Please standby. We're about to begin. Good day and welcome to the Duke Energy First Quarter Earnings Call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Mike Callahan. Please go ahead, sir.

Thank you, Noah. Good morning, everyone, and thank you for joining Duke Energy's first quarter 2017 earnings review and business update. Leading our call today is Lynn Good, Chairman, President and CEO; along with Steve Young, Executive Vice President and CFO. 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 the Investor Relations section of our website and in today's materials. Please note the appendix for today's presentation includes supplemental information and additional disclosures. As summarized on slide three, during today's call Lynn will briefly discuss our financial and operational highlights for the quarter. She will also provide an update on the progress we have made against our long-term strategy including additional details about our grid modernization efforts. Steve will then provide an overview of our first quarter financial results, insight about economic and low growth trends, and an update on our regulatory and rate case activity. With that, let me turn the call over to Lynn.

Thank you, Mike, and good morning, everyone. Today, we announced adjusted earnings per share of $1.04 for the first quarter. We had solid growth in our electric and gas utilities in the quarter driven by our ongoing investment programs. This was offset by the warm winter weather experienced across all of our jurisdictions. We're already taking action in leveraging our agile operations and ability to manage costs to offset the effects of the weather which Steve will discuss in more detail in a moment. With our strongest quarter ahead, we remain on track for 2017 and have affirmed our full year guidance range. Through all of this, our focus on operational excellence has not changed and our commitment to safety is unwavering. Over the last six months, we've welcomed our Piedmont colleagues and I'm proud to share the recent accomplishments in safety and environmental stewardship as outlined on this slide. I may not quite sound like myself today. We're suffering from a spring cold so thanks for your patience and interest in Duke. The integration of Piedmont is well underway and we're pleased with the progress to-date. Merger integration can be a time of uncertainty but our Piedmont teammates have consistently delivered strong operational, financial, and customer performance. We're looking forward to a strong full year contribution from Piedmont in 2017. Let me highlight a couple of very recent successes. In the Midwest, the American Gas Association awarded our Midwest LDCs the 2016 Safety Achievement Award. Our employees had the lowest incident rate for days away from work compared to our peers last year. Also, Piedmont was recognized as an environmental champion for the third consecutive year based on a nationwide survey. This is the result of our efforts to reduce vehicle fleet emissions and make our facilities more energy…

Thanks, Lynn. Today, I will walk you through the key earnings drivers from the first quarter, discuss current retail volume trends and economic indicators as well as provide an update on regulatory activity underway in several of our jurisdictions. I'll close with a summary of our key investor considerations. Let's start with the quarterly results. I will cover the highlights on slide 10 and discuss our adjusted earnings per share variances compared to the prior year quarter. For a more detailed information on segment variances versus last year and a reconciliation of reported results to adjusted results, please refer to the supporting materials that accompany today's press release and presentation. On a reported or GAAP basis, 2017 first quarter earnings per share were $1.02 compared to $1.01 last year. First quarter adjusted diluted earnings per share were $1.04 compared to $1.13 in the first quarter of 2016. Lower results in the current year reflect the absence of International Energy results due to the successful sale of the business in December 2016 and the effects of warm winter weather. Removing the impact of weather, we see strong growth in the regulated businesses and a solid contribution from Piedmont. Electric Utilities and Infrastructure quarterly adjusted results were $0.03 per share, lower quarter-over-quarter. This performance was primarily driven by the warm winter weather that we experienced over the past few months. In fact, this was the second warmest February and sixth warmest winter on record in the U.S, and our service territories in the Carolinas and Midwest set new record warm temperatures. Partially offsetting weather was favorable O&M largely due to lower storm restoration costs in the quarter compared to last year and our ongoing cost management efforts across the business. Our target for 2017 reflected the reduction of non-recoverable O&M cost from…

Thank you. We'll pause for a moment to allow everyone an opportunity to signal for questions. And we'll take our first question from Jonathan Arnold with Deutsche Bank.

Good morning, guys.

Good morning, Jonathan.

Good morning.

