Duke Energy Q4 2024 Earnings Call Transcript

AlphaStreet
Provided by AlphaStreet
February 13, 2025
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Operator

Hello and welcome to the Duke Energy 4th-Quarter and Year-End 2024 Earnings. My name is Elliott. I'll be your coordinator today. If you would like to register a question during today's events, please press Star-1 on your 12 keypad.

I would now like to hand over to Abby Motsinger, Vice-President of Investor Relations. Please go-ahead.

Abby Motsinger
Vice President, Investor Relations at Duke Energy

Thank you, Elliot, and good morning, everyone. Welcome to Duke Energy's 4th-quarter 2024 earnings Review and business update. Leading our call today is Lynn Good, Chair and CEO, along with Harry Sideris, President; and Brian Savoy, 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 Lynn.

Lynn Good
Chair and Chief Executive Officer at Duke Energy

Abby, thank you, and good morning, everyone. Today, we announced 2024 adjusted earnings per share of $5.90, finishing within our guidance range. 2024 was a year of great accomplishment and in many ways was defined by our response to hurricanes Hellen and Milton. We were moved by our community's outpouring of support and appreciation for our work during these historic storms.

We also announced updated guidance today, including a 2025 earnings per share range of $6.17 to $6.42 with a midpoint of $6.30 and $83 billion capital plan, which drives 7.7% earnings-based growth. This capital represents infrastructure spending driven by growing jurisdictions and underpinned by robust regulatory processes such as integrated resource plans and approved grid investment spending. And finally, the continuation of our 5% to 7% EPS growth rate through 2029 with the potential to earn higher in the range as the years progress.

Duke Energy enters the back part of this decade in a position of strength and we're excited about the future. We're committed to delivering strong earnings and earnings growth and cash flows for our investors and superior service to our customers and communities. Before we get further into 2025 guidance, let me acknowledge our key achievements in '24.

Turning to Slide 5, we continued our track-record of regulatory execution with the approval of $45 billion of rate base investments. The regulatory work of the last two years minimizes rate case exposure in 2025 and '26. We also advanced generation and transmission through our integrated resource plans and CPCN approvals, and we continue to add solar in Florida with 1,500 megawatts now in-service. And finally, I'd like to acknowledge the Piedmont Natural Gas 3PEAK.

For the third consecutive year, the team earned the J.D. Power number-one customer satisfaction ranking for natural gas service in the Southeast. And let me also just take a moment and acknowledge last month's announcement, effective April 1, Harry will become CEO and President of Duke Energy, and Ted Craver will assume the role of Independent Chair of the Board. Therefore, today will be my last earnings call prior to retirement. It's been an honor to lead this company and I appreciate everyone who has been on the journey with me.

To our employees, thank you for your commitment to our company and customers, to our shareholders. Thank you for your investment in Duke Energy. The capital you provide powers our success and makes the work we do possible. And to the analysts who cover our company, you play a valuable role in the investment community and I've appreciated your thoughtful research.

And to Harry, thank you for being an incredible leader and adviser to me. As many of you know, Harry is a 29-year veteran of the company with experience in nearly every facet of our business. Harry raised his hand for every challenging assignment and has led this company to great success, thanks to his commitment to our investors, our employees and our customers. With Harry as CEO and a strong experienced leadership team around him, Duke Energy is well-positioned to execute the next phase of our business strategy, and I'm confident in all that the company will achieve.

So with that, I'd like to turn the call over to Harry.

Harry Sideris
President at Duke Energy

Thank you, Lynn, for your kind words and for your mentorship over many years. Through your leadership, Duke Energy has become an industry-leading fully regulated utility that is ideally positioned for the growth ahead.

I'm deeply honored by the confidence the Board has placed in me in the outpouring of support I've received from employees, industry leaders and public officials as well as for many of you in the investment community. It is hard to imagine a more compelling time to lead Duke Energy. We are passionate about our mission to power the lives of our customers and the vitality of our communities. I look-forward to the opportunities ahead with optimism around our strategy, our operating culture and our team.

Turning to Slide 6, I assume this new role at a pivotal point for our company and industry. We share the new administration's commitment to ensuring the availability of reliable and affordable energy to meet our customer -- our country's aspirations for technology leadership and economic growth. These priorities align with our business strategy, and we look-forward to working with President Trump, both parties in Congress and our states to build, operate and protect the critical infrastructure needed to deliver on these goals. To that end, we are executing our all-of-the-above generation strategy to meet growing demand and replace aging infrastructure.

