Release Date: May 07, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Duke Energy Corp (DUK, Financial) reported a strong start to the year with first quarter adjusted earnings per share of $1.44, which is $0.24 above last year, driven by growth from rate activity, strengthening retail volumes, and improved weather.
- The company is on track to meet its 2024 EPS guidance range of $5.85 to $6.10 and maintains a long-term EPS growth rate of 5% to 7% through 2028.
- Duke Energy Corp (DUK) is advancing its infrastructure with a 5-year $73 billion capital plan, focusing on regulated renewables aiming for 30,000 megawatts on their system by 2035.
- The company has made significant progress in regulatory engagements and rate cases across multiple jurisdictions, which is expected to enhance financial stability and customer service.
- Duke Energy Corp (DUK) is actively managing its balance sheet, targeting a 14% FFO to debt by the end of the year, and has strategically raised $4.6 billion in long-term debt to support its financial health.
Negative Points
- The company faces challenges with the new EPA rules that place limits on certain baseload generation sources, which could impact operational flexibility and costs.
- There are ongoing concerns about the role of natural gas in achieving net zero emissions, with regulatory and public scrutiny potentially affecting project approvals and timelines.
- Duke Energy Corp (DUK) is experiencing some industrial volume declines due to customers retooling for new products, which could impact short-term revenue from the industrial sector.
- Supply chain constraints continue to pose risks to the timely execution of capital projects, although the situation is showing signs of improvement.
- The need for substantial capital to support load growth and transition to cleaner energy requires careful balance to maintain financial health and avoid overleveraging.
Q & A Highlights
Q: What's the trigger point and timing on when you will maybe reguide around load growth, which to us seems conservative, especially in the Carolinas?
A: (Brian D. Savoy, Duke Energy Corporation - Executive VP & CFO) We continue to be encouraged by the pace of economic development opportunities. We typically update our full financial plan in February, and we feel like updating load without updating the CapEx to support the load might be a bit disconnected. We see clearly more tailwinds than headwinds as we look at growth over time.
Q: Could you elaborate on how you're thinking about the new EPA rules and how that could affect some of your IRPs, just longer-term resource plans that are in flight right now?
A: (Lynn J. Good, Duke Energy Corporation - Chairman & CEO) We're looking very carefully at the rule, but also looking very carefully at how we meet the growth in our service territory, continue to decarbonize and maintain an eye on affordability and reliability. We have CPCNs in front of North Carolina right now, and those processes will continue over the course of 2024.
Q: What does the potential upside to the load growth forecast mean for your capital plan in terms of could there be further generation, but also maybe on the T&D side?
A: (Brian D. Savoy, Duke Energy Corporation - Executive VP & CFO) As we find a way to serve our customers in a reliable and affordable way, we know we're going to need more resources, because we're seeing more demand on the system. It's not just generation; it's T&D investments, too. We see an expanding CapEx profile. We've guided $73 billion for 5 years, but over the 10-year plan, $170 billion to $180 billion.
: Can you remind in North Carolina, if any sort of intertwinings between the CPCN process and your IRPs?
A: (Harry K. Sideris, Duke Energy Corporation - President) We're in the process of our CIRP (sic) [IRP] proceedings. We expect a hearing in July in North Carolina and in South Carolina in September, and we expect an order later this year in December and November for each of those states.
Q: As we think maybe earnings potential is stronger in the back end of the plan, would that be an opportunity to give yourself more cushion or you're happy with where you're targeting at the end of '24?
A: (Brian D. Savoy, Duke Energy Corporation - Executive VP & CFO) As we've mentioned in the Q4 call, 14% FFO for 2024, 14% plus as we look out in time. We're not going to stay put at 14%. We're going to continue to improve it over time. Guiding through that, we've got the benefit of the North Carolina rate cases this year.
Q: Have you been seeing anything -- any constraints from a supply chain perspective, whether it's in procuring kind of generation kits or transmission equipment that we should be keeping in mind?
A: (Brian D. Savoy, Duke Energy Corporation - Executive VP & CFO) As we've worked the capital plan and all the supply chain challenges since COVID, it's kind of been issue by issue. We now are going through these with the size and scale of Duke Energy and really partnering with OEMs on how we're going to work with them multiple years in a row.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
