Duke Energy - Q4 2025

Transcript

Operator (participant)

Hello everyone, and thank you for joining the Duke Energy fourth quarter and year-end 2025 earnings conference call. My name is Harry, and I'll be coordinating your call today. All lines will remain in listen-only mode for the presentation portion of the call, and there will be an opportunity for questions and answers at the end. During the presentation, you can enter the queue for questions by pressing * followed by 1 on your telephone keypad. If you change your mind, please press * followed by 2 to exit the queue. I will now hand the call over to Abby Motsinger, Vice President of Investor Relations. Please go ahead.

Abby Motsinger (VP of Investor Relations)

Thank you, Harry, and good morning everyone. Welcome to Duke Energy's fourth quarter 2025 earnings review and business update. Leading our call today is Harry Sideris, President and CEO, along with Brian Savoy, Executive Vice President and CFO. Today's discussion will include the use of non-GAAP financial measures and forward-looking information. Actual results may differ from forward-looking statements due to factors disclosed in today's materials and in Duke Energy's SEC filings. 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 Sideris.

Harry Sideris (President and CEO)

Thank you, Abby, and good morning everyone. Let me begin by acknowledging our teammates for their incredible response to the recent winter storms that impacted our states. We were prepared, and our system performed well, which is a testament to the efforts of our team and the benefits of our grid-hardening investments. Moving to financial results, today we announced 2025 earnings per share of $6.31, representing 7% growth over 2024 and above the midpoint of our guidance range for the year. I'm proud to say we executed on all fronts. Our performance reflects the strength of our regulated utilities, our teammates' unwavering focus on operational excellence, and our commitment to generating sustainable shareholder and customer value. Looking ahead, we're introducing 2026 earnings guidance of $6.55-$6.80. We're also extending our 5%-7% long-term EPS growth rate through 2030 off the original 2025 guidance midpoint of $6.30.

I am more confident than ever in our ability to deliver in the top half of the range beginning in 2028 as load growth accelerates. Our earnings profile is underpinned by a $16 billion increase in our five-year capital plan to $103 billion. Our capital plan will drive 9.6% earnings-based growth and is the largest fully regulated capital plan in the industry, focused on critical energy infrastructure investments that strengthen the system and serve increasing load. As the investment needs of our utilities accelerate, I want to emphasize that the cost of energy has been and will remain a key focus for Duke Energy. I'm proud that we have kept rate changes below the rate of inflation on average over the last decade, supported by our continuous improvement culture as well as sensible federal and state energy policies.

Before I turn our focus areas for the year ahead, I want to reflect on the significant financial accomplishments in 2025 as outlined on slide 5. It was a tremendous year of execution. We delivered strong reported and adjusted earnings above our guidance midpoint. We also announced two strategic transactions at premium valuations that positioned the company for growth. And our credit profile continued to strengthen. Over the last 12 months, we worked with regulators and other stakeholders to recover and securitize nearly $3 billion of storm cost, which was key to achieving 14.8% FFO to debt in 2025. We also advanced our all-of-the-above generation strategy, adding capacity to our system across a diverse mix of resources. This includes a 100-MW battery storage system we installed in North Carolina, the largest on our system to date.

We also broke ground on 5 gigawatts of new natural gas generation in the Carolinas and Indiana. Importantly, we put contracts in place to secure the long lead time equipment and workforce needed to support this new dispatchable generation. While we build for the growth of tomorrow, we remain focused on adding value for our stakeholders today by providing safe, reliable power at the lowest possible cost. Moving to slide 6, this year will be defined by continued execution in four core areas: delivering value for our customers, advancing construction on new generation, converting our economic development pipeline into firm projects, and building on our demonstrated track record of constructive regulatory outcomes. Our customers remain our top priority, and we will never waver on our commitment to value and affordability.

We'll continue to utilize every tool available to keep rates as low as possible, including managing costs, leveraging tax credits, and minimizing financing costs through regulatory mechanisms like securitization and CWIP and rate base. In 2026, we'll also move forward through the process to combine our Carolinas utilities, which, if approved, will save customers more than $1 billion through 2038. These are some of the many solutions we'll employ as we continue to challenge ourselves to find new ways to deliver affordable energy for our customers. We're also protecting existing customers from costs associated with new large load projects through tariff structures and contract provisions. This is important as we continue to convert economic development prospects into firm projects. Since the third quarter call, we signed electric service agreements for another 1.5 GW of new data centers.

