a ~~$15~~$53 million increase in operations, maintenance and other expense primarily due to increased shared services, cost to achieve merger expenses and pension settlement charge; and

an $11 million increase in depreciation ~~expense~~and ~~property and franchise taxes~~amortization expense due to additional plant in ~~service; and~~service.

Partially offset by:

a $7 million ~~increase~~decrease in impairment charges due to an impairment of software ~~resulting from planned accounting system and process integration in 2018.~~

~~Partially offset by:~~

~~a $38 million decrease in operations, maintenance and other related to acquisition and integration expenses~~ recorded in the prior year from costs paid to outside parties, primarily financial and legal advisory, severance expenses, retention costs and acceleration of incentive plans, and an accrual for our commitment of charitable contributions and community support.year.

Other Income and ~~Expense.~~Expenses. The variance was driven by:

a ~~$132~~$25 million ~~decrease~~increase in ~~gain on sale~~other income and expenses, net primarily due to higher income from non-service components of ~~unconsolidated affiliates recorded~~employee benefit costs in the ~~prior year due~~current year. For additional information on employee benefit costs, see Note 22 to ~~Piedmont’s sale of its 15 percent ownership interest in SouthStar Energy Services, LLC (SouthStar) on October 3, 2016;~~the Consolidated Financial Statements, "Employee Benefit Plans"; and

a ~~$32~~$13 million ~~decrease~~increase in equity ~~in (losses)~~ earnings of unconsolidated affiliates from pipeline investments primarily due to ~~equity~~favorable earnings ~~from the investment in SouthStar in the prior year and the~~partially offset by unfavorable impacts of the Tax Act in the ~~current~~prior year.

Income Tax Expense. The variance was primarily due to ~~a decrease in pretax income and~~ the ~~impact of~~lower statutory federal corporate tax rate under the Tax Act. ~~See~~The effective tax rates for the ~~Subsidiary Registrants section above for additional information on~~years ended December 31, 2018, and 2017 were 22.3 percent and 30.8 percent, respectively. The decrease in the effective tax rate was primarily due to the lower statutory federal corporate tax rate under the Tax Act ~~and the impact on the effective tax rate.~~.

Matters Impacting Future Results

Within this Item 7, see the Tax ~~Cuts and Jobs~~ Act section above as well as Liquidity and Capital Resources below for discussion of risks associated with the Tax Act.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Preparation of financial statements requires the application of accounting policies, judgments, assumptions and estimates that can significantly affect the reported results of operations, cash flows or the amounts of assets and liabilities recognized in the financial statements. Judgments made include the likelihood of success of particular projects, possible legal and regulatory challenges, earnings assumptions on pension and other benefit fund investments and anticipated recovery of costs, especially through regulated operations.

Management discusses these policies, estimates and assumptions with senior members of management on a regular basis and provides periodic updates on management decisions to the Audit ~~Committee of the Board of Directors.~~Committee. Management believes the areas described below require significant judgment in the application of accounting policy or in making estimates and assumptions that are inherently uncertain and that may change in subsequent periods.

For further information, see Note 1 to the Consolidated Financial Statements, "Summary of Significant Accounting Policies."

Regulated Operations Accounting

Substantially all of Duke Energy’s regulated operations meet the criteria for application of regulated operations accounting treatment. As a result, Duke Energy is required to record assets and liabilities that would not be recorded for nonregulated entities. Regulatory assets generally represent incurred costs that have been deferred because such costs are probable of future recovery in customer rates. Regulatory liabilities are recorded when it is probable that a regulator will require Duke Energy to make refunds to customers or reduce rates to customers for previous collections or deferred revenue for costs that have yet to be incurred.

Management continually assesses whether recorded regulatory assets are probable of future recovery by considering factors such as as:

applicable regulatory environment ~~changes,~~ changes;

historical regulatory treatment for similar costs in Duke Energy’s ~~jurisdictions,~~ jurisdictions;

litigation of rate ~~orders,~~ orders;

recent rate orders to other regulated ~~entities,~~ entities;

levels of actual return on equity compared to approved rates of return on ~~equity~~equity; and

the status of any pending or potential deregulation legislation.

If future recovery of costs ceases to be probable, asset write-offs would be recognized in operating income. Additionally, regulatory agencies can provide flexibility in the manner and timing of the depreciation of property, plant and equipment, recognition of asset retirement costs and amortization of regulatory assets, or may disallow recovery of all or a portion of certain assets. ~~For further information on regulatory assets and liabilities, see Note 4 to the Consolidated Financial Statements, “Regulatory Matters.”~~

~~PART II~~

As required by regulated operations accounting rules, significant judgment can be required to determine if an otherwise recognizable incurred cost ~~such as closure costs for ash impoundments,~~ qualifies to be deferred for future recovery as a regulatory asset. Significant judgment can also be required to determine if revenues previously recognized are for entity specific costs that are no longer expected to be incurred or have not yet been incurred and are therefore a regulatory liability. ~~See Note 4 to the Consolidated Financial Statements, "Regulatory Matters," for a more in-depth discussion of Regulatory Assets and Liabilities.~~

Regulated operations accounting rules also require recognition of a disallowance (also called "impairment") loss if it becomes probable that part of the cost of a plant under construction (or a recently completed or an abandoned plant) will be disallowed for ratemaking purposes and a reasonable estimate of the amount of the disallowance can be made. For example, if a cost cap is set for a plant still under construction, the amount of the disallowance is a result of a judgment as to the ultimate cost of the plant. Other disallowances can require judgments on allowed future rate recovery. See Note 4 to the Consolidated Financial Statements, “Regulatory Matters,” for a discussion of disallowances recorded.

When it becomes probable that regulated assets will be abandoned, the cost of the asset is removed from plant in service. The value that may be retained as a regulatory asset on the balance sheet for the abandoned property is dependent upon amounts that may be recovered through regulated rates, including any return. As such, an impairment charge, if any, could be partially or fully offset by the establishment of a regulatory asset if rate recovery is probable. The impairment for a disallowance of costs for regulated plants under construction, recently completed or abandoned is based on discounted cash flows.

~~For further information, see Note 4 to the Consolidated Financial Statements, "Regulatory Matters."~~



MD&A	CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Goodwill Impairment Assessments

Duke Energy ~~allocates~~performed its annual goodwill toimpairment tests for all reporting units as of August 31, 2018, and all of the reporting units' estimated fair value of equity substantially exceeded the carrying value of equity, except for the Commercial Renewables reporting units, which ~~are either the Business Segments listed in Note 3 to the Consolidated Financial Statements or one level below based on how the Business Segment is managed. Duke Energy is required to test goodwill for~~recorded impairment ~~at least annually and more frequently if it is more likely than not that the~~charges of $93 million. The fair ~~value is less than the carrying value. Duke Energy performs its annual impairment test as of August 31.~~

~~Application of the goodwill impairment test requires management's judgment, including determining the fair value~~values of the reporting ~~unit, which management estimates~~units were calculated using a weighted combination of the income approach, which estimates fair value based on discounted cash flows, and the market approach, which estimates fair value based on market comparables within the utility and energy industries.

Estimated future cash flows under the income approach are based on Duke Energy’s internal business plan. Significant assumptions used ~~in these fair value analyses include discount and~~are growth rates, future rates of return expected to result from ongoing rate regulation ~~utility sector market performance~~ and ~~transactions, forecasted earnings base, projected operating and capital cash flows for Duke Energy’s business and the fair value of debt.~~

Estimated future cash flows under the income approach are based to a large extent on Duke Energy’s internal business plan, and adjusted as appropriate for Duke Energy’s views of market participant assumptions. Duke Energy’s internal business plan reflects management’s assumptions related to customer usage and attrition based on internal data and economic data obtained from third-party sources, projected commodity pricing data and potential changes in environmental regulations. The business plan assumes the occurrence of certain events in the future, such as the outcome of future rate filings, future approved rates of returns on equity, anticipated earnings/returns related to significant future capital investments, continued recovery of cost of service, the renewal of certain contracts and the future of renewable tax credits. Management also makes assumptions regarding operation, maintenance and general and administrative costs based on the expected outcome of the aforementioned events. In estimating cash flows, Duke Energy incorporates expected growth rates, regulatory and economic stability, the ability to renew contracts and other factors, into its revenue and expense forecasts.

~~One of the most significant assumptions that Duke Energy utilizes in determining the fair value of its reporting units under the income approach is the~~ discount ~~rate applied to the estimated future cash flows.~~rates. Management determines the appropriate discount rate for each of its reporting units based on the ~~weighted average cost of capital (WACC)~~WACC for each individual reporting unit. The WACC takes into account both the after-tax cost of debt and cost of equity. A major component of the cost of equity is the current risk-free rate on 20-year U.S. Treasury bonds. In the ~~2017~~2018 impairment tests, Duke Energy considered implied WACCs for certain peer companies in determining the appropriate WACC rates to use in its analysis. As each reporting unit has a different risk profile based on the nature of its operations, including factors such as regulation, the WACC for each reporting unit may differ. Accordingly, the WACCs were adjusted, as appropriate, to account for company specific risk premiums. The discount rates used for calculating the fair values as of August 31, ~~2017,~~2018, for each of Duke Energy’s reporting units ranged from ~~5.3~~5.5 percent to ~~6.7~~6.9 percent. The underlying assumptions and estimates are made as of a point in time. Subsequent changes, particularly changes in the discount rates, authorized regulated rates of return or growth rates inherent in management’s estimates of future cash flows, could result in future impairment charges.

One of the most significant assumptions utilized in determining the fair value of reporting units under the market approach is implied market multiples for certain peer companies. Management selects comparable peers based on each peer’s primary business mix, operations, and market capitalization compared to the applicable reporting unit and calculates implied market multiples based on available projected earnings guidance and peer company market values as of August 31.

In December 2016, Duke Energy disposed of its International operations and no longer has goodwill associated with the International operations. For further information, see Note 2 to the Consolidated Financial Statements, “Acquisitions and Dispositions.”

Duke Energy primarily operates in environments that are rate-regulated. In such environments, revenue requirements are adjusted periodically by regulators based on factors including levels of costs, sales volumes and costs of capital. Accordingly, Duke Energy’s regulated utilities operate to some degree with a buffer from the direct effects, positive or negative, of significant swings in market or economic conditions. However, significant changes in discount rates over a prolonged period may have a material impact on the fair value of equity.

As of August 31, 2017, all of the reporting units’ estimated fair value of equity substantially exceeded the carrying value of equity, except for the Commercial Renewables reporting units. The goodwill at the Energy Management Solutions reporting unit of Commercial Renewables was evaluated for recoverability in 2017, and Duke Energy recorded impairment charges of $29 million.

~~PART II~~

The Commercial Renewables reporting units are impacted by a multitude of factors including, legislative actions related to tax credit extensions, long-term growth rate assumptions and discount rates. As of August 31, 2017, the Renewables reporting unit’s estimated fair value of equity exceeded the carrying value of equity by less than 10 percent. Management continues to monitor these assumptions for any indicators that the fair value of the reporting unit could be below the carrying value and will assess goodwill for impairment as appropriate.

For further information, see Note 11 to the Consolidated Financial Statements, "Goodwill and Intangible Assets."

Asset Retirement Obligations

AROs are recognized for legal obligations associated with the retirement of property, plant and ~~equipment. Substantially all AROs are related to regulated operations. When recording an ARO,~~equipment at the present value of the projected liability ~~is recognized~~ in the period in which it is incurred, if a reasonable estimate of fair value can be made. The liability is accreted over time. For operating plants, the present value of the liability is added to the cost of the associated asset and depreciated over the remaining life of the asset. For retired plants, the present value of the liability is recorded as a regulatory asset unless determined not to be recoverable.

The present value of the initial obligation and subsequent updates are based on discounted cash flows, which include estimates regarding timing of future cash flows, selection of discount rates and cost escalation rates, among other factors. These estimates are subject to change. Depreciation expense is adjusted prospectively for any changes to the carrying amount of the associated asset. The Duke Energy Registrants receive amounts to fund the cost of the ARO for regulated operations through a combination of regulated revenues and earnings on the nuclear decommissioning trust fund (NDTF). As a result, accretion expense and depreciation of the associated ARO asset are netted and deferred as a regulatory asset or liability.

Obligations for nuclear decommissioning are based on site-specific cost studies. Duke Energy Carolinas and Duke Energy Progress assume prompt dismantlement of the nuclear facilities after operations are ceased. Duke Energy Florida assumes Crystal River Unit 3 will be placed into a safe storage configuration until eventual dismantlement is completed by 2074. Duke Energy Carolinas, Duke Energy Progress and Duke Energy Florida also assume that spent fuel will be stored on-site until such time that it can be transferred to a yet to be built ~~U.S. Department of Energy (DOE)~~DOE facility.

Obligations for closure of ash basins are based upon discounted cash flows of estimated costs for site-specific plans, if known, or probability weightings of the potential closure methods if the closure plans are under development and multiple closure options are being considered and evaluated on a site-by-site basis.

For further information, see Note 9 to the Consolidated Financial Statements, "Asset Retirement Obligations."

Long-Lived Asset Impairment Assessments, Excluding Regulated Operations ~~and Equity Method Investments~~

Property, plant and equipment, excluding plant held for sale, is stated at the lower of carrying value (historical cost less accumulated depreciation and previously recorded impairments) or fair value, if impaired. Duke Energy evaluates property, plant and equipment for impairment when events or changes in circumstances (such as a significant change in cash flow projections or the determination that it is more likely than not that an asset or asset group will be sold) indicate the carrying value of such assets may not be recoverable. The determination of whether an impairment has occurred is based on an estimate of undiscounted future cash flows attributable to the assets, as compared with their carrying value.

Performing an impairment evaluation involves a significant degree of estimation and judgment in areas such as identifying circumstances that indicate an impairment may exist, identifying and grouping affected assets and developing the undiscounted future cash flows. If an impairment has occurred, the amount of the impairment recognized is determined by estimating the fair value and recording a loss if the carrying value is greater than the fair value. Additionally, determining fair value requires probability weighting future cash flows to reflect expectations about possible variations in their amounts or timing and the selection of an appropriate discount rate. Although cash flow estimates are based on relevant information available at the time the estimates are made, estimates of future cash flows are, by nature, highly uncertain and may vary significantly from actual results.

When determining whether an asset or asset group has been impaired, management groups assets at the lowest level that has discrete cash flows.

For further information, see Note 10 to the Consolidated Financial Statements, "Property, Plant and Equipment."



MD&A	CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Equity Method Investments

Equity method investments are assessed for impairment when conditions exist that indicate that the fair value of the investment is less than book value. If the decline in value is considered to be other-than-temporary, an impairment charge is recorded and the investment is written down to its estimated fair value, which establishes a new cost basis in the investment.

Events or changes in circumstances are monitored that may indicate, in management’s judgment, the carrying value of such investments may have experienced an other-than-temporary decline in value. The fair value of equity method investments is generally estimated using an income approach where significant judgments and assumptions include expected future cash flows, the appropriate discount rate, and probability weighted-scenarios, if applicable. In certain instances, a market approach may also be used to estimate the fair value of the equity method investment.

Events or changes in circumstances that may be indicative of an other-than-temporary decline in value will vary by investment, but may include:

Significant delays in or failure to complete significant growth projects of investees;

Adverse regulatory actions expected to substantially reduce the investee’s product demand or profitability;

Expected financial performance significantly worse than anticipated when initially invested;

Prolonged period the fair value is below carrying value;

A significant or sustained decline in the market value of an investee;

Lower than expected cash distributions from investees;

Significant asset impairments or operating losses recognized by investees; and

Loss of significant customers or suppliers with no immediate prospects for replacement.

ACP

As of December 31, 2018, the carrying value of the equity method investment in ACP is $0.8 billion, and Duke Energy's maximum exposure to loss for its guarantee of the ACP revolving credit facility is $0.7 billion. During the fourth quarter of 2018, ACP received several adverse court rulings as described in Note 4 to the Consolidated Financial Statements, "Regulatory Matters." As a result, Duke Energy evaluated this investment for impairment and determined that fair value approximated carrying value and therefore no impairment was necessary.

Duke Energy estimated the fair value of its investment in ACP using an income approach that primarily considered probability-weighted scenarios of discounted future net cash flows based on the most recent estimate of total construction costs and revenues. These scenarios included assumptions of various court decisions and the impact those decisions may have on the timing and extent of investment, including scenarios assuming the full resolution of permitting issues in addition to a scenario where the project does not proceed. Most of the scenarios reflect phased in-service date assumptions. Certain scenarios within the analysis also included growth expectations from additional compression or other expansion opportunities and reopeners for pricing. A discount rate of 6.1 percent was used in the analysis. Higher probabilities were generally assigned to those scenarios where court approvals were received and the project moves forward under reasonable timelines reflecting interim rates and either current contracted pricing provisions, or prices subject to the reopeners. A very low probability was assigned to the scenario where the project does not proceed.

Judgments and assumptions are inherent in our estimates of future cash flows, discount rates, growth assumptions, and the likelihood of various scenarios. It is reasonably possible that future unfavorable developments, such as a reduced likelihood of success with court approvals, increased estimates of construction costs, material increases in the discount rate, important feedback on customer price increases or further significant delays, could result in a future impairment. The use of alternate judgments and assumptions could result in a different calculation of fair value, which could ultimately result in the recognition of an impairment charge in the consolidated financial statements.

For further information, see Note 12 to the Consolidated Financial Statements, “Investments in Unconsolidated Affiliates.”

