Adeka Corp

TSE:4401

Hello, and welcome to the Duke Energy Fourth Quarter and Year-End 2024 Earnings. My name is Elliot. I'll be your coordinator today. [Operator Instructions] I would now like to hand over to Abby Motsinger, Vice President of Investor Relations. Please go ahead.

Thank you, Elliot, and good morning, everyone. Welcome to Duke Energy's Fourth Quarter 2024 Earnings Review and Business Update. Leading our call today is Lynn Good, Chair and CEO; along with Harry Sideris, President; and Brian Savoy, CFO.

Today's discussion will include the use of non-GAAP financial measures and forward-looking information. Actual results may differ from forward-looking statements due to factors disclosed in today's materials and in Duke Energy's SEC filings. The appendix of today's presentation includes supplemental information, along with a reconciliation of non-GAAP financial measures. With that, let me turn the call over to Lynn.

Abby, thank you, and good morning, everyone. Today, we announced 2024 adjusted earnings per share of $5.90, finishing within our guidance range. 2024 was a year of great accomplishment and, in many ways, was defined by our response to Hurricanes Helene and Milton. We were moved by our communities' outpouring of support and appreciation for our work during these historic storms.

We also announced updated guidance today, including a 2025 earnings per share range of $6.17 to $6.42 with a midpoint of $6.30; an $83 billion capital plan, which drives 7.7% earnings-based growth. This capital represents infrastructure spending driven by growing jurisdictions and underpinned by robust regulatory processes such as integrated resource plans and approved grid investment spending. And finally, the continuation of our 5% to 7% EPS growth rate through 2029 with the potential to earn higher in the range as the years progress.

Duke Energy enters the back part of this decade in a position of strength and we're excited about the future. We're committed to delivering strong earnings growth and cash flows for our investors and superior service to our customers and communities. Before we get further into 2025 guidance, let me acknowledge our key achievements in '24.

Turning to Slide 5, we continued our track record of regulatory execution with the approval of $45 billion of rate base investments. The regulatory work of the last 2 years minimizes rate case exposure in 2025 and '26. We also advanced generation and transmission through our integrated resource plans and CPCN approvals, and we continued to add solar in Florida with 1,500 megawatts now in service. And finally, I'd like to acknowledge the Piedmont Natural Gas three-peat. For the third consecutive year, the team earned the J.D. Power #1 customer satisfaction ranking for natural gas service in the Southeast.

And let me also just take a moment and acknowledge last month's announcement. Effective April 1, Harry will become CEO and President of Duke Energy; and Ted Craver will assume the role of independent Chair of the Board. Therefore, today will be my last earnings call prior to retirement. It's been an honor to lead this company, and I appreciate everyone who's been on the journey with me. To our employees, thank you for your commitment to our company and customers. To our shareholders, thank you for your investment in Duke Energy. The capital you provide powers our success and makes the work we do possible.

And to the analysts who cover our company, you play a valuable role in the investment community, and I've appreciated your thoughtful research. And to Harry, thank you for being an incredible leader and adviser to me. As many of you know, Harry is a 29-year veteran of the company with experience in nearly every facet of our business. Harry raised his hand for every challenging assignment and has led this company to great success, thanks to his commitment to our investors, our employees, and our customers.

With Harry as CEO and a strong experienced leadership team around him, Duke Energy is well positioned to execute the next phase of our business strategy, and I'm confident in all that the company will achieve. So with that, I'd like to turn the call over to Harry.

Thank you, Lynn, for your kind words and for your mentorship over many years. Through your leadership, Duke Energy has become an industry-leading fully regulated utility that is ideally positioned for the growth ahead. I'm deeply honored by the confidence the Board has placed in me and the outpouring of support I've received from employees, industry leaders, and public officials as well as for many of you in the investment community. It is hard to imagine a more compelling time to lead Duke Energy. We are passionate about our mission to power the lives of our customers and the vitality of our communities. I look forward to the opportunities ahead with optimism around our strategy, our operating culture and our team.