These projects form industry clusters that create value for communities for years to come and benefit our existing customers as fixed costs of the system are spread across a larger base. Finally, we will build on our established track record of delivering constructive regulatory outcomes, which includes our recent South Carolina rate case orders. As a reminder, we reached comprehensive settlements in both cases last year, which were fully approved by the Commission in December. In North Carolina, we're progressing our requests for new multi-year rate plans, which would take effect January 1st of 2027. These requests cover investments to strengthen the grid and upgrade our fleet, and importantly, reflect cost control initiatives that have allowed us to maintain flat O&M cost structure despite inflationary pressures and a growing asset base. We know there's never a good time for energy bills to go up.

Families and businesses feel every increase in affordability matters. That's why our focus is straightforward: keep costs as low as possible while maintaining reliability. Moving to slide 7, providing the reliable power our customers expect requires us to add every available megawatt to the grid and increase speed to power as we build for economic growth. We are adding approximately 14 GW of incremental generation over the next five years, which demonstrates our commitment to meet the accelerated growth in front of us by maximizing our current fleet as we add new generation. As I mentioned earlier, we already have agreements in place for the supply chain and workforce to support this incredible build, including provisions with EPC contractors to create efficiencies over time and a framework agreement with GE Vernova on turbine procurement.

With over $1 billion of capital deployed every single month, Duke Energy's scope and scale uniquely positions us to lead this record generation build. We have extensive experience from building nearly 4 gigawatts of gas generation across our fleet over the last decade, and we've been actively preparing for this next build cycle for more than 3 years, giving us full confidence in our ability to execute the work ahead. Consistent with our all-of-the-above strategy, we will also continue to add battery and solar projects at a steady pace. Our battery deployment, in particular, will ramp significantly through the 5-year plan, with approximately 4.5 gigawatts of additions through 2031. Finally, we continue to evaluate the potential for new nuclear, maintaining optionality for future development. In December, we submitted an early site permit for a potential SMR at our Belews Creek site in North Carolina.

We're taking a disciplined approach to do nuclear, sharing our operational expertise and advancing limited licensing activities while reducing supply chain risks and allowing technologies to mature. We also continue to seek solutions that mitigate financial risk for customers and investors before we make a decision to move forward with any new nuclear development. Investing in our existing fleet, advancing new generation, and evaluating emerging technologies are critical to ensure we can support our growing communities. We enter 2026 with incredible momentum and are poised to deliver. We're executing our strategy and creating meaningful value for our shareholders and customers. With that, I will now turn over the call to Brian.

Brian Savoy (EVP and CFO)

Thanks, Harry, and good morning everyone. As shown on slide 8, we delivered 2025 reported and adjusted earnings per share of $6.31, a 7% increase year over year. Results reflect strong execution of our financial plan, including top-line growth from efficient regulatory constructs in place across our growing states. These drivers will continue in 2026, and we've set our adjusted EPS guidance range at $6.55-$6.80. The electric segment will continue to drive most of the growth in 2026 as we move into year 3 of our multi-year rate plans in North Carolina, year 2 in Florida, and implement phase 2 rates in Indiana. New rates from constructive rate case orders in South Carolina will be effective in the first quarter, and we also expect to see steady growth from grid riders in the Midwest and Florida.

In addition, our plan assumes normal weather and retail sales growth of 1.5%-2% in 2026. In the gas segment, we will see growth from Piedmont Integrity Management riders and new rates at Duke Energy Kentucky. Finally, higher financing costs will drive results in the other segment. Consistent with prior guidance, we expect the Tennessee and Florida transactions to be earnings-neutral, with interest savings at the holding company fully offsetting lower earnings at Piedmont and Duke Energy Florida. I'm proud of the results we delivered in 2025, and I'm bullish about the future. We are well-positioned to execute our investment plan to serve our growing jurisdictions. Turning to slide 9, our economic development pipeline continues to progress, increasing confidence in our growth profile.

Since the third quarter earnings call, we signed an additional 1.5 GW of electric service agreements with data center customers, including Microsoft and Compass, and now have approximately 4.5 GW of data center load secured under ESAs. Our success underscores the attractiveness of our service territories to prospective large load customers. Duke Energy is a one-stop shop, providing significant speed-to-power advantages. We work with customers in our communities to optimize siting, which ensures we can connect new load quickly while minimizing system upgrade costs. As we execute our ambitious generation build cycle, we will grow together as customers ramp into their full energy demand. We are partnering with our states to attract hyperscale customers to our service territories and remain laser-focused on meeting their energy needs in a way that protects our existing customer base.

