They're at the vanguard of a green transition. They're delivering locally. In a time of global energy turmoil, utility companies are having their moment in the sun. Energy us on everyone's mind around the world. Energy independence, energy prices, energy availability. Utilities historically have been viewed as stodgy and slow moving. I would not be here if it were anything like that.
The youtub is that they're going to thrive in this environment are the ones who have a diversified energy mix, particularly the ones who have higher percential of clean energy resources that is reliable, such as nuclear as well as wind and solar and gas in the mix to beck those up. Duke Energy, providing regulated gas and electric services to about ten million customers in seven U S States,
has flourished in the spotlight. Revenues have rebounded since COVID rocked the industry in the volatility that's driven profits has also created pressures. Were in a period of inflation. We're in a period where commodity prices are high. So every season of leadership is going to have some particular challenge, and Duke will meet these challenges with fresh leadership. After almost a decade at the helm of Finance, Steve Young decided to step away from the role in September. Company
veteran Brian's avoid became CFO. Why now retire from your position a CFO? I thought it was time. It made a lot of sense. Brian was ready. Succession planning is something that is ongoing at Duke Energy, and this gave us an opportunity to promote Brian, someone who has great financial background, good market and economic background, who also has led businesses so understands P and L and so it just felt like the right time to begin that transition.
That transition in the C suite comes as Duke and barks and a transformation of its business aiming to retire all cold by achieved net zero carbon emissions by and reshape its portfolio around natural gas, nuclear power and renewables where we're basically rebuilding generation and transmission and distribution to meet the needs of the future. We're going to invest at billion over a decade. That is a staggering amount of money, which means it's a staggering amount of things.
We've got to go by, replace, install, make work, and do it in an affordable way for our customers. That's a tall order. It's a team effort. So boy, we'll have plenty of support from Young who's now Duke's Chief Commercial officer, and Lynn Good, who was once Dukes CFO herself. Any advice you want to give him from your your CFO hat CEO hat you can't give advice the CFO hat.
The advice I gave him was, you know, jump in with all fours and make this job as big as you can, because you said, at the nexus of so many things in the chief financial officer role, the business, the regulation, the finance, delivering value to investors into customers, and I think Brian is very capable of doing that. It's an amazing time to be in this role in this moment, extremely and daunting. There's a lot going on,
but I wouldn't have it any other way. Here's what Duke's power generation mix looked like with coal and oil nearly a quarter of the portfolio. Here's how it should look by renewables will more than triple as a share of the company's power output. We have been putting pieces in place in our regulated business for several years to really accelerate this clean energy transition. Renewables bring um price stability because there's no fuel right to either the sunshine
or the wind. There's typically a significant capital of front investment,
but it's predictable. Natural gas is needed to balance the grid and the reliability needs because the wind doesn't blow all the time and the sun doesn't shine all the time, and batteries can't bridge the gap enough right UM so our plan is to reduce natural gas over time, but use it as a bridge fuel as we proliferate renewables and nuclear has been just a tremendous benefit for our customers and we see promise in future nuclear in the twenty thirties as we moved to the transition, that's not
the only transition. Brian Savoy will manage. Duke wants to focus its time, money and resources, and it's regulated businesses and it's looking for a buyer for its commercial renewable energy holdings. Our commercial business is one that I ran, so I'm very familiar with UM and it served us very well. But it is only five percent of our company right and and our regulated business has a clear path to growth, and the competition for capitals fierce inside our company, and there are a lot of a lot
of interests. There's a lot of money wanting to invest in green energy. They are from a strategic review right now of this business, and I think it makes sense to do so because in the U. Tudor space, to really get credit in evaluation for a non regulated business such as renewable generation, right, you have to do it at the much larger scale, and it does make sense to take a closer look at maybe somebody else is a better story of capital here and recycled capital to
redirect that into the regulated business. Duke forecast earnings growth the five to seven percent through driven by a lot of capital investment. The company intends to spend a whopping one forty five billion dollars in the next decade, with the Lion share going to changing its energy mix and modernizing its grid. Brian Savoy is in charge of deploying this capital under highly challenging conditions, including the highest inflation
