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

Thank you, Cathy. Good morning, everyone, and thank you for joining Duke Energy's second quarter 2018 earnings review and business update. Leading our call today is Lynn Good, Chairman, President and CEO, along with Steve Young, Executive Vice President and Chief Financial Officer. Today's discussion will include forward-looking information and the use of non-GAAP financial measures. Slide 2 presents the Safe Harbor statement which accompanies our presentation materials. A reconciliation of non-GAAP financial measures can be found on duke-energy.com and in today's materials. Please note, the appendix for today's presentation includes supplemental information and additional disclosures. As summarized on slide 3, during today's call, Lynn will discuss progress we've made executing on our 2018 commitments. She will also provide an update on our North Carolina regulatory activity and our strategic investments. Steve will then provide an overview of our second quarter financial results and insight about economic and load growth trends. He will also give an update on tax reform and our financing plan before closing with key investor considerations. With that, let me turn the call over to Lynn.

Thank you, Mike, and good morning, everyone. Let me began on slide 4 and summarize what has been a very productive first half of the year. We are delivering on our 2018 commitments in key areas across the business. As of June, we have resolved both rate cases in our home state of North Carolina. The DEC order was issued on June 22, following the first quarter order received in the Duke Energy progress case. North Carolina is a constructive jurisdiction, demonstrating a commitment to affordable and reliable power for our customers and financial strength for our utilities. During the quarter, we also continued to make progress on the resolution of Federal tax reform in our jurisdictions. The clarity we have received is consistent with the plans we described to you in February. We now have direction from our regulators in Florida, the Carolinas and Kentucky. In addition, we are awaiting approval of a settlement filed in Indiana and a proposal submitted in Ohio. Based on these results, we have updated our credit metric forecasts. We now expect our FFO-to-debt metrics to be in our target range of 15% to 16% in 2019, a year earlier than previously estimated. We are pleased to see that as of yesterday, Moody's has removed the negative outlook and affirmed our current ratings at the holding company, recognizing the benefits of Duke's scale, our constructive regulatory jurisdictions and our response to tax reform. As we execute on our long-term strategy, we are on track to achieve our financial objectives. With strong results for the first half of the year, we are reaffirming our 2018 EPS guidance range of $4.55 to $4.85 and our long-term earnings growth CAGR of 4% to 6% through 2022. We expect to be at the low-end of the range in…

Thanks, Lynn. I'll start on slide 8 with quarterly results, including our adjusted earnings per share variances to the prior year quarter. For more detailed information on segment variances versus last year, and a reconciliation of reported to adjusted results, please refer to the supporting materials that accompany today's press release and presentation. On a reported or GAAP basis, 2018 second quarter earnings per share were $0.71 compared to $0.98 last year. Second quarter 2018 adjusted earnings per share was $0.93 compared to $1.01 in the prior year. The difference between reported and adjusted earnings was primarily due to changes related to the DEC rate case order. For the quarter, lower adjusted results compared to the prior year were primarily due to a lower tax shield on holding company interest. As a result of the Tax Act, higher depreciation and higher O&M, partially offset by warmer weather and contributions from the DEP North Carolina rate case. Within the segments, Electric Utilities and Infrastructure results were down $0.03 compared to the prior year. The primary drivers were higher depreciation due to our growing asset base, higher O&M driven by storm costs, and cost related to the resolution of FERC accounting matters that impacted wholesale. Partially offsetting these drivers were favorable weather, the contribution from the DEP North Carolina rate case and increased rider revenues. The growth in rider revenues was primarily due to the recovery of our grid investments in the Midwest and the recovery of qualifying facility power purchases through the fuel rider in North Carolina as a result of House Bill 589. Shifting to Gas Utilities and Infrastructure, as expected results were flat in the quarter. We continue to expect our LDC businesses to provide the bulk of their remaining earnings contribution in the fourth quarter. In our Commercial…

Thank you. And we'll take our first question from Jonathan Arnold with Deutsche Bank.

Good morning, guys.

Hi, Jonathan.

Good morning.

Thanks for reiterating your prior statements on the guidance range which we were wondering where that was in the slide deck.

We appreciate the feedback, Jonathan. You're closely reviewing the slide deck, which is good.

Yeah. And then, could I just ask about the industrial sales? Steve, you mentioned that you've been seeing curtailments, but which segment is that in and why are you – can you just give us some more color into your confidence that there's going to be a rebound second half?

Well, I think there will be. We've seen a few customers, about three customers that have had some closings or some outages. I don't want to give any customer information that's specific. We've seen that in the Midwest and in the Carolinas. I will give that information. But we think these are singular, and we think the economic health of our service territories are good, they're good places to do business, and we're seeing economic projects landing in our footprint. And I do think that as we move forward, we'll be lapping, if you will, quarters where these outages began. So, I think we'll see some uplift in the industrial load as we move to the last half of the year because of just that fact.

Without naming names there, can you share what industrial sectors we're talking about?

We've seen some textiles. We've seen some paper and we've seen some metals.

Okay. Great. Thank you. And then, the other question we had was on, you said you were going to come out with the winners in the 589 RFP shortly. Can you remind us sort of what you have in the plan for the utility in terms of renewables, owned renewables, and then maybe what's currently in for Commercial Renewables?

