Good day, and welcome to the Duke Energy Second Quarter Earnings Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Mr. Mike Callahan. Please go ahead, sir.

Thank you, Anna. Good morning, everyone, and welcome to Duke Energy's second quarter 2016 earnings review and business update. Leading our call today is Lynn Good, Chairman, President and CEO, along with Steve Young, Executive Vice President and Chief Financial Officer. Today's discussion will include forward-looking information and the use of non-GAAP financial measures. Slide two presents the Safe Harbor statement, which accompanies our presentation materials. A reconciliation of non-GAAP financial measures can be found on duke-energy.com and in today's materials. Please note the appendix for today's presentation includes supplemental information and additional disclosures. As summarized on slide three, Lynn will cover our second quarter financial highlights and provide an update on our portfolio transition and strategic initiatives. Lynn will then provide an update on our coal ash efforts as well as other operational highlights. Then Steve will provide an overview of our second quarter financial results, an update on low growth trends and recent regulatory activity before closing with our key investor considerations. With that, I'll turn the call over to Lynn. Lynn J. Good - Chairman, President & Chief Executive Officer: Good morning, everyone, and thank you for joining us today. Let me start on slide four and express how pleased I am with our financial results this quarter. This morning we announced second quarter 2016 adjusted earnings per share of $1.07, an increase of $0.12 from the prior year. We generated higher adjusted earnings with strong results at our regulated utilities, which gives us confidence to reaffirm our full year guidance for 2016. We also demonstrated our confidence in the strength of our core businesses with the recent increase in our dividend. We have consistently paid a dividend for 90 years, which extends our commitment to this key part of our total shareholder return proposition. We accomplished…

Thank you. We'll move first to Jonathan Arnold with Deutsche Bank.

Good morning. Lynn J. Good - Chairman, President & Chief Executive Officer: Hi, Jonathan.

On the Latin America sale, can you give us any update on just when you would anticipate this wrapping up? I think you're saying it's – you've gone into the second round already. Is this a this quarter or more a fourth quarter type of thing? Lynn J. Good - Chairman, President & Chief Executive Officer: You know, Jonathan, it's progressing as we expected. We are targeting an announcement by the end of the year and believe closing is a 2017 event. So we will give more specifics as we continue through the process. But we're on pace to achieve that at this point.

Okay. Great. And then just on the same topic, I think on the last call you had said that you would sort of give some updated thoughts around likely dilution as the year progressed. And given that we've seen an improvement, I guess, in the fundamentals and some other aspects, do you have anything new to say on that or should we sort of stick with the prior commentary? Lynn J. Good - Chairman, President & Chief Executive Officer: I think the prior commentary still works, Jonathan. I think until we can talk more specifics on the price and the timing, it's difficult to be more specific at this point. So we will provide that information when we have clarity and give you the kind of update you'd expect on implications to long-term earnings trajectory.

Is it fair to say that you might feel better than you did three months ago, given changes in the marketplace? Or is that just ... Lynn J. Good - Chairman, President & Chief Executive Officer: No, I certainly – yeah, I think your observations of optimism. We see stronger GDP growth being projected for 2017 working through some of the political issues seems to be moving forward. Of course, the hydrology has returned to normal so there are a number of positive trends. And you all watch FX, that's trended favorably as well.

But you're definitely selling, right? Lynn J. Good - Chairman, President & Chief Executive Officer: We're definitely selling.

All right. Thank you. Lynn J. Good - Chairman, President & Chief Executive Officer: Thank you, Jonathan.

We'll now take our next question from Stephen Byrd with Morgan Stanley. Stephen Calder Byrd - Morgan Stanley & Co. LLC: Hi. Good morning. Lynn J. Good - Chairman, President & Chief Executive Officer: Good morning, Stephen. Steven K. Young - Chief Financial Officer & Executive Vice President: Morning, Stephen. Stephen Calder Byrd - Morgan Stanley & Co. LLC: Wanted to just check in with you on coal ash spend and recovery. I know this is a topic you've talked about in the past but I just wanted to make sure I understood your latest thinking from here in terms of approach to recovery of spending, any additional thoughts you might have in terms of just strategy for addressing that spend? Lynn J. Good - Chairman, President & Chief Executive Officer: Sure. Stephen, the forecast that we have in place at this point has about $1.3 billion of coal ash spend over the next several years, really targeted to the first four sites. And we think that's a good planning assumption for now. We have requested deferral of those costs in South Carolina and we've received approval, and we will be pursuing recovery of cost in South Carolina in connection with the case that we just filed. For North Carolina, we intend to file a case really in connection with in-service date of certain of the plants. So we gave you an update on our timing on that and coal ash would be a part of that general rate case process. I'm pleased with what we've accomplished so far, both in terms of the progress we've made in basin closure. And I believe the legislation that's in place today has also reduced any uncertainty, or a lot of the uncertainty, around the cost estimate and closure methods, which I also…