and most volatile energy prices in decades. When you get a surprise like hal fuel prices, we need to adjust things like O and M, and so we work with operations and and the relationships I have throughout the company are positioning me well to help influence our operators to adjust their cost as we need to for customers. Do you feel that reducing costs right now while also increasing spending is different than in the past because of the
inflationary pressures, because of the energy transition. I would say yes, there are a lot of pressures on the business that we might have had in short spells in the past, but it feels more systemic that we're going to see, you know, inflation for some time, higher commodity prices, with the kind of volatility. If someone comes to you and say, hey, Brian, so I need some more money from my division to do this, are you like the no guy or or are you able to be really nimble and make sure
you can be the yes guy? I would say I'm the how can we go? Okay? Um? But if we say yes to a request that was emergent, we've got to say notice some other things. So how do we prioritize and make it all work? CEO and former CFO and good knows how hard this balancing act can be. I think any time you're trying to balance, you get pulled in various directions. Um, there will be a pull to build more renewables by certain of our stakeholders. There will also be a pull not to go that fast
because it could be too expensive. Maybe our industrial customers are worried about price. Vulnerable customers worried about price. So trying to strike that right balance with policymakers, with customers, with investors is a challenge in any moment, and there will be a challenge in this one. And take me inside some of the conversation you guys are having to do right now. So you and Lynn and and other CS executives sitting around the table when you guys talk
about most right now. Supply chain has been a moving target of issues right um last year at this time we were looking at solar panels and how do we lock in our solar panels that we need for the next several years to ensure we can execute the clean energy transition. It has moved to different components like transformers,
which are essential for the grid. Interest rates and the pace at which the FED is moving interest rates is something we talk about each and every week and when will that flatten out and how will that impact our business. We are a very large debt issuer, so we watched this extremely closely because it affects our call structure. Do you want to wait until interest rates level off and then does that delay your capital raising to deploy your plan.
We don't wait, but we do plan. You know, when there's opportunistic times to to issue debt, we will go with larger, larger pieces or versus smaller um and we can work with the length of the debt. Right if tenure is price more attractive than twenty or thirty, we'll we'll use the tenor to optimize the interest. That's all I knew. Yeah, yes, Brian Savoy is taking on a new challenge as he steps into the CFO position at
Duke Energy. It's really just his latest challenge. He's touched virtually every area of the company over the last two decades. I started my career Duke in Houston in our trading business UM and I was with Deloitte twos before I joined because one of my clients. You know, what I saw in Brian was tremendous enthusiasm and energy. He was ready to take on new assignments. He was thinking about advancing the ball for the corporation as opposed to any
personal goals and that and that came through. He helped us on a number of complex projects and the more we gave him the more he continued to grow. I've had five different roles in ten years, and I've seen different parts of the company from you know, transformation, leading natural gas and commercial strategy. This has prepared me for the role I have today. What's the advice that you've given him? You know, I've I've told him a couple of times, You're not going to get a home run
at every avat. There's gonna be days where things go wrong the patient, be calm, keep your eye on the ball for the future. That the thing you want to get to. Eventually you'll have bumps in the road. Fixing things that go wrong and smoothing out bumps in the road is what customers expect from energy providers, and for Duke's Renewable Assets, that process is overseen from one room in an office building in Charlotte, North Carolina. Bryan's a
voice showed me around the company's renewable control center. This is where operators are monitoring and managing over five thousand megawatts of renewables across the United States. How would this differ from like a conventional asset monitoring center, Yeah, so assets. Historically they would have the monitoring center on site so
you might have an operator with screens. But at the site whereas this we can do ninety sites, there's offshore wind, onshore wind, solar, and they're looking for the smallest change in output because every megawatt hour is money. You put an asset in. Let's say it's a hunter megawatts, you expect to get a hundred mega ontes each and every
hour that the resources there. The resource could be sunshine or it could be wind, and when you get ninety or eighty, you're you're not producing what you can and it can be because the asset isn't isn't working properly. Maybe maybe something hit the turbine blade on the wind for maybe the solar panel has debris on it, or it could be the solar intensity is not quite there.
