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

Thank you, Ally. Good morning, everyone, and thank you for joining Duke Energy's first quarter 2019 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 a 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, during today's call Lynn will provide an update on the quarter including legislative and regulatory activity in the Carolinas. She will also discuss progress on our strategic initiatives. Steve will then provide an overview of our first quarter financial results and the insight about the economic and load growth trends. He will also provide an update on our 2019 financing activities before closing with key investor considerations. With that, let me turn the call over to Lynn.

Thank you, Mike, and good morning, everyone. Today we announced reported and adjusted earnings per share of $1.24, marking a strong start to the year. We are on track to achieve our 2019 adjusted EPS guidance range of $4.80 to $5.20 and our long-term earnings growth target of 46% through 2023. We remain confident in the strength of our business and the ability to grow with investments that deliver value to our customers and our shareholders. In the first quarter, we advanced our strategy to modernize the grid, generate cleaner energy, and expand natural gas infrastructure. We added more than 400,000 smart meters, and continue to deploy self-optimizing grid technology across our system. We made progress on the construction of the Asheville combined-cycle unit as part of our Western Carolinas modernization project, and we filed for the next wave of solar generation projects in Florida. Our investments in these key areas combined with our attractive growing service areas are foundational to growth in our electric and gas utilities. We have several noteworthy accomplishments in the quarter, so let me highlight a few of them on slide four. First, we continue to advocate for modern cost recovery mechanisms in our service territories, and we're pleased to see the introduction of related legislation in North Carolina, our largest jurisdiction. We also recently announced 1,250 megawatts of regulated and commercial renewable projects that we will either own or procure on behalf of our customers. Approximately two-thirds of these projects will be built in our service territories. This was a remarkable start to the year as we expand these important resources in our portfolio. As we invest in new renewables, we are recycling capital from existing projects having announced the transaction to sell a minority stake in our current commercial renewables portfolio to John…

Thanks, Lynn. I'll start with quarterly results on slide 8 including our adjusted earnings per share variances to the prior year. For detailed information on various drivers and the reconciliation of reported to adjusted results please refer to the supporting materials at the company today's press release and presentation. On a reported and adjusted basis 2019 first quarter earnings per share were $1.24 this compared to reported and adjusted EPS of $0.88 and a $1.28 respectively last year. For the quarter, lower adjusted results compared to the prior year were primarily due to unfavorable weather and shared illusion, partially offset by growth from investments at the electric and gas utilities. Within the segments, electric utilities and infrastructure was down $0.10 compared to the prior year. These results were primarily driven by mild winter weather across the southeast in the current quarter and lower retail volumes on a weather normal basis. In addition, higher depreciation and interest expense impacted results. Partially offsetting these unfavorable drivers were base rate increases in Florida and North Carolina and higher rider revenues. Shifting to gas utilities and infrastructure, results were up $0.10 in the quarter. The increase was primarily due to a true up adjustment related to income tax recognition for our equity method midstream investments. Higher margins at the LDCs also contributed to growth. In our commercial renewable segment, results were down $0.01 for the quarter. The decrease was primarily due to below normal wind resource this year. Finally, other was up $0.01 for the quarter and share dilution drove a $0.04 decline due to the shares we issued in December to settle last year's equity forward agreements. Overall, these results and our strong execution to start the year give us confidence that we will achieve our full-year earnings target and deliver on our…

Thank you. [Operator Instructions] And we'll take our first question from Michael Weinstein from Credit Suisse. Please go ahead.

Hi, guys. Good morning.

Hi, Michael.

Good morning.

Hi. With the one-time true up on the gas side, I mean, gas midstream investment side, is that included in your -- or you including that in your ongoing guidance off the $5 number, 46% off that?

Yes. That's in our adjusted number. We often have adjustments in true ups in the tax arena with taxing authorities. We've typically included them in adjusted earnings.

Okay. I mean, that would imply that there is some other positive offset that's ongoing, right, that makes up for that, I guess -- in the future?

