Q3 2024 Earnings Summary
- Duke Energy is experiencing robust economic development, having recently signed agreements for 2 gigawatts of data centers, increasing their 2028 economic development forecast to up to 20,000 gigawatt hours of incremental load .
- The company reaffirms its 5% to 7% EPS growth target and expects to reach the higher end of that range in 2027 and 2028 due to accelerating load growth from economic development projects coming online .
- Duke Energy sees significant promise in Small Modular Reactors (SMRs), with strong support from customers, stakeholders, and large tech companies, indicating growth potential in new nuclear investments .
- Duke Energy is facing uncertainties and risks regarding its new nuclear investments, particularly with Small Modular Reactors (SMRs), due to first-of-a-kind technology risks, supply chain maturity concerns, cost overrun protection, and the need to protect their balance sheet, which may impact financial performance and capital allocation.
- The company is experiencing a slower rebound in certain industrial sectors, with expectations for recovery shifting into 2025, potentially affecting near-term load growth and revenues.
- Uncertainties exist around the realization of large economic development projects, such as the 2 gigawatts of data centers, which are expected to contribute to load growth in 2027 and 2028, but may face delays or not materialize as expected, impacting future growth projections.
| Metric | Period | Previous Guidance | Current Guidance | Change |
|---|---|---|---|---|
2024 Adjusted EPS | FY 2024 | $5.85 to $6.10 | $5.85 to $6.10, trending toward the lower half | no change |
Long-Term EPS Growth Rate | 2028 | 5% to 7% through 2028 | 5% to 7% through 2028 | no change |
2024 Effective Tax Rate | FY 2024 | no prior guidance | 12% to 14% | no prior guidance |
Tax Credit Monetization | FY 2024 | no prior guidance | $300M–$500M of energy tax credits | no prior guidance |
2024 Load Growth | FY 2024 | 2% | 2% | no change |
2028 Load Growth Forecast | 2028 | no prior guidance | Up to 20,000 GWh (2,000 GWh increase from prior update) | no prior guidance |
Capital Plan | Multi-year | $73B plan focused on grid/generation | Plan will increase as transition progresses | raised |
| Topic | Previous Mentions | Current Period | Trend |
|---|---|---|---|
Strong Load Growth | Consistently reiterated in Q2, Q1, and Q4 2023 ( ) | Emphasized top-end of 1.5%–2% CAGR, accelerating in 2027-2028 ( ) | Ongoing emphasis with higher expectations |
5%–7% EPS Growth | Consistent reiteration since Q4 2023 ( ) | Reaffirmed 5%–7% through 2028, aiming for higher end ( ) | Continued momentum toward upper range |
Ongoing Equity Issuance | Aligned with Q2–Q4 2023 plans ( ) | $500M/year noted, supports expansions ( ) | Steady approach without major change |
Monetizing Nuclear & Solar Tax Credits | Previously detailed in Q2, Q1, Q4 2023 ( ) | Focused on nuclear & solar credits, aiming to boost FFO by 40–60 bps ( ) | Sustained focus for balance sheet support |
Shift from Regulatory Uncertainty to Constructive Approvals | More uncertainty in Q2; progress anticipated ( ) | Received constructive IRP approvals in NC & SC ( ) | New positivity around regulatory outcomes |
SMRs | Introduced in Q2 with 600 MW planned by 2035 ( ) | Viewed as a potential long-term growth driver, considering first-of-a-kind risks and cost protections ( ) | Emerging technology with strong interest |
Storm-Related Outages & Costs | Not specifically highlighted in Q2, Q1, or Q4 2023 | High O&M from multiple storms ($2.4B–$2.9B total costs) impacting 2024 earnings ( ) | New major concern reflecting weather risks |
Persistent Industrial Demand Weakness | Mentioned regularly (Q2, Q1, Q4 2023) with slower recovery in certain sectors ( ) | Continued weakness, rebound shifting into 2025 ( ) | Ongoing challenge with delayed improvement |
Supply Chain Constraints | Discussed as improved by Q1 2024 ( ); not prominent in Q2/Q4 | Not mentioned in Q3 2024 | Decreased focus after initial issues |
Interest Rate Challenges | Mentioned as a headwind in Q2 and Q4 2023 ( ) | Not discussed this quarter | Less emphasis in the latest call |
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Credit Impact from Storms
Q: How are storms affecting your credit metrics?
A: Storm costs are temporarily impacting our credit in 2024, with FFO to debt expected to land in the high 13% range. Without the storms, we'd be at 14% plus. We plan to recover these costs through established mechanisms in 2025, resolving the temporary impact. -
Tax Credit Monetization
Q: Will you meet your tax credit monetization targets?
A: We've completed $200 million so far and have contracts in place to reach the upper half of our $300 million to $500 million target range for the year. Discounts are attractive, in the mid-90s or slightly above. This equates to about 40 to 60 basis points improvement in FFO to debt. We expect more monetizations next year, strengthening our credit further. -
Load Growth Outlook
Q: Will load growth be accretive to your numbers?
A: We're trending at the top end of our 1.5% to 2% long-term load growth range and expect this range to increase next year. We've signed 2 gigawatts this quarter, indicating sizable economic development opportunities. Acceleration is expected in 2027 and 2028, potentially boosting our earnings. -
Equity Financing Needs
Q: Do you need to pull forward any equity given higher capital?
A: We have $500 million of equity per year in our current 5-year plan. As we expand capital, we'll finance it in a balanced way, planning for 30% to 50% equity related to new and incremental capital. We're not signaling any additional equity needs at this time. -
Participation in New Nuclear
Q: How do you see Duke participating in new nuclear?
A: We see promise in Small Modular Reactors (SMRs) and have approval for early development activities in our current IRP plans. Any decisions will consider first-of-a-kind risks, cost overrun protection, and protecting our balance sheet. We'll continue working with commissions to advance these projects. -
EPS Growth Guidance
Q: Will you reach higher end of 5%-7% EPS growth?
A: We're working towards the higher end of the range, especially as we see acceleration in load growth in 2027 and 2028. Our constructive regulatory outcomes support our confidence in this potential. -
Mitigation Measures for Q4
Q: Have you quantified additional mitigation measures for Q4?
A: We're actively working on mitigation but haven't provided specific quantifications. We believe O&M could be lower than in 2023, and we're committed to constraining the hurricane impact to 2024. -
Data Center Growth
Q: Is Microsoft included in your 2 GW data center forecast?
A: We can't share specific customer information, but we've signed 2 gigawatts with customers who have secured land and are negotiating energy service agreements. This reflects strong interest from multiple customers due to our carbon-free nuclear energy. -
Indiana IRP Update
Q: What's new in the Indiana IRP update?
A: We filed our IRP focusing on transitioning our Culley plant to gas, adding storage and solar, and diversifying fuel supply in Indiana. We'll file a CPCN for the Cayuga plant at the beginning of next year and expect to advance the plan.
Research analysts covering Duke Energy.