When one of these assets isn't producing full capacity, we're putting another resource on and we're having to toggle this on a consistent basis, and in this as clouds come, it's this is by the minute, this is not or the hour it's off now it's by the minute, and then it'll fall will come back, and we have assets that follow this digitally as well, so that we can
keep a consistent flow of electrons on the grid. The operators in this room can respond to incoming data with immediate action, remotely controlling wind turbines, solar panels, and batteries. It's an other example of using digital and technology tools to make us more efficient, to make us more productive, minimizing the amount of people we have to have running around and observing and giving us the statistics to really
be able to maintain a monitor those facilities. So we couldn't see degradation and output as fast as we do now with the technology and the digitalization of the system. Now, we still need technicians nearby, and so we use traveling crews that can go um say sites in Kansas versus sites in in South Texas versus Central Texas and across the West. We have around the clock shifts, but about twenty people rotate through these shifts and again recovering ninety sites.
We've got about half a dozen people here at any given time managing it. You could think that would scale at overtime as renewables grow in the United States. So would you say that as you invest more renewables it's a hardware thing or a software thing, Like where do you think you're gonna spend the most money doing that. Obviously, the software will continue to improve over time, and the innswers on the equipment are very important to again identify
those degradations and output. But it's deploying the hardware, deploying the assets on the ground, getting the sites ready, connecting to the to the grid is a huge lift. Duke's hardware and software mix keeps evolving and so does its workforce. Retooling also means retraining. We've moved people to the renewable space. Some of these folks used to be in coal. We've moved people to cybersecurity, which is a growing area that we need more and more because as everything gets digitized,
there's more opportunities for bad actors to penetrate. So we need high cyber security skills and when you match that with operating skills, you really have a beautiful mix that makes a strong strong operator. Operators here have plenty of micro details to keep track of, but there's a macro
factor on their minds as well. That's the weather. We have maps the United States just to going to give the operators bearing of what's going on in the country, and we have plotted on it where our renewable sites are so they know if if there's a weather pattern, weather system coming, I expect that in that in that area. How do you manage extreme weather? So let's say we have a wind farm in the west and the windstorm
is coming. You know, the assets will turn off when the wind speeds exceed a certain level automatically because there's there's risk of of breakage of the blades and damage to people and assets and stuff. We know windstorms coming that that might damage the solar or hail storm for instance. Right, Um, we can watch those assets closer. We can put a crew on site, but this team would be dispatching those crews on onto the location. And that's where like the
weather map and the team like really works. Yeah, that's right. From hurricanes in the southeast to wildfires in the west, extreme weather events are becoming more prevalent and more intense. Utility companies are bracing for greater risk. When we think about the impacts of extreme their events on the grid, large group connect and resources would still such as large scale solar farms and large scale wind fronts would still rely on the centralized grid to deliver electricity to the
load centers. So to the extent of the grid is knocked out by a hurricane, those assets would go offline as well. So, in addition to invest in in green generation resources is extremely important, and companies pay attention to
Greek hardening measures. We're seeing more of it, more frequency of of severe events and how we predict those, monitor those and and estimate the damage using data analytics and machine learning to say how many customers might be out if this happens, what generators are at risk, and all that That modeling goes into our planning for what we put our investments. We talked about the capital plan earlier. All those investments are informed by the climate trends that
we see across our system. The next decade for Duke Energy is pretty clearly mapped out. Raise and spend million dollars on a massive clean energy transition, put the bulk of those investments into regulated businesses, while investigating the sale of non core assets to fund that push. It'll all be up to new CFO Brian Savoy to execute this plan and make sure it delivers optimal financial growth. The
motion is adopted. Congress passed the Inflation Reduction Act in August, putting provisions in place that make his task more manageable. The Inflation Reduction Act provides incentives for renewables, it provides incentives for battery storage, and it provides incentives for nuclear. All of those incentives for a regulated company go right to our customers. They reduce directly the price of our product. So when I build a renewable product, it's gonna cost
me less and will cost my customers less. It's gonna help our renewable transition. For example, one thousand megawats of solar equates to about sixty million in annual production tax credits. We're gonna have thirty thousand megawatts of renewables on our system by The Inflation Reduction Act has been a very important piece of legislation. It's not only that it creates a number of incentives for a variety of assets, right.