Yes. Michael, the point I would make is this is the first quarter of the year. You know, we started with some weakness in weather and volumes. We expect those to turn around a bit in the second and third quarter, as we look at the strength of the economy. So I would ask you to think about the full complexion of all the businesses we operate over the full-year, and we will have true ups whether it's in tax or in regulatory, these are things that happen over the course of the year and then developing our plan. We always assume that something will develop as the year progresses. So I’d put it in that context.

Yes. So, we've typically not updated within the range till after the third quarter when we get a feel for where things are going in the weather in that particular quarter.

Got you. Okay. What was the exact size of that?

It was about $0.06.

Okay, all right. Thank you.

Thanks.

And we'll take our next question from Julien Dumoulin-Smith from Bank of America. Please go ahead.

Hey. Good morning.

Hi, Julien.

Hey. So perhaps just to focus first on the coal ash side of the equation obviously you've had some developments of late which -- to which you've already referred to in your prepared remarks. I wanted to follow-up a little bit on understanding the range of outcomes and the timeline for providing an updated capital outlook just based on the appeals process that you described at DEQ. It seems like there are some big decisions that have been made of late and obviously taken up seemingly by the governor, et cetera. Can you describe how some of these big variables could move and what that means for this incremental capital?

Sure. And let me break it down, Julien, and see if this answers your question or we can continue the conversation. The appeal process for the order will take nine to 12 months. There has been a series of dates established by the hearing officer or the administrative law judge. We expect that those dates could move a little bit as people respond whether or not they will be prepared but I think nine to 12 months is a good planning assumption for the appeal process. I think in terms of capitals we've already begun to do some work on the closure costs and as we look at the next five years we believe the order if it stands as written would add about $200 million to $400 million over the five year period. And the reason it is relatively modest is because it will take time for permitting, for finding the land, for constructing the landfill and all of the other costs de-watering and other things that would occur under any closure method, those are already included in our capital plan. So I -- you should think about the majority of this impact being after the five year period giving us plenty of time to evaluate how that fits into affordability, reliability, customer rates and so on. And we'll just continue to update you as it move through the legal process and as we learn more moving forward.

Excellent, just quickly back on the ACP project, appreciate your prepared remarks here as well. Just wanted to understand little bit on the timeline of process here, obviously you need to make strategic decisions and sourcing generation -- supplying generation anyway. I'd be curious on the timeline there to -- that you need to come to terms. And then separately just in terms of the -- with respect to the jeopardy argument and the biological order here, how do you think about timeline and potential overlap with respect to permits and rerouting there as well, given the park permitting issues?

Sure. And you know, Julien, I would point to two things, maybe three things that we're monitoring. So, the Biological Opinion Incidental Take hearing is today. And as you noted there are discussions around impacts to the biological opinion. This is the Rusty Patched Bumble Bee that you'll probably learn more about and as will we as the court renders their opinion and then a number of questions around the incidental take statement which really challenges are coming in front of the court for a second time. So, these are species that we understand well. We would expect an order within 90 days. And if there is work to do as found by the court then we would expect that to occur over a one to two month period. I'm just estimating that within the construct of what we've seen before from the court, but we'll know more when the order comes out and have an opportunity to give you more specifics on that. So, that's the one thing I would be watching for. The second is the Appalachian Trail that is progressing. A petition seeking the Supreme Court review will be filed this summer. We're optimistic that the government will support. And so we'll see milestones over the course of the summer on that item. And then as you would expect we are continuing discussions with customers which are important part of this project on the status -- on the approach around phase construction Phase 1, Phase 2, Mountains, Buckingham South, revised timeline, revised cost, and those discussions will continue over the course of the year as well. So we'll continue to update you on timeline. We understand we've got some decisions to make depending on how all of these legal challenges play out, we will continue to update you as we learn more and have more transparency on when the construction will begin. We are planning that we'll be able to begin construction later this year.

