Executive Summary

Adjusted diluted EPS was $1.13, down 8.9% YoY (Q1 2015: $1.24) and above Q4 2015’s $0.87, with reported EPS at $1.01 vs $1.22 YoY; drivers were milder winter weather (-$0.10/share), absence of Midwest Generation, and higher storm O&M, partly offset by pricing/riders and ASR share count benefit (~$0.04/share) .
International delivered materially better results ($0.13/share YoY uplift) on improved Brazil hydrology and favorable tax adjustments (+$0.11/share); management reaffirmed FY16 adjusted EPS guidance of $4.50–$4.70 .
Consolidated adjusted effective tax rate was 26% vs 32% in Q1 2015; CFO indicated full-year tax rate likely ~1% lower than the prior 32–33% expectation, reflecting international tax strategies .
Strategic catalysts: continued grid modernization (Indiana T&D settlement), gas generation build (W.S. Lee, Citrus County), pipeline progress (Sabal Trail approved; ACP timeline adjusted), and portfolio transition (Piedmont Natural Gas acquisition, planned international exit) .

What Went Well and What Went Wrong

What Went Well
- International Energy: Adjusted segment income rose to $123mm from $36mm on stronger Brazil hydrology and favorable tax items (+$0.11/share), despite FX headwinds .
- Pricing and riders: Higher revenues (+$0.07/share) from NCEMPA rider and energy efficiency programs supported regulated results amidst volume softness .
- Operational execution: Nuclear fleet achieved a 95% capacity factor; storm restoration exceeded expectations (over 1.1mm customers restored across events) .
What Went Wrong
- Weather and storms: Milder winter weather (-$0.10/share) and higher storm costs (+$0.05 vs plan) pressured regulated earnings; retail volumes were softer in the quarter .
- Commercial Portfolio: Adjusted segment income fell on sale of Midwest Generation (-$0.12/share YoY), partly offset by renewables .
- O&M and D&A: Higher depreciation (-$0.06/share) from plant in service (including NCEMPA) and storm-related O&M increased cost pressure .

Financial Results

Metric	Q3 2015	Q4 2015	Q1 2016
Diluted EPS (Reported) ($)	1.35	0.69	1.01
Diluted EPS (Adjusted) ($)	1.47	0.87	1.13
Total Operating Revenues ($MM)	6,483	5,351 (sum of segments)	5,622
Operating Income (EBIT) ($MM)	1,688	977 (sum of segments)	1,333
Depreciation & Amortization ($MM)	774	803 (sum of segments)	814
EBITDA ($MM)	2,462	1,780	2,147
EBIT Margin (%)	26.0%	18.3%	23.7%
EBITDA Margin (%)	38.0%	33.3%	38.2%
Net Income Attributable ($MM)	932	477	694
Net Income Margin (%)	14.4%	8.9%	12.3%

Notes: Q4 2015 uses segment sums for revenues and operating line items as consolidated quarterly totals were not presented in the filing.

Segment adjusted income (Q1):

Segment Adjusted Income ($MM)	Q1 2015	Q1 2016
Regulated Utilities	774	695
International Energy	36	123
Commercial Portfolio	7	27
Other (Net Expense)	(43)	(154)

KPIs (Regulated Utilities):

KPI	Q1 2015	Q1 2016
Consolidated Electric Sales (GWh)	63,201	62,731
Nuclear Capacity Factor (%)	94	95
Avg Electric Customers (Total)	7,331,493	7,424,021

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Adjusted EPS	FY 2016	$4.50–$4.70	$4.50–$4.70	Maintained
Adjusted Effective Tax Rate	FY 2016	~32–33% (initial view)	Lower by ~1% (CFO update)	Lowered
Atlantic Coast Pipeline FERC Certificate	Project milestone	Earlier expectation	Mid-2017 certificate; still late-2018 in-service	Timeline adjusted
Dividend Growth Target	Ongoing	~4% annually	~4% annually	Maintained
Long-term Core EPS Growth	Through 2020	4%–6%	4%–6% (non-linear; back-end weighted)	Maintained

