Executive VP & CFO, Duke Energy Corp
Chief Future Officer: Brian Savoy, Duke Energy
Chief Financial Officers now play a critical role in shaping corporate strategy and positioning organizations to meet future challenges. This episode focuses on Duke Energy CFO Brian Savoy, who tells Alix Steel how the company plans to invest $145 billion over the next decade to transform its energy generation portfolio.
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About Brian Savoy
Brian Savoy, who became Duke Energy's executive vice president and CFO in September 2022, has described the company's plan to invest $145 billion over the next decade to transform its energy generation portfolio. Savoy stated that Duke aims to reduce natural gas over time while using it as a "bridge fuel" as the company expands renewables and nuclear power, and he expressed optimism about future nuclear development in the 2030s. He noted that incentives from the Inflation Reduction Act for regulated companies reduce costs for customers, saying that when he builds a renewable project "it's going to cost me less and cost my customers less." Savoy has discussed the challenges of balancing investments in the energy transition with customer costs amid intense regulatory oversight. He said that interest rates are a frequent topic of discussion because Duke is a large debt issuer, and that the company watches the Federal Reserve closely to identify opportunistic times to issue debt. Savoy described himself as "wired for value" and said he has the courage to make changes when needed. He also stated that utilities have "a moment to really make a mark on society" and that putting the utility sector in prominence is important.
Transcript (62 segments)
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Narrator0:10
Utility companies are having their moment in the sun. Energy is on everyone's mind around the world. Energy independence, energy prices, energy availability. Utilities historically have been viewed as stodgy and slow moving, but I wouldn't be here if it were anything like that. The ones that are going to thrive in this environment are those with a diversified energy mix, particularly those with a higher percentage of clean energy resources like nuclear, as well as wind and solar, with natural gas in the mix to back those up.
Duke Energy, providing regulated gas and electric services to about 10 million customers in seven U.S. states, has flourished in the spotlight. Revenues have rebounded since COVID. After almost a decade at the helm of finance, Steve Young decided to step away from the role. In September 2022, company veteran Brian Savoy became CFO.
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Interviewer1:24
Why now retire from your position as CFO?
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Steve Young1:27
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&L. And so it just felt like the right time to begin that transition.
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Narrator1:49
That transition in the C-suite comes as Duke embarks on a transformation of its business, aiming to retire all coal by 2035, achieve net zero carbon emissions.
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Brian Savoy2:11
We're going to invest 145 billion over a decade. That is a staggering amount of money, which means a staggering amount of things we've got to buy, replace, install, make work, and do it in an affordable way for our customers. That's a tall order. It's a team effort.
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Narrator2:28
Savoy will have plenty of support from Young, who's now Duke's chief commercial officer, and Lynn Goode, who was once Duke's CFO herself.
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Interviewer2:35
Any advice to give him your CFO hat? CEO hat?
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Steve Young2:38
You can't give advice to the CFO. The advice I gave him was to jump in with all fours and make this job as big as you can because you sit at the nexus of so many things in the chief financial officer role: the business, the regulation, finance, delivering value to investors and customers.
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Narrator3:11
Have it any other way. Here's what Duke's power generation mix looked like in 2021, with coal and oil nearly a quarter of the portfolio. Here's how it should look by 2030. Renewables will more than triple as a share of the company's power output.
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Brian Savoy3:43
We have been putting pieces in place in our regulated business for several years to really accelerate this clean energy transition. Renewables bring price stability because there's no fuel: the sunshine or the wind. There's typically a significant capital upfront investment, but it's worth it. 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 a tremendous benefit for our customers, and we see promise in future nuclear in the 2030s as we move to transition.
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Narrator4:25
That's not the only transition Brian Savoy will manage. Duke wants to focus its time, money, and resources on its regulated businesses. It's looking for a buyer for its commercial renewable energy holdings.
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Brian Savoy4:42
Our commercial business is one that I ran, so I'm very familiar with it, and it's served us very well. But it is only 5% of our company, and our regulated business has a clear path to growth. The competition for capital is fierce inside our company. There are a lot of uses for generation, and you have to do it at the largest scale. It does make sense to take a closer look at maybe somebody else has a better story for capital here, so we recycle that capital and redirect it into the regulated business.
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Narrator5:28
Duke forecasts earnings growth of 5 to 7% through 2026, driven by a lot of capital investment. The company intends to spend $145 billion in the next decade, with the lion's 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.
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Brian Savoy5:56
When you get a surprise like high fuel prices, we need to adjust things like the, well, we move costs as we need to for customers.
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Interviewer6:10
Do you feel that reducing costs right now while also increasing spending is different than in the past because of inflationary pressures, because of the energy transition?
