Executive Summary / Key Takeaways

• Duke Energy is strategically positioned to capitalize on unprecedented load growth, particularly from data centers and advanced manufacturing, driving a projected acceleration in demand starting in 2027.
• The company has significantly increased its capital plan to $83 billion through 2029, targeting substantial investments in grid modernization and new generation to meet this surging demand and support the energy transition.
• Strong regulatory execution has yielded constructive outcomes, including multi-year rate plans and IRP approvals, providing clear growth visibility, timely cost recovery, and minimizing near-term rate case exposure.
• DUK is leveraging its diverse generation mix, including nuclear license extensions and new natural gas and solar capacity, while exploring advanced technologies like Small Modular Reactors (SMRs) and enhancing grid resilience through technological upgrades.
• Despite facing risks from severe weather events, environmental regulations, and supply chain pressures, the company is actively implementing mitigation strategies, including storm cost recovery mechanisms and strategic partnerships, while maintaining a focus on strengthening its balance sheet and targeting a 14% FFO to debt ratio by the end of 2025.

Powering the Future: Unprecedented Growth and Strategic Investment at Duke Energy

Duke Energy, a venerable institution founded in 1904, has evolved into one of America's largest energy holding companies, operating primarily through its regulated Electric Utilities and Infrastructure (EUI) and Gas Utilities and Infrastructure (GUI) segments. Serving approximately 8.6 million electric and 1.7 million natural gas customers across six states in the Southeast and Midwest, DUK commands a significant presence in the U.S. energy landscape. The company's history is marked by strategic growth, including transformative mergers like the one with Progress Energy in 2012, which have shaped its current diversified portfolio and expansive service territory. This long-standing operational history is underscored by a remarkable record of paying a cash dividend on its common stock for 99 consecutive years, a testament to its stable, regulated business model.

The energy industry is currently undergoing a profound transformation, driven by accelerating demand, the imperative for decarbonization, and technological advancements. Duke Energy finds itself at the epicenter of a particularly dynamic trend: unprecedented load growth, fueled by robust economic development, notably from the proliferation of data centers and advanced manufacturing facilities across its service territories. Management describes this growth as occurring at levels "never seen" in their careers, projecting a significant acceleration in demand, particularly starting in 2027. This surging demand necessitates a commensurate investment in energy infrastructure, setting the stage for more than a decade of record build-out.

In this evolving landscape, Duke Energy competes with other large, integrated utilities such as Southern Company (SO), NextEra Energy (NEE), Dominion Energy (D), and American Electric Power (AEP). While DUK's scale and geographic diversification across six states provide a broad customer base and operational resilience, competitors like NEE have demonstrated faster technological innovation in renewables, and SO has shown slightly better cost efficiency in certain operational areas. DUK's strategic positioning emphasizes a balanced "all-of-the-above" generation mix and integrated utility services, contrasting with NEE's more aggressive pure-play renewables focus or D's gas-heavy portfolio. This balanced approach, coupled with DUK's deep regional presence and established regulatory relationships, forms a key part of its competitive moat, particularly in attracting diverse economic development.

Technological differentiation is increasingly vital in this competitive environment. Duke Energy leverages a diverse generation fleet, including nuclear, natural gas, hydro, and renewables, managed by sophisticated grid technologies. The company's investment in grid modernization, including smart, self-healing technology, is a critical operational differentiator. In 2024 alone, this technology helped avoid over 2.3 million customer outages and saved approximately 11 million hours of total outage time across major hurricane events, demonstrating tangible benefits in reliability and customer service. Currently, around 60% of DUK's customers are served by this automated restoration technology, with a target to reach 80% or more in the coming years. While specific, quantifiable efficiency advantages of DUK's generation technologies over all competitors are not detailed, the strategic focus on up-rate projects for existing natural gas, nuclear, and hydro units aims to efficiently add over 1 GW of incremental capacity, highlighting an operational approach to maximizing existing assets. In terms of future technology, DUK is actively exploring new nuclear technologies like Small Modular Reactors (SMRs), participating in a DOE grant application and including early development activities in its Integrated Resource Plans. The stated goals for SMRs are to provide carbon-free, around-the-clock power, supporting sustainability goals and economic development, though management acknowledges the need to address first-of-a-kind risk, cost overrun protection, and balance sheet impacts before significant deployment decisions. The company is also investing in electric vehicle programs in Florida, reflecting a strategic move into emerging energy technologies and customer services.