We'll now take our next question from Steve Fleishman with Wolfe Research.

Hi. Good morning, Lynn. Lynn J. Good - Chairman, President & Chief Executive Officer: Hello, Steve.

Couple of questions related to international sale – just the assumptions kind of on the edges. What was the debt level there at the end of the quarter? I had it last time around $650 million. Is that still about right? Lynn J. Good - Chairman, President & Chief Executive Officer: That's a good assumption. Steven K. Young - Chief Financial Officer & Executive Vice President: That's about right, yeah.

Okay. And you still expect that you will not have to pay any taxes on a sale – cash taxes? Lynn J. Good - Chairman, President & Chief Executive Officer: Because of the NOL position, Steve, it's pushed out.

Okay. And then is there anything you need to deal with in terms of overheads within the whole company that are being attributed there that might have to be placed to the rest of the company? Steven K. Young - Chief Financial Officer & Executive Vice President: No, I think we're in pretty good shape there. We have a Houston office that deals with the international business, and so it's a bit more stand-alone than some of our other operations. So I think we're well prepared to deal with that. Lynn J. Good - Chairman, President & Chief Executive Officer: You know, Steve, I would add to that. In each country we run a finance organization. There's a CFO, there are HR execs, there are legal support in each country. And then we also have, as Steve indicated, a Houston office that serves as overall oversight. So there are resources here at the corporate center that support international but it's not to the extent that you might expect for a more domestic business.

Okay. And then unrelated question, just I think, Steve, you mentioned something about commercial maybe tracking a little bit below plan so far this year. But then I assume the utilities may be a little above. Could you just kind of clarify what you're saying there? What are – if that's true, what are the key drivers on each -below or above? Steven K. Young - Chief Financial Officer & Executive Vice President: Right. Yeah, let me talk about some of our segments here. Commercial is running a bit below. We've had below-normal wind, if you will, and that's pushed some of the earnings down there. We'll see what happens in the last half of the year. International had a large favorable tax item that we booked in Q1. Some of that will come back over the remainder of the year. But that's been helpful to their results certainly for us. On the regulated side, we started out the year with mild weather and storms and some weak weather-normal volumes. We've done a great job in the second quarter of coming back. Weather has picked up a bit in June and certainly in July. We'll see where that goes through the third quarter. Our O&M savings have been quite significant. Year-to-date, $0.10 savings; that's been offset by about $0.06 of storm but still some very strong year-to-date O&M savings that help us there. We've gotten good top-line revenue growth from energy efficiency riders and some infrastructure riders in the Midwest. That has helped and continues there. We'll see how weather-normal load picks up in the second half. We're optimistic about the residential side of things. So there's ups and downs in the various segments there but feel good about where we're headed for the rest of the year.

Okay. Thank you. Lynn J. Good - Chairman, President & Chief Executive Officer: Thank you.

And we'll move next to Julien Dumoulin-Smith with UBS.

Hey, actually just to pick up on the last question to kick it off. Lynn J. Good - Chairman, President & Chief Executive Officer: Good morning.

Well, good morning, first off. Steven K. Young - Chief Financial Officer & Executive Vice President: Good morning.