Our diverse mix of new resources includes dispatchable natural gas, which is essential to maintaining reliability and affordability for customers and complements our substantial investments in renewables. In the Carolinas, we have started construction on over 2 gigawatts of natural gas generation that was approved last year and we are filing CPCNs for our next round of gas plants in the Carolinas and Indiana this quarter.

We've secured turbines and gas supply for each of these sites, expediting our ability to connect megawatts to support economic development growth. With our generation investments are accelerating, important grid investments will continue to be a significant portion of our five-year capital plan, ensuring the reliability and resiliency of our system. With 320,000 line miles, we operate the largest transmission and distribution system in the nation.

Working with stakeholders across our jurisdictions, we have tailored state-specific multiyear investment plans that strengthen the grid and ensure our ability to connect new large load customers. The path forward is clear as we navigate this decade of record infrastructure build and we remain focused on delivering value to our shareholders while meeting our customers' energy demands now and into the future.

With that, let me turn the call over to Brian.

Brian Savoy
Executive Vice President and Chief Financial Officer at Duke Energy

Thanks, and good morning, everyone. As Lynn mentioned, our full-year adjusted earnings per share of $5.90 was within our 2024 guidance range. For the year, we saw top-line growth from rate cases and riders across our jurisdictions, which was partially offset by the impacts of a historic hurricane season. For additional details on '24 results, please refer to supporting materials in today's news release.

Moving to Slide 8. We set our 2025 EPS guidance range at $6.17 million to $642. The $630 midpoint represents around 7% growth over 2024. This trend is a continuation of the 6% annual growth we've delivered since 2022. Within the Electric segment, constructive rate case outcomes over the past two years will continue to drive results. In January, we implemented our new multi-year rate plan in Florida and entered year two of our multi-year rate plan in North Carolina. We'll see benefits from the DEC South Carolina rate case and our recently approved Indiana rate case, as well as growth from grid riders in the Midwest and Florida.

In addition to rate activity, our plan assumes normal weather and retail sales growth of 1.5% to 2% in 2025. Growth in our gas segment will be driven by the Piedmont North Carolina rate case and annual rate mechanisms in South Carolina and Tennessee, as well as customer additions and integrity management investments. Finally, we expect results of the other segment to be driven by higher interest expense and modest share dilution to fund our growing capital plan.

Turning to Slide 9. Beginning in 2027, we see an acceleration in volumes with annual load growth increasing to 3% to 4% at the enterprise. Our confidence in this forecast is underpinned by significant economic development projects coming online, particularly in the Carolinas, which we see growing at 4% to 5% over the same-period. Our economic development pipeline reflects advanced manufacturing projects across multiple sectors, as well as data centers. As a reminder, we take a risk-adjusted approach as we evaluate which projects to include in our forecast.

We incorporate just a portion of our total pipeline, focusing on those with letter agreements or in very late-stage development. We then utilize discrete project-level analysis to ensure confidence in when the projects will begin commercial operation and require energy supply. In the near-term, we're planning for annual load growth between 1.5% to 2% at the enterprise. Our forecast is supported by strong residential customer growth, improving industrial activity and the expansion of new and existing businesses across our service territories.

Moving to Slide 10. Our five-year capital plan is now $83 billion, a 12% increase versus our prior plan. The majority of the increase is driven by generation investments reflected in our IRPs. These investments ramp-up over the five-year period as load accelerates and we replace aging infrastructure. In addition, grid investments represent around 45% of our capital plan as we continue to improve the reliability and resiliency of our system.

With our updated capital plan, we now expect roughly 7.7% annual earnings base growth through 2029, a 50 basis-point increase from our prior plan. Supporting this growth are efficient recovery mechanisms, which are critical to maintaining a healthy balance sheet, mitigating regulatory lag and smoothing customer rate impacts. The need for infrastructure to support our growing regions -- regions is not limited to this five-year plan. We have a long runway of investment opportunities that extend well into the next decade.

Turning to Slide 11, as we have demonstrated over many years, our commitment to our current credit ratings and a strong balance sheet will continue to be a top priority. We are targeting 14% FFO-to-debt by the end of 2025 and expect to improve above 14% over the five-year plan. Our long-term target provides over 100 basis-points of cushion above our Moody's downgrade threshold and over 200 basis-points above our S&P downgrade threshold.