Duke Energy's recent financial performance reflects the initial impacts of this growth and strategic execution. In the first quarter of 2025, the company reported adjusted earnings per share of $1.76, a significant $0.32 increase compared to the same period in 2024. This growth was primarily driven by strong top-line performance across both the Electric Utilities and Infrastructure (EUI) and Gas Utilities and Infrastructure (GUI) segments. The EUI segment saw results improve by $0.33, benefiting from higher retail sales volumes, favorable weather conditions compared to the prior year, and the positive impact of new rates implemented across multiple jurisdictions. The GUI segment also contributed to growth, with results up $0.08, largely due to new rates approved for Piedmont Natural Gas in North Carolina. While the "Other" segment experienced a negative impact, primarily from higher interest expense, the core regulated utility operations demonstrated solid performance, aligning with management's expectations and highlighting the strength of recent regulatory outcomes.

The company's financial health and liquidity remain key priorities. Duke Energy ended the first quarter of 2025 with $475 million in cash and cash equivalents and access to $7.80 billion under its extended $10 billion Master Credit Facility, providing ample liquidity. The company is actively managing its debt portfolio, including the recent termination and repayment of several receivables securitization facilities (DERF, DEPR, DEFR, CRC), streamlining financing structures. To support its capital plan and credit objectives, DUK is executing programmatic equity issuances, targeting $1 billion in common equity in 2025, with over $530 million already priced in Q1. The company is also leveraging the growing market for energy tax credits, having monetized over $500 million in 2024 and expecting additional transactions, which contribute positively to cash flow and FFO to debt. Management has set a clear target to achieve a 14% FFO to debt ratio by the end of 2025, aiming to improve upon this over the five-year plan and maintain a significant cushion above downgrade thresholds.

Strategic initiatives and regulatory execution are central to Duke Energy's ability to translate investment into value. The company has a strong track record, settling or receiving approval for approximately $80 billion of rate-based investments across eight rate cases since the start of 2023. These outcomes, including multi-year rate plans in major jurisdictions through 2026, provide crucial regulatory certainty and support for the significant capital investments required to modernize the grid and build new generation. Recent successes include constructive approvals for the Carolinas Integrated Resource Plans and rate case orders in Florida, Indiana, and for Piedmont Natural Gas. Looking ahead, the proposed merger of the Duke Energy Carolinas and Duke Energy Progress utilities is a key initiative, expected to generate over $1 billion in customer savings, simplify operations, and enhance flexibility, with a merger application planned for later this year and a target effective date of January 2027. The company is also actively pursuing storm cost recovery through established mechanisms, including securitization in the Carolinas and storm riders in Florida, to address the financial impact of the historic 2024 hurricane season.

The outlook for Duke Energy is anchored by its increased $83 billion capital plan through 2029, representing a 12% increase from the prior plan and projected to drive approximately 7.7% annual earnings-based growth. This plan is heavily weighted towards grid investments (about 45%) and new generation, reflecting the need to serve growing demand and replace aging infrastructure. Management has reaffirmed its 2025 adjusted EPS guidance range of $6.17 to $6.42 and extended its long-term EPS growth rate target of 5% to 7% through 2029. A key driver for achieving the top half of this growth range is the anticipated acceleration in load growth, projected to reach 3% to 4% enterprise-wide starting in 2027, with even higher growth expected in the Carolinas (4% to 5%). This forecast is supported by a robust and growing economic development pipeline, including signed letter agreements for significant data center capacity.

However, the path forward is not without challenges. Duke Energy faces ongoing risks related to environmental regulations, including the expanded scope of the 2024 CCR Rule and the EPA's GHG emission rules, which could necessitate significant future expenditures and potential litigation. Legislative changes, such as Ohio's HB 15.00, pose risks by potentially eliminating certain recovery mechanisms and impacting the recoverability of existing regulatory assets. Supply chain disruptions and the impact of tariffs on capital costs (estimated at 1% to 3% of the 5-year plan) also present challenges. While the company has established storm recovery mechanisms, the financial impact of severe weather events remains a significant operational and financial risk. Litigation related to coal ash, asbestos, and other matters also represents potential liabilities. Duke Energy is actively addressing these risks through legal challenges, regulatory filings, cost management initiatives, and strategic partnerships to mitigate impacts and ensure continued operational and financial stability.

Conclusion

Duke Energy is embarking on a period of significant investment, strategically positioned to capitalize on unprecedented load growth driven by economic development in its service territories. The company's increased capital plan, focused on modernizing the grid and building diverse new generation, is supported by a strong track record of constructive regulatory outcomes that provide essential visibility and timely cost recovery. Leveraging its extensive infrastructure, diversified energy mix, and technological advancements in grid management and generation, Duke Energy is working to meet future energy demands reliably and affordably. While challenges from environmental regulations, legislative changes, and severe weather persist, the company's proactive mitigation strategies and commitment to financial strength underpin its ability to navigate these headwinds. For investors, Duke Energy presents a compelling narrative of a regulated utility poised for accelerated growth, backed by a long history of dividend payments and a clear strategic roadmap to deliver value in a transforming energy landscape.