Pension and Other Post-Retirement Benefits

The calculation of pension expense, other post-retirement benefit expense and net pension and other post-retirement assets or liabilities require the use of assumptions and election of permissible accounting alternatives. Changes in assumptions can result in different expense and reported asset or liability amounts and future actual experience can differ from the assumptions. Duke Energy believes the most critical assumptions for pension and other post-retirement benefits are:

the expected long-term rate of return on plan assets;

the assumed discount rate applied to future projected benefit payments; and

the heath care cost trend rate.

Duke Energy elects to amortize net actuarial gain or loss amounts that are in excess of 10 percent of the greater of the market-related value of plan assets or the plan's projected benefit obligation, into net pension or other post-retirement benefit expense over the average remaining service period of active participants expected to benefit under the plan. If all or almost all of a plan's participants are inactive, the average remaining life expectancy of the inactive participants is used instead of average remaining service period. Prior service cost or credit, which represents an increase or decrease in a plan's pension benefit obligation resulting from plan amendment, is amortized on a straight-line basis over the average expected remaining service period of active participants expected to benefit under the plan. If all or almost all of a plan's participants are inactive, the average remaining life expectancy of the inactive participants is used instead of average remaining service period.



MD&A	CRITICAL ACCOUNTING POLICIES AND ESTIMATES

As of December 31, 2018, Duke Energy assumes pension and other post-retirement plan assets will generate a long-term rate of return of 6.85 percent. The expected long-term rate of return was developed using a weighted average calculation of expected returns based primarily on future expected returns across asset classes considering the use of active asset managers, where applicable. The asset allocation targets were set after considering the investment objective and the risk profile. Equity securities are held for their higher expected returns. Debt securities are primarily held to hedge the qualified pension liability. Real assets, return-seeking fixed income, hedge funds and other global securities are held for diversification. Investments within asset classes are diversified to achieve broad market participation and reduce the impact of individual managers on investments.

Duke Energy discounted its future U.S. pension and other post-retirement obligations using a rate of 4.3 percent as of December 31, 2018. Discount rates used to measure benefit plan obligations for financial reporting purposes reflect rates at which pension benefits could be effectively settled. As of December 31, 2018, Duke Energy determined its discount rate for U.S. pension and other post-retirement obligations using a bond selection-settlement portfolio approach. This approach develops a discount rate by selecting a portfolio of high quality corporate bonds that generate sufficient cash flow to provide for projected benefit payments of the plan. The selected bond portfolio is derived from a universe of non-callable corporate bonds rated Aa quality or higher. After the bond portfolio is selected, a single interest rate is determined that equates the present value of the plan’s projected benefit payments discounted at this rate with the market value of the bonds selected.

Future changes in plan asset returns, assumed discount rates and various other factors related to the participants in Duke Energy’s pension and post-retirement plans will impact future pension expense and liabilities. Duke Energy cannot predict with certainty what these factors will be in the future. The following table presents the approximate effect on Duke Energy’s 2018 pretax pension expense, pretax other post-retirement expense, pension obligation and other post-retirement benefit obligation if a 0.25 percent change in rates were to occur.



	Qualified and Non-						Other Post-Retirement
	Qualified Pension Plans						Plans
(in millions)	0.25		%	(0.25		)%	0.25		%	(0.25		)%
Effect on 2018 pretax pension and other post-retirement expense
Expected long-term rate of return	$	(22	)	$	22		$	(1	)	$	1
Discount rate	(12		)	12			1			(1		)
Effect on pension and other post-retirement benefit obligation at December 31, 2018
Discount rate	(183		)	188			(13		)	13

Duke Energy’s other post-retirement plan uses a health care cost trend rate covering both pre- and post-age 65 retired plan participants, which is comprised of a medical care cost trend rate, which reflects the near- and long-term expectation of increases in medical costs, and a prescription drug cost trend rate, which reflects the near- and long-term expectation of increases in prescription drug costs. As of December 31, 2018, the health care cost trend rate was 6.5 percent, trending down to 4.75 percent by 2024. The following table presents the approximate effect on Duke Energy’s 2018 pretax other post-retirement expense and other post-retirement benefit obligation if a 1 percentage point change in the health care cost trend rate were to occur. These plans are closed to new employees.



	Other Post-Retirement
	Plans
(in millions)	1		%	(1		)%
Effect on 2018 other post-retirement expense	$	1		$	(1	)
Effect on other post-retirement benefit obligation at December 31, 2018	22			(20		)

For further information, see Note 22 to the Consolidated Financial Statements, “Employee Benefit Plans.”

LIQUIDITY AND CAPITAL RESOURCES

Sources and Uses of Cash

Duke Energy relies primarily upon cash flows from operations, debt and equity issuances and its existing cash and cash equivalents to fund its liquidity and capital requirements. Duke Energy’s capital requirements arise primarily from capital and investment expenditures, repaying long-term debt and paying dividends to shareholders.

Among other provisions, the Tax Act lowers the corporate federal income tax rate from 35 to 21 percent and eliminates bonus depreciation for regulated utilities. For Duke Energy’s regulated operations, the reduction in federal income taxes is expected to result in lower regulated customer rates. However, due to its existing NOL position and other tax credits, Duke Energy does not expect to be a significant federal cash tax payer through at least 2022. As a result, any reduction in customer rates could cause a material reduction in consolidated cash flows from operations in the short term. Over time, the reduction in deferred tax liabilities resulting from the Tax Act will increase Duke Energy’s regulated rate base investments and customer rates. Impacts of Tax Act to Duke Energy’s cash flows and credit metrics are subject to the regulatory actions of its state commissions and the FERC. See Note 4 to the Consolidated Financial Statements, “Regulatory Matters,” for additional information.

The Subsidiary Registrants generally maintain minimal cash balances and use short-term borrowings to meet their working capital needs and other cash requirements. The Subsidiary Registrants, excluding Progress Energy (Parent), support their short-term borrowing needs through participation with Duke Energy and certain of its other subsidiaries in a money pool arrangement. The companies with short-term funds may provide short-term loans to affiliates participating under this arrangement. See Note 6 to the Consolidated Financial Statements, “Debt and Credit Facilities,” for additional discussion of the money pool arrangement.



MD&A	LIQUIDITY AND CAPITAL RESOURCES

Duke Energy and the Subsidiary Registrants, excluding Progress Energy (Parent), may also use short-term debt, including commercial paper and the money pool, as a bridge to long-term debt financings. The levels of borrowing may vary significantly over the course of the year due to the timing of long-term debt financings and the impact of fluctuations in cash flows from operations. From time to time, Duke Energy’s current liabilities exceed current assets resulting from the use of short-term debt as a funding source to meet scheduled maturities of long-term debt, as well as cash needs, which can fluctuate due to the seasonality of its businesses.

Equity Issuance

In order to strengthen its balance sheet and credit metrics and bolster cash flows, Duke Energy plans to issue $500 million of common stock equity per year through 2023 through the DRIP and ATM programs. See Note 19 to the Consolidated Financial Statements, "Common Stock," for further information regarding Duke Energy's equity issuances in 2018.

Credit Facilities and Registration Statements

See Note 6 to the Consolidated Financial Statements, "Debt and Credit Facilities," for further information regarding credit facilities and shelf registration statements available to Duke Energy and the Duke Energy Registrants.

CAPITAL EXPENDITURES

Duke Energy continues to focus on reducing risk and positioning its business for future success and will invest principally in its strongest business sectors. Duke Energy’s projected capital and investment expenditures, including debt AFUDC and capitalized interest, for the next three fiscal years are included in the table below.



(in millions)	2019		2020		2021
New generation	$	375	$	125	$	220
Regulated renewables	415		410		710
Environmental	240		125		35
Nuclear fuel	430		505		390
Major nuclear	305		315		250
Customer additions	505		480		475
Grid modernization and other transmission and distribution projects	2,835		3,160		2,980
Maintenance and other	3,395		2,605		2,390
Total Electric Utilities and Infrastructure	8,500		7,725		7,450
Gas Utilities and Infrastructure	1,675		2,000		1,600
Commercial Renewables and Other	925		825		625
Total projected capital and investment expenditures	$	11,100	$	10,550	$	9,675

DEBT MATURITIES

See Note 6 to the Consolidated Financial Statements, "Debt and Credit Facilities," for further information regarding significant components of Current Maturities of Long-Term Debt on the Consolidated Balance Sheets.

DIVIDEND PAYMENTS

In 2018, Duke Energy paid quarterly cash dividends for the 92nd consecutive year and expects to continue its policy of paying regular cash dividends in the future. There is no assurance as to the amount of future dividends because they depend on future earnings, capital requirements, financial condition and are subject to the discretion of the Board of Directors.

Duke Energy targets a dividend payout ratio of between 65 and 75 percent, based upon adjusted diluted EPS, and expects this trend to continue through 2023. In 2017 and 2018, Duke Energy increased the dividend by approximately 4 percent annually, and the company remains committed to continued growth of the dividend.

Dividend and Other Funding Restrictions of Duke Energy Subsidiaries

As discussed in Note 4 to the Consolidated Financial Statements, “Regulatory Matters,” Duke Energy’s wholly owned public utility operating companies have restrictions on the amount of funds that can be transferred to Duke Energy through dividends, advances or loans as a result of conditions imposed by various regulators in conjunction with merger transactions. Duke Energy Progress and Duke Energy Florida also have restrictions imposed by their first mortgage bond indentures and Articles of Incorporation, which in certain circumstances, limit their ability to make cash dividends or distributions on common stock. Additionally, certain other Duke Energy subsidiaries have other restrictions, such as minimum working capital and tangible net worth requirements pursuant to debt and other agreements that limit the amount of funds that can be transferred to Duke Energy. At December 31, 2018, the amount of restricted net assets of wholly owned subsidiaries of Duke Energy that may not be distributed to Duke Energy in the form of a loan or dividend does not exceed a material amount of Duke Energy’s net assets. Duke Energy does not have any legal or other restrictions on paying common stock dividends to shareholders out of its consolidated equity accounts. Although these restrictions cap the amount of funding the various operating subsidiaries can provide to Duke Energy, management does not believe these restrictions will have a significant impact on Duke Energy’s ability to access cash to meet its payment of dividends on common stock and other future funding obligations.



MD&A	LIQUIDITY AND CAPITAL RESOURCES

CASH FLOWS FROM OPERATING ACTIVITIES

Cash flows from operations of Electric Utilities and Infrastructure and Gas Utilities and Infrastructure are primarily driven by sales of electricity and natural gas, respectively, and costs of operations. These cash flows from operations are relatively stable and comprise a substantial portion of Duke Energy’s operating cash flows. Weather conditions, working capital and commodity price fluctuations and unanticipated expenses including unplanned plant outages, storms, legal costs and related settlements can affect the timing and level of cash flows from operations.

Duke Energy believes it has sufficient liquidity resources through the commercial paper markets, and ultimately, the Master Credit Facility, to support these operations. Cash flows from operations are subject to a number of other factors, including, but not limited to, regulatory constraints, economic trends and market volatility (see Item 1A, “Risk Factors,” for additional information).

At December 31, 2018, Duke Energy had cash and cash equivalents and short-term investments of $442 million.

DEBT ISSUANCES

Depending on availability based on the issuing entity, the credit rating of the issuing entity, and market conditions, the Subsidiary Registrants prefer to issue first mortgage bonds and secured debt, followed by unsecured debt. This preference is the result of generally higher credit ratings for first mortgage bonds and secured debt, which typically result in lower interest costs. Duke Energy Corporation primarily issues unsecured debt.

In 2019, Duke Energy anticipates issuing additional debt of $7.5 billion, primarily for the purpose of funding capital expenditures and debt maturities. See to Note 6 to the Consolidated Financial Statements, "Debt and Credit Facilities," for further information regarding significant debt issuances in 2018.

Duke Energy’s capitalization is balanced between debt and equity as shown in the table below.



	Projected 2019		Actual 2018		Actual 2017
Equity	44	%	43	%	43	%
Debt	56	%	57	%	57	%

Restrictive Debt Covenants

Duke Energy’s debt and credit agreements contain various financial and other covenants. Duke Energy's Master Credit Facility contains a covenant requiring the debt-to-total capitalization ratio to not exceed 65 percent for each borrower, excluding Piedmont, and 70 percent for Piedmont. Failure to meet those covenants beyond applicable grace periods could result in accelerated due dates and/or termination of the agreements or sublimits thereto. As of December 31, 2018, each of the Duke Energy Registrants was in compliance with all covenants related to their debt agreements. In addition, some credit agreements may allow for acceleration of payments or termination of the agreements due to nonpayment, or acceleration of other significant indebtedness of the borrower or some of its subsidiaries. None of the debt or credit agreements contain material adverse change clauses.



MD&A	LIQUIDITY AND CAPITAL RESOURCES

Credit Ratings

Moody’s, S&P and Fitch Ratings, Inc. provide credit ratings for various Duke Energy Registrants. The following table includes Duke Energy and certain subsidiaries’ credit ratings and ratings outlook as of February 2019.



	Moody's	S&P	Fitch
Duke Energy Corporation	Stable	Stable	Stable
Issuer Credit Rating	Baa1	A-	BBB+
Senior Unsecured Debt	Baa1	BBB+	BBB+
Commercial Paper	P-2	A-2	F-2
Duke Energy Carolinas	Stable	Stable	N/A
Senior Secured Debt	Aa2	A	N/A
Senior Unsecured Debt	A1	A-	N/A
Progress Energy	Stable	Stable	N/A
Senior Unsecured Debt	Baa1	BBB+	N/A
Duke Energy Progress	Stable	Stable	N/A
Senior Secured Debt	Aa3	A	N/A
Duke Energy Florida	Stable	Stable	N/A
Senior Secured Debt	A1	A	N/A
Senior Unsecured Debt	A3	A-	N/A
Duke Energy Ohio	Stable	Stable	N/A
Senior Secured Debt	A2	A	N/A
Senior Unsecured Debt	Baa1	A-	N/A
Duke Energy Indiana	Stable	Stable	N/A
Senior Secured Debt	Aa3	A	N/A
Senior Unsecured Debt	A2	A-	N/A
Duke Energy Kentucky	Stable	Stable	N/A
Senior Unsecured Debt	Baa1	A-	N/A
Piedmont Natural Gas	Stable	Stable	N/A
Senior Unsecured	A3	A-	N/A

Credit ratings are intended to provide credit lenders a framework for comparing the credit quality of securities and are not a recommendation to buy, sell or hold. The Duke Energy Registrants’ credit ratings are dependent on the rating agencies’ assessments of their ability to meet their debt principal and interest obligations when they come due. If, as a result of market conditions or other factors, the Duke Energy Registrants are unable to maintain current balance sheet strength, or if earnings and cash flow outlook materially deteriorates, credit ratings could be negatively impacted.

Cash Flow Information

The following table summarizes Duke Energy’s cash flows for the three most recently completed fiscal years.



	Years Ended December 31,
(in millions)	2018			2017			2016
Cash flows provided by (used in):
Operating activities	$	7,186		$	6,624		$	6,863
Investing activities	(10,060		)	(8,442		)	(11,528		)
Financing activities	2,960			1,782			4,251
Changes in cash and cash equivalents included in assets held for sale	—			—			474
Net increase (decrease) in cash, cash equivalents and restricted cash	86			(36		)	60
Cash, cash equivalents and restricted cash at beginning of period	505			541			481
Cash, cash equivalents and restricted cash at end of period	$	591		$	505		$	541



MD&A	LIQUIDITY AND CAPITAL RESOURCES

OPERATING CASH FLOWS

The following table summarizes key components of Duke Energy’s operating cash flows for the three most recently completed fiscal years.



	Years Ended December 31,
							Variance						Variance
							2018 vs.						2017 vs.
(in millions)	2018			2017			2017			2016			2016
Net income	$	2,644		$	3,064		$	(420	)	$	2,170		$	894
Non-cash adjustments to net income	6,484			5,380			1,104			5,305			75
Contributions to qualified pension plans	(141		)	(19		)	(122		)	(155		)	136
Payments for AROs	(533		)	(571		)	38			(608		)	37
Payment for disposal of other assets	(105		)	—			(105		)	—			—
Working capital	(1,163		)	(1,230		)	67			151			(1,381		)
Net cash provided by operating activities	$	7,186		$	6,624		$	562		$	6,863		$	(239	)

For the year ended December 31, 2018, compared to 2017, the variance was driven primarily by:

a $684 million increase in net income after adjustment for non-cash items primarily due to favorable weather and increased pricing and volumes in the current period; and

a $38 million decrease in payments to AROs.

Offset by:

a $122 million increase in contributions to qualified pension plans; and

a $105 million payment for disposal of Beckjord.

For the year ended December 31, 2017, compared to 2016, the variance was driven primarily by:

a $1,381 million decrease in working capital due to weather, payment of merger transaction and integration related costs and increased property tax payments in 2017.

Offset by:

a $969 million increase in net income after non-cash adjustments primarily due to the inclusion of Piedmont's earnings for a full year, favorable pricing and weather-normal retail volumes driven by the residential class in the Electric Utilities and Infrastructure segment combined with continued strong cost control;

a $136 million decrease in contributions to qualified pension plans; and

a $37 million decrease in payments to AROs.

INVESTING CASH FLOWS

The following table summarizes key components of Duke Energy’s investing cash flows for the three most recently completed fiscal years.