To support these credit objectives and fund accretive growth, we increased equity funding to $6.5 billion over the next five years. This increase in equity funds approximately 40% of our capital plan increase. We will continue to use our at-the-market and dividend reinvestment programs to efficiently fund our equity needs. As Harry mentioned, we've delivered many constructive regulatory outcomes over the past two years. These results enable timely recovery of investments and drive considerable improvement in our operating cash-flow. In addition, we continue to see a strong market for energy tax credits. In 2024, we efficiently monetized over $500 million of credits that will benefit customers over-time.

Before we open it up for questions, let me close with Slide 12. With a strong track-record of regulatory execution, we begin 2025 with confidence in our plan and our commitment to the dividend remains unchanged. We understand its importance to our shareholders and this year marks the 99th consecutive year of paying a quarterly cash dividend.

As we look-ahead, our robust capital plan, strong customer growth and constructive jurisdictions position us to deliver 5% to 7% growth through 2029 with the potential to earn higher in the range as load growth accelerates in the back-end of the plan. We look-forward to updating you on our progress throughout the year.

With that, we'll open the line for your questions.

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Operator

If you would like to ask a question, please press star followed by one on your telephone keypad. If you would like to withdraw your question, please press star followed by two. When preparing to ask your question, please ensure your device is unmuted locally. The first question comes from Shar with Guggenheim Partners. Your line is open. Please go-ahead.

Shar Pourreza
Analyst at Guggenheim Partners

Hey guys, good morning. Can you hear me?

Lynn Good
Chair and Chief Executive Officer at Duke Energy

Good morning.

Harry Sideris
President at Duke Energy

Good morning.

Shar Pourreza
Analyst at Guggenheim Partners

So obviously, just -- good morning. So just -- obviously, you guys have pretty good visibility now. The capex is updated, financing is updated. You don't have a lot of regulatory uncertainty. Just on the EPS CAGR, Brian, you mentioned this and Lynn mentioned it's just higher in the range comments in the prepared, are we just basically guiding towards the top-end of that range? And with the credit metric targets you have out there the over 100 bps above Moody's 200 bps above S&P. Brian, can you just put a bit of a finer point on a specific target range versus the quote-unquote overlanguage you guys have out there? Thanks.

Brian Savoy
Executive Vice President and Chief Financial Officer at Duke Energy

Yeah. I'll start with the EPS, Sharon. Thanks for the questions. You know, as we look at our plan and see the load growth accelerating in '27 through '29, clearly, the opportunity is there to earn-in the top half of the range. And you're exactly right. That's what we're alluding to. It's based on the economic development pipeline we have that continues to grow by the day and the ability to serve this growing load. So we clearly see the 5% to 7% over the five years in the top half and the back-end of the plan.

On the credit, you know, we're very pleased. We finished 2024 at 13.9% FFO-to-debt as -- in-spite of the storms that we saw. We were expecting some pressure from the storms, we saw it, but we overcame it because the operating cash-flow in our business is accelerating. And that's based on regulatory outcomes that we've experienced over the past couple of years. As we look out in time, we've guided to above 14%, which gives us over 100 basis-points, like you mentioned, above Moody's downgrade threshold and over 200 in S&P. And we feel like that's the right target for now above 14. We will come up with specific guidance as the plan progresses.

Shar Pourreza
Analyst at Guggenheim Partners

Okay, perfect. That's what I was trying to get at, Brian. So there will be a point in time when we can be a little bit more specific on the range that you target over the long-term. That's what I was trying to really get to.

Brian Savoy
Executive Vice President and Chief Financial Officer at Duke Energy

That's correct.

Shar Pourreza
Analyst at Guggenheim Partners

Okay, great. And then just on the load growth, obviously, everyone is focused on the incremental low-growth opportunities from hyperscalers, etc. The Deep and Stargate stuff has been out there for a few weeks now. Just any change in tone, Lynn and Harry, from your customers and your conversations as we're thinking about spending needs, speed-to-market, et-cetera, or is it kind of full-speed ahead? No pun intended by?