Turning to Slide 6. I assume this new role at a pivotal point for our company and industry. We share the new administration's commitment to ensuring the availability of reliable and affordable energy to meet our customer -- our country's aspirations for technology leadership and economic growth. These priorities align with our business strategy, and we look forward to working with President Trump, both parties in Congress and our states to build, operate, and protect the critical infrastructure needed to deliver on these goals.

To that end, we are executing our all-of-the-above generation strategy to meet growing demand and replace aging infrastructure. Our diverse mix of new resources includes dispatchable natural gas, which is essential to maintaining reliability and affordability for customers and complements our substantial investments in renewables. In the Carolinas, we have started construction on over 2 gigawatts of natural gas generation that was approved last year, and we are filing CPCNs for our next round of gas plants in the Carolinas and Indiana this quarter.

We secured turbines and gas supply for each of these sites, expediting our ability to connect megawatts to support economic development growth. With our generation investments are accelerating, important grid investments will continue to be a significant portion of our 5-year capital plan, ensuring the reliability and resiliency of our system. With 320,000 line miles, we operate the largest transmission and distribution system in the nation.

Working with stakeholders across our jurisdictions, we have tailored state-specific multiyear investment plans to strengthen the grid and ensure our ability to connect new large load customers. The path forward is clear as we navigate this decade of record infrastructure build. And we remain focused on delivering value to our shareholders while meeting our customers' energy demands now and into the future. With that, let me turn the call over to Brian.

Thanks, Harry, and good morning, everyone. As Lynn mentioned, our full year adjusted earnings per share of $5.90 was within our 2024 guidance range. For the year, we saw top line growth from rate cases and riders across our jurisdictions, which was partially offset by the impacts of a historic hurricane season. For additional details on '24 results, please refer to supporting materials and today's news release.

Moving to Slide 8. We set our 2025 EPS guidance range at $6.17 to $6.42. The $6.30 midpoint represents around 7% growth over 2024. This trend is a continuation of the 6% annual growth we've delivered since 2022. Within the Electric segment, constructive rate case outcomes over the past 2 years will continue to drive results. In January, we implemented our new multiyear rate plan in Florida and entered year 2 of our multiyear rate plan in North Carolina. We'll see benefits from the DEC South Carolina rate case and our recently approved Indiana rate case as well as growth from grid riders in the Midwest and Florida.

In addition to rate activity, our plan assumes normal weather and retail sales growth of 1.5% to 2% in 2025. Growth in our Gas segment will be driven by the Piedmont, North Carolina rate case and annual rate mechanisms in South Carolina and Tennessee as well as customer additions and integrity management investments. Finally, we expect results of the Other segment to be driven by higher interest expense and modest share dilution to fund our growing capital plan.

Turning to Slide 9. Beginning in 2027, we see an acceleration in volumes with annual load growth increasing to 3% to 4% of the enterprise. Our confidence in this forecast is underpinned by significant economic development projects coming online, particularly in the Carolinas, which we see growing at 4% to 5% over the same period. Our economic development pipeline reflects advanced manufacturing projects across multiple sectors as well as data centers.

As a reminder, we take a risk-adjusted approach as we evaluate which projects to include in our forecast. We incorporate just a portion of our total pipeline, focusing on those with letter agreements or in very late-stage development. We then utilize discrete project level analysis to ensure confidence in when the projects will begin commercial operation and require energy supply. In the near term, we're planning for annual load growth between 1.5% to 2% of the enterprise. Our forecast is supported by strong residential customer growth, improving industrial activity and the expansion of new and existing businesses across our service territories.

Moving to Slide 10. Our 5-year capital plan is now $83 billion, a 12% increase versus our prior plan. The majority of the increase is driven by generation investments reflected in our IRPs. These investments ramp up over the 5-year period as load accelerates and we replace aging infrastructure. In addition, grid investments represent around 45% of our capital plans. We continue to improve the reliability and resiliency of our system.

