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Duke Energy CEO says company operating with 'very keen focus on ESG investing'

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Duke Energy's 60-MW Monroe Solar Facility in Union County, N.C. Duke Energy on Feb. 13 unveiled a five-year, $56 billion capital plan focused on clean energy, grid modernization and natural gas infrastructure investments.
Source: S&P Global Market Intelligence

Duke Energy Corp. on Feb. 13 unveiled a new long-term earnings growth rate and five-year capital plan that prioritizes clean energy, grid and natural gas infrastructure investments.

Duke Energy extended its long-term earnings growth rate of 4% to 6% through 2024 and expanded its capital plan by $6 billion, or a 12% increase, to $56 billion for 2020 to 2024.

"We have been working actively over the last several years to reduce carbon emissions, to transform our generation fleet, to introduce new tools for our customers and to drive productivity," Duke Energy Chairman, President and CEO Lynn Good said in a Feb. 13 phone interview prior to the company's fourth-quarter 2019 earnings call. "So, the investments really center around clean generation, the energy delivery system and natural gas infrastructure, all of which are intended to improve our customers' experience. You can expect as you look at and dissect that capital plan, it will be very consistent with the way we have been positioning the company for the last several years."

Duke Energy also described environmental, social and governance, or ESG, investments and practices as an "essential component" of its strategy.

"Duke has been a leader in interaction, discussion and engagement with ESG investors for some time," Good said. "What you'll find ... is a very keen focus on ESG investing: what we've been doing in the environment area, what we've been doing on social responsibility, our climate plan, our industry-leading safety performance and in governance and transparency, our statistics on forward engagement, diversity, et cetera."

Duke Energy plans an investor day with a specific focus on ESG in May.

"We think we've got an extraordinary story to tell and we're anxious to continue to progress that discussion with all of our investors," Good said.

The CEO also explained how the company reached an agreement with the North Carolina Department of Environmental Quality and groups represented by the Southern Environmental Law Center on closing remaining ash ponds in the state, primarily by excavation.

The decision to excavate the vast majority of basins follows several largely unsuccessful challenges to an April 2019 DEQ order under which Duke Energy warned full excavation "would take decades" and add about $4 billion to $5 billion to the current $5.6 billion estimate for ash management in the Carolinas. Under the agreement, Duke Energy will excavate seven of nine coal ash impoundments subject to the order.

"We had been in discussions with the regulator over the course of 2019, really working toward a reasonable and constructive outcome, and we feel like we achieved that," Good said. "We are, as a result of the settlement, able to save our customers [$1 billion to $1.5 billion] and we have set a time frame through 2034 for the closure that will give us an opportunity to kind of spend that money over a decade plus. It will also moderate impact to customers."

"So, this gives us some clarity on how to move forward so that we can get to our continued work to close these basins. I think that's in the best interest of our customers, our communities and also Duke Energy," Good said.

M&A

On the M&A front, Duke Energy was among the bidders for Jacksonville, Fla., municipal utility JEA and South Carolina government-owned utility Santee Cooper, known legally as South Carolina Public Service Authority.

JEA recently ended its privatization efforts and the South Carolina Department of Administration in a Feb. 11 report recommended Virginia-headquartered Dominion Energy Inc.'s proposal to manage Santee Cooper and Florida-headquartered NextEra Energy Inc. offer to buy the electric and water utility over other bids, including Duke Energy's offer. The government agency also suggested that Santee Cooper could still proceed with its own strategy to reduce its reliance on coal, cut headcount and improve its financial situation.

"JEA looks like it's fallen away for now," Good said. "I don't know if it surfaces again in the next decade or so. Time will tell."

On Santee Cooper, the CEO said "the announcements have been made and I would expect the state to be moving forward and evaluating those bids."

"What we have learned over time is these M&A opportunities are opportunistic and you have to be prepared to respond if they arise and respond if they fall away," Good said.

"As I think about Duke Energy's strategy, however, it's a strategy grounded in organic growth," the CEO added. "It's the $56 billion in investments. It's operating our utilities in a way that delivers best value to customers. So, that's really where our strategic focus is. As we demonstrated in 2019, we've been able to do that in a way that delivered strong returns for our investors."

Duke Energy on Feb. 13 reported fourth-quarter 2019 adjusted earnings of $678 million, or 91 cents per share.

On a full-year basis, Duke Energy recorded adjusted earnings of $3.71 billion, or $5.06 per share, up from $3.34 billion, or $4.72 per share, in 2018.

Duke Energy is targeting 2020 adjusted earnings in the range of $5.05 per share to $5.45 per share.