FOURTH QUARTER EARNINGS REVIEW AND BUSINESS UPDATE FEB. 16, 2017 PRESENTED BY: LYN YNN GOOD D | PRESIDENT, CHAIRMAN AND CEO STEVE VE YOUNG | EXECUTIVE VP AND CFO
Safe Harbor statement This presentation includes forward-looking statements within the meaning of the federal securities laws. Actual results could differ materially from such forward-looking statements. The factors that could cause actual results to differ are discussed in the Appendix herein and in Duke Energy’s SEC filings, available at www.sec.gov. Regulation G disclosure In addition, today's discussion includes certain non-GAAP financial measures as defined under SEC Regulation G. A reconciliation of those measures to the most directly comparable GAAP measures is available in the Appendix herein and on our Investor Relations website at www.duke-energy.com/investors/ . FOURTH QUARTER 2016 EARNINGS REVIEW AND BUSINESS UPDATE 2
We’ve delivered on our commitments COMPLETED THE PO PORTF TFOLIO IO TRANSI TRANSITI TION … Duke Energy 2011 Post Transition Duke Energy & & Progress Exit of merchant Acquired Piedmont 2014 2Q 2015 4Q 2016 Progress Energy Energy Merge Midwest Generation Natural Gas text Merge Business ~25% ~100% ~75% Duke Energy Began to text Duke Energy enters Began to repatriate Completed sales of 1Q 2015 4Q 2016 2012 enters repatriate cash regulated pipeline cash from Latin American regulated from business International Generation business Core (2) Non-core pipeline International business ...AND INCREASE GROWTH ...WHILE CONTINUING TO GROW EARNINGS IN THE CORE ORE IN THE DIVIDEND BUSI USINESSES NESSES (1)(2) $3.42 $4.28 $4.15 $3.30 $3.86 $3.72 $3.18 $3.12 2013 2014 2015 2016 2013 Guidance 2014 2015 2016 (3) Midpoint Weather Normal Weather Normal Weather Normal (1) Based on adjusted diluted EPS (2) Core businesses are all Duke Energy businesses except International Energy (3) Adjusted for abnormal storm and O&M re-planning expenses FOURTH QUARTER 2016 EARNINGS REVIEW AND BUSINESS UPDATE 3
Complementary businesses with strong growth opportunities ELECTRIC UTILITIES 2017 ADJUSTED 2017-2021 2017 – 2021 & INFRASTRUCTURE EPS CONTRIBUTION GROWT WTH CAP CAPITAL AL ADJUSTED EPS CAGR (1) Cons Consolida olidated ted 4-6% 6% $30 30 B 89% 89% 8-12% 10-12% GAS UTILITIES & INFRASTRUCTURE $6 $6 B B 8% 8% 4-5% COMMERCIAL RENEWABLES Electric Utilities & Infrastructure $1 $1 B B 3% 3% Gas Utilities & Infrastructure Commercial Renewables Map credit: SNL (1) Based on adjusted diluted EPS; Consolidated growth rate includes the impact of Other FOURTH QUARTER 2016 EARNINGS REVIEW AND BUSINESS UPDATE 4
Our investor proposition A SOLID LONG-TERM HOLDING 4.5% 4.5% 4 -6% 6% ~8-10% ~8 10% DIVIDEND YIELD (1) ATTRACTIVE HIGHLY zzz WITH DIVIDEND RISK-ADJUSTED ACHIEVABLE GROWTH TOTAL S AL SHARE AREHOLDE LDER R EPS EPS GRO ROWT WTH COMMITMENT (2) RETURN RE RN (3) THRO ROUGH 2021 2021 (4) SUPPORTED BY THE STRENGTH OF OUR BALANCE SHEET (1) As of Feb. 15, 2017 (2) 4-6% dividend growth subject to approval by the Board of Directors. (3) Total shareholder return proposition at a constant P/E ratio (4) Based on adjusted diluted EPS off the midpoint of the 2017 guidance range of $4.50-$4.70 FOURTH QUARTER 2016 EARNINGS REVIEW AND BUSINESS UPDATE 5