	Years Ended December 31,
							Variance						Variance
							2018 vs.						2017 vs.
(in millions)	2018			2017			2017			2016			2016
Capital, investment and acquisition expenditures	$	(9,668	)	$	(8,198	)	$	(1,470	)	$	(13,215	)	$	5,017
Debt and equity securities, net	(15		)	27			(42		)	83			(56		)
Net proceeds from the sales of discontinued operations and other assets, net of cash divested	41			—			41			1,418			(1,418		)
Other investing items	(418		)	(271		)	(147		)	186			(457		)
Net cash used in investing activities	$	(10,060	)	$	(8,442	)	$	(1,618	)	$	(11,528	)	$	3,086



MD&A	LIQUIDITY AND CAPITAL RESOURCES

The primary use of cash related to investing activities is capital, investment and acquisition expenditures, detailed by reportable business segment in the following table.



	Years Ended December 31,
(in millions)	2018		2017		2016
Electric Utilities and Infrastructure	$	8,086	$	7,024	$	6,649
Gas Utilities and Infrastructure	1,133		907		5,519
Commercial Renewables	193		92		857
Other	256		175		190
Total capital, investment and acquisition expenditures	$	9,668	$	8,198	$	13,215

For the year ended December 31, 2018, compared to 2017, the variance was driven primarily by:

a $1,470 million increase in capital, investment and acquisition expenditures in all reportable business segments, including expenditures related to W.S. Lee CC, Asheville and Citrus County CC at Duke Energy Carolinas, Duke Energy Progress and Duke Energy Florida, respectively.

For the year ended December 31, 2017, compared to 2016, the variance was driven primarily by:

a $5,017 million decrease in capital, investment and acquisition expenditures mainly due to the Piedmont acquisition in the prior year.

Partially offset by:

a $1,418 million decrease in net proceeds from sales of discontinued operations due to the prior year sale of the International business.

FINANCING CASH FLOWS

The following table summarizes key components of Duke Energy’s financing cash flows for the three most recently completed fiscal years.



	Years Ended December 31,
							Variance						Variance
							2018 vs.						2017 vs.
(in millions)	2018			2017			2017			2016			2016
Issuance of common stock	$	1,838		$	—		$	1,838		$	731		$	(731	)
Issuances of long-term debt, net	2,393			4,593			(2,200		)	7,315			(2,722		)
Notes payable and commercial paper	1,171			(362		)	1,533			(1,447		)	1,085
Dividends paid	(2,471		)	(2,450		)	(21		)	(2,332		)	(118		)
Other financing items	29			1			28			(16		)	17
Net cash provided by financing activities	$	2,960		$	1,782		$	1,178		$	4,251		$	(2,469	)

For the year ended December 31, 2018, compared to 2017, the variance was driven primarily by:

a $1,838 million increase in proceeds from the issuance of common stock; and

a $1,533 million increase in net borrowings from notes payable and commercial paper primarily due to increased funding requirements for capital expenditures and storm costs.

Partially offset by:

a $2,200 million net decrease in proceeds from issuances of long-term debt primarily due to timing related to refinancing of existing maturities, fund growth and general corporate needs.

For the year ended December 31, 2017, compared to 2016, the variance was driven primarily by:

a $2,722 million net decrease in proceeds from issuances of long-term debt driven principally by the prior year $3,750 million of senior unsecured notes used to fund a portion of the Piedmont acquisition, offset primarily by $900 million of first mortgage bonds issued by Duke Energy Florida in the current year to fund capital expenditures for ongoing construction and capital maintenance and for general corporate purposes;

a $731 million decrease in proceeds from stock issuances used to fund a portion of the Piedmont acquisition in 2016; and

a $118 million current year increase in dividends paid.

Partially offset by:

a $1,085 million decrease in net borrowings from notes payable and commercial paper primarily due to the use of proceeds from $1,294 million nuclear asset-recovery bonds issued at Duke Energy Florida in 2016 to pay down outstanding commercial paper.



MD&A	OFF-BALANCE SHEET ARRANGEMENTS AND CONTRACTUAL OBLIGATIONS

Off-Balance Sheet Arrangements

Duke Energy and certain of its subsidiaries enter into guarantee arrangements in the normal course of business to facilitate commercial transactions with third parties. These arrangements include performance guarantees, standby letters of credit, debt guarantees, surety bonds and indemnifications.

Most of the guarantee arrangements entered into by Duke Energy enhance the credit standing of certain subsidiaries, non-consolidated entities or less than wholly owned entities, enabling them to conduct business. As such, these guarantee arrangements involve elements of performance and credit risk, which are not always included on the Consolidated Balance Sheets. The possibility of Duke Energy, either on its own or on behalf of Spectra Energy Capital, LLC (Spectra Capital) through indemnification agreements entered into as part of the January 2, 2007, spin-off of Spectra Energy Corp, having to honor its contingencies is largely dependent upon the future operations of the subsidiaries, investees and other third parties, or the occurrence of certain future events.

Duke Energy performs ongoing assessments of its respective guarantee obligations to determine whether any liabilities have been incurred as a result of potential increased non-performance risk by third parties for which Duke Energy has issued guarantees. See Note 7 to the Consolidated Financial Statements, “Guarantees and Indemnifications,” for further details of the guarantee arrangements. Issuance of these guarantee arrangements is not required for the majority of Duke Energy’s operations. Thus, if Duke Energy discontinued issuing these guarantees, there would not be a material impact to the consolidated results of operations, cash flows or financial position.

Other than the guarantee arrangements discussed above, normal operating lease arrangements and off-balance sheet debt related to non-consolidated VIEs, Duke Energy does not have any material off-balance sheet financing entities or structures. For additional information, see Notes 5 and 17 to the Consolidated Financial Statements, “Commitments and Contingencies" and "Variable Interest Entities," respectively.

Contractual Obligations

Duke Energy enters into contracts that require payment of cash at certain specified periods, based on certain specified minimum quantities and prices. The following table summarizes Duke Energy’s contractual cash obligations as of December 31, 2018.



	Payments Due By Period
									More than
			Less than		2-3 years		4-5 years		5 years
			1 year		(2020 &		(2022 &		(2024 &
(in millions)	Total		(2019)		2021)		2023)		beyond)
Long-term debt^(a)	$	52,446	$	3,291	$	8,311	$	5,861	$	34,983
Interest payments on long-term debt^(b)	32,834		2,121		3,823		3,329		23,561
Capital leases^(c)	1,428		170		351		330		577
Operating leases^(c)	1,991		239		405		330		1,017
Purchase obligations:^(d)
Fuel and purchased power^(e)(f)	20,496		4,329		5,315		3,153		7,699
Other purchase obligations^(g)	12,436		4,617		1,178		775		5,866
Nuclear decommissioning trust annual funding^(h)	482		24		48		48		362
Land easements⁽ⁱ⁾	234		10		20		20		184
Total contractual cash obligations^(j)(k)	$	122,347	$	14,801	$	19,451	$	13,846	$	74,249


(a)	See Note 6 to the Consolidated Financial Statements, “Debt and Credit Facilities.”


(b)	Interest payments on variable rate debt instruments were calculated using December 31, 2018, interest rates and holding them constant for the life of the instruments.


(c)	See Note 5 to the Consolidated Financial Statements, “Commitments and Contingencies.” Amounts in the table above include the interest component of capital leases based on the interest rates stated in the lease agreements and exclude certain related executory costs. Amounts exclude contingent lease obligations.


(d)	Current liabilities, except for current maturities of long-term debt, and purchase obligations reflected on the Consolidated Balance Sheets have been excluded from the above table.

(e)

Includes firm capacity payments that provide Duke Energy with uninterrupted firm access to electricity transmission capacity and natural gas transportation contracts, as well as undesignated contracts and contracts that qualify as NPNS. For contracts where the price paid is based on an index, the amount is based on market prices at December 31, 2018, or the best projections of the index. For certain of these amounts, Duke Energy may settle on a net cash basis since Duke Energy has entered into payment netting arrangements with counterparties that permit Duke Energy to offset receivables and payables with such counterparties.


(f)	Amounts exclude obligations under the OVEC purchase power agreement. See Note 17 to the Consolidated Financial Statements, "Variable Interest Entities," for additional information.

(g)

Includes contracts for software, telephone, data and consulting or advisory services. Amount also includes contractual obligations for EPC costs for new generation plants, wind and solar facilities, plant refurbishments, maintenance and day-to-day contract work and commitments to buy certain products. Amount excludes certain open purchase orders for services that are provided on demand, for which the timing of the purchase cannot be determined.


(h)	Related to future annual funding obligations to NDTF through nuclear power stations' relicensing dates. See Note 9 to the Consolidated Financial Statements, "Asset Retirement Obligations."


(i)	Related to Commercial Renewables wind and solar facilities.



MD&A	OFF-BALANCE SHEET ARRANGEMENTS AND CONTRACTUAL OBLIGATIONS


(j)	Unrecognized tax benefits of $24 million are not reflected in this table as Duke Energy cannot predict when open income tax years will close with completed examinations. See Note 23 to the Consolidated Financial Statements, "Income Taxes."

(k)

The table above excludes reserves for litigation, environmental remediation, asbestos-related injuries and damages claims and self-insurance claims (see Note 5 to the Consolidated Financial Statements, “Commitments and Contingencies”) because Duke Energy is uncertain as to the timing and amount of cash payments that will be required. Additionally, the table above excludes annual insurance premiums that are necessary to operate the business, including nuclear insurance (see Note 5 to the Consolidated Financial Statements, “Commitments and Contingencies”), funding of pension and other post-retirement benefit plans (see Note 22 to the Consolidated Financial Statements, "Employee Benefit Plans"), AROs, including ash management expenditures (see Note 9 to the Consolidated Financial Statements, "Asset Retirement Obligations") and regulatory liabilities (see Note 4 to the Consolidated Financial Statements, “Regulatory Matters”) because the amount and timing of the cash payments are uncertain. Also excluded are Deferred Income Taxes and ITCs recorded on the Consolidated Balance Sheets since cash payments for income taxes are determined based primarily on taxable income for each discrete fiscal year.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Risk Management Policies

The Enterprise Risk Management policy framework at Duke Energy includes strategy, operational, project execution and financial or transaction related risks. Enterprise Risk Management includes market risk as part of the financial and transaction related risks in its framework.

Duke Energy is exposed to market risks associated with commodity prices, interest rates and equity prices. Duke Energy has established comprehensive risk management policies to monitor and manage these market risks. Duke Energy’s Chief Executive Officer and Chief Financial Officer are responsible for the overall approval of market risk management policies and the delegation of approval and authorization levels. The Finance and Risk Management Committee of the Board of Directors receives periodic updates from the Chief Risk Officer and other members of management on market risk positions, corporate exposures and overall risk management activities. The Chief Risk Officer is responsible for the overall governance of managing commodity price risk, including monitoring exposure limits.

The following disclosures about market risk contain forward-looking statements that involve estimates, projections, goals, forecasts, assumptions, risks and uncertainties that could cause actual results or outcomes to differ materially from those expressed in the forward-looking statements. See Item 1A, “Risk Factors,” and “Cautionary Statement Regarding Forward-Looking Information” for a discussion of the factors that may impact any such forward-looking statements made herein.

Commodity Price Risk

Duke Energy is exposed to the impact of market fluctuations in the prices of electricity, coal, natural gas and other energy-related products marketed and purchased as a result of its ownership of energy-related assets. Duke Energy’s exposure to these fluctuations is limited by the cost-based regulation of its regulated operations as these operations are typically allowed to recover substantially all of these costs through various cost-recovery clauses, including fuel clauses, formula based contracts, or other cost-sharing mechanisms. While there may be a delay in timing between when these costs are incurred and when they are recovered through rates, changes from year to year generally do not have a material impact on operating results of these regulated operations.

Price risk represents the potential risk of loss from adverse changes in the market price of electricity or other energy commodities. Duke Energy’s exposure to commodity price risk is influenced by a number of factors, including contract size, length, market liquidity, location and unique or specific contract terms. Duke Energy employs established policies and procedures to manage risks associated with these market fluctuations, which may include using various commodity derivatives, such as swaps, futures, forwards and options. For additional information, see Note 14 to the Consolidated Financial Statements, “Derivatives and Hedging.”

The inputs and methodologies used to determine the fair value of contracts are validated by an internal group separate from Duke Energy’s deal origination function. While Duke Energy uses common industry practices to develop its valuation techniques, changes in its pricing methodologies or the underlying assumptions could result in significantly different fair values and income recognition.

Hedging Strategies

Duke Energy closely monitors risks associated with commodity price changes on its future operations and, where appropriate, uses various commodity instruments such as electricity, coal and natural gas forward contracts and options to mitigate the effect of such fluctuations on operations. Duke Energy’s primary use of energy commodity derivatives is to hedge against exposure to the prices of power, fuel for generation and natural gas for customers.

The majority of instruments used to manage Duke Energy’s commodity price exposure are either not designated as hedges or do not qualify for hedge accounting. These instruments are referred to as undesignated contracts. Mark-to-market changes for undesignated contracts entered into by regulated businesses are reflected as regulatory assets or liabilities on the Consolidated Balance Sheets. Undesignated contracts entered into by unregulated businesses are marked-to-market each period, with changes in the fair value of the derivative instruments reflected in earnings.

Duke Energy may also enter into other contracts that qualify for the NPNS exception. When a contract meets the criteria to qualify as NPNS, Duke Energy applies such exception. Income recognition and realization related to NPNS contracts generally coincide with the physical delivery of the commodity. For contracts qualifying for the NPNS exception, no recognition of the contract’s fair value in the Consolidated Financial Statements is required until settlement of the contract as long as the transaction remains probable of occurring.



MD&A	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Generation Portfolio Risks

The Duke Energy Registrants optimize the value of their generation portfolios, which include generation assets, fuel and emission allowances. Modeled forecasts of future generation output and fuel requirements are based on forward power and fuel markets. The component pieces of the portfolio are bought and sold based on models and forecasts of generation in order to manage the economic value of the portfolio in accordance with the strategies of the business units.

For the Electric Utilities and Infrastructure segment, the generation portfolio not utilized to serve retail operations or committed load is subject to commodity price fluctuations. However, the impact on the Consolidated Statements of Operations is partially offset by mechanisms in these regulated jurisdictions that result in the sharing of net profits from these activities with retail customers.

Interest Rate Risk

Duke Energy is exposed to risk resulting from changes in interest rates as a result of its issuance or anticipated issuance of variable and fixed-rate debt and commercial paper. Duke Energy manages interest rate exposure by limiting variable-rate exposures to a percentage of total debt and by monitoring the effects of market changes in interest rates. Duke Energy also enters into financial derivative instruments, which may include instruments such as, but not limited to, interest rate swaps, swaptions and U.S. Treasury lock agreements to manage and mitigate interest rate risk exposure. See Notes 1, 6, 14 and 16 to the Consolidated Financial Statements, “Summary of Significant Accounting Policies,” “Debt and Credit Facilities,” “Derivatives and Hedging,” and “Fair Value Measurements.”

At December 31, 2018, Duke Energy had $1.2 billion of U.S. treasury lock agreements, $644 million notional amount of floating-to-fixed swaps outstanding, $500 million notional amount of fixed-to-floating swaps outstanding and $300 million forward-starting swaps outstanding. Duke Energy had $8.0 billion of unhedged long- and short-term floating interest rate exposure at December 31, 2018. The impact of a 100 basis point change in interest rates on pretax income is approximately $80 million at December 31, 2018. This amount was estimated by considering the impact of the hypothetical interest rates on variable-rate securities outstanding, adjusted for interest rate hedges as of December 31, 2018.

See Note 14, "Derivatives and Hedging," to the Consolidated Financial Statements for additional information about the forward-starting interest rate swaps related to the Piedmont acquisition.

Credit Risk

Credit risk represents the loss that the Duke Energy Registrants would incur if a counterparty fails to perform under its contractual obligations. Where exposed to credit risk, the Duke Energy Registrants analyze the counterparty's financial condition prior to entering into an agreement and monitor exposure on an ongoing basis. The Duke Energy Registrants establish credit limits where appropriate in the context of contractual arrangements and monitor such limits.

To reduce credit exposure, the Duke Energy Registrants seek to include netting provisions with counterparties, which permit the offset of receivables and payables with such counterparties. The Duke Energy Registrants also frequently use master agreements with credit support annexes to further mitigate certain credit exposures. The master agreements provide for a counterparty to post cash or letters of credit to the exposed party for exposure in excess of an established threshold. The threshold amount represents a negotiated unsecured credit limit for each party to the agreement, determined in accordance with the Duke Energy Registrants’ internal corporate credit practices and standards. Collateral agreements generally also provide that the inability to post collateral is sufficient cause to terminate contracts and liquidate all positions.

The Duke Energy Registrants also obtain cash or letters of credit from certain counterparties to provide credit support outside of collateral agreements, where appropriate, based on a financial analysis of the counterparty and the regulatory or contractual terms and conditions applicable to each transaction. See Note 14 to the Consolidated Financial Statements, “Derivatives and Hedging,” for additional information regarding credit risk related to derivative instruments.

The Duke Energy Registrants’ principal counterparties for its electric and natural gas businesses are regional transmission organizations, distribution companies, municipalities, electric cooperatives and utilities located throughout the U.S. The Duke Energy Registrants have concentrations of receivables from such entities throughout these regions. These concentrations of receivables may affect the Duke Energy Registrants’ overall credit risk in that risk factors can negatively impact the credit quality of the entire sector.

The Duke Energy Registrants are also subject to credit risk from transactions with their suppliers that involve prepayments in conjunction with outsourcing arrangements, major construction projects and certain commodity purchases. The Duke Energy Registrants’ credit exposure to such suppliers may take the form of increased costs or project delays in the event of non-performance. The Duke Energy Registrants' frequently require guarantees or letters of credit from suppliers to mitigate this credit risk.

