Duke Energy Corporation Q2 FY2025 earnings call

• Brookfield Infrastructure's $6 billion minority investment in Florida business strengthens credit profile and increases Florida capital plan by $4 billion.
• Sale of Tennessee LDC business to Spire for $2.5 billion at a premium valuation.
• Second quarter adjusted EPS of $1.25, reaffirming 2025 guidance range $6.17 to $6.42 and long-term EPS growth 5%-7% through 2029.
• Advancing economic development projects, including AWS $10 billion data center in North Carolina.
• Regulatory achievements: North Carolina Power Bill Reduction Act, South Carolina Energy Security Act, Ohio House Bill 15; rate case filings in South Carolina, plan to combine DEC and DEP utilities, and advance generation investment approvals.
• Generation plans: On track to add over 8 GW of dispatchable power by 2031, including uprate projects and new combined cycle developments.

Electric Utilities and Infrastructure saw adjusted earnings per share up $0.10 compared to last year, driven by top line growth from new rates in Carolinas, Florida, and Indiana, though partially offset by higher planned O&M and interest expense. Gas Utilities and Infrastructure results were flat to last year, consistent with LDC seasonality. The Other segment was down $0.02, primarily due to higher planned interest expense. In terms of revenue contribution, details weren't explicitly broken down by percentage in the provided transcript but the segments' financial performances are as described.

• Targeting FFO to debt of 15%, a 100 basis point increase from previous target.
• Reaffirming 2025 EPS guidance range $6.17 to $6.42 and long-term EPS growth 5%-7% through 2029.
• Raising long-term FFO to debt target to 15%, with confidence in achieving 14% FFO to debt this year.

Q: How do you think about positioning yourself within the EPS CAGR with the recent transactions?

A: The way I'd look at this, Julien, is this really just gives us even more confidence in our 5% to 7% range that we've mentioned many times before and also gives us confidence in earning in the top half of that range in the 28% and 29% at the back end of the plan.

Q: Can you elaborate further about how the latest Carolinas legislation shifts your plan?

A: The passage of that bill really enhances the attractiveness for growth in the state. It had bipartisan support, and we definitely support a growing state. And like I mentioned, North Carolina is #1 for business ranked by CNBC. So a lot of good things going on in North Carolina with AWS and other things. So our plan is still intact with the bill. It gives us some credit help with CWIP being able to recover annually.

Q: What's the feedback from the agencies been on the increased FFO to debt to 15%?

A: The rating agencies have always been supportive of our metrics at where they were. This is just going to enhance that. We just recently had a meeting in April with them, and they were supportive of our plans, our regulatory outcomes that we have in the states that we serve around storm securitization and storm recovery those tools that we have really help them feel comfortable with where we are today at 14% and they're only going to be more comfortable at a higher level, obviously.

Q: Can you provide more color on your views on resource preferences as we head into the next update, specifically on new nuclear?

A: Yes, Steve, I'll take that one. We've always had the all-of-the-above strategy. So we look at a wide range of resources, including nuclear. Like we said many times, we operate the largest regulated fleet of nuclear plants in the country. We have -- we think nuclear has a place to play and a lot of promise in the future. But before we go down that path, we're going to have to have some things figured out. We're going to have to have the first-of-a-kind risk, design, supply chain, workforce resolved for SMRs and even bigger reactors, how we're going to handle that. We're also going to have to have overrun protection from the federal government or others to be able to protect our customers and our investors from any overruns on these projects. And then lastly, we're going to have to have a means to make sure that we're protecting the balance sheet as we're building these facilities. So until we get those items resolved, we're still looking at solar, gas and upgrading and getting everything that we can out of our current assets.

Q: Can you provide color on the timing of the Amazon AWS investment and its impact on CapEx expectations?

A: Carly, yes, the Amazon deal is a big deal for us. It does have ramping like all these data centers do. So it will start coming in, in the '27, '28 time frame, and it will ramp in through the next -- beginning of the next decade. We anticipate that they will also look at ways to add to it. Typically, when they build a data center campus, they have plans for longer term as well. So we anticipate some additional items coming in towards the middle part of the 2030s as well from them. But you'll see a ramp, and that will be built into our plans as we do our updates.

Q: What was the impetus for the sales of the Tennessee LDC business and the Florida investment?

A: The reason we did these deals is they're just very efficient use of equity. So we feel comfortable in what we've done so far. And we also feel comfortable with the equity plans that we've laid out to cover our growth. So I would look at it as for now that we're going to stick and get these transactions done and implementing our plan and continuing our growth trajectory that we have.

Q: Any thoughts on the pace of dividend growth with a stronger balance sheet?

A: Andrew, we like the growth the last couple of years. Our Board has approved a 2% growth in the dividend. We feel like that's appropriate given the capital allocation and investment cycle we're attacking into. So we will continue to drive down the payout ratio as that level of dividend growth remains through the planning period.