Thank you very much. Best of luck.

Thank you, Julian.

We'll take our next question from Steve Fleishman from Wolfe Research. Please go ahead.

Hi, good morning.

Good morning, Steve.

Good morning.

Hi. So, on the -- first of all, on the South Carolina orders that you referenced, how much coal ash was disallowed in those orders?

There was an amount mentioned in the order of 470 million for -- in the DEC order, I have not looked at the most recent directive. And again I would emphasize I want to wait till I see the full order, and that $470 million number is a system wide number, so the allocation would then have to occur to that number. Now when I look at the full number, and I'm seeing now that's about 330 million is in the DEP order. Again that's a system wide number.

So you should be thinking, Steve, kind of in the 20% to 30% range for DEP, and for DEC and 10% for DEP.

All those numbers, okay.

That's right. That's right.

Okay. And then, can the commission still change its view or are they just - before they put the written order or the written order is just getting the details around what they've already decided?

So, we would think about it this way, Steve, I think the order that we're expecting to come out you know kind of mid-month, will be further documentation around the directive. And then we have 10 days to file a request for reconsideration, which we intend to do. And then, the commission has about 20 days to respond to that request for reconsideration. So, I think it would be that 20-day period where potential reconsideration of this -- the terms of the directive could occur. We are anxious to read the order because we have very limited information now on all of the -- elements here and the real depth of the legal reasoning that underpins this. So, that is the work that remains and we should expect to see those as I said a moment ago within - within a few weeks. After that reconsideration period that's when we would evaluate appeal. And so, then you'd move through an appeal process with a longer timeline of course to work through the court system.

Okay. And I know this is not directly related, but maybe indirectly does this affect any interest you might have in Santee Cooper?

You know, Steve, we've been a part of the process -- a competitive process I think we've talked about that before. We believe we had a lot to bring to the table for this state whether it's an outright purchase or management of those assets. We've operated in the state for 100 years. Legislation is moving through the state, which we believe will establish a process in a way forward that would include additional due diligence and other things. But I think it's fair to say that we will closely evaluate further investing in the state in light of these directives, but those decisions are yet to be made, we have had a long history in South Carolina, it's been a constructed jurisdiction. But I think with this directive we need to learn a little bit more.

Okay. And then one separate topic question just on the North Carolina legislation, could you just -- is there any timeline for house ruling on it as the governor had a view, and just how would it actually then turn from a law and being implemented in the case?

Steve, there is no specific timeline for the legislature in North Carolina. So you can expect it to move through the House over the coming weeks. It's really hard to forecast how long that will take. We believe the strong bipartisan support and sponsorship has been favorable. Certainly, getting it out of the Senate and moving it to the House we have strong bipartisan sponsorship in the House. We believe the policy is very sound. So this is what we will continue to update as progress is made, but it's difficult to forecast a specific timing for the legislation. In terms of implementation, having the legislation in place allows us to include innovative solutions as we move forward with future rate cases, but the timing and approach for that is yet to be determined. So, more to come and we'll, as I said before keep everyone updated as the session progresses.

Okay. Thank you.

Thank you.

We'll take our next question from Caroline Bone from Deutsche Bank. Please go ahead.

Good morning. And thank you for…

Hello.

Good morning.

Good morning, Caroline.

Hi. Okay, great. I was just hoping, I mean Steve actually just asked a few of my questions but I was just wondering if you could talk a little bit more about how these South Carolina PSC directives might impact your longer term outlook. Does it have, does it push you to the lower end of the growth rate if it were a 9.5% ROE we were to be approved. I'm just wondering if you could talk a little bit more about that.

Yes. Caroline, I think when we think about the scale that South Carolina represents to do, we believe we're still positioned to grow within the range of 4% to 6% that ROE signal though does indicate to us an important factor in allocating capital as we go forward. And so you know when I talk about growth capital and discretionary capital and other things we will evaluate the placement of our capital based on where it's attractive to invest. And that's a part of our five year cleaning process and we'll have more to say about that both as this appeal progresses and as we share additional refinements to the five year capital plan.