With our updated capital plan, we now expect roughly 7.7% annual earnings base growth through 2029, a 50 basis point increase from our prior plan. Supporting this growth are efficient recovery mechanisms, which are critical to maintaining a healthy balance sheet, mitigating regulatory lag and smoothing customer rate impacts. The need for infrastructure to support our growing regions is not limited to this 5-year plan. We have a long runway of investment opportunities that extend well into the next decade.

Turning to Slide 11. As we have demonstrated over many years, our commitment to our current credit ratings and a strong balance sheet will continue to be a top priority. We are targeting 14% FFO to debt by the end of 2025 and expect to improve above 14% over the 5-year plan. Our long-term target provides over 100 basis points of cushion above our Moody's downgrade threshold and over 200 basis points above our S&P downgrade threshold.

To support these credit objectives and fund accretive growth, we increased equity funding to $6.5 billion over the next 5 years. This increase in equity funds approximately 40% of our capital plan increase. We will continue to use our at-the-market and dividend reinvestment programs to efficiently fund our equity needs. As Harry mentioned, we've delivered many constructive regulatory outcomes over the past 2 years. These results enable timely recovery of investments and drive considerable improvement in our operating cash flow. In addition, we continue to see a strong market for energy tax credits. In 2024, we efficiently monetized over $500 million of credits that will benefit customers over time.

Before we open it up for questions, let me close with Slide 12. With a strong track record of regulatory execution, we begin 2025 with confidence in our plan, and our commitment to the dividend remains unchanged. We understand its importance to our shareholders and this year marks the 99th consecutive year of paying a quarterly cash dividend. As we look ahead, our robust capital plan, strong customer growth, and constructive jurisdictions position us to deliver 5% to 7% growth through 2029, with the potential to earn higher in the range as load growth accelerates in the back end of the plan. We look forward to updating you on our progress throughout the year. With that, we'll open the line for your questions.

[Operator Instructions] First question comes from Shar Pourreza with Guggenheim Partners.

So just obviously, you guys have pretty good visibility now. The CapEx is updated, financing is updated. You don't have a lot of regulatory uncertainty. Just on the EPS CAGR, Brian, you mentioned this and Lynn mentioned this, just higher in the range comments, in the prepared. Are we just basically guiding towards the top end of that range? And with the credit metric targets you have out there, the over 100 bps above Moody's, 200 bps above S&P, Brian, can you just put a bit of a finer point on a specific target range versus the "over" language you guys have out there?

Yes, I'll start with the EPS, Shar, and thanks for the questions. As we look at our plan and see the load growth accelerating in '27 through '29, clearly, the opportunity is there to earn in the top half of the range. And you're exactly right. That's what we're alluding to. It's based on the economic development pipeline we have that continues to grow by the day and the ability to serve this growing load. So we clearly see the 5% to 7% over the 5 years in the top half and the back end of the land.

On the credit, we're very pleased. We finished 2024 at 13.9% FFO to debt as -- in spite of the storms that we saw. We were expecting some pressure from the storms. We saw it but we overcame it because the operating cash flow and our business is accelerating. And that's based on regulatory outcomes that we've experienced over the past couple of years. As we look out in time, we've guided to above 14%, which gives us over 100 basis points, like you mentioned, above Moody's downgrade threshold and over 200 in S&P. We feel like that's the right target for now above 14%. We will come up with specific guidance as the plan progresses.

Okay, perfect. That's what I was trying to get at, Brian. So there will be a point in time when we can be a little bit more specific on the range that you target over the long term. That's what I was trying to really get to.

That's correct.

Okay, great. And then just on the load growth, obviously, everyone is focused on the incremental load growth opportunities from hyperscalers, et cetera. The DeepSeek and Stargate stuff has been out there for a few weeks now. Just any change in tone, Lynn and Harry, from your customers and your conversations as we're thinking about spending needs, speed to market, et cetera? Or is it kind of full speed ahead? No pun intended, by the way.

Yes. I'll take that one, Shar. Yes, we feel very confident in our plan that we shared with you, and we have a wealth of opportunities. In our discussions with the hyperscalers, they anticipated efficiency gains so DeepSeek was not a surprise to them. They're full speed ahead. They're looking at the fact that these efficiencies may actually increase the demand for AI, so we have not seen any pullback in anything they're planning on.