Perhaps if you could – good morning. I wanted to follow up here on the commercial renewables, if you will. What is a good rule of thumb when you're thinking about wind or solar as you build those out and make the year-over-year comparisons? I know that you've had these pressures but what are the rules of thumb? What is 100 megawatts, what's a gigawatt equal on an EPS basis? Again, you've obviously got the one-time ITC element here but just kind of an ongoing basis. Lynn J. Good - Chairman, President & Chief Executive Officer: Julien, that's an interesting metric. The way we look at these projects is overall return over the life of the project with an expectation that the return has to clear hurdle rates around cost to capital and other things. So we don't look at it as a specific metric of revenue or EBIT per megawatt hour, whether it's wind or solar. The profile, as you indicated, is different. So the ITC impact of solar for the commercial can have a more heavily weighted near-term impact. Wind comes in over the 10-year PTC period. What's influencing results for us in the first half is just the wind not blowing as much, so we had relatively weaker wind in the quarter relative to plan. But it's really consistent with what we saw last year with weaker wind, so not much of a year-over-year delta. Hopefully, that clarifies.

Yes, absolutely. And then if you can expand on your strategic vision for the company. Obviously, we've seen other peers in the Southeast look at Midstream a lot more closely. Obviously, you guys have more of a history. Can you give us your latest thinking on the trajectory? Is gas utility it or are you going to go further? Lynn J. Good - Chairman, President & Chief Executive Officer: Julien, if you look at the investments we've made over the last three years, we have been turning more attention to gas infrastructure. And that is really building on the transition in our generation portfolio toward more natural gas. So if you go back to 2008, 2009, 2010, the Carolina companies had very little generation coming from natural gas. That, today, is in the range of 25% to 30% of our energy is coming from natural gas. So we made an investment in the Atlantic Coast pipeline, $2 billion investment, to bring more infrastructure into the state to provide infrastructure for further development of generation and also services to customers. We made an investment in Sabal Trail, which is important to Florida, which is already a very gas-heavy area. And then we added Piedmont, which is the interstate pipeline in the Carolinas, which we believe has great growth opportunity, not only for the customers they serve, but for increasing power generation. So we believe that gas infrastructure fits with Duke. The returns, the regulated returns, the cash flows in support of our dividend are important. And we will look for ways to continue to add to that portfolio as we go forward. At the same time, as you know, we are also adding to our electric business with grid investment, renewables, gas generation. And we'll continue with those investments as well. Always looking for ways we can add additional value to customers and to our investors.

Great. Thank you. And a quick clarification on a prior question. When you were talking about recovery mechanism for coal ash and the timeline in turn for rate cases, can you elaborate a little bit on your confidence of the 4% to 6% and when that's going to materialize as it relates to the latest clarity in coal ash recovery and, in turn, the clarity that you're now getting for your rate case timeline? Lynn J. Good - Chairman, President & Chief Executive Officer: Julien, we're on track for 4% to 6% as we've talked about, really over this year. The rate cases will be more in the back half of the five-year period. So you should be thinking about greater contribution in 2018 and 2019 than in 2017, as an example. I think what the coal ash legislation does is it provides more certainty on our larger sites, on the methods that we can use to close. And therefore, the overall cost and impact to customers will be lower over the 10- to 15-year period that we pursue closure of these basins. So I think it's all fitting together in what we have shared with you as our approach to delivering the 4% to 6% over the five-year period.

Great, thank you. Lynn J. Good - Chairman, President & Chief Executive Officer: Thank you.

We'll now take our next question from Shar Pourreza with Guggenheim Partners.

Good morning. Lynn J. Good - Chairman, President & Chief Executive Officer: Hi, Shar. Good morning. Steven K. Young - Chief Financial Officer & Executive Vice President: Hi, Shar.

So most of the questions were answered. Just real quick on Atlantic Coast Pipeline. I think that it's obviously now fully subscribed. So is there sort of a viewpoint on when and if you would look to upsize it to around 2 BCF of laterals and compressors? Lynn J. Good - Chairman, President & Chief Executive Officer: Shar, we need to get through the FERC process for the existing status or investment of the pipeline. We expect to receive a scheduling order soon and anticipate the FERC order in 2017. So I think discussions about the future around that pipeline will be better served 2017, 2018 as we continue to progress the existing project.

