about progress on our capital plan.
Brian Savoy: We're continuing to advance our grid improvement plans.
Brian Savoy: And as Harry highlighted we're investing in our existing fleet and hitting a new gear and building generation.
Brian Savoy: We invested more than $3 billion of capital in the quarter and we're on track for 15 billion for the full year.
Brian Savoy: As we think about our capital plan going forward, we are evaluating the impact of tariffs.
Brian Savoy: It is important to remember that tariffs primarily affect capital and the majority of our capital spend is American labor, which is not subject to tariffs.
Brian Savoy: We currently estimate the impact of tariffs to be about 1% to 3% of our five year capital plan.
Brian Savoy: And we are confident in our ability to further minimize the impact leveraging our size and scale to work with suppliers across our diverse supply chain.
Brian Savoy: Moving to slide 10.
Brian Savoy: We remain confident in delivering our 2025 earnings guidance range of $6 17 to $6 42, and 5% to 7% earnings growth through 2029.
Brian Savoy: With the potential to earn the top half of the range as load growth accelerates in the back end of the plan.
Brian Savoy: Our track record of constructive regulatory outcomes provides a solid foundation and minimizing near term regulatory exposure in our financial plan.
Brian Savoy: We are well positioned to achieve our growth targets.
Brian Savoy: Combined with our attractive dividend yield provide a compelling risk adjusted return for shareholders.
Brian Savoy: With that we'll open the line for your questions.
Speaker Change: Thank you very much so I'll ask a question. Please press star followed by one on your telephone keypad now.
Brian Savoy: If you change your mind based pissed off what I would like to.
Speaker Change: Whilst your question please ensure devices on mute locally.
Speaker Change: Our first question comes from shop Alrosa Guggenheim Partners your.
Speaker Change: Your line is open. Please go ahead.
Speaker Change: Hey, guys good morning.
Speaker Change: Good morning Shar.
Speaker Change: Good morning morning.
Speaker Change: Just I guess first it's obviously, it's been reaffirmed but youre seeing obviously, a fairly strong step up in 'twenty seven youre signing more letters of agreements 27 isn't that far off I guess.
Speaker Change: At what point can we start seeing some guideposts around incremental capex opportunities above your base plan like some of your peers have been doing so a range of maybe possible upside capex opportunities that can go into plan.
Speaker Change: As more deals are signed I guess are you considering this type of placeholder disclosure.
Speaker Change: It'd be the podium for that thanks.
Speaker Change: Yes, thanks for that Shar, I'll start off and turn it over to Brian for any feedback he has on it as well. So we just updated our plan in February as you know $83 billion for the next five years.
Speaker Change: Half of that going into the grid half of it for generation build we've got several updates coming up with our RFP in the Carolinas being updated we continue to work our pipeline.
Speaker Change: It is stable and growing and as that continues in our updates to our our IR Pete I can never say that word.
Speaker Change: We will continue to look at our plans, but we do have a wealth of investment opportunities and growth opportunities and we will continue to look at that and update you as that comes along and Brian do you have anything to add.
Brian Savoy: Yes, I would add.
Speaker Change: Updating our resource plans and we just actually filed our 10 year site plan in Florida, which calls for more resources than our previous plan and Shar. We've we've kind of gotten on this annual cycle of updated capital in February.
Speaker Change: If there is a catalyst we will definitely update the investment community, but until then I would kind of look to February as our major capital update cycle, but we take all of these things into consideration when we update.
Speaker Change: Okay got it.
Speaker Change: And then just maybe a question for Brian just on credit metrics I mean, obviously.
Speaker Change: The key thing is the visibility is improving you guys are monetizing the tax credits are getting storm cost recoveries I guess when can we start seeing some more specificity around actual target ranges within the plan versus the 100 basis points 200 basis guidance you guys have out there for some time is there a point when you constructed.
Speaker Change: Disclose around actual ranges you guys decide to you could land you can land at during the trajectory. Thanks.
Speaker Change: I appreciate the question Sharon is something that we've been discussing a lot internally as we've continued to improve the credit profile of Duke and growing the operating cash flow and clearing some of these.
Speaker Change: Items that are in front of us like storm recovery and storm securitization. So.
Speaker Change: I think we're going continue to evaluate it but we will see this within maybe our next cycle in February we will give a more defined targeted range on where we would be on the credit.
Speaker Change: Okay that was actually my question I appreciate that thanks, guys.