These incremental volumes will support affordability over the life of the contract as system costs are spread over a larger base. The ESA contract provisions, including minimum billing requirements, termination charges, and refundable capital advances, ensure new large load customers pay their fair share of overall system costs. As a reminder, we've consistently taken a risk-adjusted approach to evaluate which projects to include in our load forecast. I'm proud of the work we've done to streamline processes across the organization to accelerate projects through the pipeline, which is yielding results. This allows us to focus our resources and efforts on high-confidence projects, supporting speed to power. With signed ESAs that lock in ramp schedules and minimum demand, we have high confidence in the load forecast underpinning our broader financial plan.

On slide 10, our $103 billion capital plan is the largest among regulated utilities and represents an increase of 18% versus our prior plan. Our capital plan is increasing as we progress further into the generation build cycle and invest in fuel security infrastructure to support future combined cycle plants in the Carolinas, as outlined in the IRP. Beyond generation, we continue to strengthen the grid to improve reliability and resiliency, delivering value for customers. Our industry-leading capital plan drives 9.6% earnings-based growth through 2030, up over 150 basis points versus the prior plan. This accelerated earnings-based growth, combined with efficient recovery mechanisms across our utilities, underpin our confidence in delivering sustainable, long-term growth. Beyond the five-year plan, we see a long runway of capital investment opportunities as our generation modernization strategy advances well into the next decade.

As the investment plans of our utilities accelerate, we remain committed to customer value and affordability. We are focused on making the right investments at the right time in a way that enhances reliability and affordability. Turning to the balance sheet on slide 11, we reported 14.8% FFO to debt in 2025. The significant improvement over 2024 reflects timely storm recovery and improving operating cash flows from continued regulatory execution. We are forecasting 2026 FFO to debt of approximately 14.5% and remain well-positioned to achieve our long-term target of 15% as proceeds from the Tennessee and Florida transactions are received. Our financing plan includes $10 billion of equity in the 2027 to 2030 time frame to fund accretive growth. This represents approximately 35% equity funding of the capital plan increase and demonstrates our ongoing commitment to balance sheet strength.

While our base plan assumes common equity issuances through our DRIP and ATM programs, we'll also evaluate hybrids and other equity content securities to fund a portion of our equity needs over the planning horizon. Brookfield's minority interest investment in Duke Energy Florida and the sale of our Piedmont Tennessee business to Spire will further strengthen our credit profile and satisfy our 2026 equity needs. We remain on track to close the Tennessee sale by the end of the first quarter and the first tranche of the DEF investment in early 2026. With efficient recovery mechanisms in place, a disciplined focus on capital deployment, and a balanced funding approach, we are positioned for sustainable, long-term growth. Let me close with slide 12. I'm proud of the work of our employees in 2025 to deliver on our commitments.

It takes all of us executing at a high level to succeed in this dynamic environment, and we will continue to build on this momentum. As load growth and capital investment accelerate, we are more confident than ever in our ability to earn the top half of the 5%-7% EPS range beginning in 2028. Combined with our attractive dividend yield, our growth targets provide a compelling, risk-adjusted return for shareholders. Before we move to questions, I'd like to recognize Abby's exceptional work leading our investor relations function for more than three years. She has set the model of excellence for the industry, and we wish her continued success in her next chapter as she becomes our Chief Accounting Officer and Controller on March 1.

I also want to congratulate Mike Switzer, who will succeed Abby as our Head of Investor Relations, in addition to continuing to oversee corporate development. I know many of you are familiar with Mike's leadership from our strategic transactions this year, and we look forward to the opportunity for you to work more closely with him in the coming weeks and months ahead. With that, we'll open the line for your questions.

Operator (participant)

Thank you, Brian. To ask a question, please press star followed by 1 on your telephone keypad. If you change your mind, please press star followed by 2 to exit the queue. And finally, when preparing to ask your question, please ensure that your device is unmuted locally. Our first question will be from the line of Nicholas Campanella with Barclays. Please go ahead. Your line is open.

Nicholas Campanella (Senior Equity Research Analyst)

Hey, good morning. Thanks for all the updates. Appreciate it.

Harry Sideris (President and CEO)

Morning, Daniel.

Nicholas Campanella (Senior Equity Research Analyst)

I just wanted to ask. Hey, morning. You brought up the storms and your prepared remarks and the response. Just any costs or impacts from that that you could disclose? And is that already kind of embedded in the midpoint view of the 668? If you could just confirm that.