In fact, we've seen a lot more discussions with accelerating some of their work. And speed, as you mentioned, is very important to them. And it's something that we pride ourselves on and working innovatively on solutions with them to find ways to bring them on quicker, which is what they want. So we'll continue to work with them, but we're not seeing any pullback, in fact, an acceleration in what they're discussing with us.

And sure, the only thing...

Okay, that's helpful. And then...

Yes, a little delay, sorry. Harry, you might talk about what we see in the near-term pipeline. There's a lot of the data centers that are really focused on cloud compute.

Yes. That's a good point, Lynn. The near-term data centers that we're having under construction are really associated with cloud computing and expansion there. And then as we move later into the plan, that's where some of the generative AI data centers are coming in, and that's when we see the larger load growth.

Perfect. And Harry and Lynn, big congrats on both your Phase 2s, and Lynn, I know we're going to miss you a lot. It's been over 20 years of earnings calls but it's going to be fun watching you take over Board. So thank you much.

Thanks, Shar.

We now turn to Julien Dumoulin-Smith with Jefferies. We now move on to Nicholas Campanella with Barclays.

I'll echo Shar's comments. Congrats to Lynn. I counted the earnings call, it's over 80. But yes, congrats to all that.

Thank you.

But just in the equity that you outlined for this new plan, if you were to do kind of junior sub or hybrid or any type of like equity content like instrument, does that change the equity needs? Or do you just kind of remain -- do you expect this to kind of remain constant through the plan?

Nick, I would just frame the equity a little bit. The equity funding in the context of a company our size is around 1%, 1.5% of the market cap, what we need on an annual basis. And you would expect us to look for the most cost-effective, shareholder-friendly solutions to fund that equity as we look through the plan. And we're planning on using the ATM and the DRIP. But hybrids have continued to be attractive in the market, and you would expect us to look at this and we will.

Yes, definitely appreciate in context of the market cap is smaller. So another question. Just legislation in South Carolina has been a discussion point for many investors. And just curious, I assume none of that is kind of in your plan at this point. If you can maybe detail how it would impact the plan. Are you under-earning in South Carolina? Could legislation, in any way, change your ability to execute differently on the resource plans you put out there?

Yes, Nick, this is Harry. I'll take that one. We're always pleased to take part in energy policy discussions at our states, and South Carolina is no different. This is something that has been going on since last year and is making progress. It's really more tone-setting around support for the dual state system that we operate, regulatory time lines, as well as the all-of-the-above strategy and support for that. So we don't anticipate changes to our plans from the legislation, but it will make the tone in South Carolina stronger for us, and we support that and continue to work with our policymakers on that front.

We now turn to David Arcaro with Morgan Stanley.

And Lynn, best wishes with your upcoming retirement. And congratulations, Harry.

Thank you, David.

Thank you.

Let me see. Brian, just to put you on the spot. We're going to see -- like is the top end possible in 2027, specifically? Or how are you thinking about it just within the specifics of the 5-year plan here?

Yes, David, we're not going to get that specific on the day but we do see load growth stepping up in '27 and that's in our slides. And that's when a lot of these economic development projects that are under construction now will start taking energy and will start serving them. So that's the year where we do see this kind of ratcheting up of growth on the top line, and it does present the opportunity.

Yes. Okay, great. No, that's helpful. Now getting [indiscernible] to centers that you're seeing crystallized in the state, which is great to see. And just curious, just the quantum of data center activity that's back there on the pipeline.

Yes, David, we have a wealth of opportunity in not just data centers but total economic development. We have advanced manufacturing and pharmaceuticals, a very diverse pipeline. Our near-term pipeline and advanced stage pipeline is over 7 gigawatts, and our broader pipeline is at least double that and continues to grow. As Brian mentioned, we take a risk-based approach in what we put in our load forecast because we know these loads can move around and the timing of them.