Credit risk associated with the Duke Energy Registrants’ service to residential, commercial and industrial customers is generally limited to outstanding accounts receivable. The Duke Energy Registrants mitigate this credit risk by requiring customers to provide a cash deposit, letter of credit or surety bond until a satisfactory payment history is established, subject to the rules and regulations in effect in each retail jurisdiction, at which time the deposit is typically refunded. Charge-offs for retail customers have historically been insignificant to the operations of the Duke Energy Registrants and are typically recovered through retail rates. Management continually monitors customer charge-offs and payment patterns to ensure the adequacy of bad debt reserves. Duke Energy Ohio and Duke Energy Indiana sell certain of their accounts receivable and related collections through CRC, a Duke Energy consolidated variable interest entity. Losses on collection are first absorbed by the equity of CRC and next by the subordinated retained interests held by Duke Energy Ohio, Duke Energy Kentucky and Duke Energy Indiana. See Note 17 to the Consolidated Financial Statements, “Variable Interest Entities.” Duke Energy also provides certain non-tariff services, primarily to large commercial and industrial customers, in which incurred costs are intended to be recovered from the individual customer and therefore are not subject to rate recovery in the event of customer default. Customer credit worthiness is assessed prior to entering into these transactions.



MD&A	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Duke Energy’s Commercial Renewables business segment enters into long-term agreements with certain creditworthy buyers that may not include the right to call for collateral in the event of a credit rating downgrade, and is therefore exposed to market price risk and credit risk related to these agreements. Credit concentration exists to certain counterparties on these agreements.

Duke Energy Carolinas has third-party insurance to cover certain losses related to asbestos-related injuries and damages above an aggregate self-insured retention. See Note 5 to the Consolidated Financial Statements, "Commitments and Contingencies" for information on asbestos-related injuries and damages claims.

The Duke Energy Registrants also have credit risk exposure through issuance of performance and financial guarantees, letters of credit and surety bonds on behalf of less than wholly owned entities and third parties. Where the Duke Energy Registrants have issued these guarantees, it is possible that they could be required to perform under these guarantee obligations in the event the obligor under the guarantee fails to perform. Where the Duke Energy Registrants have issued guarantees related to assets or operations that have been disposed of via sale, they attempt to secure indemnification from the buyer against all future performance obligations under the guarantees. See Note 7 to the Consolidated Financial Statements, “Guarantees and Indemnifications,” for further information on guarantees issued by the Duke Energy Registrants.

Based on the Duke Energy Registrants’ policies for managing credit risk, their exposures and their credit and other reserves, the Duke Energy Registrants do not currently anticipate a materially adverse effect on their consolidated financial position or results of operations as a result of non-performance by any counterparty.

Marketable Securities Price Risk

As described further in Note 15 to the Consolidated Financial Statements, “Investments in Debt and Equity Securities,” Duke Energy invests in debt and equity securities as part of various investment portfolios to fund certain obligations. The vast majority of investments in equity securities are within the NDTF and assets of the various pension and other post-retirement benefit plans.

Pension Plan Assets

Duke Energy maintains investments to facilitate funding the costs of providing non-contributory defined benefit retirement and other post-retirement benefit plans. These investments are exposed to price fluctuations in equity markets and changes in interest rates. The equity securities held in these pension plans are diversified to achieve broad market participation and reduce the impact of any single investment, sector or geographic region. Duke Energy has established asset allocation targets for its pension plan holdings, which take into consideration the investment objectives and the risk profile with respect to the trust in which the assets are held. See Note 22 to the Consolidated Financial Statements, “Employee Benefit Plans,” for additional information regarding investment strategy of pension plan assets.

A significant decline in the value of plan asset holdings could require Duke Energy to increase funding of its pension plans in future periods, which could adversely affect cash flows in those periods. Additionally, a decline in the fair value of plan assets, absent additional cash contributions to the plan, could increase the amount of pension cost required to be recorded in future periods, which could adversely affect Duke Energy’s results of operations in those periods.

Nuclear Decommissioning Trust Funds

As required by the NRC, NCUC, PSCSC and FPSC, subsidiaries of Duke Energy maintain trust funds to fund the costs of nuclear decommissioning. As of December 31, 2018, these funds were invested primarily in domestic and international equity securities, debt securities, cash and cash equivalents and short-term investments. Per the NRC, Internal Revenue Code, NCUC, PSCSC and FPSC requirements, these funds may be used only for activities related to nuclear decommissioning. These investments are exposed to price fluctuations in equity markets and changes in interest rates. Duke Energy actively monitors its portfolios by benchmarking the performance of its investments against certain indices and by maintaining, and periodically reviewing, target allocation percentages for various asset classes.

Accounting for nuclear decommissioning recognizes that costs are recovered through retail and wholesale rates; therefore, fluctuations in investment prices do not materially affect the Consolidated Statements of Operations, as changes in the fair value of these investments are primarily deferred as regulatory assets or regulatory liabilities pursuant to Orders by the NCUC, PSCSC, FPSC and FERC. Earnings or losses of the fund will ultimately impact the amount of costs recovered through retail and wholesale rates. See Note 9 to the Consolidated Financial Statements, “Asset Retirement Obligations,” for additional information regarding nuclear decommissioning costs. See Note 15 to the Consolidated Financial Statements, “Investments in Debt and Equity Securities,” for additional information regarding NDTF assets.

OTHER MATTERS

Environmental Regulations

The Duke Energy Registrants are subject to federal, state and local regulations regarding air and water quality, hazardous and solid waste disposal and other environmental matters. These regulations can be changed from time to time and result in new obligations of the Duke Energy Registrants.

The following sections outline various proposed and recently enacted legislation and regulations that may impact the Duke Energy Registrants. Refer to Note 4 to the Consolidated Financial Statements, "Regulatory Matters," for further information regarding potential plant retirements and regulatory filings related to the Duke Energy Registrants.



MD&A	OTHER MATTERS

Coal Combustion Residuals

In April 2015, EPA published a rule to regulate the disposal of CCR from electric utilities as solid waste. The federal regulation classifies CCR as nonhazardous waste and allows for beneficial use of CCR with some restrictions. The regulation applies to all new and existing landfills, new and existing surface impoundments receiving CCR and existing surface impoundments that are no longer receiving CCR but contain liquid located at stations currently generating electricity (regardless of fuel source). The rule establishes requirements regarding landfill design, structural integrity design and assessment criteria for surface impoundments, groundwater monitoring, protection and remedial procedures and other operational and reporting procedures to ensure the safe disposal and management of CCR. Various industry and environmental parties have appealed EPA's CCR rule in the D.C. Circuit Court. On April 18, 2016, EPA filed a motion with the federal court to settle five issues raised in litigation. On June 14, 2016, the court approved the motion with respect to all of those issues. Duke Energy does not expect a material impact from the settlement or that it will result in additional ARO adjustments. On September 13, 2017, EPA responded to a petition by the Utility Solid Waste Activities Group that the agency would reconsider certain provisions of the final rule, and asked the D.C. Circuit Court to suspend the litigation. The D.C. Circuit Court denied EPA’s petition to suspend the litigation and oral argument was held on November 20, 2017. On August 21, 2018, the D.C. Circuit issued its decision in the CCR rule litigation denying relief for industry petitioners' remaining claims and ruling in favor of environmental petitioners on a number of their challenges, including the regulation of inactive CCR surface impoundments at retired plants and the continued operation of unlined impoundments.

On March 15, 2018, EPA published proposed amendments to the federal CCR rule, including revisions that were required as part of a CCR litigation settlement, as well as changes that the agency considers warranted due to the passage of the Water Infrastructure Improvements for the Nation Act, which provides statutory authority for state and federal permit programs. On July 17, 2018, EPA issued a rule (Phase 1, Part 1) finalizing certain, but not all, elements included in the agency's March 15, 2018, proposal. The final rule revises certain closure deadlines and groundwater protection standards in the CCR rule. It does not change the primary requirements for groundwater monitoring, corrective action, inspections and maintenance, and closure, and thus does not materially affect Duke Energy’s coal ash basin closure plans or compliance obligations under the CCR rule. On October 22, 2018, a coalition of environmental groups filed a petition for review in the D.C. Circuit Court challenging EPA's final Phase 1, Part 1 revisions to the CCR rule. Briefing in the case concluded in February 2019.

In addition to the requirements of the federal CCR regulation, CCR landfills and surface impoundments will continue to be independently regulated by most states. Cost recovery for future expenditures will be pursued through the normal ratemaking process with federal and state utility commissions and via wholesale contracts, which permit recovery of necessary and prudently incurred costs associated with Duke Energy’s regulated operations. For more information, see Notes 4 and 9 to the Consolidated Financial Statements, "Regulatory Matters" and "Asset Retirement Obligations," respectively.

Coal Ash Management Act of 2014

AROs recorded on the Duke Energy Carolinas and Duke Energy Progress Consolidated Balance Sheets at December 31, 2018, and December 31, 2017, include the legal obligation for closure of coal ash basins and the disposal of related ash as a result of the Coal Ash Act, the EPA CCR rule and other agreements. The Coal Ash Act includes a variance procedure for compliance deadlines and other issues surrounding the management of CCR and CCR surface impoundments and prohibits cost recovery in customer rates for unlawful discharge of ash impoundment waters occurring after January 1, 2014. The Coal Ash Act leaves the decision on cost recovery determinations related to closure of ash impoundments to the normal ratemaking processes before utility regulatory commissions.

Consistent with the requirements of the Coal Ash Act, Duke Energy has submitted comprehensive site assessments and groundwater corrective plans to NCDEQ and will submit to NCDEQ site-specific coal ash impoundment closure plans in advance of closure. In support of these closure plans, on November 15, 2018, Duke Energy submitted options analyses, groundwater modeling and net environmental benefits analyses for six sites potentially eligible for closure by cap in place. Separately, on November 16, 2018, Duke Energy submitted a variance application requesting that NCDEQ grant a six-month extension to the closure deadline applicable to the CCR surface impoundments at the Sutton Plant. NCDEQ held a public meeting on January 14, 2019 at which it announced that an extension would be appropriate. A final decision on the variance application is expected by April 15, 2019.



MD&A	OTHER MATTERS

The current plans for each site are listed in the table below.



NCDEQ Risk Classification	Plants/Current Closure Date	Expected Closure Method
Low	Allen – December 31, 2029^(a) Belews Creek – December 31, 2029^(a) Buck – December 31, 2029^(a)(b) Rogers – December 31, 2029^(a) Marshall – December 31, 2029^(a) Mayo – December 31, 2029^(a) Roxboro – December 31, 2029^(a)	Combination of a cap system and a groundwater monitoring system, or for selected sites, conversion for beneficial use.
Medium	H.F. Lee – December 31, 2029^(b) Cape Fear – December 31, 2029^(b) Weatherspoon – August 1, 2028	Excavation, which may include conversion of the basin to a lined industrial landfill, transferring coal ash to an engineered landfill, or for selected sites, conversion for beneficial use.
High	Sutton – August 1, 2019 Riverbend – August 1, 2019 Dan River – August 1, 2019 Asheville – August 1, 2022	Excavation, which may include a combination of transferring coal ash to an engineered landfill or for selected sites, conversion for beneficial use.


(a)	In November 2018, the closure deadline for these basins was extended to December 31, 2029 as a result of the completion of certain dam improvement projects and alternative drinking water source projects by October 15, 2018.


(b)	The Coal Ash Act requires the installation and operation of three large-scale coal ash beneficiation projects to produce reprocessed ash for use in the concrete industry. Duke Energy has selected the Buck, H.F. Lee and Cape Fear plants for these projects. Closure at these sites is required to be completed no later than December 31, 2029.

For further information on ash basins and recovery, see Notes 4 and 9 to the Consolidated Financial Statements, "Regulatory Matters" and “Asset Retirement Obligations,” respectively.

Estimated Cost and Impacts of Rulemakings

Duke Energy will incur capital expenditures to comply with the environmental regulations and rules discussed above. The following table, as of December 31, 2018, provides five-year estimated costs, excluding AFUDC, of new control equipment that may need to be installed on existing power plants primarily to comply with the Coal Ash Act requirements for conversion to dry disposal of bottom ash and fly ash, CWA 316(b) and ELGs through December 31, 2023. The table excludes ash basin closure costs recorded in Asset retirement obligations on the Consolidated Balance Sheets. For more information related to AROs, see Note 9 to the Consolidated Financial Statements.



(in millions)	Five-Year Estimated Costs
Duke Energy	$	420
Duke Energy Carolinas	185
Progress Energy	200
Duke Energy Progress	80
Duke Energy Florida	120
Duke Energy Ohio	15
Duke Energy Indiana	20

The Duke Energy Registrants also expect to incur increased fuel, purchased power, operation and maintenance and other expenses, in addition to costs for replacement generation for potential coal-fired power plant retirements, as a result of these regulations. Actual compliance costs incurred may be materially different from these estimates due to reasons such as the timing and requirements of EPA regulations and the resolution of legal challenges to the rules. The Duke Energy Registrants intend to seek rate recovery of necessary and prudently incurred costs associated with regulated operations to comply with these regulations.

Other Environmental Regulations

The Duke Energy Registrants are also subject to various federal, state and local regulations regarding air and water quality, hazardous and solid waste disposal and other environmental matters, including the following:

Clean Water Act

Steam Effluent Limitation Guidelines

Cross-State Air Pollution Rule

Carbon Pollution Standards for New, Modified and Reconstructed Power Plants

Clean Power Plan/ACE Rule

Duke Energy continues to comply with enacted environmental laws and regulations even as certain of these regulations are in various stages of clarification, revision or legal challenges. The Duke Energy Registrants cannot predict the outcome of these matters.



MD&A	OTHER MATTERS

Section 126 Petitions

On November 16, 2016, the state of Maryland filed a petition with EPA under Section 126 of the Clean Air Act alleging that 19 power plants, including two plants (three units) that Duke Energy Registrants own and operate, contribute to violations of EPA’s NAAQS for ozone in the state of Maryland. On March 12, 2018, the state of New York filed a petition with EPA, also under Section 126 of the Clean Air Act alleging that over 60 power plants, including four that Duke Energy Registrants own and operate, contribute to violations of EPA’s ozone NAAQS in the state of New York. Both Maryland and New York seek EPA orders requiring the states in which the named power plants operate impose more stringent NO_x emission limitations on the plants. On October 5, 2018, EPA published a final rule denying the Maryland petition. That same day, Maryland appealed EPA's denial of their Section 126 petition to the D.C. Circuit Court. The impact of these petitions could be more stringent requirements for the operation of NO_x emission controls at these plants. The Duke Energy Registrants cannot predict the outcome of these matters.

Global Climate Change

The Duke Energy Registrants’ GHG emissions consist primarily of CO₂ and result primarily from operating a fleet of coal-fired and natural gas-fired power plants. In 2018, the Duke Energy Registrants’ power plants emitted approximately 105 million tons of CO₂. Future levels of CO₂ emissions will be influenced by variables that include fuel prices, compliance with new or existing regulations, economic conditions that affect electricity demand and the technologies deployed to generate the electricity necessary to meet the customer demand.

The Duke Energy Registrants have taken actions that have resulted in a reduction of CO₂ emissions over time. Actions have included the retirement of 47 coal-fired EGUs with a combined generating capacity of 5,425 MW. Much of that capacity has been replaced with state-of-the-art highly efficient natural gas-fired generation that produces far fewer CO₂ emissions per unit of electricity generated. Duke Energy also has made investments to expand its portfolio of wind and solar projects, increase energy efficiency offerings and invest in its zero-CO₂ emissions hydropower and nuclear plants. These efforts have diversified its system and significantly reduced CO₂ emissions. Between 2005 and 2018, the Duke Energy Registrants have collectively lowered the CO₂ emissions from their electricity generation by 31 percent, which potentially lowers the exposure to any future mandatory CO₂ emission reduction requirements or carbon tax, whether as a result of federal legislation, EPA regulation, state regulation or other as yet unknown emission reduction requirement. Duke Energy will continue to explore the use of currently available and commercially demonstrated technology to reduce CO₂ emissions, including energy efficiency, wind, solar, storage and nuclear. Duke Energy will adjust to evolving and innovative technologies in a way that balances the reliability and affordability that customers expect. Under any future scenario involving mandatory CO₂ limitations, the Duke Energy Registrants would plan to seek recovery of their compliance costs through appropriate regulatory mechanisms.

The Duke Energy Registrants recognize certain groups associate severe weather events with increasing levels of GHGs in the atmosphere and forecast the possibility these weather events could have a material impact on future results of operations should they occur more frequently and with greater severity. However, the uncertain nature of potential changes in extreme weather events (such as increased frequency, duration and severity), the long period of time over which any potential changes might take place and the inability to predict potential changes with any degree of accuracy, make estimating any potential future financial risk to the Duke Energy Registrants’ operations impossible.

The Duke Energy Registrants annually, biannually or triennially prepare lengthy, forward-looking IRPs. These detailed, highly technical plans are based on the company’s thorough analysis of numerous factors that can impact the cost of producing and delivering electricity that influence long-term resource planning decisions. The IRP process helps to evaluate a range of options, taking into account forecasts of future electricity demand, fuel prices, transmission improvements, new generating capacity, integration of renewables, energy storage, energy efficiency and demand response initiatives. The IRP process also helps evaluate potential environmental and regulatory scenarios to better mitigate policy and economic risks. The IRPs we file with regulators look out 10 to 20 years depending on the jurisdiction.