Harry Sideris (President and CEO)

From this quarter specifically?

Brian Savoy (EVP and CFO)

Yes, we're still in one queue. Thank you.

Harry Sideris (President and CEO)

Yeah, we're still compiling those costs, but I'm really proud of the response the company had there. We had 200,000 outages. We restored over 95% of those within 24 hours, and really a testament to the team and their preparation, as well as our grid strengthening that we've done over the years. We do have mechanisms in the Carolinas for recovery of those costs, so we'll be finalizing that. But we don't anticipate any impacts to our guidance for this year.

Brian Savoy (EVP and CFO)

Nick, I would add to that.

Nicholas Campanella (Senior Equity Research Analyst)

Great. Thanks.

Brian Savoy (EVP and CFO)

Nick, this is Brian. I would just add, we budget for storms. This might affect the shaping in some of the expenses throughout the year because sometimes the storms come more in Q3 when hurricanes have impacted our regions. But we budget for storms, and we have really good recovery mechanisms in place that allow us to defer costs for future recovery that are above a certain deductible level. So no impact to the guidance for 2026.

Nicholas Campanella (Senior Equity Research Analyst)

Great. Thanks. Appreciate that. And then on the North Carolina rate case, the Carolinas rate case specifically, you brought up affordability in your comments. Obviously, a lot of stakeholders are kind of watching the case. And since it is a larger case with the merger being a big item, just curious on how you're viewing the strategy of, do you need to kind of go the full distance here, or do you think that you can constructively get to an agreement to settle it like you have in prior cases? And I recognize it's early in the process, but just kind of understanding how you're viewing that potential.

Harry Sideris (President and CEO)

Yeah, Nick. We don't take rate cases lightly, especially in this environment of affordability. I know our customers are struggling with housing costs, insurance costs, healthcare costs, as well as food prices. But we're really focused on delivering reliable and affordable energy, which is what our commission and our legislators want as well. So we're aligned there. We have a lot of tools in our bag with tax credits, our one utility merger that you mentioned. These are all things that are going to help mitigate some of those increases. We have a good case that shows a lot of value for our investments going forward. So we feel we have a good case if we get to litigation. But in the past, we've always tried to settle or settle portions and have a constructive track record of doing that, and we'll look to do that again.

But again, we're just focused on making sure that our customers in the Carolinas get reliable and affordable energy from us.

Nicholas Campanella (Senior Equity Research Analyst)

Thank you.

Harry Sideris (President and CEO)

Thank you.

Brian Savoy (EVP and CFO)

Thanks, Daniel.

Operator (participant)

The next question will be from the line of Shah Pourreza with Wells Fargo. Please go ahead. Your line is open.

Alexander Weintraub (Head of Mobile Channels and Managing Director)

Hey, good morning, everyone. It's actually Alex on for Shah. Thanks for taking our questions.

Brian Savoy (EVP and CFO)

Morning, Alex.

Harry Sideris (President and CEO)

Good morning, Alex.

Alexander Weintraub (Head of Mobile Channels and Managing Director)

Good morning. Good morning. So just on the CapEx outlook and the drivers behind it, obviously, a healthy number you put out there. Can you help us think about the incremental data center opportunities you're seeing on the slides? And can you just talk about your level of confidence in rolling that into plan? We've seen data centers pull out of other states despite signing ESAs. So at what point does this move the needle for you? And how do you think about customer protections in lieu of having a blanket large load tariff? Thanks.

Harry Sideris (President and CEO)

Yeah, I'll start off, and then Brian can add some color. But we're very confident in our 5%-7% growth rate, as well as our capital plan that supports that. The ESAs that we've signed, all of those are under construction. They're turning dirt. They have zoning in hand. So we don't anticipate any of those backing out. And then we have a robust pipeline that we continue to work. So we feel very confident with our projections of 5%-7% through the period, as well as in the top half starting in 2028 as some of those loads come online. So a very durable plan, consistent with what we've been talking about the last several times. Brian, I don't know if you want to add anything.

Brian Savoy (EVP and CFO)

Yeah, I would just say that signing these ESAs, Alex, gives us high confidence in the growth outlook of Duke Energy because we're risk-adjusting our load forecasts basically to the minimum billing demands of these contracts, which clearly gives us high confidence in the revenue profile as these projects come online. And we've got 4.5 gigawatts of ESAs signed. You think about those, those will start coming online in late 2027 and really ramp in 2028. That's why we're pointing to 2028 as an inflection point in earnings. And our pipeline in the late stage, the ones that are moving through the funnel at pace, is about double that. So you think about 9 gigawatts is what we're working through, and you should expect new announcements over the course of 2026 as we progress the pipeline in a very expedient manner.