Harry Sideris
President at Duke Energy

Yeah. I'll take that one, Char. Yeah, we feel very confident in our plan that we shared with you and we have a wealth of opportunities. In our discussions with the hyperscalers, they anticipated efficiency gains. So DeepSeq was not a surprise to them. They're full-speed ahead. They're looking at the fact that these efficiencies may actually increase the demand for AI. So we have not seen any pullback in anything they're planning on. In fact, we've seen a lot more discussions with accelerating some of their work. And speed, as you mentioned, is very important to them. And it's something that we pride ourselves on in working innovatively on solutions with them to find ways to bring them on quicker, which is what they want. So we'll continue to work with them, but we're not seeing any pullback, in fact, an acceleration in what they're discussing with us.

Lynn Good
Chair and Chief Executive Officer at Duke Energy

Thanks, the only thing.

Shar Pourreza
Analyst at Guggenheim Partners

Okay. That's helpful.

Lynn Good
Chair and Chief Executive Officer at Duke Energy

And then a little delight. Sorry. Here you might talk about what we see in the near-term pipeline. There's a lot of the data centers that are really focused on cloud computers.

Harry Sideris
President at Duke Energy

Yeah. That's a good point, Lynn. The near-term data centers that we're having under-construction are really associated with cloud computing and expansion there. And then as we move later into the plan, that's where some of the generative AI data centers are coming in and that's when we see the larger load growth.

Shar Pourreza
Analyst at Guggenheim Partners

Perfect. And thanks guys so much. And Harry and Lynn, a big congrats on both your Phase 2s and Lynn, I know we're going to miss you a lot. It's been over 20 years of earnings calls and -- but it's going to be fun watching you take overboard so thank you much.

Operator

We now turn to Julian Smith with Jefferies. Your line is open. Please go-ahead. Good morning, Julian. We now move on to Nicholas Campanello with Barclays. Your line is open. Please go-ahead.

Nicholas Campanella
Analyst at Barclays

Hey, good morning, everyone. And I'll echo Sharth's comments. Congrats to Lynn. I counted the earnings calls over 80, so but yeah, congrats all-around.

Lynn Good
Chair and Chief Executive Officer at Duke Energy

Thank you.

Nicholas Campanella
Analyst at Barclays

But hey, just in the equity that you outlined for this new plan, if you were to do kind of junior sub or hybrid or any type of like equity content like instrument, does that change the equity needs or do you just kind of remain -- do you expect this to kind of remain confident through the plan?

Brian Savoy
Executive Vice President and Chief Financial Officer at Duke Energy

Yeah, Nick, I would just frame the equity a little bit. The equity funding in the context of a company our size is around 1% -- 1.5% of the market cap what we need on an annual basis. And you would expect us to look for the most cost-effective shareholder-friendly solutions to fund that equity as we look-through the plan and we're planning on using the ATM and the DRIP. But hybrids have continued to be attractive in the market and you would expect us to look at this and we will.

Nicholas Campanella
Analyst at Barclays

And yeah, definitely appreciate in context of the market cap, it's smaller. So another question, just legislation in South Carolina has been a discussion point for many investors. And just curious, I assume none of that's kind of in your plan at this point, if you can maybe detail how it would impact the plan. Are you under-earning in South Carolina? Could legislation in any way change your ability to execute differently on the resource plans you've put out there? Thank you.

Harry Sideris
President at Duke Energy

Yeah, Nick, this is Harry. I'll take that one. We're always pleased to take part in energy policy discussions at our states and South Carolina is no different. This is something that has been going on since last year and is making progress. It's really more tone setting around support for the dual state system that we operate, regulatory timelines as well as the all-of-the-above strategy and support for that. So we don't anticipate changes to our plans from the legislation, but it will make the tone in South Carolina stronger for us and we support that and continue to work with our policy makers on that front.

Nicholas Campanella
Analyst at Barclays

All right. Well, thanks a lot. See you soon.

Harry Sideris
President at Duke Energy

Thank you.

Operator

Thank you. We now turn to David Arcaro with Morgan Stanley. Your line is open. Please go-ahead.

David Arcaro
Analyst at Morgan Stanley

Thanks. Good morning. And Lynn, best wishes with your upcoming retirement and congratulations, Harry.

Lynn Good
Chair and Chief Executive Officer at Duke Energy

Thank you.