I have a question about the Carolinas grid plan, the $13 billion. Is the $4.9 billion of undergrounding reasonable for the proxy for the proportion to hold the $25 billion broader plan that would be from undergrounding or is that sort of more specific to this piece of it?

Jonathan, if you're referring to slide eight...

Yeah. I think so.

Yeah. That's the Carolina view.

Yeah. So if we look at the $25 billion, would the $4.9 billion sort of scale proportionately?

So it would not scale exactly proportionate. This is Lee Mazzocchi with the Grid Solutions group. We found that our heaviest concentration of densely vegetated lands that cause outages are really preponderantly in the Carolinas. We do have investments in Florida and the Midwest but they're not quite to the scale and the magnitude of what we're seeing in the Carolinas in the $25 billion.

Okay. So it's almost 40% of the Carolinas plan, that's what prompted the question.

You would see it less than 40% in the other jurisdictions.

Okay. And then just conceptually, how are you proposing that that would be socialized? Is it locally to the communities that sort of benefit from it or is that more across the whole system?

Jonathan, we think there is a basis to treat this like any electric plant and service, and treat it as a rate base item. And what we're planning to do or are doing is using data analytics to identify the sections of our service areas that are affected by this, and that then has an implication to lowering our outage and outage costs which we believe all of our customers will benefit from. So it's a long-term investment around the improved reliability of the total system and we believe it brings great customer benefits and, of course, benefits to investors as well.

That makes sense. Great. Thank you. Other than FERC, what else do you need to move forward on ACP, if anything?

So, Jonathan, there are other permits. Water processing permits, for example, in the states and we are working actively with all of the states to progress those permits on a timeline consistent with the FERC approval. And so we feel like we're on track with the timeline that we've laid out for you.

Okay. And then if I may. I think last quarter's call, when you sort of hinted that if you execute well on the plan the upper end of the guidance range could be in scope, I think the growth rate is based off the midpoint of the 2017 guidance. Having had this slower start to 2017, is that still something you think you can get to with cost offsets and the like or that's the case now?

Jonathan, we remain on track. I mean, this is three months of a year against a five-year plan. The actions that we've identified for 2017 are really consistent with actions that we've taken when you have variability around weather. And so we've identified about $100 million and we'll continue executing on that on 2017. And then the investments that will ultimately drive growth are something that'll build over time, and we've given you some visibility on what those look like and where they're located and we're executing on all them.

Steve mentioned some of $100 million might flow through would be sustainable, I think was the word he used. Can you be sort of more specific as to what percentage of it?

At this point I think it's pretty immature to get that granular, Jonathan. So when we go after costs, we're always looking for things that can be sustainable but also recognize just flexibility within the year can be helpful. So it's a combination of both. I don't have any more specifics that I'd share with you at this point.

Okay. Great. Well thanks very much.

Thank you.

Our next question is from Julien Dumoulin with UBS.

Hi. Good morning.

Hi, Julien.

Good morning.

Hey. Perhaps just to elaborate a little bit on the last question. On the cost offsets here for the first quarter, I think you said about $100 million or so. Does that have any kind of ongoing benefit or is that really kind of a transient phenomenon? I think you suggested the former.

Well I think it will have an ongoing benefit. I think many of these costs are accelerations of the cost efficiency efforts that are underway, so I think many of them will be sustainable. It's hard to define precisely at this point. But I would also discuss and mention last year, in 2016, we came out of the gate with storms and low volumes and we accelerated cost reductions of $100 million. Then when the weather came in the third quarter, we moved some work into 2016. So that type of dexterity can go both ways but, certainly, many of the cost reductions in 2016, and I think many that we're doing in 2017, will be sustainable throughout our five-year plan. It's hard to be granular at this point given the flexibility that we try to exercise.

Right. So just to be clear about this. This is basically fungible with the wider cost reductions you've been contemplating in the five-year program, right?

That's certainly part of it. Absolutely.

Julien, what I would add to that is I think this point of cost flexibility is what we want to emphasize with this. So we believe we have the scale and the expertise from the work that we've done over a number of years to be flexible with cost management. And every time we go after cost in a given area we're always working to make it sustainable, and in that event it could be incremental to some of the things we've shared with you previously. But I think the expertise that we're developing around cost management is really fundamental to the business, and we had a good track record of executing.