Got it. And then just lastly on the solar, as we sort of think about your pipeline and your backlog and installations, how should we sort of think about the solar versus at the regulated utility, regulated rates or at the commercial business? As you look to do more solar. Lynn J. Good - Chairman, President & Chief Executive Officer: So at this point in the regulated business, Shar, it's almost all solar. You should think about the Carolinas renewables investments as being solar investments. We have one wind investment in Indiana and there could be potential for more wind in the Midwest. But I would think about our regulated potential as being primarily a solar potential. As we think about commercial, we look at both. And, in fact, this year we're going to install more megawatts of wind than solar, just based on the opportunistic nature of what we've developed, the returns we've delivered and what we believe to be the highest quality projects. So we'll be more opportunistic in the commercial business looking at a complement of wind and solar. We like the profile of PTC. So there might be a slight bias toward wind. But in our regulated business, as I said, solar will be the predominant investment type.

Got it. And then do you expect that mix between wind and solar commercial to potentially invert as the PTCs roll off? Lynn J. Good - Chairman, President & Chief Executive Officer: We always look at that, Shar, and what makes the most sense for the business. Where do we have the greatest return potential? We are heavily weighted to wind. We've probably put more attention to solar in 2014 and 2015 and so we continue to look at a mix.

Excellent. Thanks so much. Lynn J. Good - Chairman, President & Chief Executive Officer: Thank you.

We'll now take our next question from Michael Lapides with Goldman Sachs. Michael Lapides - Goldman Sachs & Co.: Hi, guys. Can you just talk about pension for a second? Just trying to think about what your sensitivity is to changes in discount rates and interest rates and how that may impact O&M and which jurisdictions do you get kind of more real-time recovery of that increased cost versus which ones where there's a little bit of lag? Steven K. Young - Chief Financial Officer & Executive Vice President: Sure, Michael. A sensitivity first: 25 bps on our discount rate is about $0.02 up or down on our pension expense. And it's a similar sensitivity on the return on assets of a 25 bps change on the return on the fund assets. A couple of things about our pension plan, it's fully funded, over 100% funded. And it's a closed pension plan. And we have de-risks that -- we're in the process of de-risking it. And so we're not quite as volatile as maybe some folks might be regarding swings there. Most of our jurisdictions have that as part of cost of service in our service territory. So you update pension cost like you do other non-fuel O&M type costs. Michael Lapides - Goldman Sachs & Co.: Got it. One other question, a little bit of a change of topic, but when you look at demand across your different service territories, the demand trends look very different near Southern service territories versus those in the Midwest. Can you talk a little bit about how having those very different kind of demand trajectories impacts how you might think about managing those different jurisdictions differently? Steven K. Young - Chief Financial Officer & Executive Vice President: Sure, Michael. You certainly do see…

We'll now take our next question from Brian Chin with Bank of America. Lynn J. Good - Chairman, President & Chief Executive Officer: Good morning, Brian.

Good morning. Just a general industry question. We've heard from a number of your peers that are investing in wind and solar that because of the improvement in technology and economies of scale that PPA prices are now economical at lower and lower levels. Could you give just a general sense of what your commercial team is seeing with regards to PPA prices for wind and solar? And what's your general take on to what extent do you agree with that statement versus does the industry – is the industry experiencing a little bit of a capital discipline issue here? Can you just comment on that generally? Thank you. Lynn J. Good - Chairman, President & Chief Executive Officer: Brian, the prices are lower. PPA prices are declining. I think that reflects the improvement in the technology. And the comment that I would make, the economics are still largely, largely driven by tax incentives. And so an important criteria in establishing returns is your ability to monetize those tax credits, either through a tax equity structure or through your own profile. And so that's something that we look closely at. I think we've disclosed that we are in an NOL position. And so our appetite for immediate monetization is limited. And so I think there are a variety of considerations as we look at additional investment and what discipline means for Duke Energy in the returns that we're trying to deliver with renewables.