David Arcaro
Analyst at Morgan Stanley

Let me see. Hey, Brian, just to put you on the spot. We're going to see -- like is the top-end possible in 2027 specifically or how are you thinking about it just within the specifics of the of the five-year plan here?

Brian Savoy
Executive Vice President and Chief Financial Officer at Duke Energy

Yeah, David, we're not going to get that specific on the day, but we do see load growth stepping up in '27 and that's in our slides and that's when a lot of these economic development projects that are under-construction now will start taking energy and we'll start serving them. So that's the year where we do see this kind of ratching up of growth on the top-line and it does present the opportunity.

David Arcaro
Analyst at Morgan Stanley

Okay, great. Now that's helpful. I appreciate your not getting overly precise here with it. But -- and then could you speak to just how much of a pipeline of data center activity that you're kind of seeing and working on in the background? It sounds like a lot of the growth is even beyond data centers that you're seeing crystallized in the state, which is great to see. And just curious just the quantum of data center activity that's back there in the pipeline.

Harry Sideris
President at Duke Energy

Yeah, David, we have a wealth of opportunity and not just data centers, but total economic development. We have advanced manufacturing and pharmaceuticals, a very diverse pipeline. Our near-term pipeline and advanced-stage pipeline is over 7 gigawatts and our broader pipeline is at least double that and continues to grow. As Brian mentioned, we take a risk-based approach in what we put in our load forecast because we know these loads can move around and the timing of them.

So we're really putting in the load forecast items that are either turning dirt or have letter agreements or near letter agreements and we continue to work with the ones in the pipeline to bring them forward and get them in the load forecast. And we feel very strongly about our positioning for economic development and future growth, not just in data centers, but in other economic development projects?

David Arcaro
Analyst at Morgan Stanley

Yeah. Excellent. Now that's helpful. I appreciate the color. And I was just is it -- is it possible that there could be even more upside, I guess, based on the pace of the development that you're seeing in the -- in your service territory. I know you've put obviously a lot of thought into this updated load growth and of course, probability-weighted it here. But in terms of the pace of -- or the rate of change that you're seeing, is there potential for further upside over-time?

Harry Sideris
President at Duke Energy

David, we're definitely confident in the plan that we shared with you and we continue to work to bring as much additional load that we can and we focus on making sure that we can serve that load reliably and affordably. Like I mentioned earlier, the speed is important. So how can we speed this up and we continue to have those discussions with the hyperscalers as well as the advanced manufacturing and other economic development folks.

Lynn Good
Chair and Chief Executive Officer at Duke Energy

And David, I would say as we look at the pipeline over the last year, it hasn't continued to increase. And if we look out to 2029, for example, 50% of the pipeline is now data centers. So I do think the hard work of the team in bringing customers to our service territory will not stop and we'll keep you updated along the way on how that translates into growth.

David Arcaro
Analyst at Morgan Stanley

Okay, great. Very helpful. Thanks so much for the color.

Lynn Good
Chair and Chief Executive Officer at Duke Energy

Thank you.

Operator

Thank you. We now return to Julian with Jefferies. Your line is open. Please go-ahead.

Julien Dumoulin-Smith
Analyst at Jefferies Financial Group

Hey, good morning, team. Can you guys hear me?? All set? Good morning. Hey. Excellent. Awesome. Hey, good morning. Congratulations to both you guys nicely, Don and Lynn. All the best. It's been a pleasure over the year. Indeed. As they said. Absolutely. Look, maybe just shifting the conversation focus slightly. Can we talk a little bit about cost-savings, just the ability to drive more efficiencies out-of-the organization? It seems like a potential meaningful year ahead here as you think about the opportunity.

Again, maybe a question more for Harry, if anyone. How do you think about the scale of what you could deliver here, especially against the backdrop of what seems like a reinflationary cycle from a variety of different factors and how that makes you guys relatively competitive? I appreciate your rates remain competitive against a number of different peers and metrics, but how do you think about that contributing to the backdrop of economic development in that 3% to 4% as well?

Brian Savoy
Executive Vice President and Chief Financial Officer at Duke Energy

Hey, Julian, it's Brian. I'm going to start and Harry is going to come back and add some additional color. But we've been a cost leader in the industry. And over the past many years, leveraging technology, including AI, process improvement and our scale to drive our cost to where they are and you're recognizing that and thank you for that. I will say as our asset-base grows to serve a larger customer-base, O&M is going to increase.