Got it. Follow-up question here on coal ash if I can. Really just kind of curious. Are your plans at all changed given the shift in what seems like ELGs and CCRs at the federal level? I imagine not but I just wanted to clarify that.

At this point, our plans are moving forward, Julien, and you can think about at least the North Carolina business is having an implication not only from CCR but from CAMA, the laws in North Carolina. And so we're on track. We don't have any specific change of plans just to resolve all of these new executive actions.

Got it. And lastly, can you give us a little bit of a sense of what kind of size of rate increase that we're talking about as a function of the forthcoming cases in North Carolina? Do you have a sense yet and how that might net against cost?

Well on the increase, and maybe get to that second one in a second, Julien. On the increase, we'll share more specifics when we file for the increase which will be in about a month for DEP and then there'll be a notice and then a filing for DEC. So we'll, at that time, be in a position to give you more specifics on the composition of the filing as well as the percentage increase.

Got it. All right. Fair enough. Thank you.

Thanks.

Thank you.

Our next question is from Michael Weinstein with Credit Suisse. Michael Weinstein - Credit Suisse Securities (USA) LLC: Hi, guys.

Good morning.

Hello. Michael Weinstein - Credit Suisse Securities (USA) LLC: Good morning. Hey, I was wondering if you could give kind of an update on legislative initiatives within the Carolinas especially as to how they might be interacting with your presenting of this plan on April 12. Is it all integrated into one kind of public push with legislators to get more riders in place going forward?

So, Mike, we continue to engage with our stakeholders here in the Carolinas about our priorities and, certainly, regulatory modernization that fits the nature of the investments we're planning to make in the delivery system are a part of those discussions, as are renewables and integration of renewables into our system. So it's really early in the legislative session at this point, but there could still be some opportunities in the current session and we'll share milestones when appropriate. And in the backdrop, as you know, of all of these, the rate case filings that will also occur in 2017 in the Carolinas. Michael Weinstein - Credit Suisse Securities (USA) LLC: Right. I guess with 13,900 jobs projected for 10 years, are you getting support from any specific groups enough for that kind of program or...?

Mike, I think there's a lot of interest in infrastructure investment and job creation. I think that's in the Carolinas as well as around the U.S. And this represents really important infrastructure and gives North Carolina an opportunity to lead the way on infrastructure investment. And I think job creation particularly in the eastern part of the state that has been hampered economically is very attractive. So we believe this plan is a win-win for customers, for investors, and for communities. Michael Weinstein - Credit Suisse Securities (USA) LLC: Great. And just one last question. Is there any change to load growth guidance at all for electric load growth or even on the gas side?

No. Our growth assumptions, I think, for our five-year planning horizon of 0.005%, I think those are still the viable and right place to be at this point in time. Michael Weinstein - Credit Suisse Securities (USA) LLC: Okay. Great. Thank you very much.

Thank you.

Thank you.

And we'll take our next question from Greg Gordon with Evercore ISI.

Thanks. Good morning.

Good morning.

Switching gears. You've made significant proposals in the state of North Carolina with regard to how PURPA is being used by solar developers to get contracts for large utility-scale solar. I'm not sure whether the commission has actually made a decision on the things that you've requested be changed in the way that you're forced to sign these types of PURPA contracts. Can you review for people because I think this is a little under the radar for some? What has been going on with regard to PURPA as it relates to solar in North Carolina, what you're asking for to be changed, and where will we stand in that process?

Sure. So, Greg, there are couple of things going on. In the regulatory arena, we made an avoided cost filing which addresses the price, the term, the size of these facilities, and that went to hearing in mid-April. There is, of course, the position of the other parties and the public staff in North Carolina has testimonies that I think would be helpful for investors to take a look at. And really what's being proposed is an opportunity to move this development of renewables and solar in the state into a more sustainable model. So in addition to size and price that we're pursuing on the regulated front, we're also having discussions in the general assembly about the development of a competitive process on an annual basis with a determined size that would give solar developers and also the utility an opportunity to plan. We also think a competitive process would impact price to customers and believe that better planning and better pricing would create a more sustainable market. And so there are two things to track here, not only the regulatory proceedings, avoided cost, went to hearing in April – that's moving through as procedural process – but also continued discussions in the legislature about sustainable solar development in the state of North Carolina.

