00:00 Speaker A
earnings highlighted electricity demand that continues to rise across its footprint. The company narrowed its outlook near the top end of its profit outlook. Data centers are a major part of that growth story, and the company is investing heavily in grid upgrades and new generation to meet that growth, while also trying to keep customer costs in check.
00:19 Danny
Danny. Let’s discuss further. please to say that the Duke Energy CFO, Brian Savoy is joining us now. Brian, great to see you. And look, it’s it’s a beat across all metrics. So I want to ask about the sustainability of this because as you deploy roughly about $2 billion a month to build out the power grid, it is ultimately customers who have to pay for that. Given what we saw on Tuesday night, given that customers and localities are pushing back against this question of affordability. Can you continue these types of results?
01:05 Brian Savoy
You know, Danny, it’s great to be here and and thank you for uh having me this morning. Um, yes, we can. Uh, you know, customer um cost and affordability has been and always will be our priority. Uh, we we we are tasked with delivering reliable energy for customers at the lowest possible cost. And, um, and in the areas we serve in the country, population growth is uh, around 2%, which is very, very strong. Uh, that translates into businesses and as well as as data centers coming to our territories. And we are building the the critical infrastructure needed to serve those customers and tapping every opportunity to reduce cost, uh, you know, from tax credits to, uh, operational efficiencies, uh, to Department of Energy grants and loans. All those things help keep cost low while we’re in this major CAPEX cycle.
02:18 Speaker D
But Brian, how do you ensure that it’s hyperscalers and not customers that are paying for the power and grid upgrades that they require?
02:26 Brian Savoy
You know, we were one of the pioneers in setting the contract structures with hyperscalers, uh with minimum billing demands, with capital advances, termination provisions, credit support. All these things ensure these customers pay their fair share. Uh we are codifying those in tariff contracts across the states we operate in that make those those provisions public, but we we are certain that these these uh data center customers not only uh are paying their fair share, they’re providing value to the communities and the customers over the lives of the contracts that uh we wouldn’t have otherwise. So it is a really a win-win once you look through all of all of the um the noise with the data centers.
03:22 Danny
I mean, even then at what point, Brian, is noise more than just noise? Do you expect a slow down at all at least on the margin? Again, as we look at places like Texas where you saw local elections starting to usher in a wide swath of more Democrat candidates, as you see governors that ran on slowing data center growth, putting on moratoriums, capping some of it. Do you expect at all some growth, some slowing of growth in AI data centers?
03:59 Brian Savoy
Now, it’s a great point, Danny. Um I think the answer to this is collaboration. You know, deep collaboration with the communities to uh demonstrate the value of of the data center being cited in their localities and how they will uh defray property tax burdens on residents and provide critical infrastructure that the community would be otherwise not not uh able to build. Um and when we when we work with communities, which we’ve done for over a century in building uh critical infrastructure at Duke Energy. We’re working with our our potential customers at the community level, uh demonstrating their value and and you know, we’ve seen tremendous success in this and we have over 5 gigawatts of data centers under construction that will come online next year in our territories. And I think that’s that’s proof point that there is a path to uh success and it involves collaboration.
05:07 Danny
So Brian, does that mean the answer to that is no, that you don’t expect any slowing?
05:11 Brian Savoy
I don’t expect slowing in our territories. Uh data centers have been welcome because we’ve been um broad reaching in in the benefits to the communities.
05:22 Speaker D
And to Danny’s point, do you think data center development could maybe shift towards the Carolinas and Florida as states push back and do you stand to benefit from that, Duke Energy?
05:35 Brian Savoy
There’s been a a ton of interest in these states um uh uh along the way. Uh I I think they might double down um because there’s a lot of attractive attributes to these to these regions with low energy costs, um uh in the Carolinas, 50% of the power is nuclear, which is which is uh clean reliable energy 24/7. Uh so there there’s there’s a lot of things that that are to like in these regions and and um not having the the political um um uh challenges could could also pave the way.
06:21 Danny
What do you then make of in North Carolina, again, your your home state where regulators rejected one of your gas turbines, basically saying, you know, we’re not convinced that these data centers will actually get built and have the need for that. Um does that change your Q2 projection of 15 gigawatt data center pipeline by the first half of next year?
06:50 Brian Savoy
Not at all. No. We we we believe that uh the North Carolina um public public staff and commission clearly see the needs for the generation in in our territories. Um and and this turbine, we’re going to um uh wait on the commission’s ruling on a resource plan, which is expected later this year, and then uh come back to the commission with with um the justification for this unit. But this is one small unit in the midst of 10 gigawatts of of natural gas that we’re building across the system.
07:31 Speaker D
But this election, Brian, this midterm election was an affordability election. I mean, even electricity bills, they’re becoming a major political issue. How do you how do you justify a multibillion dollar investment plan without really burdening a lot of your consumers?
07:54 Brian Savoy
It it it it is a really important balance uh to provide uh reliable affordable energy in in the regions we serve. Um like I said earlier, customer affordability has always been our priority, um along with reliability of the system. And and that’s been uh uh the recipe to keep our rates below the national average in all the states we serve. Uh we will continue to balance this uh need to improve the infrastructure to ensure that um the grid is there for customers and this summer was the hottest on record in the United States. Teams across Duke Energy served customers keeping the grid stable, supplying the the energy they they customers expect each and every day during these 100 degree days. Um we need we need energy, we need it at the lowest possible cost and we’ll be tapping every every tool in the box uh from operational efficiencies to tax credits to Department of Energy loans and grants to keep to keep rates low while we need to invest in the system.
09:21 Danny
Brian, understood what you’re saying and understood about the benefits of building out this infrastructure, the benefits of AI data infrastructure. Is this just a PR problem? I mean, again, I hate to keep harping on this, but considering what we saw Tuesday, do you and the industry, yes, I know you’re putting in the work to make sure that these localities understand the benefit you’re bringing, but has something gone wrong? Has something gone wrong in sort of the communication and PR of the whole thing?
10:02 Brian Savoy
Danny, I do believe the narrative has gotten um a little awry and and the facts are c
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