For a number of years, the Duke Energy Registrants have included a price on CO₂ emissions in their IRP planning process to account for the potential regulation of CO₂ emissions. Incorporating a price on CO₂ emissions in the IRPs allows for the evaluation of existing and future resource needs against potential climate change policy risk in the absence of policy certainty. One of the challenges with using a CO₂ price, especially in the absence of a clear and certain policy, is determining the appropriate price to use. To address this uncertainty and ensure the company remains agile, the Duke Energy Registrants typically use a range of potential CO₂ prices to reflect a range of potential policy outcomes.

The Duke Energy Registrants routinely take steps to reduce the potential impact of severe weather events on their electric distribution systems by modernizing the electric grid through smart meters, storm hardening, self-healing and targeted undergrounding and applying lessons learned from previous storms to restoration efforts. The Duke Energy Registrants’ electric generating facilities are designed to withstand extreme weather events without significant damage. The Duke Energy Registrants maintain an inventory of coal and oil on-site to mitigate the effects of any potential short-term disruption in fuel supply so they can continue to provide customers with an uninterrupted supply of electricity.

State Legislation

In July 2017, the North Carolina General Assembly passed House Bill 589, and it was subsequently enacted into law by the governor. The law includes, among other things, overall reform of the application of PURPA for new solar projects in the state, a requirement for the utility to procure approximately 2,600 MW of renewable energy through a competitive bidding process and recovery of costs related to the competitive bidding process through the fuel clause and a competitive procurement rider. The law stipulated certain deadlines for Duke Energy to file for NCUC approval of programs required under the law. Duke Energy has made some regulatory filings since the passage of the law and will continue to implement the requirements of House Bill 589.

In July 2018, Duke Energy issued an RFP for the first tranche of 680 MW. In accordance with the provisions of HB 589, total procurement will be changed based upon how much generation with no economic dispatch or curtailment occurs over the procurement period. Most of this type of generation is solar procured under PURPA. Based upon the current forecasted amount of such generation that will occur over procurement period, Duke Energy estimates the total under HB 589 competitive procurement will be approximately 1,500 to 2,000 MW.

In various states, legislation is being considered to allow third-party sales of electricity. Deregulation or restructuring in the electric industry may result in increased competition and unrecovered costs. The Duke Energy Registrants cannot predict the outcome of these initiatives.



MD&A	OTHER MATTERS

Liquefied Natural Gas Facility

Piedmont Natural Gas plans to build a liquefied natural gas facility in Robeson County, North Carolina. The project is expected to be completed in the summer of 2021 at a cost of $250 million. Construction will begin in the summer of 2019.

New Accounting Standards

See Note 1 to the Consolidated Financial Statements, “Summary of Significant Accounting Policies,” for a discussion of the impact of new accounting standards.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

See “Management’s Discussion and Analysis of Results of Operations and Financial Condition – Quantitative and Qualitative Disclosures About Market Risk.”



FINANCIAL STATEMENTS

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA



Duke Energy
Report of Independent Registered Public Accounting Firm	86
Consolidated Statements of Operations	87
Consolidated Statements of Comprehensive Income	88
Consolidated Balance Sheets	89
Consolidated Statements of Cash Flows	90
Consolidated Statements of Changes in Equity	91

Duke Energy Carolinas
Report of Independent Registered Public Accounting Firm	92
Consolidated Statements of Operations and Comprehensive Income	93
Consolidated Balance Sheets	94
Consolidated Statements of Cash Flows	95
Consolidated Statements of Changes in Equity	96

Progress Energy
Report of Independent Registered Public Accounting Firm	97
Consolidated Statements of Operations and Comprehensive Income	98
Consolidated Balance Sheets	99
Consolidated Statements of Cash Flows	100
Consolidated Statements of Changes in Equity	101

Duke Energy Progress
Report of Independent Registered Public Accounting Firm	102
Consolidated Statements of Operations and Comprehensive Income	103
Consolidated Balance Sheets	104
Consolidated Statements of Cash Flows	105
Consolidated Statements of Changes in Equity	106

Duke Energy Florida
Report of Independent Registered Public Accounting Firm	107
Consolidated Statements of Operations and Comprehensive Income	108
Consolidated Balance Sheets	109
Consolidated Statements of Cash Flows	110
Consolidated Statements of Changes in Equity	111

Duke Energy Ohio
Report of Independent Registered Public Accounting Firm	112
Consolidated Statements of Operations and Comprehensive Income	113
Consolidated Balance Sheets	114
Consolidated Statements of Cash Flows	115
Consolidated Statements of Changes in Equity	116

Duke Energy Indiana
Report of Independent Registered Public Accounting Firm	117
Consolidated Statements of Operations and Comprehensive Income	118
Consolidated Balance Sheets	119
Consolidated Statements of Cash Flows	120
Consolidated Statements of Changes in Equity	121

Piedmont
Report of Independent Registered Public Accounting Firm	122
Consolidated Statements of Operations and Comprehensive Income	123
Consolidated Balance Sheets	124
Consolidated Statements of Cash Flows	125
Consolidated Statements of Changes in Equity	126



FINANCIAL STATEMENTS



Combined Notes to Consolidated Financial Statements
Note 1 – Summary of Significant Accounting Policies	127
Note 2 – Acquisitions and Dispositions	137
Note 3 – Business Segments	140
Note 4 – Regulatory Matters	144
Note 5 – Commitments and Contingencies	166
Note 6 – Debt and Credit Facilities	174
Note 7 – Guarantees and Indemnifications	181
Note 8 – Joint Ownership of Generating and Transmission Facilities	182
Note 9 – Asset Retirement Obligations	182
Note 10 – Property, Plant and Equipment	185
Note 11 – Goodwill and Intangible Assets	187
Note 12 – Investments in Unconsolidated Affiliates	189
Note 13 – Related Party Transactions	191
Note 14 – Derivatives and Hedging	192
Note 15 – Investments in Debt and Equity Securities	198
Note 16 – Fair Value Measurements	203
Note 17 – Variable Interest Entities	209
Note 18 – Revenue	213
Note 19 – Common Stock	217
Note 20 – Severance	218
Note 21 – Stock-Based Compensation	219
Note 22 – Employee Benefit Plans	221
Note 23 – Income Taxes	243
Note 24 – Other Income and Expenses, Net	251
Note 25 – Subsequent Events	252
Note 26 – Quarterly Financial Data (Unaudited)	253



REPORTS

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the shareholders and the Board of Directors of Duke Energy Corporation

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Duke Energy Corporation and subsidiaries (the "Company") as of December 31, 2018 and 2017, the related consolidated statements of operations, comprehensive income, changes in equity, and cash flows, for each of the three years in the period ended December 31, 2018, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2018 and 2017, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2018, in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2018, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 28, 2019, expressed an unqualified opinion on the Company's internal control over financial reporting.

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

/s/ Deloitte & Touche LLP

Charlotte, North Carolina

February 28, 2019

We have served as the Company's auditor since 1947.



FINANCIAL STATEMENTS

DUKE ENERGY CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS



	Years Ended December 31,
(in millions, except per share amounts)	2018			2017			2016
Operating Revenues
Regulated electric	$	22,097		$	21,177		$	21,221
Regulated natural gas	1,773			1,734			863
Nonregulated electric and other	651			654			659
Total operating revenues	24,521			23,565			22,743
Operating Expenses
Fuel used in electric generation and purchased power	6,831			6,350			6,625
Cost of natural gas	697			632			265
Operation, maintenance and other	6,463			5,944			6,224
Depreciation and amortization	4,074			3,527			3,294
Property and other taxes	1,280			1,233			1,142
Impairment charges	402			282			18
Total operating expenses	19,747			17,968			17,568
(Losses) Gains on Sales of Other Assets and Other, net	(89		)	28			27
Operating Income	4,685			5,625			5,202
Other Income and Expenses
Equity in earnings (losses) of unconsolidated affiliates	83			119			(15		)
Other income and expenses, net	399			508			463
Total other income and expenses	482			627			448
Interest Expense	2,094			1,986			1,916
Income From Continuing Operations Before Income Taxes	3,073			4,266			3,734
Income Tax Expense From Continuing Operations	448			1,196			1,156
Income From Continuing Operations	2,625			3,070			2,578
Income (Loss) From Discontinued Operations, net of tax	19			(6		)	(408		)
Net Income	2,644			3,064			2,170
Less: Net (Loss) Income Attributable to Noncontrolling Interests	(22		)	5			18
Net Income Attributable to Duke Energy Corporation	$	2,666		$	3,059		$	2,152

Earnings Per Share – Basic and Diluted
Income from continuing operations attributable to Duke Energy Corporation common stockholders
Basic	$	3.73		$	4.37		$	3.71
Diluted	$	3.73		$	4.37		$	3.71
Income (Loss) from discontinued operations attributable to Duke Energy Corporation common stockholders
Basic	$	0.03		$	(0.01	)	$	(0.60	)
Diluted	$	0.03		$	(0.01	)	$	(0.60	)
Net income attributable to Duke Energy Corporation common stockholders
Basic	$	3.76		$	4.36		$	3.11
Diluted	$	3.76		$	4.36		$	3.11
Weighted average shares outstanding
Basic	708			700			691
Diluted	708			700			691

See Notes to Consolidated Financial Statements



FINANCIAL STATEMENTS

DUKE ENERGY CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME



	Years Ended December 31,
(in millions)	2018			2017		2016
Net Income	$	2,644		$	3,064	$	2,170
Other Comprehensive (Loss) Income, net of tax
Foreign currency translation adjustments	—			—		694
Pension and OPEB adjustments	(6		)	3		(11		)
Net unrealized (losses) gains on cash flow hedges	(10		)	2		17
Reclassification into earnings from cash flow hedges	6			8		13
Unrealized (losses) gains on available-for-sale securities	(3		)	13		2
Other Comprehensive (Loss) Income, net of tax	(13		)	26		715
Comprehensive Income	2,631			3,090		2,885
Less: Comprehensive (Loss) Income Attributable to Noncontrolling Interests	(22		)	5		20
Comprehensive Income Attributable to Duke Energy Corporation	$	2,653		$	3,085	$	2,865

See Notes to Consolidated Financial Statements



FINANCIAL STATEMENTS

DUKE ENERGY CORPORATION

CONSOLIDATED BALANCE SHEETS



	December 31,
(in millions)	2018			2017
ASSETS
Current Assets
Cash and cash equivalents	$	442		$	358
Receivables (net of allowance for doubtful accounts of $16 at 2018 and $14 at 2017)	962			779
Receivables of VIEs (net of allowance for doubtful accounts of $55 at 2018 and $54 at 2017)	2,172			1,995
Inventory	3,084			3,250
Regulatory assets (includes $52 at 2018 and $51 at 2017 related to VIEs)	2,005			1,437
Other (includes $162 at 2018 and $214 at 2017 related to VIEs)	1,049			634
Total current assets	9,714			8,453
Property, Plant and Equipment
Cost	134,458			127,507
Accumulated depreciation and amortization	(43,126		)	(41,537		)
Generation facilities to be retired, net	362			421
Net property, plant and equipment	91,694			86,391
Other Noncurrent Assets
Goodwill	19,303			19,396
Regulatory assets (includes $1,041 at 2018 and $1,091 at 2017 related to VIEs)	13,617			12,442
Nuclear decommissioning trust funds	6,720			7,097
Investments in equity method unconsolidated affiliates	1,409			1,175
Other	2,935			2,960
Total other noncurrent assets	43,984			43,070
Total Assets	$	145,392		$	137,914
LIABILITIES AND EQUITY
Current Liabilities
Accounts payable	$	3,487		$	3,043
Notes payable and commercial paper	3,410			2,163
Taxes accrued	577			551
Interest accrued	559			525
Current maturities of long-term debt (includes $227 at 2018 and $225 at 2017 related to VIEs)	3,406			3,244
Asset retirement obligations	919			689
Regulatory liabilities	598			402
Other	2,085			1,865
Total current liabilities	15,041			12,482
Long-Term Debt (includes $3,998 at 2018 and $4,306 at 2017 related to VIEs)	51,123			49,035
Other Noncurrent Liabilities
Deferred income taxes	7,806			6,621
Asset retirement obligations	9,548			9,486
Regulatory liabilities	14,834			15,330
Accrued pension and other post-retirement benefit costs	988			1,103
Investment tax credits	568			539
Other (includes $212 at 2018 and $241 at 2017 related to VIEs)	1,650			1,581
Total other noncurrent liabilities	35,394			34,660
Commitments and Contingencies
Equity
Common stock, $0.001 par value, 2 billion shares authorized; 727 million shares outstanding at 2018 and 700 million shares outstanding at 2017	1			1
Additional paid-in capital	40,795			38,792
Retained earnings	3,113			3,013
Accumulated other comprehensive loss	(92		)	(67		)
Total Duke Energy Corporation stockholders' equity	43,817			41,739
Noncontrolling interests	17			(2		)
Total equity	43,834			41,737
Total Liabilities and Equity	$	145,392		$	137,914

See Notes to Consolidated Financial Statements



FINANCIAL STATEMENTS

DUKE ENERGY CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS



	Years Ended December 31,
(in millions)	2018			2017			2016
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	2,644		$	3,064		$	2,170
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization and accretion (including amortization of nuclear fuel)	4,696			4,046			3,880
Equity component of AFUDC	(221		)	(237		)	(200		)
Losses (Gains) on sales of other assets	88			(33		)	477
Impairment charges	402			282			212
Deferred income taxes	1,079			1,433			900
Equity in (earnings) losses of unconsolidated affiliates	(83		)	(119		)	15
Accrued pension and other post-retirement benefit costs	61			8			21
Contributions to qualified pension plans	(141		)	(19		)	(155		)
Payments for asset retirement obligations	(533		)	(571		)	(608		)
Payment for the disposal of other assets	(105		)	—			—
Other rate case adjustments	37			—			—
Provision for rate refunds	425			—			—
(Increase) decrease in
Net realized and unrealized mark-to-market and hedging transactions	22			18			34
Receivables	(345		)	(83		)	(372		)
Inventory	156			268			272
Other current assets	(721		)	(400		)	(174		)
Increase (decrease) in
Accounts payable	479			(204		)	296
Taxes accrued	23			149			236
Other current liabilities	270			(482		)	182
Other assets	(1,008		)	(436		)	(186		)
Other liabilities	(39		)	(60		)	(137		)
Net cash provided by operating activities	7,186			6,624			6,863
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures	(9,389		)	(8,052		)	(7,901		)
Contributions to equity method investments	(416		)	(414		)	(307		)
Acquisitions, net of cash acquired	—			(13		)	(4,778		)
Return of investment capital	137			281			1
Purchases of debt and equity securities	(3,762		)	(4,071		)	(5,153		)
Proceeds from sales and maturities of debt and equity securities	3,747			4,098			5,236
Proceeds from the sales of discontinued operations and other assets, net of cash divested	41			—			1,418
Other	(418		)	(271		)	(44		)
Net cash used in investing activities	(10,060		)	(8,442		)	(11,528		)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from the:
Issuance of long-term debt	5,299			6,909			9,238
Issuance of common stock	1,838			—			731
Payments for the redemption of long-term debt	(2,906		)	(2,316		)	(1,923		)
Proceeds from the issuance of short-term debt with original maturities greater than 90 days	472			319			2,081
Payments for the redemption of short-term debt with original maturities greater than 90 days	(282		)	(272		)	(2,166		)
Notes payable and commercial paper	981			(409		)	(1,362		)
Dividends paid	(2,471		)	(2,450		)	(2,332		)
Other	29			1			(16		)
Net cash provided by financing activities	2,960			1,782			4,251
Changes in cash and cash equivalents included in assets held for sale	—			—			474
Net increase (decrease) in cash, cash equivalents, and restricted cash	86			(36		)	60
Cash, cash equivalents, and restricted cash at beginning of period	505			541			481
Cash, cash equivalents, and restricted cash at end of period	$	591		$	505		$	541
Supplemental Disclosures:
Cash paid for interest, net of amount capitalized	$	2,086		$	1,963		$	1,794
Cash (received from) paid for income taxes	(266		)	4			229
Significant non-cash transactions:
Accrued capital expenditures	1,112			1,032			1,000
Non-cash dividends	107			—			—

See Notes to Consolidated Financial Statements



FINANCIAL STATEMENTS

DUKE ENERGY CORPORATION

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY



									Duke Energy Corporation Stockholders' Accumulated Other Comprehensive Loss
															Net Unrealized						Total
									Foreign			Net			Gains (Losses)						Duke Energy
	Common			Additional					Currency			Losses on			on Available-			Pension and			Corporation
	Stock	Common		Paid-in		Retained			Translation			Cash Flow			for-Sale-			OPEB			Stockholders'			Noncontrolling			Total
(in millions)	Shares	Stock		Capital		Earnings			Adjustments			Hedges			Securities			Adjustments			Equity			Interests			Equity
Balance at December 31, 2015	688	$	1	$	37,968	$	2,564		$	(692	)	$	(50	)	$	(3	)	$	(61	)	$	39,727		$	44		$	39,771
Net income	—	—		—		2,152			—			—			—			—			2,152			18			2,170
Other comprehensive income (loss)^(a)	—	—		—		—			692			30			2			(11		)	713			2			715
Common stock issuances, including dividend reinvestment and employee benefits	12	—		773		—			—			—			—			—			773			—			773
Common stock dividends	—	—		—		(2,332		)	—			—			—			—			(2,332		)	—			(2,332		)
Distributions to noncontrolling interest in subsidiaries	—	—		—		—			—			—			—			—			—			(6		)	(6		)
Other^(b)	—	—		—		—			—			—			—			—			—			(50		)	(50		)
Balance at December 31, 2016	700	$	1	$	38,741	$	2,384		$	—		$	(20	)	$	(1	)	$	(72	)	$	41,033		$	8		$	41,041
Net income	—	—		—		3,059			—			—			—			—			3,059			5			3,064
Other comprehensive income	—	—		—		—			—			10			13			3			26			—			26
Common stock issuances, including dividend reinvestment and employee benefits	—	—		51		—			—			—			—			—			51			—			51
Common stock dividends	—	—		—		(2,450		)	—			—			—			—			(2,450		)	—			(2,450		)
Distributions to noncontrolling interest in subsidiaries	—	—		—		—			—			—			—			—			—			(2		)	(2		)
Other^(c)	—	—		—		20			—			—			—			—			20			(13		)	7
Balance at December 31, 2017	700	$	1	$	38,792	$	3,013		$	—		$	(10	)	$	12		$	(69	)	$	41,739		$	(2	)	$	41,737
Net income	—	—		—		2,666			—			—			—			—			2,666			(22		)	2,644
Other comprehensive (loss) income	—	—		—		—			—			(4		)	(3		)	(6		)	(13		)	—			(13		)
Common stock issuances, including dividend reinvestment and employee benefits	27	—		2,003		—			—			—			—			—			2,003			—			2,003
Common stock dividends	—	—		—		(2,578		)	—			—			—			—			(2,578		)	—			(2,578		)
Distributions to noncontrolling interests in subsidiaries	—	—		—		—			—			—			—			—			—			(1		)	(1		)
Other^(d)	—	—		—		12			—			—			(12		)	—			—			42			42
Balance at December 31, 2018	727	$	1	$	40,795	$	3,113		$	—		$	(14	)	$	(3	)	$	(75	)	$	43,817		$	17		$	43,834


(a)	Foreign Currency Translation Adjustments amount includes $620 million of cumulative adjustment realized as a result of the sale of the Latin American generation business. See Note 2 to the Consolidated Financial Statements.