The bottom line is that – and this is me summarizing it, not you -the solar developers have been using PURPA as an opportunity to get above market contracts and you're looking for a process that's more transparent so you can be more comfortable, that you're not burdening your customers with solar contracts that are not economic relative to market. Is that fair?

Greg, I think that's fair. We've done some calculations of the prices implied in these contracts, and we believe it's costing customers about $1 billion more than a market price would cost them over a 12-year period. And this notion of better planning and better pricing, we believe, can create more certainty not only for the solar industry but better pricing for customers, and I think that's important as this market continues to develop.

Okay. Thank you.

Thank you.

Our next question comes from Michael Lapides with Goldman Sachs. Michael Lapides - Goldman Sachs & Co.: Hey, guys. Thanks for taking my question.

Hi, Michael.

Hey, Mike. Michael Lapides - Goldman Sachs & Co.: Real quickly. On the capital budget for the next few years, you've made a few announcements in just the last few months, even one or two since you reported fourth quarter of 2016. Just curious, any significant changes to the capital budget over the next few years? And if so, which jurisdictions?

No significant changes, Michael, over the next five years. Some of the timing may be a bit different. But we've got a capital plan, $45 billion to $50 billion over the five years, and that's where it's going to be at at this point. Michael Lapides - Goldman Sachs & Co.: Got it. And then just curious, Lynn. How are you thinking about the opportunities at the renewable business, and how the growth over the next couple of years will look relative to the substantial number of megawatts you added over the last two to three years?

Michael, when we put forward our plans in February there's a shift in the renewable investment more toward regulated investment than commercial, and we think that just makes good sense for not only investors but customers in our jurisdictions. So we have about $2.5 billion in the five-year plan; about $1.5 billion sits in the jurisdictions and $1 billion in commercial. And so I think we've shared with you that we're looking at that commercial investment very closely. Returns are tight, the tax position is uncertain for us at least over the next couple of years, and we'll continue to make the right decisions about deploying capital in that commercial business as we see returns that fit our expectations. Michael Lapides - Goldman Sachs & Co.: And are there opportunities with that renewable business regarding either, potentially, to add more via less on the development side and more via on the acquisition of whole portfolios? Or on the flip side, is your portfolio potentially more valuable and have you assessed that in the hands of, maybe, other parties?

Well, Michael, we continue to look at what we own, its value and contribution as well as what it might command on the outside. So those are ongoing assessments that we do. We feel like we have a really strong portfolio of 3,000 megawatts wind and solar, backed by a long-term contract. And so those are assessments that are ongoing but nothing specific to share with you today on a strategic analysis or initiative that we're considering. Michael Lapides - Goldman Sachs & Co.: Got it. Thank you. Much appreciated.

Thank you.

We'll take our next question from Praful Mehta with Citi.

Thanks so much. Hi, guys.

Good morning.

Good morning.

Hi. So firstly on the holding company debt. You continue to have a target of about 35% holdco debt to total debt for 2017. I just wanted to understand. Given tax reform expected to come at least, is there any view that you want to, over time, reduce that number or how are you looking at that? And if there is any goal to reduce it, what levers or tools do you have to bring down that holding company debt over time?

Well, Praful, when you look at our five-year plan, you do see over the five years the holding company debt level does decrease. Our credit metrics improve over the five-year plan. We're still issuing holding company debt because we're growing over that five-year period but the ratio to total debt does decline. So that's part of our five-year plan that we've baked in under current tax laws. Now regarding tax reform, it's hard to say where that's going. Proposals are still in very early stages. It hasn't gotten very far. We'll continue to keep our eye on that and we've been assessing other scenarios and other ways to finance if that were to change significantly. But overall, we feel good about our balance sheet and our ability to deal with the holding company debt.