Jonathan, we put all of the renewables capital in one place in the five-year plan, so it's under Commercial Renewables and it's about $1.5 billion over the five-year period. The 589 RFP will close September 11, so in the third quarter or fourth quarter, we should have more clarity on that and we will be bidding into it as I know others will. We have the opportunity to win up to 30%, but also have an opportunity to buy beyond that if we think the economics work for us.

So, we should think of the placeholder in Commercial as potentially being partly in the utility eventually, but it's just all there at the moment?

That's right. That's right.

Thank you very much.

And I think the other point to note on that, Jonathan, is because it's in Commercial, we would expect investment beyond North Carolina in those numbers, right. So, as we continue to pursue commercial development. So everything is in there and as we get more clarity on how the RFP plays out and so on, we'll of course update those numbers. So, there could be some upside potential, but I think the $1.5 billion is a good planning assumption.

Thanks very much.

And we'll take our next question from Julien Dumoulin-Smith from Bank of America Merrill Lynch.

Hey, good morning. This is actually Claire stepping in for Julien.

Hi Claire.

Hi, Claire.

Hey, good morning. Thanks for taking my question.

Sure.

So, my first actually has to do with the South Carolina rate case. So, I know there's been a bit of a political situation down there. Just you're thoughts on timing and your prospects on the case?

Yeah. So Claire, we're evaluating the case in South Carolina and as you know from our history, we typically have investments impacting both of our jurisdictions similarly. So, you can think about a South Carolina case perhaps later this year, towards the end of the year that would then be – go through the process in 2019.

Got it. Anything more than a 3Q or 4Q event or just generally second half of year?

I'm sorry, could you repeat that, we had trouble hearing you a little bit?

Oh, no problem. Any specificity besides end of the year, maybe 3Q or 4Q or are you just saying for now end of the year?

I would target fourth quarter for filing of a case. It won't be sooner than that.

Got it. That's helpful color. And turning to North Carolina here, do you have any color you can give right now on the grid mod rider strategy for the legislative session for next year and anything we should be watching in the ongoing state elections?

Claire, we have talked about our strategic priority on grid for some time and described that as being a parallel process between the regulatory and the legislative arena. We have a number of options that we're considering. And our objective is to continue to advance the dialogue. We think there are great customer benefits, economic benefits and our role will be to continue to engage with customers and stakeholders to build momentum for what we're trying to achieve. And so, I think what I would leave you with on this is our strategic priority around this has not changed and the work continues and as we have more clarity about specific tactics that we'll pursue, we'll discuss them with you at that time, but it remains front and center priority for us here in the Carolinas.

Thank you for that.

Thank you.

We'll now take our next question from Michael Weinstein with Credit Suisse. Maheep Mandloi - Credit Suisse Securities (USA) LLC: Hi there. Good morning. This is Maheep on behalf of Mike.

Good morning.

Good morning. Maheep Mandloi - Credit Suisse Securities (USA) LLC: Thanks for taking the questions. Just on the ACP, could you discuss any potential upside opportunity at Piedmont from the pipeline?

The ACP is an important investment into the Carolinas to support the Piedmont system, and we have capital in the plan in connection with that expansion that is part of the ordinary course business of supporting the Piedmont system. So, I don't have anything specific that I would point to, but our hope and expectation is that with that additional mainline pipe into the Carolinas that we will see further expansion opportunities with industrials and new customers in that Eastern part of the state that will continue to drive investment. Maheep Mandloi - Credit Suisse Securities (USA) LLC: Sorry about that, that was on mute. Thanks for the answer. And just on grid mod rider, could you just talk about how these rate case settlements have helped you getting support for an any grid rider legislations?

I think about the partial settlement in the DEC case as being an indication of our ability and willingness to sit down with stakeholders, to come up with collaborative approaches. I think it's particularly important as you think about policy and investment strategies and you've seen us in the Carolinas with Renewables, with HB 589 and South Carolina with solar with Senate Bill 236, you saw the partial settlement in the DEC case and I think engagement of stakeholders is an important part of progressing any strategic objective and our approach here will be to continue to advance the dialogue in the Carolinas around grid investment. We have a number of options, more frequent rate cases, regulatory arena, legislation and we will be focusing on all of those. The strategic priority of achieving an outcome remains key to us and our work continues. Maheep Mandloi - Credit Suisse Securities (USA) LLC: Thank you for answering the questions.

Thank you.

We'll now take our next question from Christopher Turnure with JPMorgan.

Good morning, Lynn and Steve.

Good morning.

Good morning.

Appreciate the reiteration of the 4% to 6% and getting back into the range. I wanted to know given some of the positives that you've received over the past three or so months on the regulatory front and on the credit agency front. Has anything, kind of, changed underlying that 4% to 6% range for better or for worse or is the kind of makeup of how you're going to grow into 2019 and 2020 changed at all?