Earnings Call Themes & Trends

Topic	Previous Mentions (Q3 2015)	Previous Mentions (Q4 2015)	Current Period (Q1 2016)	Trend
International strategy/taxes	FX/headwinds; hydrology improving; Brazil relief discussions	Plan to exit international; proceeds to delever; sale expected dilutive	Tax strategies lowered U.S. taxes; ahead of plan at international; expect some reversal later in year	Improving hydrology; tax optimization; progressing exit
Grid modernization	Indiana T&D plan revision filing expected by year-end	Indiana T&D settlement advancing; hearings under way	Settlement reached with intervenors; decision expected mid-year	Executing; regulatory progress
Gas generation build	W.S. Lee and Citrus County on-time/on-budget	Construction continues; Citrus groundbreaking	Continued progress; Asheville modernization approved	On track
Pipelines (ACP, Sabal Trail)	ACP formal FERC filing; Sabal Trail FERC approval expected	Sabal Trail FERC approval (Feb); ACP draft EIS issued; certificate adjusted to mid-2017; ISD late-2018	Reiterated timing; partners addressing environmental routes	ACP timing adjusted; Sabal Trail proceeding
Load growth and customer trends	Rolling 12-month load ~0.3%; strong customer adds; industrial mixed	0.7% weather-normal retail load growth rolling; softness in quarter; residential customer growth ~1.3%	Weak quarter; management emphasizes 12-month trends; multi-family vs single-family mix impacting usage	Modest growth; focus on cost control
Storm costs/recovery	Carolinas flooding/storms; strong restoration	3-year winter storms ~$50–$60mm typical	Winter storms above plan by ~$0.05/share	Elevated Q1 impact

Management Commentary

“Adjusted diluted EPS…$1.13…primarily due to milder winter weather, the absence of prior-year Midwest Generation results, and higher winter storm costs. International’s results were supported by a favorable tax adjustment and stronger results in Brazil.”
“Our nuclear fleet achieved a 95% capacity factor, building on its record breaking performance in 2015.”
“We are affirming our full-year 2016 guidance range of $4.50 to $4.70 per share.”
“We…will recognize additional US income taxes for international up until the point of sale…we remain on track to achieve our 2016 guidance.”
“Our five-year capital plan through 2020 includes deployment of between $25 billion and $30 billion…grid investment, commercial and regulated renewables and gas pipeline infrastructure.”

Q&A Highlights

International taxes and effective tax rate: CFO guided full-year ETR ~1% lower than 32–33%; some portion of Q1’s $0.11 tax benefit will reverse later in the year .
International sale structure/timing: Strong market interest; optimizing value; exit of entire portfolio intended; timing details to follow as process advances .
ACP timeline: Certificate targeted mid-2017; in-service late 2018; delay driven by route adjustments and environmental/stakeholder engagement .
O&M and regulatory lag: Ex-storm, utility O&M down ~$0.04 YoY; regulatory lag averages ~-3% over five years; S.C. case may be accelerated .
Dividend policy: ~4% annual growth remains consistent with long-term EPS growth; payout ratio trending slightly above 70% near-term due to portfolio transition .

Estimates Context

Wall Street consensus EPS and revenue estimates for Q1 2016 via S&P Global were unavailable in our session, so we cannot quantify beats/misses versus consensus. Given reaffirmed FY16 EPS guidance and softer regulated volumes due to weather, modeled near-term regulated estimates may need modest downward adjustments, partly offset by international tax benefits and improved Brazil hydrology .
If consensus becomes available, compare $1.13 adjusted EPS to Street and note revenue of $5.62B vs Q1 2015 $6.07B .

Key Takeaways for Investors

Narrative: Despite adverse winter weather and storm costs, Duke reaffirmed FY16 EPS guidance, supported by pricing/riders, ASR share count reduction, and improved international tax/hydrology; margins held resilient with EBITDA margin ~38% in Q1 .
Watch ACP cadence: Mid-2017 certificate with late-2018 ISD maintained; regulatory/environmental milestones are catalysts (de-risk as milestones are hit) .
Portfolio transition: Progressing on international exit (near-term EPS dilution but balance sheet deleveraging and risk reduction); Piedmont acquisition remains accretive from 2017 .
Cost discipline: Management is offsetting low load growth with O&M actions; storm normalization and rider recoveries should restore regulated earnings trajectory into 2H .
Tax dynamics: Lower adjusted effective tax rate in Q1 (26%) supports EPS, but management flagged some reversal later; incorporate slightly lower full-year ETR in models .
Dividend visibility: ~4% annual growth sustained by stable core cash flows and constructive jurisdictions; payout ratio temporarily above 70% during transition .
Near-term trading: Stock likely sensitive to headlines on ACP/DEQ coal ash classifications, international sale progress, and rate case timing in Carolinas and South Carolina .

Additional Data Points (for reference)

Special items EPS impact in Q1 2016 totaled -$0.12/share (merger costs -$0.11, cost savings -$0.02, discontinued ops +$0.01) .
Capital expenditures in Q1 2016: $1.704B vs $1.454B YoY (regulated $1.448B; commercial $214mm) .
Consolidated capitalization at Q1 2016: Total debt $43,794mm; total equity $39,941mm .

Citations: All figures and statements are sourced from Duke Energy’s Q1 2016 Form 8‑K and Exhibit 99.1, and Q1 2016 earnings call transcript, with additional prior-quarter context from Q4 2015 and Q3 2015 filings and transcripts .

Duke Energy CORP (DUK)·Q1 2016 Earnings Summary