So we're really putting in the load forecast, items that are either turning dirt or have letter agreements or near letter agreements. And we continue to work with the ones in the pipeline to bring them forward and get them in the load forecast. And we feel very strongly about our positioning for economic development and future growth, not just in data centers but in other economic development projects.

Yes, excellent. No, that's helpful. I appreciate the color. And I was just -- is it possible that there could be even more upside, I guess, based on the pace of the development that you're seeing in the -- in your service territory? I know you've put obviously a lot of thought into this updated load growth, and of course, probability weighted here. But in terms of the pace of -- or the rate of change that you're seeing, is there a potential for further upside over time?

David, we're definitely confident in the plan that we shared with you, and we continue to work to bring as much additional load that we can. And we focus on making sure that we can serve that load reliably and affordably. Like I mentioned earlier, the speed is important. So how can we speed this up, and we continue to have those discussions with the hyperscalers as well as the advanced manufacturing and other economic development folks.

David, I would say as we looked at the pipeline over the last year, it has continued to increase. And if we look out to 2029, for example, 50% of the pipeline is now data centers. So I do think the hard work of the team and bringing customers to our service territory will not stop. And we'll keep you updated along the way on how that translates into growth.

We now return to Julien Dumoulin-Smith with Jefferies.

Congratulations to both of you, guys. Nicely done. And Lynn, all the best. It's been a pleasure over the years, indeed, as they said. Look, maybe just shifting the conversation focus slightly. Can we talk a little bit about cost savings? Just the ability to drive more efficiencies out of the organization. It seems like a potential meaningful year ahead here as you think about the opportunity.

Again, maybe a question more for Harry, if anyone. How do you think about the scale of what you could deliver here, especially against the backdrop of what seems like a reinflationary cycle from a variety of different factors? And how that makes you guys relatively competitive? I appreciate your rates are -- remain competitive against a number of different peers and metrics. But how do you think about that contributing to the backdrop of economic development in that 3% to 4% as well?

Julien, it's Brian. I'm going to start, and Harry is going to come back and add some additional color, but we've been a cost leader in the industry. And over the past many years, leveraging technology, including AI, process improvement and our scale to drive our cost to where they are. And you're recognizing that and thank you for that.

I will say, as our asset base grows to serve a larger customer base, O&M is going to increase. We will continue our cost -- our continuous improvement efforts to keep those increases much smaller than the additional customers we're serving or the revenue that comes with them. But over the time, as we increase our assets, you did see some slight increase in O&M, and I suspect the whole industry is going to see it.

And we don't believe our position as a cost leader is going to change. And we're going to manage this very tightly. But the long-term planning assumption we have is around the 1% CAGR on O&M growth, and that's, again, much less than the assets and customers we're adding.

And I would add, Julien, we have a strong continuous improvement culture. It's really in our DNA to find better ways to do things each and every day. And then our size and scale helps us negotiate better deals with our supply chain partners as well a lot of improvement that we made using technology on our planning to make sure that we have long-term plans and locked-up resources and materials to implement our growth strategy. So that helps us manage our costs.

And we're taking a programmatic approach to some of the generation build that we're doing. That's really saving us a lot of money and really allowing us to have definitive ways to implement this in an efficient and dependable manner. So we'll continue to do that. Brian mentioned technology, and we talk about AI a lot of times on the load side, but that's another opportunity for us to continue to leverage those tools to make us more efficient in the future.

Awesome. All right, excellent. And then -- yes, I thought we're going to talk a little bit more about the consolidation within the utilities here. If I could maybe press you guys a little bit further on that. But related, if I can, I'd also love to hear a little bit about customer deposits and how you think about that impacting rate base and starting point and cumulative rate base. Certainly, we've seen that with some of your peers of late as loads are ramping. Is that a factor here that we should be thinking about, especially as you think about the relative increase in rate base versus the CapEx?

Julien, let me jump in. You may be talking about some of the creative tariff structures for the large load. And I would think of that as being a little bit of noise for us, given the scale of the company. So the rate base numbers that we're sharing with you have a high degree of confidence in the amount of capital that's actually going to be deployed in our rate structure.