Alexander Weintraub (Head of Mobile Channels and Managing Director)

Great. That's very helpful. Thank you. Just on the long-term growth rate outlook, so you raised the rate base to about 9.6%, and you reiterated the top half of that 5%-7% by 2028. Can you just walk us through what's driving the delta between the two? You're obviously seeing a lot of growth and investment opportunities, especially in the Carolinas. Do you see an opportunity for that delta to narrow between rate base and EPS prior to 2028, or is that just based on timing of load ramp? Thanks.

Brian Savoy (EVP and CFO)

Yeah, Alex, the delta between the earnings base CAGR and EPS CAGR, there's always a difference, right? And we have our holding company. We're funding these investments partially with equity, partially with debt. There is a drag there that we would see, but I would point to the revenues are accelerating into that 2028 time frame because that's when these customers will start taking energy. And we are locking in these ramp schedules, so we have high confidence in this revenue acceleration. Our earnings outlook is robust. We're pointing to the top half, which is the 6%-7% of the 5%-7% CAGR. And we see a very robust plan in front of us.

Alexander Weintraub (Head of Mobile Channels and Managing Director)

Great. That's all I had. I'll leave it there. Thank you.

Harry Sideris (President and CEO)

Thank you.

Operator (participant)

The next question today will be from the line of Julian Dumoulin-Smith with Jefferies. Please go ahead. Your line is open.

Julien Dumoulin Smith (VP and Equity Research Analyst)

Hi, guys. We've got James Ward here on for Julian. How are you this morning?

Brian Savoy (EVP and CFO)

Hey, James. We're good.

Julien Dumoulin Smith (VP and Equity Research Analyst)

Hey. Awesome. I'm going to ask just a little bit differently. So in November, you reaffirmed the 5-7 through 2029. You've extended to 2030. You've got the 9.6 of earnings base growth. Assuming about 2.5% dilution from financing, what has to go right to deliver the top half performance beginning in 2028 in terms of earned ROEs and so on?

Harry Sideris (President and CEO)

Yeah, James, we feel very confident in our plan that we laid out. 2028, like Brian mentioned, is an inflection point for our load, late 2027. And 2028 is those data centers start ramping up. So that's what's driving our confidence in that upper end of the 5%-7%. And we see that extending out as those ramp rates continue in 2029 and 2030 and beyond. So we feel like our plan is very durable. We're very confident in our regulatory outcomes that we have a very strong track record of, again, providing value and showing that value to our customers and our regulators is important.

And then the tools I mentioned earlier, how are we going to use one utility to offset some of these costs, how the data centers are paying for their fair share, and then over time reducing the cost to the customers as we spread out our fixed cost over a broader base. So we feel very confident that we'll continue to have constructive outcomes regulatorily and that our shaping of the load that we've laid out and our contracts will deliver that upper half of the range starting in 2028.

Julien Dumoulin Smith (VP and Equity Research Analyst)

Got it. Thank you for that. And then second question was on FFO to debt. You obviously achieved 14.8% 2025. You're targeting 14.5 in 2026, 15% longer term. With a larger capital plan, what are the key assumptions that keep you within those guardrails? Timing of Tennessee and Florida proceeds, you spoke to already, but thinking on regulatory cash flow mechanisms, dividend payout, and what would cause you to adjust the funding mix?

Brian Savoy (EVP and CFO)

Yeah, James, one, I'm incredibly proud of the improvement in our cash flow profile that we made in 2025 and will continue into the future. So it's underpinned by improving operating cash flows. So the great work we've done with our regulators and policymakers over the last several years is paying dividends because recovering our investments for customers in a timely way is a way to support the balance sheet and keep rates low for customers. So we're seeing that. So what has to happen to get to the 15%? Basically, the fundamentals are in place. We don't need a change in regulatory policy. We don't need a law passed. We need to continue to execute the plan we have and support our capital investments with some equity funding.

You'll see that the increase in capital we funded with 35% equity, that's a good gauge of where we might be to maintain that 15% FFO to debt once we're in 2028 and beyond.

Harry Sideris (President and CEO)

Yeah, no, I would add a lot of the regulatory work we've already accomplished with some of the multi-year rate plans that we have in place. We'll be looking at multi-year rate plan in Ohio. Those help, as well as CWIP recovery. That helps with our customer costs, but also helps with our cash positions. That was work that we've accomplished over the last several years that will continue to help us support our FFO to debt number.