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Brian Savoy6:22
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 inflation for some time, higher commodity prices with volatility. If someone comes here and says, 'Hey, Brian, I need some more money for my division to do this,' are you like the 'no' guy? 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' guy. But if we say yes to a request that was emergent, we get to say no to some other thing. So how do we prioritize and make it all work?
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Narrator7:12
There are stakeholders pushing for a faster transition to renewables, but also a pull not to go that fast because it could be too expensive.
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Brian Savoy7:18
Maybe our industrial customers are worried about price, our residential customers are worried about price. So trying to strike that right balance with policymakers, customers, and investors is a challenge at any moment and will be a challenge in this one.
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Interviewer7:31
Take me inside some of the conversations you guys are having right now. You, Lynn, and other C-suite executives sitting around a table—what do you talk about most right now?
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Brian Savoy7:41
Supply chain has been a moving target of issues. Last year at this time, we were looking at solar panels and how to lock in our solar panels for the next several years to ensure we can execute the clean energy transition. It has moved to different components that impact our business. For example, we are a very large debt issuer, so we watch interest rates extremely closely because they affect our cost structure. Do we 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. When there are opportunistic times to issue debt, we will go with larger components, versus smaller pieces, and we can work with the length of the debt. If the 10-year is priced more attractively than the 20- or 30-year, we'll use that tenor to optimize interest.
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Narrator8:46
Coming up, Brian Savoy takes me to the room where it happens. An expert team gathers data and makes decisions that keep Duke's renewables running smoothly.
Brian Savoy is taking on a new challenge as he steps into the CFO position at Duke Energy. But it's really just his latest challenge. He's touched virtually every area of the company over the last two decades.
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Brian Savoy9:27
I started my career at Duke and Euston in our trading business. I was with Deloitte Touche before I joined Duke. Duke was one of my clients.
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Steve Young9:33
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 came through. He helped us on a number of complex projects, and the more we gave him, the more he delivered.
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Brian Savoy10:11
This has prepared me for the role I have today.
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Interviewer10:13
What's the advice that you've given him?
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Steve Young10:16
I've told him a couple of times, you're not going to get a home run at every at bat. There's going to be days where things go wrong. Be patient, be calm. Keep your eye on the ball for the future, the thing you want to get to. Eventually you'll have bumps in the road.
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Narrator10:35
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. Brian Savoy showed me around the company's renewable control center. This is where operators are monitoring screens. From this one room, we can do 90 sites—offshore wind, onshore wind, solar—and they're looking for the smallest change in output because every megawatt hour is money.
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Brian Savoy11:26
You put an asset in, say it's a hundred megawatts. You expect to get 100 megawatts each and every hour that the resource is there. The resource could be sunshine or it could be wind. And when you get 90 or 80, you know you're not producing what you can. It could be because the asset isn't working properly, maybe something hit the turbine blade on the wind farm, maybe the solar panel has debris on it, or it could be that the solar intensity is not quite there. When one of these assets comes back, we have assets that follow this digitally as well so that we can keep a consistent flow of electrons on the grid.
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Narrator12:19
The operators in this room can respond to incoming data with immediate action, remotely controlling wind turbines, solar panels, and batteries.
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Brian Savoy12:30
It's another example of using digital and technology tools to make us more efficient, more productive, minimizing the amount of people we have to have running around and observing, and giving us the statistics to really maintain and monitor those facilities. We couldn't see degradation in output as fast as we do now with the technology and digitization of the system. Now, we still need technicians nearby, so we use traveling crews that can go to sites in Kansas versus sites elsewhere, managing it at any given time. You could think that would scale out over time as renewables grow in the United States.
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Interviewer13:17
So would you say that as you invest more in renewables, it's a hardware thing or a software thing? Where do you think you spend the most money doing that?
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Brian Savoy13:25
Obviously, the software will continue to improve over time, and the sensors on the equipment are very important to identify those degradations in output. But it's deploying the hardware, deploying the assets on the ground, getting the sites ready, connecting them to the grid. That's a huge lift.
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Narrator13:46
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 safety and security. Operators here have plenty of micro details to keep track of, but there's a macro factor on their minds as well: the weather.
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Brian Savoy14:22
We have maps of the United States just to give the operators a bearing of what's going on in the country, and we have plotted on it where our renewable sites are. So they know if there's a weather pattern or system coming, what to expect in that area.
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Interviewer14:37
How do you manage extreme weather? Let's say we have a wind farm in the West and a wind storm is coming.
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Brian Savoy14:43
The assets will turn off when the wind speeds exceed a certain level automatically, because there's risk of breakage of the blades and damage. We send crews onto the location.
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Interviewer15:11
So the weather map and the team really works?
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Brian Savoy15:15
That's right.