It also is very durable and long term. So instead of a patchwork of different tax credits that we've seen in the past, it actually creates a glidepath going well into twenty thirties for this long term transition on the grid. Political winds may shift, and regulations are always subject to change. For the moment, policy in Washington aligns with Duke's strategic goals, but they feel like there's a paral partnership. Now we
have um a voice at the table. I have a lot of conversations with the Treasury Department about about tax policy and and as they define the rules around the i ra A, they will seek input from people like us and we will weigh in. This is what you should think about as you write the detailed rules to implement this this act. When it comes to the relationship between utility and policy makers and regulators, those have always
been extremely important. Those dudes that cultivate have cultivated those relationships in the constructive US and whether they've been good stewards of capital and operated the system well and tonto consideration interests of various stakeholders in addition to you know, the equity and dead investors. Of course, UH, those of yous enjoy con relationships with the regulators in our experience right and that over time translates into constructive rate outcomes
and UH and better recovery mechanism. Recovery mechanisms are set at the state level. They also help companies and customers absorb the capital costs of the clean energy transition. We cannot adjust our price without working. The regulators and modern recovery mechanisms allow us to adjust price more frequently and align with our investments so that when the investments start
causing expenses, revenues follow and then there's alignment. Otherwise, we call it regulatory lag, where you have expenses before we can earn revenues on those assets. Historically, would we would build up investments, then have what's called the rate case and have a large increase in one one slog. The modern recovery mechanisms place assets and service each year essentially, so you're smoothing rate increases over time. So customers can
plan better and we can plan better. Even with meticulous planning and regulatory tail winds, us utilities must proceed with caution. Europe's energy crisis highlights the fight between green energy and energy security, raising questions about how fast and hard the world can pivot. There's been criticisms say in Europe that they were trying to go too fast into renewables, for example, and therefore they left out nuclear and they sort of shuttered coal plants and now they're paying the price in
that respect. Um, what's the right pace? I think the pace is maintaining balance with a reliability and affordability. That's the only way we know to to gauge pace. We will not put a plan together that we don't have a high degree of confidence. We can serve our customers every hour, every season, and we have to keep an eye on affordability. We call it a responsible balance transition. The transition away from fossil fuels is coming. I mean is think about coal. Five years ago, you could get
as much coal as you want. Now coal is constrained and it's going to become even more constrained. So operating coal assets is not even going to be an option as we move through time. So um, the convergence of energy independence and security I believe is coming soon. That's the state of play for Brian Savoy as he starts his tenure as Duke's CFO. I asked him what he sees when he looks ahead. What is the biggest opportunity over the next ten year. It's a CFO that you're
most excited about over the next decade. I feel like utilities have a moment to really make a mark on society. And again it's long lasting. It's gonna be for our grandkids, and their grandkids. So putting the utility sector in prominence of the world, that's what I want to do. What's the biggest challenge? What are you most worried about the
next ten years and doing your job? I think the biggest challenge is balancing invest the investments we need to make and the transition in front of us with the cost to customers, because the oversight by regulators is only getting more and more and more right, and we've got to be more clear on the customer benefits of every
dollar we spend that turns into value for customers. And I can see this playing out in just hand to hand combat over the next decade, and we will work it and we believe the investments we're making will will meet that bar. What is a skill that you have as CFO that you think will help that. I'm wired for value. I don't like waste at all, and when I see things that we need to change, I have the courage to make it happen. And as CFO, I'm
in a position to really move that. And Duke, and what's a new skill set of knowledge that you're excited about it over the next ten years? I would say the new skill set would be how to balance all of the external views of the company with the internal I've I've worked inside this company and have great influence, but ensuring that a similar level of influence is out in the external world. What's the best advice you've you've received coming into CFO. You know, I will go back
um many years ago, over over ten years ago. I was working for Lynn and she told me, Brian, the skills you have positioned you for a wide range of roles. I had no idea what that meant then. This was like two thousand nine, But as I've looked at my career and she has moved me to gain experience across Duke in the right areas of operations and strategy. That advice back then I didn't appreciate, but I appreciate it now more than ever. I'm Alex Steele. This is Bloomberg SI