Q2 2024 Earnings Summary
- Strong customer growth and load projections exceeding expectations: Duke Energy added 80,000 retail customers in the first half of the year, more than any first half in recent years. Residential growth is robust, aligning with their 1.5% to 2% load growth projection for 2024. The commercial segment is performing better than expected, driven by data centers, healthcare, and universities. Load growth is trending toward the high end of the 1.5% to 2% CAGR over the five-year planning horizon.
- High confidence in delivering 5% to 7% EPS growth, with potential to reach the top end of the range: The company has a high degree of confidence in achieving its 5% to 7% EPS growth rate through 2028. This confidence is supported by accelerating load growth, consistent investment in critical infrastructure, and a stabilizing interest rate environment.
- Constructive regulatory outcomes and strong stakeholder engagement: Duke Energy has a strong track record of positive regulatory outcomes, attributed to its operational excellence and stakeholder engagement. The company is confident in achieving constructive outcomes in upcoming rate cases, such as in Indiana, which will support investments for growth and economic development.
- Slower rebound in industrial sales: Duke Energy is experiencing a slower rebound in industrial sales, with growth potentially pushed into late 2024 or early 2025 due to higher interest rates and pressure on legacy industries like textile and paper.
- Risk of economic downturn affecting demand: The company acknowledges that an economic downturn could negatively impact customer demand and affect growth projections.
- Delay in nuclear Production Tax Credit guidance: The delay in receiving formal guidance on nuclear Production Tax Credits from the Treasury may impact the timing of monetizing these credits and could affect the company's credit metrics.
-
EPS Guidance and Growth
Q: How are you tracking within the 5% to 7% EPS growth path?
A: Management sees more tailwinds than headwinds, with accelerating load growth, consistent infrastructure investment, and a stabilizing interest rate environment providing high confidence in achieving at least 5% to 7% EPS growth, possibly at the top end later in the period. Potential risks include an economic downturn affecting customer demand, but overall, they are optimistically positioned due to strong growth opportunities. -
Load Growth Expectations
Q: Can you reassess the 1.5% to 2% load growth assumptions?
A: Duke Energy is trending toward the high end of their 1.5% to 2% load growth projections. They plan a comprehensive update on load and capital in February. Residential growth is robust, with about 80,000 retail customers added in the first half, putting them on track for 1.5% to 2% growth in 2024. Commercial growth exceeds expectations, driven by data centers, healthcare, and universities. Industrial growth is slower due to caution amid economic concerns but is expected to rebound later in 2024 or early 2025. -
Industrial Growth and MoUs
Q: Are the MoUs with data centers incremental to load projections?
A: The MoUs with data centers and companies like Nucor are incremental, especially after 2028. Data centers represent about 25% of the economic development pipeline, increasing beyond 2030. Discussions focus on meeting load and sustainability goals while protecting retail customers, exploring structures like SMRs and clean energy offtake agreements. The risk-sharing aspects are being carefully considered. -
Nuclear PTCs Update
Q: Update on nuclear PTCs timing and monetization?
A: Formal guidance on nuclear PTCs is expected by year-end. Duke's 11 nuclear plants earned about $250 million in PTCs through June, recorded in financial statements. They plan to test the market for monetizing these PTCs in the third quarter and do not expect delays to impact credit metrics in 2024. -
Nuclear Expansion Plans
Q: Latest thoughts on new nuclear technology and timing?
A: Small Modular Reactors (SMRs) are included in Duke's IRP. They plan to bring 600 megawatts online in 2035 at the Blue Creek station in North Carolina. They are working through technology selection and have a site selected, with public staff agreements in place. There's also interest in nuclear options in Indiana, though timing may be later. -
Regulatory Strategy and IRP Updates
Q: Will load growth lead to more frequent IRP filings?
A: Duke may provide more frequent IRP updates as load growth evolves. In the Carolinas, IRPs are filed every other year; they provided an update in January due to increasing load growth. They work closely with state agencies on economic development, enabling proactive planning for transmission and generation needs. -
Election Impact on IRP
Q: Could upcoming elections impact IRP outcomes?
A: Management does not expect the November elections to affect regulatory rulings in the Carolinas or Indiana. They maintain a bipartisan approach to energy policy, aiming to serve customers with reliable, affordable, and clean energy. -
Indiana DEI Case Settlement
Q: Can you settle the DEI case before hearings?
A: Duke is open to settlement discussions for the DEI case in Indiana, with hearings scheduled later this month. They are confident in their case, emphasizing customer benefits and investments supporting growth and economic development in Indiana.