All right. Thanks very much. And then…

Thank you.

-- I know you sounded a very confident tone on the ability to achieve your outlook for the commercial renewables business but I was just wondering if you could just help us understand the earnings trajectory this year, how you kind of close the gap between the $13 million earned in Q1 and the $230 million targeted for the full-year?

Caroline that's a good question. A couple of things I would point to. So if think about our renewables business between operating and wind assets it's about 50% of what we expect and there was a slow start to the year for wind resources. So the $13 million you should not consider to be a normal run rate, but it was reflected or impacted by weather. And then we will bring projects on in the second quarter and later in the year, solar primarily that will impact those numbers. So you've got a shaping issue on commercial renewables that really links to the question that you're asking this morning. Steve, would you add to that?

Yes. So, that's correct, Lynn. And Caroline we're going to bring a couple of projects and they're going to boost the earnings this year, get it up above the $200 million level. And we've got good line aside as Lynn said to 2019 and 2020 earnings and good line of sight overall to 60% of the earnings. The projects will bring in the early part of our five year plan, the solar projects are going to have income recognized in the one-year to two-year period. But just to give you a flavor for it, we've got a lot of longer term wind profile that we're building as well, and a matter to think about is for us to keep the net income level above $200 million through the five-year plan, given that what we've already built in place. We need to close about 250 megawatts to 300 megawatts of solar per year and that's on the one-year to two-year recognition schedule. And I think that's very doable, when you look at the amount of megawatts that we've put together already in 2019 and the CPRE process that will continue throughout. I think we have a good capability in earnings trajectory in commercial renewables.

Good. Thanks very much. I appreciate it.

Thank you, Caroline.

We'll take our next question from Praful Mehta from Citigroup. Please go ahead.

Thanks so much. Hi, guys.

Hi, Praful.

Hi. So, may be just staying on commercial renewables, congratulations on your asset transaction or the sale transaction. Just want to get a little bit more control in terms of firstly how competitive the process was because there is a lot going on in that side? And do why keep the tax assets given you are unable to actually utilize them right now given your tax profile, why do you decide to keep the tax assets as the part of that transaction?

Sure, Praful. A couple of comments here, was a competitive process we did seek bids and then narrowed it down to a short list and work from there and Hancock became the best partner providing the best overall value. So it's quite a competitive process and a lot of interest from financials and international, global and so forth. So we feel good about that process. And then, regarding keeping the tax benefits of these assets, Hancock does not have a tax appetite. And what we found is you look out you the people that are pursuing the underlying PPA cash flows they're not looking for the tax attributes people looking for the tax attributes, they are not looking for the underlying cash flow. So it's a logical matching here. So, we'll maintain those tax benefits as we move forward and we've utilized some of those tax benefits to date. You can only sell what's remaining. So we'll still have those to keep in our portfolio.

Understood. And is there any plan to do further sales in the commercial renewable side or do you think at this point you kind of have the transaction done for at least the near term?

Well, Hancock has an option on some development projects that could provide further proceeds that have been defined as part of this arrangement and we'll continue to look as we develop projects in the future whether there is interest with our existing partner or others.

Got you. Thanks. And then just finally on the effective tax rate point, Q1 effective tax rate was 9.6%, I'm assuming because of that one time that you talked about, but just wanted to clarify that. And then also longer term do you still see that 12% to 14% as something that stays not just in 2019 but going forward through your forecast, or does that change over time?

You're correct, Praful. The quarterly effective tax rate of 9.6% was driven down by the booking of the tax adjustment, and that won't recur in future quarters. I expect by the end of the year we'll be within the 12% to 14% range. I don't want to try to handicap now with all that's in front of us as to whether it's lower than that or where it would be, I'd stick with that for now.

Understood. Thanks so much guys.

Thank you.

We'll take our next question from Ali Agha from SunTrust. Please go ahead.