Julien Dumoulin Smith (VP and Equity Research Analyst)

Very clear. Thank you both. Much appreciated. I'll hop back in the queue.

Harry Sideris (President and CEO)

Thank you.

Brian Savoy (EVP and CFO)

Thanks, James.

Operator (participant)

The next question will be from the line of Carly Davenport with Goldman Sachs. Please go ahead. Your line is open.

Carly Davenport (VP and Equity Research Analyst)

Hey, good morning. Thanks so much for taking the questions and for all the updates. Maybe just on the generation build cycle you've referenced, outside of the CPCN approvals, are there any outstanding items or constraints to signing firm EPC contracts for the execution of the gas generation build in your plans?

Harry Sideris (President and CEO)

Yeah, good morning, Carly. Yeah, we've been planning for this for the last three years, making sure that we had the supply chain built out to make sure we had all the long lead items, whether it's transformers, circuit breakers, as well as gas turbines, and also the EPC contracts. We've taken a different approach going forward with how we do this, where we're looking at more of a programmatic approach with one EPC vendor that will get us efficiencies that will help us deliver the projects on time and on budget and move them from one project through the next project through the next project. So as we stage those out and layer them out, we feel like that'll keep us with a solid workforce, as well as the experience to be able to develop these projects in a timely and qualitative manner.

Carly Davenport (VP and Equity Research Analyst)

Great. Thank you for that. And then maybe just on some of the uprate opportunities that you've given us, I think, some more details just on the type of generation that you're looking at those opportunities. Could you talk a little bit about the timing of sort of the cadence of the gas, nuclear, and hydro uprate opportunity, and also any indication on the capital investment required to execute on those projects?

Harry Sideris (President and CEO)

Yeah, so there's about 1,000 megawatts of uprates across the system. A lot of that is on the gas fleet with advanced materials, as well as packages into those. We've done a lot of that work already in Florida. We also have about 300 megawatts of nuclear uprates, and then the rest are some hydro uprates. These are very competitive to new generation. They're actually cheaper than anything that we can do on the system. That's why we're going forward. They also add an efficiency component that allows you to get more megawatts for the same fuel, which helps with fuel costs and drives that affordability number that we were talking about earlier. So we feel very comfortable with our plan and our costs that we have in our plan, and those are very good investments for our customers.

Carly Davenport (VP and Equity Research Analyst)

Great. Thank you for the time.

Brian Savoy (EVP and CFO)

Thanks, Carly.

Operator (participant)

The next question will be from the line of Anthony Crowdell with Mizuho. Please go ahead. Your line is open.

Anthony Crowdell (Managing Director)

Hey, thanks so much. Good morning, team. Abby, congrats. Last quarter, last quarterly call. I'm sure you're going to really miss it.

Harry Sideris (President and CEO)

Thanks, Anthony.

Anthony Crowdell (Managing Director)

Also, Harry, kudos to you, an operator with the same first name. It's probably not happened in a while.

Harry Sideris (President and CEO)

We planned it that way just for you.

Anthony Crowdell (Managing Director)

All right. Just quickly, it's not so much Duke specific. I'm curious because I know you guys have 2 pending rate cases to follow up on Nick's question earlier. But in the current environment where affordability has really reached a new level of concern for policymakers, do you think it's easier for parties now to come to a settlement, or do you think with that affordability backdrop, and it seems like every politician is using this as a stump speech, it's getting more challenging to reach a settlement?

Harry Sideris (President and CEO)

Well, affordability is definitely on everybody's mind. Like I mentioned earlier, it's not just electricity prices that they have on their mind. It's really housing, healthcare, food prices. So it is definitely a topic of discussion. What we focused on talking to stakeholders and legislators is making sure that we show the value that Duke Energy provides to our customers through storm response, reliability, economic development, bringing more jobs and businesses into the communities, but also showing that we have always, for over 120 years, focused on cost. That's what's made us successful in the past. That's why we have auto manufacturers and other businesses in our territory because we've always had low rates. We continue to have rates well below the national average. Our rate increases, on average, have been below the rate of inflation.

Those are very important points as we talk to the stakeholders about what we're trying to accomplish. And then we have a lot of tools. Like I mentioned, the tax credits, $500-plus million a year of nuclear credits because of our well-run nuclear plants allow us to turn that back into the customers, helping absorb some of those increases as we build out the system for the future. So we feel like we're positioned very well. We have a history of having constructive settlements. And again, we feel like we have a strong case based on value, reliability, and affordability for our customers if we have to litigate it.