Speaker Change: Thank you.
Speaker Change: Our next question comes from Julien Dumoulin Smith from Jefferies. Your line is open. Please go ahead.
Speaker Change: Hey, good daily good morning team. Thank you guys very much for the time, Hey, <unk> Hey.
Speaker Change: Hey, guys, just a follow up a little bit I would start with just picking out here I mean, the one gigawatt of signed deals in April alone.
Speaker Change: Quite a statement there.
Speaker Change: Think about the statement.
Speaker Change: With respect to the cadence that you had contemplated I mean, obviously.
Speaker Change: As you say you've seen this accelerated load growth, but is it actually accelerating actively versus what you guys have contemplated initially maybe I'm not asking specifically about the capex, but just in terms of the cadence of adding a single gigawatt in the single month of data center deals specifically.
Speaker Change: Are you seeing more than what you would even talked about back in February or maybe another way to ask that is where are you within that range of the 3% to 4% that you laid out just a handful of months ago as you see these data points coming out.
Julien: Yes Julien.
Julien: Our pipeline continues to be robust and continues to grow.
Julien: We've really focused on accelerating getting projects through what we call our funnel to get them from the pipeline through these letter agreement stages to assure them up. So this one gigawatt that we just signed is working through our process. It's been contemplated in our plans and we will continue to work that large pipeline that we have to move more of these through our funnel.
Julien: To look at how we go to in the future. So we feel very comfortable and confident that we have a great pipeline and we continue to find ways to work through that faster for our customers.
Speaker Change: Got it understood all right and then if I can pivot slightly differently I mean.
Julien: Big announcement, the other day.
Julien: Your friends at JV here.
Julien: Do you think about the 19 turbine commitments I mean, just against what you guys have in the plan. How do you think about that juxtaposing versus whats formally in the plan versus what's possible here again I know that's not a formal commitment on your side per se, but I'm, just curious how that fits and what that might suggest about future activities.
Future generation needs.
Julien: And the time, Larry pleased with.
Julien: We were very pleased with the partnership with GE, we talked about meeting the moment at Duke and serving the tremendous low growth that we have ahead of us and.
Julien: An innovative agreements and framework agreements like this gives us the flexibility as we're moving projects through that funnel that we're able to have the supply chain shored up in terms of turbines and other agreements that we have so that we could quickly serve these customers as they want to come on so this is important to shore up and give us the flexibility as we.
Julien: Move these projects into fruition that we're able to deliver them to the customer quickly because thats what they want so these agreements are great.
Julien: <unk>.
Julien: Got it exited 25, it seems like you're trending well already I mean, it's too early to talk about.
Julien: Shall we say moving within the range, but.
Julien: How do you think about putting more latitude against shoring up where you are against the longer term outlook, just even 26 year de risking some of the future years.
Julien: Yes Julien.
Julien: We look at our five year plan, and our 5% to 7% growth and feel very good about about that growth outlook.
Julien: Good start to 'twenty five obviously helps helps to every year in front of it. So we think that 2026.
Julien: Planning has been underway for many months now as we think about.
Julien: The years ahead, and we're well positioned to deliver on that growth range as we look at the plan.
Julien: Great guys alright, thank you so much.
Julien: Thank you thank.
Julien: Thank you.
Julien: Our next question comes from Doug <unk> Chopra.
Speaker Change: From Evercore ISI your line.
Speaker Change: Is open please go ahead.
Speaker Change: Good morning team. Thank you for giving me time, congrats once again.
Speaker Change: Good morning.
Speaker Change: Good morning, guys you guys have discussed the D. BDC margin in the past, maybe just a little bit more color.
Speaker Change: What are the financial implications.
Speaker Change: All of that margin wondering if approved cost savings I know theres going to be some operations streamlining, but just any color you can share there would be appreciated.
Speaker Change: Yes, yes, yes, we're excited about the opportunity to merge our D C and D. P utilities, something we've contemplated since the merger back in 2012.
Speaker Change: Our stakeholders are very supportive of this it does generate a lot of savings over time for our customers over a $1 billion.
Speaker Change: So that will help with the affordability to our rates for our customers going forward.
Speaker Change: It really focuses on operational savings fuel savings from running a combined system.
Speaker Change: Managing our reserve margins as a whole instead of separate separately, allowing us to put plants in the best location and optimize that it's less regulatory proceedings, which are regulators like as well as us.