INVESTING IN INFRASTRUCTURE OUR CUSTOMERS VALUE. DELIVE DELIVERIN RING G SUSTAINABLE GR GROWTH. WTH. FOURTH QUARTER 2016 EARNINGS REVIEW AND BUSINESS UPDATE 6
Advancing our strategic vision TRANSFORM THE CUSTOMER EXPERIENCE EXPAND NAT ATURAL RAL GAS AS MODERNIZE THE GENERATE ENERG RGY Y GRI RID CLEAN CLE ANER R ENERG RGY INFRAS FRASTRU RUCT CTURE RE STAKEHOLDER ENGAGEMENT FOURTH QUARTER 2016 EARNINGS REVIEW AND BUSINESS UPDATE 7
The next decade ACHIEVE TOP QUARTILE CUSTOMER SATISFACTION EXPAND NAT ATURAL RAL GAS AS MODERNIZE THE GENERATE ENERG RGY Y GRI RID CLE CLEAN ANER R ENERG RGY INFRAS FRASTRU RUCT CTURE RE $2 $25 5 B $11 B $11 15% 15% INVESTMENTS IN INVESTMENTS IN PROPORTION OF OUR GRID MODERNIZATION CLEANER GENERATION BUSINESS MIX FROM GAS OVER 10 VER 10 YE YEAR ARS OVER 10 VER 10 YE YEAR ARS (1 (1) IN 10 YE IN YEAR ARS S FROM 8% TODAY (2) ALL ALL REVENUES RECOVERED VIA MODERN REGULATORY MECHANISMS JURISDIC JURISDICTIO TIONS NS WI WITHIN 10 YE 10 YEARS ARS (1) Includes natural gas and renewables generation. Excludes nuclear relicensing and new nuclear projects FOURTH QUARTER 2016 EARNINGS REVIEW AND BUSINESS UPDATE 8 (2) Based on adjusted diluted EPS
Improving system performance through smarter energy infrastructure GRID M GRID MODERNIZA ODERNIZATI TION PR ON PROGRA OGRAMS MS More Mor e Smar Smarte ter r Relia eliable ble Grid Grid Storm Hardening Advanced Metering System System MODERNIZE THE ENERG RGY Y GRI RID Targeted Advanced Systems $25 B Undergrounding & Communication OF GRID INVESTMENTS Self Optimizing OVER 10 YEARS Resiliency Grid #1 CUST CUSTOM OMER BENEFI ER BENEFITS TS DUKE’S T&D SYSTEM IS LARGEST IN THE U.S . WITH 295K LINE MILES DE DECRE CREAS ASE PROVI VIDE DE NEW W ENABLE ABLE HIGHER R OUTAGES AN AND D DATA A AN AND D LE LEVE VELS LS OF F 50% ENABLE ABLE FAS ASTER, R, INFO FORM RMATION RE RENEWABLE WABLE MORE RE A AUTOMATED D OUR R CU CUSTOMERS RS ENERGY Y REDUCTION IN OUTAGE RE RESTORA RATION VAL ALUE RESOURCE RE CES FREQUENCY AND DURATION OVER NEXT 10 YEARS FOURTH QUARTER 2016 EARNINGS REVIEW AND BUSINESS UPDATE 9
Our generation investments result in significantly reduced emissions FUEL DIVERSITY (MWh OUTPUT) 28% 34% GENERATE CLE CLEAN ANER R ENERG RGY 61% 35% 28% $11 B 5% INVESTMENTS IN CLEAN CLE ANER R GENERA RATION OVER 10 YEARS (1) 28% 34% 32% 35% 9% 4% 2% 2005 (2) 2026 2026 (3 2016 (2) (3) CO 2 REDUCTION BY 2026 (4) Coal / Oil Natural Gas FROM 2005 LEVELS Nuclear Hydro, Wind & Solar (1) Excludes any spend related to nuclear relicensing and new nuclear projects (2) 2005 and 2016 data based on Duke’s ownership share of U.S. generation assets as of Dec. 31, 2016 (3) 2026 estimate does not reflect the EPA Clean Power Plan (4) 2026 carbon reduction will be influenced by customer demand, generation mix, weather, fuel availability and prices FOURTH QUARTER 2016 EARNINGS REVIEW AND BUSINESS UPDATE 10