(b)	Noncontrolling Interests amount is primarily related to the sale of the Latin American generation business. See Note 2 to the Consolidated Financial Statements.


(c)	Retained Earnings relates to a cumulative-effect adjustment due to implementation of a new accounting standard related to stock-based compensation and the associated income taxes. See Note 1 to the Consolidated Financial Statements for additional information. Noncontrolling Interests relates to the purchase of remaining interest in REC Solar.


(d)	Amounts in Retained Earnings and Accumulated Other Comprehensive Loss represent a cumulative-effect adjustment due to implementation of a new accounting standard related to Financial Instruments Classification and Measurement. See Note 1 for more information. Amount in Noncontrolling Interests primarily relates to tax equity financing activity in the Commercial Renewables segment.

See Notes to Consolidated Financial Statements



REPORTS

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the shareholder and the Board of Directors of Duke Energy Carolinas, LLC

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Duke Energy Carolinas, LLC and subsidiaries (the "Company") as of December 31, 2018 and 2017, the related consolidated statements of operations and comprehensive income, changes in equity, and cash flows, for each of the three years in the period ended December 31, 2018, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2018 and 2017, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2018, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

/s/ Deloitte & Touche LLP

Charlotte, North Carolina

February 28, 2019

We have served as the Company's auditor since 1947.



FINANCIAL STATEMENTS

DUKE ENERGY CAROLINAS, LLC

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME



	Years Ended December 31,
(in millions)	2018			2017		2016
Operating Revenues	$	7,300		$	7,302	$	7,322
Operating Expenses
Fuel used in electric generation and purchased power	1,821			1,822		1,797
Operation, maintenance and other	2,130			2,021		2,158
Depreciation and amortization	1,201			1,090		1,075
Property and other taxes	295			281		276
Impairment charges	192			—		1
Total operating expenses	5,639			5,214		5,307
(Losses) Gains on Sales of Other Assets and Other, net	(1		)	1		(5		)
Operating Income	1,660			2,089		2,010
Other Income and Expenses, net	153			199		214
Interest Expense	439			422		424
Income Before Income Taxes	1,374			1,866		1,800
Income Tax Expense	303			652		634
Net Income	$	1,071		$	1,214	$	1,166
Other Comprehensive Income, net of tax
Reclassification into earnings from cash flow hedges	1			2		2
Other Comprehensive Income, net of tax	1			2		2
Comprehensive Income	$	1,072		$	1,216	$	1,168

See Notes to Consolidated Financial Statements



FINANCIAL STATEMENTS

DUKE ENERGY CAROLINAS, LLC

CONSOLIDATED BALANCE SHEETS



	December 31,
(in millions)	2018			2017
ASSETS
Current Assets
Cash and cash equivalents	$	33		$	16
Receivables (net of allowance for doubtful accounts of $2 at 2018 and 2017)	219			200
Receivables of VIEs (net of allowance for doubtful accounts of $7 at 2018 and 2017)	699			640
Receivables from affiliated companies	182			95
Inventory	948			971
Regulatory assets	520			299
Other	72			19
Total current assets	2,673			2,240
Property, Plant and Equipment
Cost	44,741			42,939
Accumulated depreciation and amortization	(15,496		)	(15,063		)
Net property, plant and equipment	29,245			27,876
Other Noncurrent Assets
Regulatory assets	3,457			2,853
Nuclear decommissioning trust funds	3,558			3,772
Other	1,027			979
Total other noncurrent assets	8,042			7,604
Total Assets	$	39,960		$	37,720
LIABILITIES AND EQUITY
Current Liabilities
Accounts payable	$	988		$	842
Accounts payable to affiliated companies	230			209
Notes payable to affiliated companies	439			104
Taxes accrued	171			234
Interest accrued	102			108
Current maturities of long-term debt	6			1,205
Asset retirement obligations	290			337
Regulatory liabilities	199			126
Other	571			486
Total current liabilities	2,996			3,651
Long-Term Debt	10,633			8,598
Long-Term Debt Payable to Affiliated Companies	300			300
Other Noncurrent Liabilities
Deferred income taxes	3,689			3,413
Asset retirement obligations	3,659			3,273
Regulatory liabilities	5,999			6,231
Accrued pension and other post-retirement benefit costs	99			95
Investment tax credits	231			232
Other	671			566
Total other noncurrent liabilities	14,348			13,810
Commitments and Contingencies
Equity
Member's equity	11,689			11,368
Accumulated other comprehensive loss	(6		)	(7		)
Total equity	11,683			11,361
Total Liabilities and Equity	$	39,960		$	37,720

See Notes to Consolidated Financial Statements



FINANCIAL STATEMENTS

DUKE ENERGY CAROLINAS, LLC

CONSOLIDATED STATEMENTS OF CASH FLOWS



	Years Ended December 31,
(in millions)	2018			2017			2016
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	1,071		$	1,214		$	1,166
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization (including amortization of nuclear fuel)	1,487			1,409			1,382
Equity component of AFUDC	(73		)	(106		)	(102		)
Losses (Gains) on sales of other assets	1			(1		)	5
Impairment charges	192			—			1
Deferred income taxes	305			410			470
Accrued pension and other post-retirement benefit costs	4			(4		)	4
Contributions to qualified pension plans	(46		)	—			(43		)
Payments for asset retirement obligations	(230		)	(271		)	(287		)
Provision for rate refunds	182			—			—
(Increase) decrease in
Net realized and unrealized mark-to-market and hedging transactions	2			9			5
Receivables	(86		)	(9		)	(76		)
Receivables from affiliated companies	(87		)	68			(56		)
Inventory	25			78			215
Other current assets	(161		)	7			67
Increase (decrease) in
Accounts payable	168			23			(69		)
Accounts payable to affiliated companies	21			(38		)	18
Taxes accrued	(65		)	86			187
Other current liabilities	89			(161		)	63
Other assets	(179		)	(49		)	20
Other liabilities	(90		)	(31		)	6
Net cash provided by operating activities	2,530			2,634			2,976
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures	(2,706		)	(2,524		)	(2,220		)
Purchases of debt and equity securities	(1,810		)	(2,124		)	(2,832		)
Proceeds from sales and maturities of debt and equity securities	1,810			2,128			2,832
Notes receivable from affiliated companies	—			66			97
Other	(147		)	(109		)	(83		)
Net cash used in investing activities	(2,853		)	(2,563		)	(2,206		)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from the issuance of long-term debt	1,983			569			1,587
Payments for the redemption of long-term debt	(1,205		)	(116		)	(356		)
Notes payable to affiliated companies	335			104			—
Distributions to parent	(750		)	(625		)	(2,000		)
Other	(23		)	(1		)	—
Net cash provided by (used in) financing activities	340			(69		)	(769		)
Net increase in cash and cash equivalents	17			2			1
Cash and cash equivalents at beginning of period	16			14			13
Cash and cash equivalents at end of period	$	33		$	16		$	14
Supplemental Disclosures:
Cash paid for interest, net of amount capitalized	$	452		$	398		$	393
Cash paid for (received from) income taxes	89			193			(60		)
Significant non-cash transactions:
Accrued capital expenditures	302			315			347

See Notes to Consolidated Financial Statements



FINANCIAL STATEMENTS

DUKE ENERGY CAROLINAS, LLC

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY



				Accumulated Other
				Comprehensive
				Loss
				Net Losses
				on Cash
	Member's			Flow			Total
(in millions)	Equity			Hedges			Equity
Balance at December 31, 2015	$	11,617		$	(11	)	$	11,606
Net income	1,166			—			1,166
Other comprehensive income	—			2			2
Distributions to parent	(2,000		)	—			(2,000		)
Other	(2		)	—			(2		)
Balance at December 31, 2016	$	10,781		$	(9	)	$	10,772
Net income	1,214			—			1,214
Other comprehensive income	—			2			2
Distributions to parent	(625		)	—			(625		)
Other	(2		)	—			(2		)
Balance at December 31, 2017	$	11,368		$	(7	)	$	11,361
Net income	1,071			—			1,071
Other comprehensive income	—			1			1
Distributions to parent	(750		)	—			(750		)
Balance at December 31, 2018	$	11,689		$	(6	)	$	11,683

See Notes to Consolidated Financial Statements



REPORTS

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the shareholder and the Board of Directors of Progress Energy, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Progress Energy, Inc. and subsidiaries (the "Company") as of December 31, 2018 and 2017, the related consolidated statements of operations and comprehensive income, changes in equity, and cash flows, for each of the three years in the period ended December 31, 2018, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2018 and 2017, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2018, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

/s/ Deloitte & Touche LLP

Charlotte, North Carolina

February 28, 2019

We have served as the Company's auditor since 1930.



FINANCIAL STATEMENTS

PROGRESS ENERGY, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME



	Years Ended December 31,
(in millions)	2018			2017		2016
Operating Revenues	$	10,728		$	9,783	$	9,853
Operating Expenses
Fuel used in electric generation and purchased power	3,976			3,417		3,644
Operation, maintenance and other	2,613			2,301		2,458
Depreciation and amortization	1,619			1,285		1,213
Property and other taxes	529			503		487
Impairment charges	87			156		7
Total operating expenses	8,824			7,662		7,809
Gains on Sales of Other Assets and Other, net	24			26		25
Operating Income	1,928			2,147		2,069
Other Income and Expenses, net	165			209		186
Interest Expense	842			824		689
Income From Continuing Operations Before Income Taxes	1,251			1,532		1,566
Income Tax Expense From Continuing Operations	218			264		527
Income From Continuing Operations	1,033			1,268		1,039
Income From Discontinued Operations, net of tax	—			—		2
Net Income	1,033			1,268		1,041
Less: Net Income Attributable to Noncontrolling Interests	6			10		10
Net Income Attributable to Parent	$	1,027		$	1,258	$	1,031

Net Income	$	1,033		$	1,268	$	1,041
Other Comprehensive Income, net of tax
Pension and OPEB adjustments	5			4		1
Net unrealized gain on cash flow hedges	6			5		—
Reclassification into earnings from cash flow hedges	—			—		8
Unrealized (losses) gains on available-for-sale securities	(1		)	4		1
Other Comprehensive Income, net of tax	10			13		10
Comprehensive Income	1,043			1,281		1,051
Less: Comprehensive Income Attributable to Noncontrolling Interests	6			10		10
Comprehensive Income Attributable to Parent	$	1,037		$	1,271	$	1,041

See Notes to Consolidated Financial Statements



FINANCIAL STATEMENTS

PROGRESS ENERGY, INC.

CONSOLIDATED BALANCE SHEETS



	December 31,
(in millions)	2018			2017
ASSETS
Current Assets
Cash and cash equivalents	$	67		$	40
Receivables (net of allowance for doubtful accounts of $5 at 2018 and $4 at 2017)	220			123
Receivables of VIEs (net of allowance for doubtful accounts of $8 at 2018 and $7 at 2017)	909			780
Receivables from affiliated companies	168			31
Notes receivable from affiliated companies	—			240
Inventory	1,459			1,592
Regulatory assets (includes $52 at 2018 and $51 at 2017 related to VIEs)	1,137			741
Other (includes $39 at 2018 and $44 at 2017 related to VIEs)	125			334
Total current assets	4,085			3,881
Property, Plant and Equipment
Cost	50,260			47,323
Accumulated depreciation and amortization	(16,398		)	(15,857		)
Generation facilities to be retired, net	362			421
Net property, plant and equipment	34,224			31,887
Other Noncurrent Assets
Goodwill	3,655			3,655
Regulatory assets (includes $1,041 at 2018 and $1,091 at 2017 related to VIEs)	6,564			6,010
Nuclear decommissioning trust funds	3,162			3,324
Other	974			931
Total other noncurrent assets	14,355			13,920
Total Assets	$	52,664		$	49,688
LIABILITIES AND EQUITY
Current Liabilities
Accounts payable	$	1,172		$	1,006
Accounts payable to affiliated companies	360			251
Notes payable to affiliated companies	1,235			805
Taxes accrued	109			101
Interest accrued	246			212
Current maturities of long-term debt (includes $53 at 2018 and 2017 related to VIEs)	1,672			771
Asset retirement obligations	514			295
Regulatory liabilities	280			213
Other	821			729
Total current liabilities	6,409			4,383
Long-Term Debt (includes $1,636 at 2018 and $1,689 at 2017 related to VIEs)	17,089			16,916
Long-Term Debt Payable to Affiliated Companies	150			150
Other Noncurrent Liabilities
Deferred income taxes	3,941			3,502
Asset retirement obligations	4,897			5,119
Regulatory liabilities	5,049			5,306
Accrued pension and other post-retirement benefit costs	521			545
Other	351			302
Total other noncurrent liabilities	14,759			14,774
Commitments and Contingencies
Equity
Common stock, $0.01 par value, 100 shares authorized and outstanding at 2018 and 2017	—			—
Additional paid-in capital	9,143			9,143
Retained earnings	5,131			4,350
Accumulated other comprehensive loss	(20		)	(25		)
Total Progress Energy, Inc. stockholder's equity	14,254			13,468
Noncontrolling interests	3			(3		)
Total equity	14,257			13,465
Total Liabilities and Equity	$	52,664		$	49,688

See Notes to Consolidated Financial Statements



FINANCIAL STATEMENTS

PROGRESS ENERGY, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS



	Years Ended December 31,
(in millions)	2018			2017			2016
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	1,033		$	1,268		$	1,041
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization and accretion (including amortization of nuclear fuel)	1,987			1,516			1,435
Equity component of AFUDC	(104		)	(92		)	(76		)
Gains on sales of other assets	(24		)	(28		)	(34		)
Impairment charges	87			156			7
Deferred income taxes	358			703			532
Accrued pension and other post-retirement benefit costs	24			(28		)	(24		)
Contributions to qualified pension plans	(45		)	—			(43		)
Payments for asset retirement obligations	(230		)	(248		)	(270		)
Other rate case adjustments	37			—			—
Provision for rate refunds	122			—			—
(Increase) decrease in
Net realized and unrealized mark-to-market and hedging transactions	18			—			42
Receivables	(207		)	(89		)	7
Receivables from affiliated companies	(137		)	71			211
Inventory	121			125			35
Other current assets	(12		)	(397		)	50
Increase (decrease) in
Accounts payable	217			(260		)	252
Accounts payable to affiliated companies	109			(97		)	37
Taxes accrued	8			17			15
Other current liabilities	129			(166		)	(42		)
Other assets	(913		)	(300		)	(248		)
Other liabilities	(34		)	(98		)	(36		)
Net cash provided by operating activities	2,544			2,053			2,891
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures	(3,854		)	(3,152		)	(3,306		)
Asset Acquisitions	—			—			(10		)
Purchases of debt and equity securities	(1,753		)	(1,806		)	(2,143		)
Proceeds from sales and maturities of debt and equity securities	1,769			1,824			2,187
Net proceeds from sales of other assets	20			—			—
Proceeds from insurance	—			7			58
Proceeds from the sale of nuclear fuel	—			20			20
Notes receivable from affiliated companies	240			(160		)	(80		)
Other	(182		)	(86		)	47
Net cash used in investing activities	(3,760		)	(3,353		)	(3,227		)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from the issuance of long-term debt	1,833			2,118			2,375
Payments for the redemption of long-term debt	(771		)	(813		)	(327		)
Notes payable to affiliated companies	430			100			444
Dividends to parent	(250		)	(124		)	(2,098		)
Other	(1		)	(4		)	(3		)
Net cash provided by financing activities	1,241			1,277			391
Net increase (decrease) in cash, cash equivalents, and restricted cash	25			(23		)	55
Cash, cash equivalents, and restricted cash at beginning of period	87			110			55
Cash, cash equivalents, and restricted cash at end of period	$	112		$	87		$	110
Supplemental Disclosures:
Cash paid for interest, net of amount capitalized	$	798		$	773		$	673
Cash received from income taxes	(348		)	(146		)	(187		)
Significant non-cash transactions:
Accrued capital expenditures	478			391			317
Equitization of certain notes payable to affiliates	—			1,047			—
Dividend to parent related to a legal entity restructuring	—			547			—

See Notes to Consolidated Financial Statements



FINANCIAL STATEMENTS

PROGRESS ENERGY, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY



						Accumulated Other Comprehensive Loss
						Net			Net Unrealized						Total Progress
	Additional					Losses on			Gains (Losses)			Pension and			Energy, Inc.
	Paid-in		Retained			Cash Flow			on Available-for-			OPEB			Stockholder's			Noncontrolling			Total
(in millions)	Capital		Earnings			Hedges			Sale Securities			Adjustments			Equity			Interests			Equity
Balance at December 31, 2015	$	8,092	$	4,831		$	(31	)	$	—		$	(17	)	$	12,875		$	(22	)	$	12,853
Net income	—		1,031			—			—			—			1,031			10			1,041
Other comprehensive income	—		—			8			1			1			10			—			10
Distributions to noncontrolling interests	—		—			—			—			—			—			(1		)	(1		)
Dividends to parent	—		(2,098		)	—			—			—			(2,098		)	—			(2,098		)
Other	2		—			—			—			—			2			—			2
Balance at December 31, 2016	$	8,094	$	3,764		$	(23	)	$	1		$	(16	)	$	11,820		$	(13	)	$	11,807
Net income	—		1,258			—			—			—			1,258			10			1,268
Other comprehensive income	—		—			5			4			4			13			—			13
Dividends to parent^(a)	—		(672		)	—			—			—			(672		)	—			(672		)
Equitization of certain notes payable to affiliates	1,047		—			—			—			—			1,047			—			1,047
Other	2		—			—			—			—			2			—			2
Balance at December 31, 2017	$	9,143	$	4,350		$	(18	)	$	5		$	(12	)	$	13,468		$	(3	)	$	13,465
Net income	—		1,027			—			—			—			1,027			6			1,033
Other comprehensive income (loss)	—		—			6			(1		)	5			10			—			10
Distributions to noncontrolling interests	—		—			—			—			—			—			(1		)	(1		)
Dividends to parent	—		(250		)	—			—			—			(250		)	—			(250		)
Other^(b)	—		4			—			(5		)	—			(1		)	1			—
Balance at December 31, 2018	$	9,143	$	5,131		$	(12	)	$	(1	)	$	(7	)	$	14,254		$	3		$	14,257


(a)	Includes a $547 million non-cash dividend related to a legal entity restructuring.