We will continue our cost -- our continuous improvements efforts to keep those increases much smaller than the additional customers we're serving or the revenue that comes with them. But over the time, as we increase our assets, you do see some slight increase in O&M and I suspect that whole industry is going to see it. And we don't believe our position as a cost leader is going to change and we're going to manage this very tightly. But the long-term planning assumption we have is around the 1% CAGR on O&M growth and that's again much less than the assets and customers we're adding.

Harry Sideris
President at Duke Energy

And I would add, Julian, we have a strong continuous improvement culture. It's really in our DNA to find better ways to do things each and every day. And then our size and scale helps us negotiate better deals with our supply-chain partners as well as a lot of improvement that we made using technology on our planning to make sure that we have long-term plans and locked up resources and materials to implement our growth strategy. So that helps us manage our costs.

And we're taking a programmatic approach to some of the generation build that we're doing that's really saving us a lot of money and really allowing us to have definitive ways to implement this in an efficient and dependable manner. So we'll continue to do that. Brian mentioned technology and we talk about AI a lot of times on the load side, but that's another opportunity for us to continue to leverage those tools to make us more efficient in the future.

Julien Dumoulin-Smith
Analyst at Jefferies Financial Group

Awesome. All right, excellent. And then yeah, I thought we're going to talk a little bit more about the consolidation within the utilities here. If I could maybe press you guys a little bit further on there. But related, if I can, I'd also love to hear a little bit about customer deposits and how you think about that impacting rate base and your starting point and cumulative rate base. Certainly, we've seen that with some of your peers of late as are ramping. Is that is that a factor here that we should be thinking about, especially as you think about the relative increase in rate base versus the capex?

Lynn Good
Chair and Chief Executive Officer at Duke Energy

Julian, let me jump-in. You may be talking about some of the creative tariff structures for the large load. And I would think of that as being a little bit of noise for us given the scale of the company. So the rate base numbers that we're sharing with you have a high degree of confidence in the amount of capital that's actually going to be deployed in our rate structure. And I think the team has done an extraordinary job developing creative tariff structures to attract large load-in a way that protects our residential customers or low-income customers, but also makes our state attractive for economic development.

Julien Dumoulin-Smith
Analyst at Jefferies Financial Group

Awesome. Yeah. I was thinking the 7.7 CAG versus the 7.2 that you guys had previously. I would have thought maybe the translation of the -- between the 84% and 73% would have been a little bit higher is what I was getting at earlier. If there was any offsets with between the capex to rate base translation.

Lynn Good
Chair and Chief Executive Officer at Duke Energy

I think we can go through more specifics with you.

Julien Dumoulin-Smith
Analyst at Jefferies Financial Group

Take it offline? Thank you.

Lynn Good
Chair and Chief Executive Officer at Duke Energy

Yeah, Julian, I would say to you, 12% rate base growth is incredibly strong. And as a great underpinning of what we see, all that capital has been put through our regulatory processes. We have integrated resource plans in-place, et-cetera. And I would say to you that if I were to hold the operators around the table, they'd like even more capital because the opportunities that we see to invest in our business are just really strong. So we'll keep going and delivering the returns that go with it.

Julien Dumoulin-Smith
Analyst at Jefferies Financial Group

Awesome. All right guys, thank you very much. Best of luck again.

Lynn Good
Chair and Chief Executive Officer at Duke Energy

Thank you Eliot are you still there.

Operator

Ladies and gentlemen, sorry for the technical difficulties. We'll now turn to Jeremy Tonet with JPMorgan. Your line is open. Please go-ahead.

Jeremy Tonet
Analyst at JPMorgan Chase & Co.

Thank you. Hi, good morning.

Lynn Good
Chair and Chief Executive Officer at Duke Energy

Good morning.

Jeremy Tonet
Analyst at JPMorgan Chase & Co.

But Lynn, best of luck going-forward. Harry, congratulations.

Lynn Good
Chair and Chief Executive Officer at Duke Energy

Thank you.

Harry Sideris
President at Duke Energy

Thank you.

Jeremy Tonet
Analyst at JPMorgan Chase & Co.

I was just wondering if you could dig in a little bit more, I guess, on what you're seeing economic activity. Clearly in the Carolinas, there's a lot of good things happening there, but we've heard other peer utilities talk about improvements in the Midwest as well. And just wondering if you could touch on what you see in some of those areas in your footprint.