Got you. Thanks. And then secondly in terms of the cost saving initiatives. It seems like it's almost dry powder that you used to offset any weather impacts. I wanted to understand if that's a fair characterization, and if it is why not do more? As in, why not do more rather than wait for weather and use it as dry powder? I'm just trying to understand how you kind of think about the cost savings.

Praful, I would suggest that we've been very aggressive on cost savings. If you look at the track record of Duke, we've had flat O&M for a number of years and are projecting flat through 2020. We think that's aggressive and we continue to focus on ways we can drive costs out of the business, and that is our job every day. But what we're talking about here is flexibility as a result of weather where we may make some decisions in a short-term basis in order to offset weather. It could be holding a vacancy, it could be working with a contractor differently, things of that sort. But you should take away that we understand the assignment of being very aggressive with our cost structure and we are achieving that with initiatives throughout the company.

Got you. Thank you, guys.

Thank you.

Thank you.

And we'll take our next question from Ali Agha with SunTrust.

Thank you. Good morning.

Good morning.

Thanks. First question, Lynn or Steve. Can you remind us? When you talk about the 4% to 6% CAGR in earnings, is that fairly linear? Or given the timing of rate cases and rate increase, there is a lumpiness factored into that as well?

Ali, we shared in February that every year we'll be within the range, that we've developed a plan that puts every year within the range. And so I think that's the way I would respond to that question. And we will have rate cases in 2017 that are important to 2018 and we'll give you more update on those milestones as we go forward.

Okay. And then overall, just remind us, perhaps, on an LTM basis as well what's the current regulatory lag in the system and where within your jurisdictions are you seeing the biggest lag right now?

Ali, we had talked about regulatory lag over the past couple of years, and it'll vary depending upon the timing of base rate cases that we'll see. But we see most of our regulatory lag in the Carolinas jurisdiction where you have recovery mechanisms through riders or decouplings, similar to what we see in our gas business at Piedmont, you have less lag. And we're trying to work to minimize lag through various initiatives in our regulatory jurisdictions. Most of the lag, I would say, is in the Carolinas jurisdictions at this point in time. Again, it's hard to put a specific number on it in terms of how much it'll pull down in any given year. Specifically, it'll just depend upon the timing of rate cases.

Yeah. And, Steve, as you look at that five-year CapEx plan and the funding of it, when at the earliest should we be thinking about equity coming back into the picture from a funding perspective?

Our five-year plan contemplates the use of a DRIP starting in 2018 throughout the remainder of the plan, and we estimate that to be in the ballpark of $350 million a year. So that's in our base plan.

I see, okay. And last question, also remind us. Within the commercial earnings and net income right now, roughly how much of that is recognition of tax credits?

Ali, I would say the majority of the tax credits. If you think about it, it's primarily a renewables business. PTCs are the lion's share of it because our portfolio is primarily wind.

So PTCs more than ITCs?

Yes.

Yes. That's correct.

Got it. Thank you.

Thank you.

Thank you.

And we'll take our next question from Andy Levi with Avon Capital Advisors. Andrew Levi - Avon Capital/Millennium: Wow. I got a question.

Hello, Andy.

Hello, Andy. Andrew Levi - Avon Capital/Millennium: How are you guys doing.

We're good. How are you? Andrew Levi - Avon Capital/Millennium: I'm doing all right. It's kind of cold here, though. What can we do.

It's warm out here. Andrew Levi - Avon Capital/Millennium: Still kind of spring winter. Hey, just a couple of very, very quick questions. On the cost savings that you did this quarter, is there like a breakdown? I don't expect you to have it specifically, but is the majority in a certain jurisdiction or is it kind of across the board?

The delta on the O&M this quarter, Andy, I would think about as being across the board. But the one thing you should note, that first quarter of 2016 had a lot of storm restoration in it. That was primarily Carolinas, so the delta over the quarter is being influenced by that. The $100 million as we go forward over the balance of the year, you can think about that as being across the company. Andrew Levi - Avon Capital/Millennium: Okay. But the $100 million is exclusive to the storm restoration change? Is that correct or not?