And I think the team has done an extraordinary job developing creative tariff structures to attract large load in a way that protects our residential customers, our low-income customers, but also makes our state attractive for economic development.

Awesome. Yes, I was thinking of the 7.7% CAGR versus the 7.2% that you guys had previously, I would have thought maybe the translation of the -- from between the [ 84 and 73 ] would have been a little bit higher is what I was getting at earlier, if there was any offsets between the CapEx to rate base translation.

I think we can go through more specifics with you offline.

Let's take it offline.

Yes. Julien, I would say to you, 12% rate base growth is incredibly strong. And as a great underpinning of what we see, all that capital has been put through our regulatory processes. We have integrated resource plans in place, et cetera. And I would say to you that if I were to call the operators around the table, they'd like even more capital because the opportunities that we see to invest in our business are just really strong. So we'll keep going and delivering the returns that go with it.

Ladies and gentlemen, sorry for the technical difficulties. We'll now turn to Jeremy Tonet with JPMorgan.

Lynn, best of luck going forward. Harry, congratulations.

Thank you.

Thank you.

Was just wondering if you could dig in a little bit more, I guess, on what you're seeing, economic activity clearly, in the Carolinas, a lot of good things happening there. But we've heard other carrier utilities talk about improvements in the Midwest as well. And just wondering if you could touch on what you see in some of those areas in your footprint.

Yes, Jeremy, I'll take that. In Indiana, we're seeing strong growth as well. The main focus that we've seen in our territories around advanced manufacturing and facilities -- manufacturing facilities expanding, we do have some data centers coming into the pipeline there but not to the level that others are seeing in Indiana or that we're seeing in the Carolinas. But we continue to have discussions with them and have plans to bring as much economic development into Indiana as we can. It's a very constructive state. They do a great job of attracting industries and have a very business-friendly environment, and we work side by side with them to advance that.

Got it. And was just wondering, with the change in administration in D.C. if that impacts, I guess, your thought process at all, granted you're making very long-term decisions and 4-year terms aren't ways to really run the ship. But just curious if there's anything out of D.C., particularly as it relates to, I guess, nuclear at this point. It seems like there's some maybe improving momentum with regards to nuclear initiatives across the country.

Jeremy, thanks for that question. And I would say that as we think about the strategy of Duke Energy, it is a strategy that has been built to really serve customers for decades. And as we look at this particular administration, we have shared aspirations with our federal -- the federal administration, but frankly, with our states as well to ensure that we keep delivering reliable power at low cost and that we deploy generation and embrace this growth and economic development that our states are seeing in a way that demonstrates good speed to meet what the market requires but also does it in a way that continues to underpin economic growth going forward.

So that framework and that strategy that we're pursuing, we think, is a strong underpinning both at the federal level and the state level. And if I were to talk about nuclear in particular, we've been -- we're a strong nuclear operator. We are pursuing how nuclear can be a part of our all-of-the-above strategy as we get into the 2030s and beyond. You likely saw that we joined a consortium with TVA and others around a DOE grant. We think continuing to learn more on these technologies are important so that when we're ready to deploy, we have a high degree of confidence that there is a supply chain and engineering design.

Constructors ready to go so that we can produce and operate these new technologies in a way that makes sense for customers. So we are deeply engaged at the state level and the federal level and see a lot of opportunity to support growth across the U.S.

Our next question comes from Anthony Crowdell with Mizuho.

Congrats, Lynn. Congrats, Harry. Unfortunately, most for my questions are for Brian. You guys get a little break here. And maybe the same question, I guess, 1 [indiscernible] and I don't want to part -- I'm not looking to hold you down. I know you addressed it a little bit with Shar.

On Slide 11, you talk about FFO to debt to improve above 14% over the 5-year plan. What's a reasonable cushion to assume that like you would improve by? And the second question is more so, as you've talked about in the back end of the plan, you tend -- you expect to be towards the high end of the 5% to 7% earnings growth. How do you think about the income statement? Maybe we raise the earnings growth rate or we work on improving the balance sheet maybe to the upgrade trigger? And then maybe the same question so I'll leave it there.