Harry Sideris
President at Duke Energy

Yeah, Jeremy, I'll take that. In Indiana, we're seeing strong growth as well. The main focus that we've seen in our territory is around advanced manufacturing and facilities -- manufacturing facilities expanding. We do have some data centers coming into the pipeline there, but not to the level that others are seeing in Indiana or that we're seeing in the Carolinas, but we continue to have discussions with them and have the -- have plans to bring as much economic development into Indiana as we can. It's a very constructive state. They do a great job of attracting industries and have a very business-friendly environment, and we work side-by-side with them to advance that.

Jeremy Tonet
Analyst at JPMorgan Chase & Co.

Got it. Thank you for that. And I was just wondering with the change in administration in DC, if that impacts, I guess, your thought process at all. Granted, you're making very long-term decisions in four-year terms aren't ways to really run the ship. But just curious if there's anything out of DC, particularly as it relates to, I guess, nuclear at this point, it seems like there is some maybe improving momentum on with regards to nuclear initiatives across the country.

Lynn Good
Chair and Chief Executive Officer at Duke Energy

Jeremy, thanks for that question. And I would say that as we think about the strategy of Duke Energy, it is a strategy that has been built to really serve customers for decades. And as we look at this particular administration, we have shared aspirations with our federal -- the federal administration, but frankly with our states as well to ensure that we keep delivering reliable power at low-cost and that we deploy generation and embrace this growth and economic development that our states are seeing in a way that demonstrates a good speed to meet what the market requires, but also does it in a way that continues to underpin economic growth going-forward.

So that framework and that strategy that we're -- we're pursuing, we think is a strong underpinning both at the federal level and the state-level. And if I were to talk about nuclear, in particular, we've been -- we're a strong nuclear operator. We are pursuing how nuclear can be a part of our all-of-the-above strategy as we get into the 2030s and beyond. You likely saw that we joined a consortium with TVA and others around a DOE grant. We think continuing to learn more on these technologies are important so that when we're ready to deploy, we have a high degree of confidence that there is a supply-chain, an engineering design, constructors ready to go so that we can produce and operate these new technologies in a way that makes sense for customers. So we are deeply engaged at the state-level and the federal level and see a lot of opportunity to support growth across the US.

Jeremy Tonet
Analyst at JPMorgan Chase & Co.

Got it. That's helpful. Thank you.

Operator

Thank you. Our next question comes from Anthony Crodell with Mizuho. Your line is open. Please go-ahead.

Anthony Crowdell
Analyst at Mizuho

Hey, good morning. Congrats, Lynn. Congrats, Harry. Unfortunately, my question is for Brian. So you guys have a little break here. Brian and maybe the same question. I guess one is and I don't want to part -- I'm not looking to hold you down. I know you addressed a little bit -- a little bit with Shar. On Slide 11, you talk about FFO-to-debt to improve above 14% over the five-year plan. What's a reasonable cushion to assume that like you would improve by? And the second question is more so, as you've talked about in the back-end of the plan, you tend -- you expect to be towards the high-end of the 5% to 7% earnings growth. How do you think about the income statement? You know, maybe we raise the earnings growth rate or we work on improving the balance sheet maybe to the upgrade the upgrade trigger. And then maybe the same question, so I'll leave it there.

Brian Savoy
Executive Vice President and Chief Financial Officer at Duke Energy

No, thanks, Anthony. And you know, as we think about our FFO-to-debt and the size and scale of Duke Energy, I firmly believe 100 basis-points of cushion from the Moody's downgrade threshold gives us flexibility to execute our plans with confidence and to deal with uncertainties that come our way. And we've proven that over the past several years. The rating agencies have been tremendously positive towards us and the regulatory outcomes that we've been able to work with our regulators on have provided that operating cash-flow that the rating agencies are looking for and that consistency of top-line revenues that support a credit profile of ours. So I would start with that. So the 14% is a solid number for Duke Energy given the size and scale and diversity we have in the rating agencies have been very supportive of us every step of the way.

As we look-through time, operating cash-flow does accelerate. We're making more investments. Those investments are turning into top-line revenues and we see the 14% improving. Again, I'm going to provide more details as the plan progresses, but we feel very good that where we sit and how we see the five years playing out in front of us. And on the earnings question, I would just say that load growth in '27, '28, '29 is a step-change for us. It moves up from the 1.5% to 2% we're seeing in '25 and '26 to a 3% to 4% across the enterprise and that's a substantial step-up and it gives us clearly the opportunity to earn-in the top half.

