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    Duke Energy Corp (DUK)

    Q1 2024 Earnings Summary

    Reported on Jan 10, 2025 (Before Market Open)
    Pre-Earnings Price$100.42Last close (May 6, 2024)
    Post-Earnings Price$101.00Open (May 7, 2024)
    Price Change
    $0.58(+0.58%)

    What went well

    • Duke Energy expects 2% load growth in 2024, driven by strong commercial growth including data centers, and economic development projects coming online in the second half of 2024. Temporary downturn in industrial load due to plant retooling is expected to rebound mid-Q2, supporting the growth trajectory.
    • The company is successfully addressing supply chain challenges by entering into long-term agreements with key suppliers, partnering with OEMs, and preplanning and preordering to ensure timely access to critical components for infrastructure investments, thus supporting their capital plan and growth objectives.
    • Duke Energy is making significant progress in strengthening their balance sheet, aiming to achieve 14% FFO to debt by end of 2024. Key drivers include improved cash flows from rate cases, successful deferred fuel recovery, planned equity issuances of $500 million in 2024, and expected monetization of tax credits in the second half of the year.

    What went wrong

    • Potential financing challenges due to upcoming perpetual preferred dividend reset: Duke Energy has a perpetual preferred with a dividend reset in September. Repricing at current rates is unattractive, and the company is exploring alternatives to refinance, which may impact the balance sheet.
    • Uncertainty from new EPA regulations affecting resource plans: The company is evaluating the implications of new EPA rules on its Integrated Resource Plans (IRPs), acknowledging potential challenges in meeting load growth, decarbonization goals, and managing its aging coal fleet.
    • Supply chain constraints could hinder capital projects: Duke Energy faces tight markets for critical components like transformers and generation equipment. While efforts are underway to mitigate these issues, supply chain challenges may impact the execution of its capital plans.

    Q&A Summary

    1. Load Growth Impact on EPS
      Q: Will you update load growth guidance and EPS outlook?
      A: Duke Energy is seeing strong economic development opportunities, trending toward the higher end of their 1.5% to 2% load growth assumption. They plan to provide a comprehensive update in February, accounting for both load growth and the capital required to support it, which could push EPS growth to the higher end of their 5% to 7% range.

    2. CapEx Plans and Load Growth
      Q: How will load growth affect your capital expenditures?
      A: Increased load growth requires more resources, including generation and T&D investments. Duke Energy sees an expanding CapEx profile, with $73 billion over five years and $170–$180 billion over ten years, which could drive long-term EPS growth while maintaining a strong balance sheet.

    3. Refinancing Perpetual Preferred
      Q: What's the plan for refinancing the perpetual preferred stock?
      A: Duke Energy plans to address the perpetual preferred stock resetting in September as part of their financing plan. They are exploring options to avoid repricing at current high rates, considering alternative tools to maintain balance sheet support.

    4. Balance Sheet and FFO Targets
      Q: Will stronger earnings improve your balance sheet targets?
      A: Duke Energy aims to reach 14% FFO/debt by the end of 2024 and continue improving thereafter. Potential higher earnings could allow further strengthening of the balance sheet while providing growth for investors.

    5. Impact of EPA Rules on IRPs
      Q: How will new EPA rules affect your resource plans?
      A: Duke Energy is evaluating the new EPA rules' implications on Integrated Resource Plans (IRPs). They are studying the impact on meeting load growth, decarbonization, reliability, and affordability, and will reflect these regulations in upcoming IRPs in North Carolina and Indiana. Litigation is also being considered across the industry.

    6. Supply Chain Constraints
      Q: Are supply chain issues impacting your capital plans?
      A: Supply chain constraints are improving. Duke Energy has mitigated challenges by partnering with suppliers over multiple years, preplanning, and preordering to stay ahead of the curve, ensuring that investments continue as planned.

    7. Gas Supply for New Generation
      Q: How will you secure gas supply for new generation additions?
      A: Duke Energy has been securing agreements in 2023 to support existing gas infrastructure and expand capacity for new generation. They are confident in executing their plan despite pipeline development challenges, ensuring adequate supply for reliable service.

    8. Commercial vs. Industrial Load Growth
      Q: What's driving load growth in commercial vs. industrial sectors?
      A: In Q1, commercial load grew by 3.5%, driven by data center growth, while industrial load decreased by 2.5% due to temporary plant retooling. Industrial customers are expected to resume full operations by mid-Q2, supporting the 2% load growth target for 2024.

    9. CPCN and IRP Processes
      Q: How do CPCN filings relate to your IRPs in North Carolina?
      A: The Integrated Resource Plan (IRP) provides a multi-year view of generation needs, while Certificate of Public Convenience and Necessity (CPCN) filings are for approval of specific assets. The filings are complementary, with CPCN investments already included in the capital plan.

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