(b)	Amounts in Retained Earnings and Accumulated Other Comprehensive Loss represent a cumulative-effect adjustment due to implementation of a new accounting standard related to Financial Instruments Classification and Measurement. See Note 1 for more information.

See Notes to Consolidated Financial Statements



REPORTS

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the shareholder and the Board of Directors of Duke Energy Progress, LLC

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Duke Energy Progress, LLC and subsidiaries (the "Company") as of December 31, 2018 and 2017, the related consolidated statements of operations and comprehensive income, changes in equity, and cash flows, for each of the three years in the period ended December 31, 2018, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2018 and 2017, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2018, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

/s/ Deloitte & Touche LLP

Charlotte, North Carolina

February 28, 2019

We have served as the Company's auditor since 1930.



FINANCIAL STATEMENTS

DUKE ENERGY PROGRESS, LLC

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME



	Years Ended December 31,
(in millions)	2018		2017		2016
Operating Revenues	$	5,699	$	5,129	$	5,277
Operating Expenses
Fuel used in electric generation and purchased power	1,892		1,609		1,830
Operation, maintenance and other	1,578		1,439		1,565
Depreciation and amortization	991		725		703
Property and other taxes	155		156		156
Impairment charges	33		19		1
Total operating expenses	4,649		3,948		4,255
Gains on Sales of Other Assets and Other, net	9		4		3
Operating Income	1,059		1,185		1,025
Other Income and Expenses, net	87		115		132
Interest Expense	319		293		257
Income Before Income Taxes	827		1,007		900
Income Tax Expense	160		292		301
Net Income and Comprehensive Income	$	667	$	715	$	599

See Notes to Consolidated Financial Statements



FINANCIAL STATEMENTS

DUKE ENERGY PROGRESS, LLC

CONSOLIDATED BALANCE SHEETS



	December 31,
(in millions)	2018			2017
ASSETS
Current Assets
Cash and cash equivalents	$	23		$	20
Receivables (net of allowance for doubtful accounts of $2 at 2018 and $1 at 2017)	75			56
Receivables of VIEs (net of allowance for doubtful accounts of $5 at 2018 and 2017)	547			459
Receivables from affiliated companies	23			3
Inventory	954			1,017
Regulatory assets	703			352
Other	62			97
Total current assets	2,387			2,004
Property, Plant and Equipment
Cost	31,459			29,583
Accumulated depreciation and amortization	(11,423		)	(10,903		)
Generation facilities to be retired, net	362			421
Net property, plant and equipment	20,398			19,101
Other Noncurrent Assets
Regulatory assets	4,111			3,507
Nuclear decommissioning trust funds	2,503			2,588
Other	612			599
Total other noncurrent assets	7,226			6,694
Total Assets	$	30,011		$	27,799
LIABILITIES AND EQUITY
Current Liabilities
Accounts payable	$	660		$	402
Accounts payable to affiliated companies	278			179
Notes payable to affiliated companies	294			240
Taxes accrued	53			64
Interest accrued	116			102
Current maturities of long-term debt	603			3
Asset retirement obligations	509			295
Regulatory liabilities	178			139
Other	408			376
Total current liabilities	3,099			1,800
Long-Term Debt	7,451			7,204
Long-Term Debt Payable to Affiliated Companies	150			150
Other Noncurrent Liabilities
Deferred income taxes	2,119			1,883
Asset retirement obligations	4,311			4,378
Regulatory liabilities	3,955			3,999
Accrued pension and other post-retirement benefit costs	237			248
Investment tax credits	142			143
Other	106			45
Total other noncurrent liabilities	10,870			10,696
Commitments and Contingencies
Equity
Member's Equity	8,441			7,949
Total Liabilities and Equity	$	30,011		$	27,799

See Notes to Consolidated Financial Statements



FINANCIAL STATEMENTS

DUKE ENERGY PROGRESS, LLC

CONSOLIDATED STATEMENTS OF CASH FLOWS



	Years Ended December 31,
(in millions)	2018			2017			2016
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	667		$	715		$	599
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization (including amortization of nuclear fuel)	1,183			936			907
Equity component of AFUDC	(57		)	(47		)	(50		)
Gains on sales of other assets	(9		)	(5		)	(6		)
Impairment charges	33			19			1
Deferred income taxes	236			384			384
Accrued pension and other post-retirement benefit costs	15			(20		)	(32		)
Contributions to qualified pension plans	(25		)	—			(24		)
Payments for asset retirement obligations	(195		)	(192		)	(212		)
Other rate case adjustments	37			—			—
Provisions for rate refunds	122			—			—
(Increase) decrease in
Net realized and unrealized mark-to-market and hedging transactions	5			(4		)	4
Receivables	(107		)	(58		)	(17		)
Receivables from affiliated companies	(20		)	2			11
Inventory	63			59			12
Other current assets	(201		)	(75		)	84
Increase (decrease) in
Accounts payable	219			(230		)	181
Accounts payable to affiliated companies	99			(48		)	37
Taxes accrued	(11		)	(39		)	90
Other current liabilities	46			(131		)	114
Other assets	(484		)	(53		)	(163		)
Other liabilities	12			(18		)	12
Net cash provided by operating activities	1,628			1,195			1,932
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures	(2,220		)	(1,715		)	(1,733		)
Purchases of debt and equity securities	(1,236		)	(1,249		)	(1,658		)
Proceeds from sales and maturities of debt and equity securities	1,206			1,207			1,615
Net proceeds from the sales of other assets	20			—			—
Proceeds from insurance	—			4			—
Notes receivable from affiliated companies	—			165			(165		)
Other	(115		)	(55		)	26
Net cash used in investing activities	(2,345		)	(1,643		)	(1,915		)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from the issuance of long-term debt	845			812			505
Payments for the redemption of long-term debt	(3		)	(470		)	(15		)
Notes payable to affiliated companies	54			240			(209		)
Distributions to parent	(175		)	(124		)	(300		)
Other	(1		)	(1		)	(2		)
Net cash provided by (used in) financing activities	720			457			(21		)
Net increase (decrease) in cash and cash equivalents	3			9			(4		)
Cash and cash equivalents at beginning of period	20			11			15
Cash and cash equivalents at end of period	$	23		$	20		$	11
Supplemental Disclosures:
Cash paid for interest, net of amount capitalized	$	303		$	291		$	248
Cash (received from) paid for income taxes	(112		)	59			(287		)
Significant non-cash transactions:
Accrued capital expenditures	220			191			147

See Notes to Consolidated Financial Statements



FINANCIAL STATEMENTS

DUKE ENERGY PROGRESS, LLC

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY



	Member's
(in millions)	Equity
Balance at December 31, 2015	$	7,059
Net income	599
Distribution to parent	(300		)
Balance at December 31, 2016	$	7,358
Net income	715
Distribution to parent	(124		)
Balance at December 31, 2017	$	7,949
Net income	667
Distribution to parent	(175		)
Balance at December 31, 2018	$	8,441

See Notes to Consolidated Financial Statements



REPORTS

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the shareholder and the Board of Directors of Duke Energy Florida, LLC

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Duke Energy Florida, LLC and subsidiaries (the "Company") as of December 31, 2018 and 2017, the related consolidated statements of operations and comprehensive income, changes in equity, and cash flows, for each of the three years in the period ended December 31, 2018, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2018 and 2017, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2018, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

/s/ Deloitte & Touche LLP

Charlotte, North Carolina

February 28, 2019

We have served as the Company's auditor since 2001.



FINANCIAL STATEMENTS

DUKE ENERGY FLORIDA, LLC

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME



	Years Ended December 31,
(in millions)	2018			2017		2016
Operating Revenues	$	5,021		$	4,646	$	4,568
Operating Expenses
Fuel used in electric generation and purchased power	2,085			1,808		1,814
Operation, maintenance and other	1,025			853		884
Depreciation and amortization	628			560		509
Property and other taxes	374			347		333
Impairment charges	54			138		6
Total operating expenses	4,166			3,706		3,546
Gains on Sales of Other Assets and Other, net	1			1		—
Operating Income	856			941		1,022
Other Income and Expenses, net	86			96		63
Interest Expense	287			279		212
Income Before Income Taxes	655			758		873
Income Tax Expense	101			46		322
Net Income	$	554		$	712	$	551
Other Comprehensive (Loss) Income, net of tax
Unrealized (losses) gains on available-for-sale securities	(1		)	3		1
Other Comprehensive (Loss) Income, net of tax	(1		)	3		1
Comprehensive Income	$	553		$	715	$	552

See Notes to Consolidated Financial Statements



FINANCIAL STATEMENTS

DUKE ENERGY FLORIDA, LLC

CONSOLIDATED BALANCE SHEETS



	December 31,
(in millions)	2018			2017
ASSETS
Current Assets
Cash and cash equivalents	$	36		$	13
Receivables (net of allowance for doubtful accounts of $3 at 2018 and 2017)	143			65
Receivables of VIEs (net of allowance for doubtful accounts of $3 at 2018 and $2 at 2017)	362			321
Receivables from affiliated companies	28			2
Notes receivable from affiliated companies	—			313
Inventory	504			574
Regulatory assets (includes $52 at 2018 and $51 at 2017 related to VIEs)	434			389
Other (includes $39 at 2018 and $40 at 2017 related to VIEs)	46			86
Total current assets	1,553			1,763
Property, Plant and Equipment
Cost	18,792			17,730
Accumulated depreciation and amortization	(4,968		)	(4,947		)
Net property, plant and equipment	13,824			12,783
Other Noncurrent Assets
Regulatory assets (includes $1,041 at 2018 and $1,091 at 2017 related to VIEs)	2,454			2,503
Nuclear decommissioning trust funds	659			736
Other	311			284
Total other noncurrent assets	3,424			3,523
Total Assets	$	18,801		$	18,069
LIABILITIES AND EQUITY
Current Liabilities
Accounts payable	$	511		$	602
Accounts payable to affiliated companies	91			74
Notes payable to affiliated companies	108			—
Taxes accrued	74			34
Interest accrued	75			56
Current maturities of long-term debt (includes $53 at 2018 and 2017 related to VIEs)	270			768
Asset retirement obligations	5			—
Regulatory liabilities	102			74
Other	406			334
Total current liabilities	1,642			1,942
Long-Term Debt (includes $1,336 at 2018 and $1,389 at 2017 related to VIEs)	7,051			6,327
Other Noncurrent Liabilities
Deferred income taxes	1,986			1,761
Asset retirement obligations	586			742
Regulatory liabilities	1,094			1,307
Accrued pension and other post-retirement benefit costs	254			264
Other	93			108
Total other noncurrent liabilities	4,013			4,182
Commitments and Contingencies
Equity
Member's equity	6,097			5,614
Accumulated other comprehensive income	(2		)	4
Total equity	6,095			5,618
Total Liabilities and Equity	$	18,801		$	18,069

See Notes to Consolidated Financial Statements



FINANCIAL STATEMENTS

DUKE ENERGY FLORIDA, LLC

CONSOLIDATED STATEMENTS OF CASH FLOWS



	Years Ended December 31,
(in millions)	2018			2017			2016
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	554		$	712		$	551
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization and accretion	793			570			516
Equity component of AFUDC	(47		)	(45		)	(26		)
Gains on sales of other assets	(1		)	(1		)	—
Impairment charges	54			138			6
Deferred income taxes	159			245			224
Accrued pension and other post-retirement benefit costs	5			(13		)	2
Contributions to qualified pension plans	(20		)	—			(20		)
Payments for asset retirement obligations	(35		)	(56		)	(58		)
(Increase) decrease in
Net realized and unrealized mark-to-market and hedging transactions	7			5			38
Receivables	(100		)	(38		)	23
Receivables from affiliated companies	(26		)	—			21
Inventory	58			66			23
Other current assets	59			(138		)	(86		)
Increase (decrease) in
Accounts payable	(1		)	(32		)	71
Accounts payable to affiliated companies	17			(51		)	9
Taxes accrued	40			1			(117		)
Other current liabilities	82			(37		)	(149		)
Other assets	(428		)	(229		)	(84		)
Other liabilities	(61		)	(82		)	(53		)
Net cash provided by operating activities	1,109			1,015			891
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures	(1,634		)	(1,437		)	(1,583		)
Purchases of debt and equity securities	(517		)	(557		)	(485		)
Proceeds from sales and maturities of debt and equity securities	563			617			572
Proceeds from insurance	—			4			58
Proceeds from the sale of nuclear fuel	—			20			20
Notes receivable from affiliated companies	313			(313		)	—
Other	(65		)	(31		)	21
Net cash used in investing activities	(1,340		)	(1,697		)	(1,397		)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from the issuance of long-term debt	988			1,306			1,870
Payments for the redemption of long-term debt	(769		)	(342		)	(12		)
Notes payable to affiliated companies	108			(297		)	(516		)
Distribution to parent	(75		)	—			(775		)
Other	1			(1		)	—
Net cash provided by financing activities	253			666			567
Net increase (decrease) in cash, cash equivalents, and restricted cash	22			(16		)	61
Cash, cash equivalents, and restricted cash at beginning of period	53			69			8
Cash, cash equivalents, and restricted cash at end of period	$	75		$	53		$	69
Supplemental Disclosures:
Cash paid for interest, net of amount capitalized	$	270		$	274		$	208
Cash (received from) paid for income taxes	(120		)	(197		)	216
Significant non-cash transactions:
Accrued capital expenditures	258			199			170

See Notes to Consolidated Financial Statements



FINANCIAL STATEMENTS

DUKE ENERGY FLORIDA, LLC

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY



				Accumulated
				Other
				Comprehensive
				Income (Loss)
				Net Unrealized
				Gains (Losses) on
	Member's			Available-for-			Total
(in millions)	Equity			Sale Securities			Equity
Balance at December 31, 2015	$	5,121		$	—		$	5,121
Net income	551			—			551
Other comprehensive income	—			1			1
Distribution to parent	(775		)	—			(775		)
Other	2			—			2
Balance at December 31, 2016	$	4,899		$	1		$	4,900
Net income	712			—			712
Other comprehensive income	—			3			3
Other	3			—			3
Balance at December 31, 2017	$	5,614		$	4		$	5,618
Net income	554			—			554
Other comprehensive loss	—			(1		)	(1		)
Distribution to parent	(75		)	—			(75		)
Other^(a)	4			(5		)	(1		)
Balance at December 31, 2018	$	6,097		$	(2	)	$	6,095


(a)	Amounts represent a cumulative-effect adjustment due to implementation of a new accounting standard related to Financial Instruments Classification and Measurement. See Note 1 for more information.

See Notes to Consolidated Financial Statements



REPORTS

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the shareholder and the Board of Directors of Duke Energy Ohio, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Duke Energy Ohio, Inc. and subsidiaries (the "Company") as of December 31, 2018 and 2017, the related consolidated statements of operations and comprehensive income, changes in equity, and cash flows, for each of the three years in the period ended December 31, 2018, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2018 and 2017, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2018, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

/s/ Deloitte & Touche LLP

Charlotte, North Carolina

February 28, 2019

We have served as the Company's auditor since 2002.