Speaker Change: <unk> continues to provide a lot of benefits for our customers. So we continue to work with our stakeholders on finalizing the details like I mentioned earlier, we plan to file later this summer with the North Carolina, and South Carolina commissions as well as FERC.
Speaker Change: And look to be running as one utility in January of 2027.
Speaker Change: Got it okay sounds like.
Speaker Change: Kind of room for.
Speaker Change: Making.
Speaker Change: Improvements on the on the customer.
Speaker Change: Right.
Speaker Change: Great just one quick follow up on the data center.
Speaker Change: One gigawatt signing can you just size how many customers is that just trying to get a flavor for are these one or two large customers or just the megawatts.
Speaker Change: Sure.
Speaker Change: Customer if you will thank you.
Speaker Change: Yes.
Speaker Change: One gigawatt, we talked about is actually two customers.
Speaker Change: Okay. Thanks, so much.
Speaker Change: Okay. Good.
Speaker Change: Our next.
Speaker Change: <unk> does from Carly Davenport Goldman Sachs. Your line is open. Please go ahead.
Carly Davenport: Hey, good morning, Thank you for taking my question.
Speaker Change: Good morning, Harley Star IRA Good morning, Harry Thanks for taking the time.
Carly Davenport: Maybe just to start IRI has been pretty topical throughout earnings season here.
Speaker Change: Look at some of the potential legislation coming through reconciliations can.
Speaker Change: Can you just provide your latest views on the outlook both for transferability and the future of of the tax credits that support a lot of these renewables projects and can you just remind us in terms of what is actually baked into the financial plan.
Speaker Change: From a transferability perspective.
Speaker Change: Yeah, I'll take that one.
Speaker Change: We appreciate the Congress has ahead of them and how many priorities there'll be weighing as they work through the budget reconciliation process.
Speaker Change: We tend to look at this from the customer's perspective.
Speaker Change: And really our overarching objective is to maintain affordability for our customers and that's what we've framed or advocacy around.
Speaker Change: The savings our customers receive from these energy credits fall right in line to what the President wants to do which is delivering on its promise to reduce power builds across the country.
Speaker Change: As you know each one of these dollars that we earn in energy tax credits goes back to our customers. The nuclear tax credits are most important to us.
Speaker Change: <unk> well run low cost nuclear plants earned over $500 billion of tax credits that go directly to reducing our customers' bills.
Speaker Change: <unk> has broad support in Washington, and we were.
Speaker Change: We're pleased to see last week 26, Representatives signed a letter stressing the importance of these nuclear tax credits and transferability to the President's objective of affordable and reliable energy. So we continue to work with folks in Washington to advocate to help our customers lower their bills through these credits and we will continue to do.
Speaker Change: As they work through the process.
Speaker Change: Great I appreciate that and then maybe just as we think about the macro.
Speaker Change: Is there anything that youre seeing or hearing from in particular, your industrial customer base in terms of activity levels potentially being impacted by a higher degree of economic and policy uncertainty at this point.
Speaker Change: Now obviously the topic everyone's talking about currently and we.
Speaker Change: So we are in close communication with our large customers as we always are and.
Speaker Change: We've not seen any changes to their production schedules or expectations for 'twenty five, but I would say there is somewhat of a cautionary stance right because.
Speaker Change: Everybody is waiting for the Finalization of where the tariff policies might land in.
Speaker Change: Their inputs reliance on our global supply chain all factor into that equation. So I would say that today, it's no change no knee jerk reactions from our customers but.
Speaker Change: Kind of a cautionary stance and that's that.
Speaker Change: That makes sense, given given where we are so we think our one 5% to 2% load growth for 2025 is intact fully in the first quarter was evidenced that we're right in line with that.
Speaker Change: We also see the potential quarterly for some of our customers to increase production because of the tariffs actually help their business think about steel producers and those type of <unk>. So we're in contact with some of those customers as well.
Speaker Change: That's great very clear thanks, so much for the time.
Speaker Change: Thank you.
Speaker Change: We currently have no further questions. So I thought Tom about the Harris <unk> Harris for some closing remarks.
Speaker Change: Alright, Thank you everyone.
Speaker Change: Thank you for your investment in Duke Energy, our IR team is standing by if you have any further questions. During the day and I hope everybody has a great day.
Speaker Change: This concludes today's call. Thank you very much for joining you may now disconnect your lines.
Speaker Change: [music].