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Narrator15:18
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.
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Brian Savoy15:28
When we think about the impacts of extreme weather events on the grid, large-scale resources like solar farms and wind farms still rely on the centralized grid to deliver electricity to load centers. So to the extent the grid is knocked out by a hurricane, those assets would go offline as well. So in addition to investing in green generation resources, it's extremely important for companies to pay attention to grid hardening measures. We're seeing more frequency of severe events, and that modeling goes into our planning for our investments. We talked about the capital plan earlier—all those investments are informed by the climate trends we see across our system.
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Narrator16:21
Coming up, Duke's clean energy plans get a major boost from D.C. with the Inflation Reduction Act. Brian Savoy is already working through the possibilities. For example, 1,000 megawatts of solar equates to about $60 million in annual production tax credits. This is Bloomberg.
The next decade for Duke Energy is pretty clearly mapped out: raise and spend $145 billion on a massive clean energy transition. But the bulk of those investments are in regulated businesses, while investigating the Inflation Reduction Act, which passed in August, puts provisions in place that make his task more manageable.
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Brian Savoy17:19
The Inflation Reduction Act provides incentives for renewables, battery storage, and it provides incentives for nuclear. All of those incentives for a regulated company go right to our customers and they reduce directly the price of our product. So when I build a renewable project, it's going to cost me less and cost my customers less. It's going to help our renewable transition. For example, 1,000 megawatts of solar equates to about $60 million in annual production tax credits. We're going to have 30,000 megawatts of renewables on our system by 2035. The Inflation Reduction Act has been a very important piece of legislation. Not only does it create certainty, but it also supports our goals.
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Narrator18:13
Political winds may shift and regulations are always subject to change, but for the moment, policy in Washington aligns with Duke's strategic goals.
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Brian Savoy18:22
There's a real partnership now. We have a voice at the table. I have a lot of conversations with the Treasury Department about tax policy. As they define the rules around the IRS, they will seek input from people like us, and we will weigh in on what they should think about as they write the detailed rules to implement this act, without consideration of its own utility and policymakers and regulators. Those have always been extremely important. Utilities that have cultivated those relationships in a constructive fashion, where they have been good stewards of capital, achieve constructive outcomes. And the better recovery mechanisms set at the state level also help companies and customers absorb the capital costs of the clean energy transition.
We cannot adjust our price without working through 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 there's alignment. Otherwise, we call it regulatory lag, where you have expenses before you can earn revenues on those assets. Historically, we would build up investments and then have what's called a rate case and have a large increase in one slug. The modern recovery mechanisms place assets in service each year and adjust accordingly.
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Interviewer20:12
There's a fight between green energy and energy security, raising questions about how fast and hard the world can pivot. There's been criticism in Europe that they were trying to go too fast into renewables, leaving out nuclear and shuttering coal plants, and now they're paying the price. What's the right pace?
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Brian Savoy20:33
I think the pace is maintaining balance with the right reliability and affordability. That's the only way we know 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. We have to keep an eye on affordability. We call it a responsible, balanced transition. The transition away from fossil fuels is coming. Think about coal—five years ago, you could get as much as you wanted. Now it's coming to an end.
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Narrator21:11
That's the state of play for Brian Savoy as he starts his tenure as Duke CFO. I asked him what he sees when he looks ahead.
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Interviewer21:22
What is the biggest opportunity over the next 10 years as CFO that you're most excited about?
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Brian Savoy21:26
I feel like utilities have a moment to really make a mark on society, and it's long lasting. It's going to be for our grandkids and their grandkids, putting the utility sector in prominence in the world.
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Interviewer21:46
What's the biggest challenge you're most worried about over the next 10 years in doing your job?
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Brian Savoy21:49
I think the biggest challenge is balancing the investments we need to make and the transition in front of us with the cost to customers. It's going to be hand-to-hand combat over the next decade, and we'll work it. We believe the investments we are making will meet that bar.
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Interviewer22:21
What skill do you have as CFO that you think will help?
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Brian Savoy22:24
I'm wired for value. I don't like waste at all. When I see things we need to change, I have the courage to make it happen. As CFO, I'm in a position to really move that at Duke.
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Interviewer22:40
What's a new skill set or knowledge that you're excited about over the next 10 years?
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Brian Savoy22:43
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 worked inside this company and have experience, but managing external perspectives is key.
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Narrator23:10
Many years ago, over 10 years ago, Brian was working for Lynn Goode.
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Brian Savoy23:15
She told me, 'Brian, the skills you have position you for a wide range of roles.' I had no idea what that meant back in 2009. But as I've looked at my career, she 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.
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Narrator23:43
I'm Alix Steel. This is Bloomberg.