Okay, great. And then one other question. You made it very clear at the beginning of the year that the National Methanol group was not part of the international sale effort. Can you comment on are there any conditions that might occur in the future that might prompt you to revisit that? And what is the investment case for owning National Methanol? I understand that you have a very complex relationship with the government of Saudi Arabia in terms of an ownership structure. But from just purely an investment standpoint, what is the case for continuing to own that business? Lynn J. Good - Chairman, President & Chief Executive Officer: Brian, I'll maybe give you a little perspective on history on this. We had the opportunity to renegotiate the NMC contract. My, what has it been? 2011, 2012? Steven K. Young - Chief Financial Officer & Executive Vice President: Yes. Lynn J. Good - Chairman, President & Chief Executive Officer: Where we extended the life of the contract in exchange for a reduction in ownership because we were not going to put additional investment dollars into the joint venture. And we ended up with a very attractive net present value on that investment where you get another 15 years or so of earnings with no additional capital investment. And we thought that was a prudent thing to do because the value of selling it at that point of renegotiation was inferior to the extension profile. And so at any point, I guess we could enter into discussions with our partners about an exit. But I look at it today as being a very small investment that produces strong cash flows that we're able to bring in and use to support the dividend. And in the scheme of all of Duke, it's relatively modest. Right? We're talking about less than $100 million of net income. So that's the history I would share with you and it's been a good contributor over time, as you know. Steven K. Young - Chief Financial Officer & Executive Vice President: Yes, I would add that it's an investment on our books of less than $100 million that produces net income, cash dividended to the parent of, in some years, close to $100 million a year. It's lower than that, but still very profitable at the lower levels. So it is an equity investment; doesn't require a lot of management time or effort. Selling it has some challenges. So we'll hold on to it.

Great. Thank you, and best of luck as you complete the international asset sale. Steven K. Young - Chief Financial Officer & Executive Vice President: Thank you. Lynn J. Good - Chairman, President & Chief Executive Officer: Thank you, Brian.

We'll now take our next question from Michael Weinstein (51:59) with Credit Suisse.

Hi. Good morning. Lynn J. Good - Chairman, President & Chief Executive Officer: Hello, Michael (51:48).

Good morning. A lot of my questions have been answered. But just to follow up a little bit on coal ash, would you remind us how much has actually been spent to date so far versus the total plan, and is that the amount that you expect to file in your next North Carolina rate case? Steven K. Young - Chief Financial Officer & Executive Vice President: We've spent roughly $500 million to date, and we'll be spending at accelerated clips as we go forward. So we'll be determining what – based upon levels of prior spend, that will impact our filing criteria. Typically, we would not try to recover costs that have not yet been spent. So that's why you build up a spend pattern a little bit and then make recovery applications there. Lynn J. Good - Chairman, President & Chief Executive Officer: I think, Michael, it's important, when we talk about $500 million, in the Carolinas, we operate four utilities. So it's North Carolina – Duke Energy Carolinas, Duke Energy Progress; South Carolina – Duke Energy Carolina, Duke Energy Progress. So that spend would be included in four different sets of rate cases as we go forward.

All right. That makes sense. And I know that you said earlier that the tax – that you don't expect any kind of, I guess, gains tax on the sale of the Brazilian portfolio? Lynn J. Good - Chairman, President & Chief Executive Officer: So we're in an NOL position on our federal tax basis is what we were talking about. And so cash taxes – if there are cash taxes to be paid – will be deferred into the future. Steven K. Young - Chief Financial Officer & Executive Vice President: Well, we...

Yeah. Steven K. Young - Chief Financial Officer & Executive Vice President: Well, we would suspect that we would have a taxable gain on the sale. But the level of taxes recognized depends upon the sales price and so forth and various tax mechanisms put in place. But whatever tax liability we get from that will be deferred due to the NOL positioning.

Have you disclosed the tax basis? Steven K. Young - Chief Financial Officer & Executive Vice President: No, we have not.

Okay. All right. Thank you very much. Lynn J. Good - Chairman, President & Chief Executive Officer: Thank you. Steven K. Young - Chief Financial Officer & Executive Vice President: Sure.

And we'll now take our next question from Praful Mehta with Citi.

Hi, guys, thanks for taking the question. Lynn J. Good - Chairman, President & Chief Executive Officer: Good morning.