Thank you. Good morning.

Good morning, Ali.

Good morning.

Good morning. Lynn and Steven, I apologize if you may have addressed this. I did come on a little late on the call. The ROEs that were set on the South Carolina both the rate cases of 9.5% are below obviously what you previously had and below what your budget is for this year of earning you know 10% to 10.5% overall in Carolina ROEs. Just wondering how that impacts or what kind of headwind, earnings headwind does that create, and what are some of the offsets against that?

Ali, the ROE that you referenced of course is disappointing. There were constructive elements to the order the equity pad of 53%, the amortization of excess deferred taxes. And so as we look at 2019 earnings we always plan for a range of outcomes and believe that the results of this case fit within our planning but as we talked about on the call and in some of the subsequent questions we do intend to request rehearing on the coal ash and the ROE item as well as potentially some others and we're also consider an appeal of the case and the ROE we will have an impact on the way we think about additional growth and discretionary investment.

I see. And linked to that, Lynn, I mean from historical cases of precedent do you find that you know the ROEs that get said in South Carolina that you see much influence when North Carolina rate cases are dissolved and ROEs are set, is that a good correlation between the two?

My expectation, Ali, for North Carolina is that they will continue the good work that they've done over many years acting in an independent manner, reviewing the evidence in front of them and we would expect the commission in North Carolina to continue to behave in that fashion. So I think it's premature to reach a conclusion on cases yet to be filed in North Carolina on how South Carolina is going to invoice now.

I see. Thank you.

Thank you.

And we'll take our last question from Michael Lapides from Goldman Sachs. Please go ahead.

Yes. Hey, guys thanks for taking my question…

Hi, Michael.

Hi, Michael

Hi, Lynn and Steve. Real quick, and you've touched on this I think a little bit. The attorney general's lawsuit, I know you're probably limited in what you can say given its ongoing litigation. Is that just dealing with the last rate case and how is that rate case dealt with coal ash recovery or is that dealing with the broader policy of what is the level - what is the process for coal ash recovery or is the coal ash recovery something that should be recovered at all. I'm a little confused about just kind of the main tenant of that case and whether, it's just a one-off of the last rate case that got resolved by the commission or is it more kind of a policy focused one longer term?

It's the former, Michael. It is an appeal of the rate case. And so I would -- have you look at it in that context because it's exactly what it is and we believe the order out of North Carolina was very well written, very strongly supported on the regulatory laws in North Carolina, and we'll be vigorously defending that case as you would expect. The timing on that is you know briefing will occur during 2019. We expect a hearing late this year or early next, and then potentially a decision in a six month or so time frame. You may remember the last appeal from the attorney general in North Carolina was on ROE in our last case and that took about two years.

Got it. And then a follow-up question a little bit on Florida, legislation just passed it sitting on the governor's desk in terms of storm hardening. How do you think that would impact your capital spend plans in Florida, if the governor signs it. And given your rate agreement now would you still qualify for incremental rate increases tied to that legislation or in the near term next two years to four years or do you have to wait for the right deal to kind of expire or roll off?

Michael, the way I'd think about it is that's very solid policy and legislation that I think will serve Florida well, particularly as you think about storm hardening and resiliency, our multiyear rate plan runs through 2021. So, I would think about that legislation is being impactful to our business after 2021; it really gives us an opportunity to look at how to extend and continue important energy delivery investment. You may recall we've got $1.1 billion being deployed through now and 2021. This would set the contracts for more capital spending beyond that period.

Got it. Thank you. And thanks, Steve.

Thank you.

Thank you.

And I'll now turn the call back over to Lynn Good for any additional or closing remarks.

Well, thank you, Ally, and thanks to everyone who joined today. We appreciate your interest and investment in Duke Energy. And as always, our team is available for follow-on questions, and look forward to seeing you in the near future. Thanks again for joining.

And that does conclude today's conference. Thank you for your participation. You may now disconnect.