Anthony Crowdell
Analyst at Mizuho

Great. Thanks so much for taking the questions.

Operator

Thank you. Our final question today comes from Durkesh Chopra with Evercore ISI. Your line is open. Please go-ahead.

Durgesh Chopra
Analyst at Evercore ISI

Hey, team, good morning. Thank you for giving me time and Ako the congratulations for Lim and Lynn and Harry. All the best to you both.

Brian Savoy
Executive Vice President and Chief Financial Officer at Duke Energy

Thank you.

Durgesh Chopra
Analyst at Evercore ISI

Hey, just certainly. Brian, sorry, I'll apologize in advance because this is an annoying question. But when I think about the '25 guidance and that compares to the '24 original guidance midpoint, it's a 5% EPS growth and obviously, the '25 guidance was lower because of hurricane and onetime stuff. So I'm just wondering, are you being conservative as it relates to 2026? Or are there other headwinds like interest rates that is causing you to be at the low-end versus the original 2025? Any color you could share there?

Brian Savoy
Executive Vice President and Chief Financial Officer at Duke Energy

I would start with, the 630 is firmly within our 5% to 7%. As we've looked at our plan, we feel like it hits the right level for us. But you'll see one-item I'd point to in our electric walk-up on the earnings. We have O&M increasing. And that is due to two things. One, we had resources focus on the storms in the second-half of the year, right? So we didn't do some grid projects or some generation outages that we had planned. Those are going to be caught up in 2025. So we have some shifts in O&M from that. And we also set-aside some O&M resources for additional storm costs because we've seen a more frequent set of storms impact our regions. And if you wanted to point to one thing, I would say that's a timing shift that's showing up in '25 that you might not have had in your model. But other than that, we feel like the 630 is right in-line with where we need to be and we have a high degree of confidence in achieving it.

Durgesh Chopra
Analyst at Evercore ISI

Got it. Just a little bit of O&M catch-up on timing. That's very helpful. I appreciate that. And then finally, just you know, shifting gears. Looking at the ROE charts that you publish annually, thank you for doing that. The Ohio, Kentucky is still considerably below your other subsidiary ROE averages. So just wondering what steps and you have a footnote there, timing of rate cases on that. So what steps could you take to kind of get it to 9% plus percent? Just any thoughts there? Thank you.

Lynn Good
Chair and Chief Executive Officer at Duke Energy

Yeah, thank you for that question, Durgesh. Yeah, we continually look and work-in ways with rate cases and other mechanisms on our riders to improve that. And we will continue to focus on that, working with our commissioners in the future okay. Thank you. The only thing I would add is there can be some variability in ROE from year-to-year as we think about whether it's an outage or we think about other activities that may be going on, I would ask you to evaluate those returns over a longer-term period. And our objective is to earn at our allowed rate-of-return by aggressively pursuing rate cases and cost reductions in a way to position the utilities for success.

Durgesh Chopra
Analyst at Evercore ISI

Sure. Okay.

Lynn Good
Chair and Chief Executive Officer at Duke Energy

Yeah, absolutely.

Durgesh Chopra
Analyst at Evercore ISI

Thank you. Thanks again for your time.

Lynn Good
Chair and Chief Executive Officer at Duke Energy

Thank you.

Operator

Thank you. This concludes our Q&A. I will now hand back to Lynn Good for any final remarks.

Lynn Good
Chair and Chief Executive Officer at Duke Energy

Well, thank you all. I appreciate the sentiments of congratulations for Harry and for me. But most of all, I appreciate your investment in Duke Energy. We feel like we presented a strong long-term case for growth, for cash flows and delivering returns for all of you and look-forward to continuing that conversation. So thanks again for joining us.

Operator

Ladies and gentlemen, today's call is now concluded. We'd like to thank you for your participation. You may now disconnect your lines.

Corporate Executives
  • Abby Motsinger
    Vice President, Investor Relations
  • Lynn Good
    Chair and Chief Executive Officer
  • Harry Sideris
    President
  • Brian Savoy
    Executive Vice President and Chief Financial Officer
Analysts

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