Anthony Crowdell (Managing Director)

Great. And then just again, maybe this one may be more specific to Duke on the data centers that are signing up and I guess maybe regulatory approval of them. You guys highlighted earlier, and you've been pretty steadfast on making sure that data centers or the big hookups, large loads don't really impact residential customers or residential customers are made whole from these large loads. I'm just wondering, do you think there are regulatory shifts where not only you have to show that it's no impact to the residential or the small customer, but actually that this new load is beneficial or some net benefit, and that maybe their regulators want to quantify that sooner? Or do you think that the current backdrop of just showing that there's no impact to the smaller customer really will stay hold for the next several years?

Harry Sideris (President and CEO)

I think this is another hot topic among regulators and politicians as well. And we continue to show that our data centers are paying their fair share, and then over time, they're actually reducing the cost to the broader base of customers through spreading out the fixed cost over a larger base. So we continue to show those results to them. We have a tariff filed in Florida, but in the other jurisdictions, we're using currently approved tariffs that protect the customer. And these minimum take requirements, these termination fees, these upfront capital investments from them are all tools that we're using to show that these folks are not only carrying their weight, but they're actually, over time, going to help our customers. So we've been very constructive discussions with our regulators on that.

Anthony Crowdell (Managing Director)

Great. Thanks so much for taking my questions.

Harry Sideris (President and CEO)

Appreciate it. You're welcome. Thank you.

Operator (participant)

The next question today will be from the line of David Arcaro with Morgan Stanley. Please go ahead. Your line is now open.

David Arcaro (Executive Director and Senior Equity Research Analyst)

Oh, hey, good morning. Thanks so much for taking my question.

Harry Sideris (President and CEO)

Good morning, David.

David Arcaro (Executive Director and Senior Equity Research Analyst)

Let me see. Morning. I was curious with the data center pipeline, are you evaluating interruptibility or flexibility as kind of one of the characteristics as a way to speed up interconnection? Is that something that you think data centers would be willing to consider or something that you're exploring as you firm up the ESAs?

Harry Sideris (President and CEO)

Yeah, great question, David. Yes, we absolutely have done that with the contracts that we have signed. That's been one of the provisions. It helps us get them online faster. They've been open to doing it because it does give them that speed to the power that they need. And it also helps us, as we discussed, benefits to the customers in the fact that it's going to maintain reliability, having that ability to curtail their load or have them go on their backup generation for 50 hours or so a year. So very constructive discussions, and that's in our contracts that we have signed.

David Arcaro (Executive Director and Senior Equity Research Analyst)

Great. Okay, thanks so much. We'll leave it there. Appreciate it.

Brian Savoy (EVP and CFO)

Thanks, David.

Operator (participant)

The next question will be from the line of Stephen D'Ambrisi with RBC. Please go ahead. Your line is open.

Steve D'Ambrisi (Utilities Analyst)

Hi, Harry and Brian. Thanks very much for the time this morning.

Brian Savoy (EVP and CFO)

Hey, Steve.

Steve D'Ambrisi (Utilities Analyst)

Just had a quick one on sales growth and the incremental 1.5 GW of data center ESAs that you've signed. Can you just level set us on what amount of data center load growth is embedded in the 3%-4% enterprise load growth and the 4%-5% Carolinas load growth, and just if there's any sensitivities that we can think about to the extent you have incremental data center ESA signings?

Brian Savoy (EVP and CFO)

Yeah. So as you intimate, it's becoming a more increasingly larger component of the load growth profile as we get later in the decade. And just for a number, the economic development profile that we have in the Carolinas and across the system, data centers comprise about 75% of that by the end of 2030, right? So it's a growing component. That was only 50% just a couple of quarters ago, but as we sign new customers, it becomes a larger component. And so if you break down the 3%-4% long-term load growth enterprise-wide, I think residential and existing customers are maybe a third of that, and then the other two-thirds relate to economic development, of which a big portion is data centers.

Steve D'Ambrisi (Utilities Analyst)

Okay. And then that's really helpful. And then just to the extent that we have incrementally you referenced 9 GW of pipeline. To the extent where we roll forward a couple of quarters and the 4.5 GW of ESAs goes to 6, obviously, there's timing considerations, but how should we think about that layering into load growth and rolling forward your load growth projections?