Good morning. Just one question on – we've talked a lot about your portfolio about for commercial, natural gas, putting the 4% to 6% growth rate that you have in context, how would you look at these different pieces of the business? As in what's driving – what's kind of delivering higher growth in the 4% to 6%, what is lower? And as you look forward, how do you look at your portfolio? I mean, what do you look to grow? What do you think will deliver that stronger growth more post the four- to five-year timeframe as well? Lynn J. Good - Chairman, President & Chief Executive Officer: I would point back to the slide that we included in our February call that laid out the components of the growth. Certainly the utilities, the regulated utilities are an important part of that. And it's a combination of wholesale growth, investment growth and modest load growth. Our commercial business will contribute. Piedmont and the gas platform will contribute. We see Piedmont as growing at a faster rate than 4% to 6% and the pipeline investment will be growing at a slightly faster rate. So I would refer you back to that slide. I think it's the – probably the best depiction of the details around how the 4% to 6% unfolds over the next five years.

Got you. And do you see that trend happening more past that five-year trend as well? As in, do you see utility growth tapering off a little bit and that Piedmont picks up on that growth over time? Lynn J. Good - Chairman, President & Chief Executive Officer: You know, I think we continue to look for ways that we can deliver investment for customers in our electric business. I think the one thing I would point out, if you look at the profile of Duke over the last 5 to 10 years, our growth has been more heavily weighted toward generation, which means we continue to have a lot of potential in distribution, grid, transmission and customer, that we'll continue to find opportunities to put capital to work over the next five years. But I believe that trend will continue into the future. Renewables are another area that I think will continue beyond the five-year period. Steven K. Young - Chief Financial Officer & Executive Vice President: Right. I would add that we see our regulated rate base growing at 5% over our five-year timeframe. And ultimately, that's a way to think about an earnings base. And now the timing can vary depending on rate case timing but that's the earnings based growth we see.

Got you. Thanks so much, guys. Lynn J. Good - Chairman, President & Chief Executive Officer: Thank you.

We'll now take our next question from Ali Agha with SunTrust. Lynn J. Good - Chairman, President & Chief Executive Officer: Good morning, Ali.

Good morning, Lynn and Steve. First question – just so that we don't double count these numbers, can you just remind us in the base case scenario, how much cash had you assumed you would be taking out from international on a going forward basis? Lynn J. Good - Chairman, President & Chief Executive Officer: About $300 million a year. Steven K. Young - Chief Financial Officer & Executive Vice President: That's correct. And thus far we've taken back about $1.5 billion through the repatriation effort that we put together in late 2014.

Okay. But that $300 million a year, was that indefinite or was that over some period of years? Lynn J. Good - Chairman, President & Chief Executive Officer: So, Ali, you might remember we declared a $2.7 billion dividend. The $1.5 billion that Steve indicated has already moved against that dividend. So we had $1.2 billion left, and I believe we were targeting to move that between now and 2021 or something like that. So it was not – what we had accomplished was a very favorable structure transaction that gave us an opportunity to move $2.7 billion in an advantaged way. And we were going to move the $300 million a year against that between now and 2021.

Got it. And just to be clear, Lynn, correct me if I'm wrong, so when we think about the proceeds that you'll get from the international sales, it's the stuff or cash that's above $1.2 billion that we should think of as incremental cash that you would not have counted on in your base case original plan. Lynn J. Good - Chairman, President & Chief Executive Officer: Certainly accelerated – an accelerated $1.2 billion. Steven K. Young - Chief Financial Officer & Executive Vice President: Right. It accelerates it and would be greater than $1.2 billion.

Right, right. And then separately, with the write-off, I know you alluded to that in your opening remarks, what is the book value of those international assets now? Steven K. Young - Chief Financial Officer & Executive Vice President: They are in the neighborhood of $2.4 billion, $2.5 billion.

Got it. Okay. And last question, the 4% to 6% growth longer term, can you remind us the underlying load growth weather-normalized, is that 0.5% have you assumed that stays consistent over that period or just remind us what you assumed there? Lynn J. Good - Chairman, President & Chief Executive Officer: 0.5%. You have a good memory.

Okay. Thank you. Lynn J. Good - Chairman, President & Chief Executive Officer: All right. Thanks so much.

And it appears there are no further questions at this time. I'd like to turn the conference over to Ms. Good for any additional or closing remarks. Lynn J. Good - Chairman, President & Chief Executive Officer: So I want to thank you all for your interest in investment in Duke Energy. We look forward to continuing to provide updates on all of these matters as we go forward. And, of course, the IR team is available today for any follow-up questions. So thanks again.

Once again, that does conclude today's conference. We thank you all for your participation.