That's not correct. So two things I would point to. If you look at our actual versus actual announcements for the first quarter, O&M is the positive driver. And that positive driver is primarily the result of the fact that 2016 had storms in it and 2017 doesn't. Andrew Levi - Avon Capital/Millennium: Okay. Because I guess what I was trying to figure out was not all of the – and I think Julien had asked the question, too, but I think you forgot to answer the last part of it. As you think about the rate cases you're going to file in the Carolinas, I guess in this case for the quarter and depending on when the test year is, obviously you've had a lot of cost savings. So to the benefit of the customers, those cost savings will be passed on and that'll lessen the blow of any type of rate increase. But I guess also even this $100 million or the cost that you achieved in the first quarter, that actually is offset by the storm restoration that you did. Did you collect the storm restoration or you didn't? Do you understand what I'm getting at? I'm just trying to figure out – again, I know we have to wait for your rate case to be filed – but I would assume there's some good cost to offset the increase. Is that correct?

Yeah. Let me try to... Andrew Levi - Avon Capital/Millennium: And how should we think about that?

Yeah. Let me perhaps give some clarity on a few things. We'll file for these rate cases with a 2016 test year and then there are other things you make to that. And you try to look at sometimes normalized cost levels within that, looking at storms and so forth. So I don't think you can draw a definitive conclusion about a cost level in a particular period of time and what it might mean. I would say the ongoing cost efforts that we have to reduce costs, they offset salary increases, inflation, and so forth. So if you recall, in February we talked about our goal is to keep our non-fuel O&M flat through 2020 and we think we can do that and, in fact, reduce it a bit here in 2017. So I'd look at costs more holistically in that way, that we're keeping them flat and maybe slightly reducing them as well, offsetting a lot of the inflationary and salary increase impacts.

And Andy, on the storms, you may remember we filed a deferral request. It's not Hurricane Matthew and Jonas and Hermine. I mean, there were a number of storms impacting. And that deferral request will be a part of this rate case in the Carolinas. Andrew Levi - Avon Capital/Millennium: Got it. That's very helpful. And then my last question is just kind of basic for both of you and just how you're thinking, and I understand what you're saying about equity going forward. But with your stock price doing very well at $0.82, $0.87 at the moment, down $0.05 just to give you a report.

Thank you. Andrew Levi - Avon Capital/Millennium: And then you look at, like, PPO kind of decided to fix their balance sheet a little bit because their stock price has been doing well. I guess it's one of the reasons. There are other reasons, too. And the stock actually is up 13.5% this year even though they decided to issue incremental equity. And so I guess what I'm trying to get at is because if I kind of ran the numbers and doing a mid-sized equity offering now would actually help you on your credit metrics – and I'm talking about more of the balance sheet, not your FFO and the debt, obviously – and it would be kind of a one-day type event. Why not kind of go now and try to kind of take down some of that parent debt and issue some equity since, obviously, you have a lot of CapEx? I mean, you understand what I'm getting at. I'm not going to just keep going, but just kind of what's the big thinking of that, with the stock prices so high?

Yeah. Steve may have something to share on this as well, but we are very comfortable with our balance sheet. We believe the portfolio transition and the businesses that we own are very low risk. We have an improving profile in our balance sheet as a result of the strength of this plan. We believe the DRIP is an effective way to issue equity that matches the deployment of capital over time. So we always evaluate financing techniques but believe this is the most appropriate one given where we are. Andrew Levi - Avon Capital/Millennium: Okay. And Steve, do you have anything to say or we're good?

No. We're good. Andrew Levi - Avon Capital/Millennium: Okay. Thank you, guys.

Andy, thank you. All right. Andrew Levi - Avon Capital/Millennium: Have a great Mother's Day, Lynn.

Thank you, Andy.

And that will conclude today's question-and-answer session. I would now like to turn the call back over to Lynn Good for any additional or closing remarks.

Well thank you, everyone, for joining today and for your interest in investing in Duke Energy. We look forward to seeing many of you over the next several months, and we'll continue to keep you updated on our key milestones. Thanks again for joining.

And that does concludes today's conference. Thank you for your participation, and you may now disconnect.