Brian Savoy (EVP and CFO)

It definitely is a tailwind, Steve. But your point about timing is important because contracts that we signed in 2026 are going to be a year behind those we signed in 2025, and then the ramp will start. So I would think about it as two ways. One, it's a tailwind to the load growth around the 2030 timeframe, and then it extends that ramp well into the 2030s.

Harry Sideris (President and CEO)

Yeah, a lot of those that are in the pipeline now will be a little further out as they start their development. So that ramp rate will be towards the back end of the plan.

Steve D'Ambrisi (Utilities Analyst)

Okay. That's helpful. And then the only other question I had was just on the rate-based CAGR. It says you raised it, obviously, to 9.6%. I noted that the footnote said that it's growth of minority interest investments or minority investments. And so just with the impact of the DEF transaction, can you talk about what that number is on maybe a net basis?

Brian Savoy (EVP and CFO)

Yeah, happy to, Steve. And I would say first, we put the footnote for clarity, but we've always shown the rate-based growth because we've had the GIC investment in Indiana since 2021. So this isn't new, and it's how we're investing the CapEx growth, and then the minority interest is taken out at the bottom of the income statement. So we're not doing any trickery here with the rate-based growth. But the 9.6, if we took out the minority investment in Florida that's going to happen during this five-year window, would knock the CAGR to 8.8%. But I want to underscore the proceeds coming in from Brookfield are going to offset a Holdco.

If you're doing the detailed model, whatever you're modeling for holdco interest expense should be less than it would be otherwise if you were going to have it on a gross level.

Steve D'Ambrisi (Utilities Analyst)

Perfect. Yeah, wasn't implying that there was any trickery. Just wanted to get the clarity.

Brian Savoy (EVP and CFO)

No, no, no. I just.

Steve D'Ambrisi (Utilities Analyst)

Appreciate it.

Brian Savoy (EVP and CFO)

No, I wanted to be clear. I wanted to be clear. We added the footnote this time. That was a new add.

Steve D'Ambrisi (Utilities Analyst)

Yeah. Yeah. Thank you very much.

Brian Savoy (EVP and CFO)

Thank you.

Harry Sideris (President and CEO)

Thanks, Steve.

Operator (participant)

The next question will be from the line of David Paz with Wolfe Research. Please go ahead. Your line is open.

David Paz (SVP and Equity Research Analyst)

Thank you. I appreciate the confidence in your growth inflection in 2028. But I want to make sure I heard you correctly. Did you say that you could still reach the top half or 6%-7% in 2028 reflecting just the minimum takes? So in other words, you'll hit at least 6% even if for some reason the data centers do not show up in 2028.

Harry Sideris (President and CEO)

Yeah. Good morning, Dave. That is absolutely correct. We are fully confident in being able in 2028 as that load comes online with these minimum take contract provisions that we have of reaching that top half, that 6%-7% growth rate.

David Paz (SVP and Equity Research Analyst)

Okay. Great. Thank you. And then just on the 4.5 gigawatts ESAs, would any of those or I guess any signed from now until there's potentially some kind of order ruling on a large load tariff in North Carolina? If we were to see a large load tariff, do you anticipate they would impact 4.5 gigawatts?

Harry Sideris (President and CEO)

No, not at all. We have existing tariffs that these things are signed under, and they'll continue to function under that. Any new changes to tariffs will only apply to the new ones. We've had conferences and technical conferences with the commission in North Carolina, and they are supportive of the way that we're approaching this, and we don't see any impacts there.

David Paz (SVP and Equity Research Analyst)

Great. Thank you so much.

Harry Sideris (President and CEO)

Thank you.

Brian Savoy (EVP and CFO)

Thank you.

Operator (participant)

Thank you. This will conclude Q&A, so I'll now hand back to Harry Sideris for some closing remarks.

Harry Sideris (President and CEO)

Yeah. Thank you for the questions today. I just wanted to wrap up real quick and reemphasize that our business has never been stronger. We delivered on 2025 commitments, and we're going to build on that momentum into 2026. We are fully executing on all gears on our strategy, reaching new milestones in our generation build, and converting our economic development pipeline into real projects. I am more confident than ever of our ability to earn the top half, like we talked about, of our 5%-7% EPS growth range starting in 2028, and also the fact that this will be durable into the future. So again, thanks for joining us today, and thank you for your investment in Duke Energy. Take care.

Operator (participant)

This concludes the Duke Energy fourth quarter and year-end 2025 earnings call. Thank you for joining. You may now disconnect your line.