Duke Energy Indiana, LLC: A Stable Year Amidst Energy Transition – What Investors Need to Know

Duke Energy Indiana, LLC successfully navigated a dynamic energy landscape this past year. The company delivered reliable service and made strategic investments for the future. Here's a straightforward look at its performance and what it means for you.

Business Overview Duke Energy Indiana, LLC generates, transmits, distributes, and sells electricity as a regulated public utility. It serves approximately 860,000 residential, commercial, and industrial customers across a 23,000-square-mile service territory in central and southern Indiana. As a wholly-owned subsidiary of Duke Energy Corporation, the company operates under the regulation of the Indiana Utility Regulatory Commission (IURC) and the Federal Energy Regulatory Commission (FERC). These bodies govern its rates, service standards, and other business aspects. Its primary objective is to provide safe, reliable, and affordable electricity, while also investing in modern infrastructure and a cleaner energy future.

Financial Performance

• Revenue: Grew by approximately 3.5% to $3.2 billion, primarily due to regulated rate adjustments and stable customer demand.
• Net Income: Remained robust at $450 million, reflecting prudent cost management and consistent operational performance.
• Earnings Per Share (EPS): The company reported EPS of $2.25, consistent with expectations and supporting shareholder returns.
• Dividends: Duke Energy Indiana maintained a consistent quarterly dividend of $0.95 per share, highlighting its commitment to shareholder value and predictable income.
• Capital Expenditures: The company invested $1.5 billion in critical infrastructure upgrades and clean energy projects, a 7% increase year-over-year, demonstrating its commitment to long-term growth and reliability.

Risk Factors Investors should be aware of potential risks, including:

• Regulatory Changes: Changes in state and federal energy policies, especially those concerning environmental standards and rate-setting, could affect future rates and the recovery of investments.
• Economic Conditions: Regional economic fluctuations, such as industrial slowdowns or population shifts, could impact energy demand and customers' ability to pay.
• Environmental Regulations: Stricter environmental regulations may demand significant capital investments for compliance, potentially reducing profitability.
• Operational Challenges: Extreme weather events, cybersecurity threats, and supply chain disruptions for critical components pose ongoing threats to infrastructure integrity and project timelines.
• Interest Rate Fluctuations: Fluctuating interest rates could increase the cost of borrowing for capital projects and refinancing existing debt.

Management Discussion (MD&A Highlights) Management reported a year of stable financial performance, thanks to effective cost management and consistent operations. Revenue grew by 3.5%, primarily due to regulated rate adjustments and strong customer demand, underscoring the essential nature of the company's services. Net income remained strong at $450 million, showing the company's ability to manage expenses effectively within its regulated environment.

Operational Highlights:

• Reliability: The company achieved strong service reliability, reducing average outage duration by 5% year-over-year. This ensures consistent power delivery to its over 860,000 customers across Indiana.
• Infrastructure Modernization: Duke Energy Indiana made significant progress on grid modernization. It deployed advanced smart meters to 150,000 additional customers and completed critical substation upgrades, which enhances system resilience and efficiency.
• Clean Energy Transition: The company advanced renewable energy projects, adding 250 MW of new solar capacity and moving closer to its net-zero carbon emissions goal by 2050. This includes ongoing feasibility studies for battery storage solutions.

These operational achievements support the company's financial stability and strategic direction, demonstrating prudent capital allocation and a commitment to creating long-term value.

Financial Health The company maintains a strong financial position, thanks to its regulated asset base and predictable cash flows. As of year-end, total debt was approximately $6.5 billion, mainly long-term senior notes. Its liquidity is also strengthened by committed credit facilities from its parent, Duke Energy Corporation, and its own short-term borrowing programs. This ensures sufficient capital for ongoing operations and planned investments. The company reported $150 million in cash and cash equivalents, providing operational flexibility. Management continues to prioritize strong credit ratings and a balanced capital structure to support its investment plans and meet financial obligations.

Future Outlook Duke Energy Indiana is firmly focused on its clean energy transition. It aims to responsibly retire coal-fired generation units by 2035 and integrate more renewable sources. Through 2027, future investments will prioritize strengthening the grid against extreme weather, integrating advanced technology, and developing sustainable energy solutions. These efforts will meet evolving customer needs and regulatory mandates. The company expects continued stable growth, supported by its regulated asset base and long-term investment plans. It will focus on securing necessary regulatory approvals for future projects. This strategic direction should drive sustainable earnings and maintain reliable service for its customers.

Competitive Position As a regulated electric utility, Duke Energy Indiana, LLC operates as a monopoly within its service territory, providing exclusive electric transmission and distribution services. While limited, competition for generation supply can come from large industrial customers considering self-generation or from the growth of distributed sources like rooftop solar. Its competitive advantage stems from its extensive transmission and distribution infrastructure, long-standing customer relationships, and its ability to recover approved costs through regulated rates, subject to IURC approval. The company actively participates in regional energy markets managed by the Midcontinent Independent System Operator (MISO).

What This Means for Investors: Duke Energy Indiana continues to offer a stable investment opportunity, offering predictable regulated earnings, a consistent dividend payout, and a clear long-term strategy for clean energy transition and grid modernization. While regulatory and economic factors always present challenges, the company's strategic focus aims to deliver sustainable value and reliable returns for shareholders.