Thanks, Anthony. And as we think about our FFO to debt and the size and scale of Duke Energy, I firmly believe 100 basis points of cushion from the Moody's downgrade threshold gives us flexibility to execute our plans with confidence and to deal with uncertainties that come our way. And we've proven that over the past several years. The rating agencies have been tremendously positive towards us.

And the regulatory outcomes that we've been able to work with our regulators on have provided that operating cash flow that the rating agencies are looking for and that consistency of top line revenues that support the credit profile of ours. So I would start with that. So the 14% is a solid number for Duke Energy, given the size and scale and diversity we have, and the rating agencies have been very supportive of us every step of the way.

As we look to time, operating cash flow does accelerate. We're making more investments. Those investments are turning into top line revenues and we see the 14% improving. Again, I'm going to provide more details as the plan progresses, but we feel very good that where we sit and how we see the 5 years playing out in front of us.

And on the earnings question, I would just say that load growth in '27, '28, '29 is a step change for us. It moves up from the 1.5% to 2% we're seeing in '25 and '26 to a 3% to 4% across the enterprise. And that's a substantial step up, and it gives us clearly the opportunity to earn in the top half.

Our final question today comes from Durgesh Chopra with Evercore ISI.

And I echo the congratulations for Lynn, Harry. All the best to you. Brian, sorry, I'll apologize in advance as this is an annoying question. But when I think about the '25 guidance and I compare it to the '24 original guidance midpoint, it's a 5% EPS growth. And obviously, the '25 guidance was lowered because of hurricane and onetime stuff. So I'm just wondering, are you being conservative as it relates to 2026? Or are there other headwinds like interest rates that is causing you to be at the low end versus the original 2025? Any color you could share there?

Durgesh, I would start with, the $6.30 is firmly within our 5% to 7%. As we've looked at our plan, we feel like it's the right level for us. But you see, 1 item I'd point to in our Electric walk-up on the earnings, we have O&M increasing and that is due to 2 things. One, we had resources focused on the storm in the second half of the year, right? So we didn't do some grid projects or some generation outages that we had planned. Those are going to be caught up in 2025. So we have some shifts in O&M from that.

And we also set aside some O&M resources for additional storm costs because we've seen more frequent set of storms impact our regions. And if you wanted to point to 1 thing, I would say that's a timing shift that's showing up in '25 that you might not have had in your model. But other than that, we feel like the $6.30 is right in line with where we need to be, and we have a high degree of confidence in achieving it.

Got it. So it's a little bit of O&M catch-up on timing. That's very helpful. I appreciate that. And then finally, just shifting gears, looking at the ROE charts that you publish annually, thank you for doing that. The Ohio, Kentucky still considerably below your other subsidiary ROE averages. So just wondering what steps in -- you have a footnote there, timing of rate case on that. So what steps could you take to kind of get it to 9-plus percent? Just any thoughts there.

Yes, thank you for that question, Durgesh. Yes, we continually look and work in ways with rate cases and other mechanisms on our riders to improve that. And we will continue to focus on that, working with our commissioners in the future.

The only thing I would add is there can be some variability in ROE from year-to-year as we think about whether it's an outage or we think about other activities that may be going on. I would ask you to evaluate those returns over a longer-term period. And our objective is to earn [indiscernible] rate of return by aggressively pursuing rate cases and cost reductions in a way that position the utilities for success.

This concludes our Q&A. I will now hand back to Lynn Good for any final remarks.

Well, thank you, all. I appreciate the sentiments of congratulations for Harry and for me, but most of all, I appreciate your investment in Duke Energy. We feel like we've presented a strong long-term case for growth, for cash flows, and delivering returns for all of you and look forward to continuing that conversation. So thanks again for joining us.

Ladies and gentlemen, today's call has now concluded. We'd like to thank you for your participation. You may now disconnect your lines.