01—Abstract
Summary
Summary of the 10-K filed February 27, 2023. Cited figures are marked; the original filing is the authoritative source.
Duke Energy's FY2022 10-K shows a company in the middle of a major clean energy transition, with a headline GAAP result depressed by a one-time charge on its planned exit from Commercial Renewables.
Reported net income available to common stockholders was $2,444 milliona ($3.17 per share), down from $3,802 million ($4.94) in 2021, primarily because of an estimated $1.3 billion after-tax loss from discontinued operations tied to the Commercial Renewables Disposal Groups. Management's adjusted EPS, which strips out special items, rose to $5.27 from $4.99. Note that the 10-K as filed shows Duke Energy Indiana's $175 million coal ash charge already included, and the reported figure of $2,444 million reflects that revision.
Operationally, Electric Utilities and Infrastructure (EU&I) drove results, with segment income rising to $3,929 millionb on higher retail volumes and favorable weather, while Gas Utilities and Infrastructure income increased to $468 million on margin growth. Operating cash flow fell to $5.9 billion from $8.3 billion, largely because of roughly $2.6 billion of under-collected deferred fuel costs, which Duke is recovering through rate proceedings and which is funded with increased borrowing. Duke plans to invest over $145 billion in its regulated businesses over the next decade, with 2023 projected capital expenditures of about $12.2 billion.
The key investor watch items are regulatory recovery and financing needs. Pending rate cases include a Carolinas filing requesting $823 millionc (about 15.7%) and a Progress North Carolina filing requesting $615 million.
Coal ash closure costs, a $175 milliond Indiana charge, and litigation over Texas Winter Storm Uri add uncertainty. The dividend was paid for the 96th consecutive year, and the company targets a 65% to 75% payout ratio on adjusted EPS.
02—Key points
Key Highlights
- GAAP EPS of $3.17 vs. $4.94 in 2021, driven mainly by a ~$1.3B after-tax loss from discontinued Commercial Renewables operations; adjusted EPS rose to $5.27 from $4.99.
- EU&I segment income increased to $3.93B (from $3.85B) on higher retail sales volumes, favorable weather, and rate case contributions; GU&I segment income rose to $468M (from $396M).
- Operating cash flow declined to $5.9B from $8.3B, reflecting ~$2.6B of under-collected deferred fuel costs and higher working capital needs.
- Capital plan of ~$12.2B in 2023 (rising to ~$13.4B by 2025), with over $145B of clean energy and grid investment planned across regulated businesses over the next decade.
- Pending rate cases include Duke Energy Carolinas' $823M (15.7%) North Carolina request and Duke Energy Progress' $615M North Carolina request, both tied to multiyear rate plans under HB 951.
- Coal ash exposure remains significant: ~$8-9B estimated total closure cost in the Carolinas, and a $175M pretax charge at Duke Energy Indiana after an Indiana Court of Appeals ruling on February 21, 2023.
- Planned sale of Commercial Renewables (~5,000 MW portfolio) expected in 2H 2023; the 2022 impairment is ~$1.7B pretax, and the company plans to use proceeds for debt avoidance.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2022filed February 27, 2023Financial Statements
FY2022 against FY2021
| Line item | FY2022FY2021 | Change |
|---|---|---|
| Revenue | $28.68B$24.49B | +17.1% |
| Operating Expenses | $22.78B$19.13B | +19.1% |
| Operating Income | $6.01B$5.50B | +9.3% |
| Interest Expense | $2.44B$2.21B | +10.5% |
| Net Income | $2.55B$3.91B | −34.7% |
| EPS (Basic) | $3.17$4.94 | −35.8% |
| EPS (Diluted) | $3.17$4.94 | −35.8% |
| Shares Outstanding (Basic) | 770.00M769.00M | +0.1% |
| Shares Outstanding (Diluted) | 770.00M769.00M | +0.1% |
05—Questions
Frequently Asked Questions
Why did Duke Energy's GAAP earnings fall sharply in 2022 even though adjusted earnings grew?
The decline came primarily from the estimated impairment on the planned sale of the Commercial Renewables business, which is reported as discontinued operations. That loss, roughly $1.3B after tax, cut GAAP EPS to $3.17 from $4.94 in 2021. Adjusted EPS, which excludes this and other special items such as litigation, workforce realignment, and regulatory matters, rose to $5.27 from $4.99 on higher volumes, favorable weather, and rate case gains.
Why did operating cash flow decline so much in 2022?
Operating cash flow fell to $5.9B from $8.3B. The main driver was roughly $2.6B of under-collected deferred fuel costs caused by sharply higher natural gas, coal, and purchased power prices. These amounts are deferred as regulatory assets and recovered through future rates, so the cash impact is timing-related, but it required increased short-term borrowing in the interim.
What are the main regulatory and legal risks to watch?
Key risks include the pending North Carolina rate cases (Carolinas $823M request and Progress $615M request), coal ash cost recovery, which the Indiana courts have partly disallowed and which led to a $175M charge, and nuclear license renewal timing. Litigation related to Texas Winter Storm Uri and the Carolinas' Dan River dam lawsuit also carry uncertain outcomes. Management states that most costs are expected to be recovered through rates, but recovery is not guaranteed.
How is Duke Energy funding its large capital plan, and what are the leverage metrics?
Duke plans about $12.2B of capital spending in 2023 and expects to issue roughly $6.7B of new securities in 2023. Capitalization is about 59% debt and 41% equity. The Master Credit Facility covenant caps debt-to-capital at 65% for most borrowers (70% for Piedmont). The company also raised about $2B from GIC through a minority stake in Duke Energy Indiana, closed in two tranches (2021 and December 2022), and has an ATM equity program of up to $1.5B.
Is the dividend at risk?
Duke has paid a cash dividend for 96 consecutive years and increased it about 2% annually in 2021 and 2022. The company targets a payout ratio of 65% to 75% of adjusted EPS. The 2022 dividends paid were about $3.2B, so the dividend is covered by cash from operations, although the 2022 operating cash decline increased reliance on external financing. Future payments depend on earnings, capital needs, and Board discretion.
06—Continue