Chris, it hasn't changed. Our assignment here is to execute the plan that we've put in front of you and that's exactly what we're doing. And I think the track record we've demonstrated here in 2018, whether it's on rate case execution or tax reform resolution or the balance sheet and credit metrics, we've executed across all of those things and that process will continue. And so, we look into 2019 with investments and rate activity, Atlantic Coast Pipeline. We have a number of things that are in front of us and I would summarize our job is to execute and that's where our focus is.

And then, my second question is on cost cuts, kind of, underlying the plan. Clearly, you're planning on filing in the Carolinas to support the growth and you have riders in most other jurisdictions, but how important is cost cuts to, kind of, any lag catch-up or preventing any lag from opening up during that time period?

Chris, keeping a focus on productivity and cost while maintaining a focus on operational excellence and serving customers is our job every day. And as we look at what's in our plan, we're planning for O&M to be flat over the period, and have demonstrated our agility around O&M over the last several years, as we have responded to impacts in our business, and we feel like we have a good track record of doing that, and we will exercise that agility if need be. And as I said a moment ago, that's part of execution in my mind.

Yeah, so I would add that controlling O&M costs is essential every day, and it gives us headroom to make more capital investment for our customers that are beneficial at lower rates. So, we work at that every day.

And we should think about that flat over the time period as flat in every individual year or is that just an average?

I would think about it every year.

Okay, excellent. Thanks guys.

Thank you.

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

Thanks, guys. Hi, guys.

Morning.

Hello.

Morning. So, on the FFO, congrats on the improvement, or at least the earlier kind of hitting your target.

Thank you.

Just wanted to understand, what does that mean from a capital allocation perspective? Is that creating headroom for something you could do incremental in terms of CapEx or on the Commercial Renewables side? Just wanted to understand, what's the implication of that for the story?

I think capital allocation is something, Praful, we look at every year in connection with our five-year plan. And we do have some opportunities coming up with HB 589, the Commercial business always remains. But our commitment to that balance sheet strength is also critical and maintaining within those targets is the way we manage the plan, and so we'll provide an update on capital allocation and optimization when we come to you in February with guidance. But I wouldn't share anything more specific than that at this point. Steve, any further thoughts?

I agree. We'll look at our capital plan. We have an extensive capital optimization process where we look across jurisdictions and functions and try to find the optimal placing of capital. And we'll continue that process but we'll have further updates later.

Got you, thanks guys. And then just stepping back I think like you said Lynn, you've had a very good trajectory in 2018 with some good rate case outcomes or regulatory outcomes. Clearly your credit pressure is now behind you or mostly behind you. How are you now looking forward strategically? I get the execution is still the focus which clearly is great, but strategically is there anything else in your radar that you are thinking about that needs to be done either M&A-wise or anything else from a portfolio management perspective?

Nothing specific on portfolio management, Praful, but demonstrating organic growth is – I'd just like to emphasize that as part of execution, so this is getting this grid investment to work, it's delivering the benefits to customers, delivering returns, continuing to grow the dividend. That I would put at the top of the list of strategic priorities for the company.

All right. Great. Thanks guys.

Thank you.

Thank you.

We'll take our next question from Andrew Weisel from Scotia Howard Weil.

Hey good morning everyone.

Good morning.

Good morning.

Before I get to my question, I just want to clarify if I heard you right. For grid modernization, are you suggesting that the rider would have helped, but it's not the only way and would you move forward with accelerating some of those initiatives without a potential legislative fix?

So, the grid rider is not the only way, Andrew, I would say, and we will always pace our investment in a way that makes sense for the recovery strategy. That's part of capital optimization that Steve talked about a moment ago. And so, our work continues here to pursue appropriate next steps. We'll keep the dialogue going, bringing stakeholders together on the way forward. But we'll look at capital relative to the tactical plan around recovery and make the appropriate adjustments that we need to make.

Okay, good. That's helpful. Then a two-part question on Renewables. First under HB 589, you mentioned there's that 30% cap that you could acquire beyond that cap. When might deals like that potentially be announced? Would it be at the time of the RFP decision, during construction or maybe after it begins operations?

I believe they would be after bids have been selected and winners of bids have been selected that some of those types of transactions might subsequently occur.

When I think about September 11, RFP closes, there'll be some reviewed analysis. I would assume following that, winners would be announced subsequently. Then, we have an opportunity to perhaps purchase some. We'll see where we performed in the RFP. So, this will play out over the next couple of quarters, it's the way I would think about it Andrew.

Great. That's helpful. Then lastly, if I understand correctly, Shoreham was your first tax equity financing. How would you describe your appetite for more tax equity deals going forward? And how would you describe the market for it?

We do have an appetite for using tax equity in our deals. Shoreham was the first that we've executed on. And there is a market out there for tax equity. There is the tax appetite there and that's useful to us in our Commercial Renewables business. So we'll continue in that direction.

Very good. Thank you.

Thank you.

That concludes today's question-and-answer session. Ms. Lynn Good, at this time I would like to turn the conference back to you for any additional or closing remarks.

Well thank you everyone for your questions and your interest and investment in Duke Energy. We look forward to speaking with many of you over the days and weeks to come and look forward to a successful third and fourth quarter. Thank you.

And that concludes today's presentation. Thank you for your participation. You may now disconnect.