Expanding natural gas infrastructure with LDCs and midstream growth ATLANTIC COAST PIPELINE LOW VOLUMETRIC EXPOSURE DUE TO MOSTLY TO BRING SIGNIFICANT GAS FIXED MARGINS… SUPPLY TO UNDERSERVED EASTERN CAROLINAS 8% 14% Additional power generation potential LDC expansion for Piedmont Natural 92% Gas EXPAND NAT ATURA RAL L GAS AS MOSTLY INFRAS FRASTRU RUCT CTURE RE 78% FIXED MARGINS (1) #2 DUKE’S USE OF NATURAL Fixed Semi-fixed Volumetric GAS ACROSS ITS LDC AND Margin Margin Margin ELECTRIC BUSINESSES …WITH EARNINGS DRIVEN BY RANKS SECOND IN THE U.S. INVESTMENT AND STRONG CUSTOMER GROWTH 15% 1.2% 1.2% 1.1% 1.1% 0.9% GAS SEGMENT EARNINGS IN 10 YEARS FROM 8% IN 2017 (2) Coal plants 2013 2014 2015 2016 2017E Combined cycle gas plants Map credit: SNL ACP (1) As of Oct. 31, 2016 (2) Investment level will depend upon how the project and Duke investments are financed, based on adjusted diluted EPS Transco Pipeline (3) Piedmont CAGR: 1.5%, Midwest LDC CAGR: 0.5% FOURTH QUARTER 2016 EARNINGS REVIEW AND BUSINESS UPDATE 11
We are engaged with policy makers OUR TAX POLICY TAX AX REFORM REFORM O OVER VERVIEW VIEW OBJECTIVES Administration Plan House GOP Blueprint RETAINING THE 20% tax rate (1) 20% tax rate DEDUCTIBILITY OF Retention of interest expense No interest expense INTEREST EXPENSE Planning deductibility deduction on new debt Assumptions SECURING FAIR AND Straight-line depreciation Immediate expensing of EFFECTIVE TRANSITION capital expenditures RULES , INCLUDING THE Financial Neutral to slightly accretive ~5% dilutive by 2021 NORMALIZATION OF Impact DEFERRED AND EXCESS DEFERRED TAXES BALANCING THE INTERESTS OF CUSTOMERS AND INVESTORS (1) We simplified our assumptions for modeling purposes and assumed a federal income tax rate of 20% for both plans FOURTH QUARTER 2016 EARNINGS REVIEW AND BUSINESS UPDATE 12
2017 earnings guidance and clean base year for long-term earnings growth 2017 2017 ~5% GUIDAN ANCE CE KEY 2017 DRIVERS RANGE GROWTH IN CORE Electric Utilities & Infrastructure BUSINESSES $4.70 SINCE 2013 (1) HISTORICAL GROWTH • Base rate increases IN CO CORE RE BUSINESSES (1)(2) • Investment riders $4.50 • Major capital projects • Retail & wholesale load growth $4.50 - $4.70 $4.28 • Regulatory Lag $4.15 EPS (2) GUIDANCE Gas Utilities & Infrastructure RANGE FOR 2017 • Customer growth $3.86 • Integrity management investment $3.72 • Midstream investments Other Drivers 4 - 6% Interest Expense International (sold in 2016) GROWTH IN EPS (2) THROUGH 2021 (3) 2013 2014 2015 2016 OFF 2017 GUIDANCE Guidance Weather Weather Weather MIDPOINT OF $4.60 Midpoint Normal Normal Normal (1) Core businesses are all Duke Energy businesses except International Energy (2) Based on adjusted diluted EPS (3) Adjusted for abnormal storm and O&M re-planning expenses FOURTH QUARTER 2016 EARNINGS REVIEW AND BUSINESS UPDATE 13
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