FINANCIAL STATEMENTS

DUKE ENERGY OHIO, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME



	Years Ended December 31,
(in millions)	2018			2017			2016
Operating Revenues
Regulated electric	$	1,450		$	1,373		$	1,410
Regulated natural gas	506			508			503
Nonregulated electric and other	1			42			31
Total operating revenues	1,957			1,923			1,944
Operating Expenses
Fuel used in electric generation and purchased power – regulated	412			369			442
Fuel used in electric generation and purchased power – nonregulated	—			58			51
Cost of natural gas	113			107			103
Operation, maintenance and other	480			530			514
Depreciation and amortization	268			261			233
Property and other taxes	290			278			258
Impairment charges	—			1			—
Total operating expenses	1,563			1,604			1,601
(Losses) Gains on Sales of Other Assets and Other, net	(106		)	1			2
Operating Income	288			320			345
Other Income and Expenses, net	23			23			11
Interest Expense	92			91			86
Income From Continuing Operations Before Income Taxes	219			252			270
Income Tax Expense From Continuing Operations	43			59			78
Income From Continuing Operations	176			193			192
(Loss) Income From Discontinued Operations, net of tax	—			(1		)	36
Net Income and Comprehensive Income	$	176		$	192		$	228

See Notes to Consolidated Financial Statements



FINANCIAL STATEMENTS

DUKE ENERGY OHIO, INC.

CONSOLIDATED BALANCE SHEETS



	December 31,
(in millions)	2018			2017
ASSETS
Current Assets
Cash and cash equivalents	$	21		$	12
Receivables (net of allowance for doubtful accounts of $2 at 2018 and $3 at 2017)	102			68
Receivables from affiliated companies	114			133
Notes receivable from affiliated companies	—			14
Inventory	126			133
Regulatory assets	33			49
Other	24			39
Total current assets	420			448
Property, Plant and Equipment
Cost	9,360			8,732
Accumulated depreciation and amortization	(2,717		)	(2,691		)
Net property, plant and equipment	6,643			6,041
Other Noncurrent Assets
Goodwill	920			920
Regulatory assets	531			445
Other	41			21
Total other noncurrent assets	1,492			1,386
Total Assets	$	8,555		$	7,875
LIABILITIES AND EQUITY
Current Liabilities
Accounts payable	$	316		$	313
Accounts payable to affiliated companies	78			62
Notes payable to affiliated companies	274			29
Taxes accrued	202			190
Interest accrued	22			21
Current maturities of long-term debt	551			3
Asset retirement obligations	6			3
Regulatory liabilities	57			36
Other	74			71
Total current liabilities	1,580			728
Long-Term Debt	1,589			2,039
Long-Term Debt Payable to Affiliated Companies	25			25
Other Noncurrent Liabilities
Deferred income taxes	817			781
Asset retirement obligations	87			81
Regulatory liabilities	840			891
Accrued pension and other post-retirement benefit costs	79			59
Other	93			108
Total other noncurrent liabilities	1,916			1,920
Commitments and Contingencies
Equity
Common stock, $8.50 par value, 120 million shares authorized; 90 million shares outstanding at 2018 and 2017	762			762
Additional paid-in capital	2,776			2,670
Accumulated deficit	(93		)	(269		)
Total equity	3,445			3,163
Total Liabilities and Equity	$	8,555		$	7,875

See Notes to Consolidated Financial Statements



FINANCIAL STATEMENTS

DUKE ENERGY OHIO, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS



	Years Ended December 31,
(in millions)	2018			2017			2016
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	176		$	192		$	228
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization and accretion	271			265			237
Equity component of AFUDC	(11		)	(11		)	(6		)
Losses (Gains) on sales of other assets	106			(1		)	(2		)
Impairment charges	—			1			—
Deferred income taxes	25			90			55
Accrued pension and other post-retirement benefit costs	3			2			6
Contributions to qualified pension plans	—			(4		)	(5		)
Payments for asset retirement obligations	(3		)	(7		)	(5		)
Provision for rate refunds	24			—			—
(Increase) decrease in
Net realized and unrealized mark-to-market and hedging transactions	—			—			(2		)
Receivables	(33		)	2			(4		)
Receivables from affiliated companies	19			(4		)	(36		)
Inventory	7			6			(32		)
Other current assets	16			(22		)	79
Increase (decrease) in
Accounts payable	(19		)	12			19
Accounts payable to affiliated companies	16			(1		)	10
Taxes accrued	12			11			3
Other current liabilities	14			(19		)	(54		)
Other assets	(26		)	(28		)	(35		)
Other liabilities	(27		)	(5		)	(31		)
Net cash provided by operating activities	570			479			425
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures	(827		)	(686		)	(476		)
Notes receivable from affiliated companies	14			80			(94		)
Other	(89		)	(41		)	(30		)
Net cash used in investing activities	(902		)	(647		)	(600		)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from the issuance of long-term debt	99			182			341
Payments for the redemption of long-term debt	(3		)	(2		)	(53		)
Notes payable to affiliated companies	245			13			(87		)
Dividends to parent	—			(25		)	(25		)
Other	—			(1		)	(2		)
Net cash provided by financing activities	341			167			174
Net increase (decrease) in cash and cash equivalents	9			(1		)	(1		)
Cash and cash equivalents at beginning of period	12			13			14
Cash and cash equivalents at end of period	$	21		$	12		$	13
Supplemental Disclosures:
Cash paid for interest, net of amount capitalized	$	87		$	85		$	81
Cash received from income taxes	(6		)	(8		)	(46		)
Significant non-cash transactions:
Accrued capital expenditures	95			82			83
Non-cash equity contribution from parent	106			—			—

See Notes to Consolidated Financial Statements



FINANCIAL STATEMENTS

DUKE ENERGY OHIO, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY



			Additional
	Common		Paid-in			Accumulated			Total
(in millions)	Stock		Capital			Deficit			Equity
Balance at December 31, 2015	$	762	$	2,720		$	(698	)	$	2,784
Net income	—		—			228			228
Contribution from parent	—		—			9			9
Dividends to parent	—		(25		)	—			(25		)
Balance at December 31, 2016	$	762	$	2,695		$	(461	)	$	2,996
Net income	—		—			192			192
Dividends to parent	—		(25		)	—			(25		)
Balance at December 31, 2017	$	762	$	2,670		$	(269	)	$	3,163
Net income	—		—			176			176
Contribution from parent	—		106			—			106
Balance at December 31, 2018	$	762	$	2,776		$	(93	)	$	3,445

See Notes to Consolidated Financial Statements



REPORTS

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the shareholder and the Board of Directors of Duke Energy Indiana, LLC

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Duke Energy Indiana, LLC and subsidiaries (the "Company") as of December 31, 2018 and 2017, the related consolidated statements of operations and comprehensive income, changes in equity, and cash flows, for each of the three years in the period ended December 31, 2018, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2018 and 2017, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2018, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

/s/ Deloitte & Touche LLP

Charlotte, North Carolina

February 28, 2019

We have served as the Company's auditor since 2002.



FINANCIAL STATEMENTS

DUKE ENERGY INDIANA, LLC

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME



	Years Ended December 31,
(in millions)	2018		2017		2016
Operating Revenues	$	3,059	$	3,047	$	2,958
Operating Expenses
Fuel used in electric generation and purchased power	1,000		966		909
Operation, maintenance and other	788		743		727
Depreciation and amortization	520		458		496
Property and other taxes	78		76		58
Impairment charges	30		18		8
Total operating expenses	2,416		2,261		2,198
Gains on Sales of Other Assets and Other, net	—		—		1
Operating Income	643		786		761
Other Income and Expenses, net	45		47		26
Interest Expense	167		178		181
Income Before Income Taxes	521		655		606
Income Tax Expense	128		301		225
Net Income	$	393	$	354	$	381
Other Comprehensive Loss, net of tax
Reclassification into earnings from cash flow hedges	—		—		(1		)
Comprehensive Income	$	393	$	354	$	380

See Notes to Consolidated Financial Statements



FINANCIAL STATEMENTS

DUKE ENERGY INDIANA, LLC

CONSOLIDATED BALANCE SHEETS



	December 31,
(in millions)	2018			2017
ASSETS
Current Assets
Cash and cash equivalents	$	24		$	9
Receivables (net of allowance for doubtful accounts of $2 at 2018 and 2017)	52			57
Receivables from affiliated companies	122			125
Inventory	422			450
Regulatory assets	175			165
Other	35			30
Total current assets	830			836
Property, Plant and Equipment
Cost	15,443			14,948
Accumulated depreciation and amortization	(4,914		)	(4,662		)
Net property, plant and equipment	10,529			10,286
Other Noncurrent Assets
Regulatory assets	982			978
Other	194			189
Total other noncurrent assets	1,176			1,167
Total Assets	$	12,535		$	12,289
LIABILITIES AND EQUITY
Current Liabilities
Accounts payable	$	200		$	196
Accounts payable to affiliated companies	83			78
Notes payable to affiliated companies	167			161
Taxes accrued	43			95
Interest accrued	58			57
Current maturities of long-term debt	63			3
Asset retirement obligations	109			54
Regulatory liabilities	25			24
Other	107			104
Total current liabilities	855			772
Long-Term Debt	3,569			3,630
Long-Term Debt Payable to Affiliated Companies	150			150
Other Noncurrent Liabilities
Deferred income taxes	1,009			925
Asset retirement obligations	613			727
Regulatory liabilities	1,722			1,723
Accrued pension and other post-retirement benefit costs	115			76
Investment tax credits	147			147
Other	16			18
Total other noncurrent liabilities	3,622			3,616
Commitments and Contingencies
Equity
Member's Equity	4,339			4,121
Total Liabilities and Equity	$	12,535		$	12,289

See Notes to Consolidated Financial Statements



FINANCIAL STATEMENTS

DUKE ENERGY INDIANA, LLC

CONSOLIDATED STATEMENTS OF CASH FLOWS



	Years Ended December 31,
(in millions)	2018			2017			2016
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	393		$	354		$	381
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization, and accretion	524			462			499
Equity component of AFUDC	(32		)	(28		)	(16		)
Impairment charges	30			18			8
Deferred income taxes	95			152			213
Accrued pension and other post-retirement benefit costs	7			2			8
Contributions to qualified pension plans	(8		)	—			(9		)
Payments for asset retirement obligations	(69		)	(45		)	(46		)
Provision for rate refunds	53			—			—
(Increase) decrease in
Receivables	7			59			(2		)
Receivables from affiliated companies	3			(11		)	(43		)
Inventory	28			54			66
Other current assets	(25		)	28			(67		)
Increase (decrease) in
Accounts payable	37			(86		)	8
Accounts payable to affiliated companies	5			4			(9		)
Taxes accrued	(52		)	64			(4		)
Other current liabilities	14			(10		)	(81		)
Other assets	29			(28		)	(27		)
Other liabilities	(33		)	(20		)	(8		)
Net cash provided by operating activities	1,006			969			871
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures	(832		)	(840		)	(755		)
Purchases of debt and equity securities	(48		)	(20		)	(14		)
Proceeds from sales and maturities of debt and equity securities	44			7			11
Proceeds from the sales of other assets	15			—			—
Notes receivable from affiliated companies	—			86			(3		)
Other	3			(65		)	32
Net cash used in investing activities	(818		)	(832		)	(729		)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from the issuance of long-term debt	—			—			494
Payments for the redemption of long-term debt	(3		)	(5		)	(478		)
Notes payable to affiliated companies	6			161			—
Distributions to parent	(175		)	(300		)	(149		)
Other	(1		)	(1		)	(1		)
Net cash used in financing activities	(173		)	(145		)	(134		)
Net increase (decrease) in cash and cash equivalents	15			(8		)	8
Cash and cash equivalents at beginning of period	9			17			9
Cash and cash equivalents at end of period	$	24		$	9		$	17
Supplemental Disclosures:
Cash paid for interest, net of amount capitalized	$	162		$	179		$	171
Cash paid for (received from) income taxes	75			117			(7		)
Significant non-cash transactions:
Accrued capital expenditures	88			125			99

See Notes to Consolidated Financial Statements



FINANCIAL STATEMENTS

DUKE ENERGY INDIANA, LLC

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY



													Accumulated
													Other
													Comprehensive
													Income
				Additional									Net Gains on
	Common			Paid-in			Retained			Member's			Cash Flow			Total
(in millions)	Stock			Capital			Earnings			Equity			Hedges			Equity
Balance at December 31, 2015	$	1		$	1,384		$	2,450		$	—		$	1		$	3,836
Net income	—			—			—			381			—			381
Other comprehensive loss	—			—			—			—			(1		)	(1		)
Distributions to parent	—			—			—			(149		)	—			(149		)
Transfer to Member's Equity	(1		)	(1,384		)	(2,450		)	3,835			—			—
Balance at December 31, 2016	$	—		$	—		$	—		$	4,067		$	—		$	4,067
Net income	—			—			—			354			—			354
Distributions to parent	—			—			—			(300		)	—			(300		)
Balance at December 31, 2017	$	—		$	—		$	—		$	4,121		$	—		$	4,121
Net income	—			—			—			393			—			393
Distributions to parent	—			—			—			(175		)	—			(175		)
Balance at December 31, 2018	$	—		$	—		$	—		$	4,339		$	—		$	4,339

See Notes to Consolidated Financial Statements



REPORTS

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the shareholder and the Board of Directors of Piedmont Natural Gas Company, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Piedmont Natural Gas Company, Inc. and subsidiaries (the "Company") as of December 31, 2018 and 2017, the related consolidated statements of operations and comprehensive income, changes in equity, and cash flows, for each of the three years in the periods ended December 31, 2018, December 31, 2017, October 31 2016, and for the two months ended December 31, 2016 and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2018 and 2017, and the results of its operations and its cash flows for each of the three years in the periods ended December 31, 2018, December 31, 2017, October 31, 2016, and for the two months ended December 31, 2016, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Emphasis of Matter

As discussed in Note 1 to the financial statements, effective for fiscal year 2016, the Company changed its fiscal year end from October 31 to December 31. This resulted in a two-month transition period beginning November 1, 2016 through December 31, 2016.

/s/ Deloitte & Touche LLP

Charlotte, North Carolina

February 28, 2019

We have served as the Company's auditor since 1951.



FINANCIAL STATEMENTS

PIEDMONT NATURAL GAS COMPANY, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME



	Years Ended December 31,					Two Months Ended December 31,			Year Ended October 31,
(in millions)	2018		2017			2016			2016
Operating Revenues
Regulated natural gas	$	1,365	$	1,319		$	320		$	1,139
Nonregulated natural gas and other	10		9			2			10
Total operating revenues	1,375		1,328			322			1,149
Operating Expenses
Cost of natural gas	584		524			144			391
Operation, maintenance and other	357		304			50			353
Depreciation and amortization	159		148			23			137
Property and other taxes	49		48			7			43
Impairment charges	—		7			—			—
Total operating expenses	1,149		1,031			224			924
Operating Income	226		297			98			225
Equity in earnings (losses) of unconsolidated affiliates	7		(6		)	2			29
Gain on sale of unconsolidated affiliates	—		—			—			133
Other income and expense, net	14		(11		)	(2		)	(1		)
Total other income and expenses	21		(17		)	—			161
Interest Expense	81		79			12			69
Income Before Income Taxes	166		201			86			317
Income Tax Expense	37		62			32			124
Net Income	$	129	$	139		$	54		$	193
Other Comprehensive Income, net of tax
Unrealized loss from hedging activities of equity method investments	—		—			—			(3		)
Reclassification into earnings from hedging activities of equity method investments	—		—			—			4
Other Comprehensive Income, net of tax	—		—			—			1
Comprehensive Income	$	129	$	139		$	54		$	194

See Notes to Consolidated Financial Statements



FINANCIAL STATEMENTS

PIEDMONT NATURAL GAS COMPANY, INC.

CONSOLIDATED BALANCE SHEETS



	December 31,
(in millions)	2018			2017
ASSETS
Current Assets
Cash and cash equivalents	$	—		$	19
Receivables (net of allowance for doubtful accounts of $2 at 2018 and 2017)	266			275
Receivables from affiliated companies	22			7
Inventory	70			66
Regulatory assets	54			95
Other	19			52
Total current assets	431			514
Property, Plant and Equipment
Cost	7,486			6,725
Accumulated depreciation and amortization	(1,575		)	(1,479		)
Net property, plant and equipment	5,911			5,246
Other Noncurrent Assets
Goodwill	49			49
Regulatory assets	303			283
Investments in equity method unconsolidated affiliates	64			61
Other	52			65
Total other noncurrent assets	468			458
Total Assets	$	6,810		$	6,218
LIABILITIES AND EQUITY
Current Liabilities
Accounts payable	$	203		$	125
Accounts payable to affiliated companies	38			13
Notes payable to affiliated companies	198			364
Taxes accrued	84			19
Interest accrued	31			31
Current maturities of long-term debt	350			250
Regulatory liabilities	37			3
Other	58			69
Total current liabilities	999			874
Long-Term Debt	1,788			1,787
Other Noncurrent Liabilities
Deferred income taxes	551			564
Asset retirement obligations	19			15
Regulatory liabilities	1,181			1,141
Accrued pension and other post-retirement benefit costs	4			5
Other	177			170
Total other noncurrent liabilities	1,932			1,895
Commitments and Contingencies
Equity
Common stock, no par value: 100 shares authorized and outstanding at 2018 and 2017	1,160			860
Retained earnings	931			802
Total equity	2,091			1,662
Total Liabilities and Equity	$	6,810		$	6,218

See Notes to Consolidated Financial Statements



FINANCIAL STATEMENTS

PIEDMONT NATURAL GAS COMPANY, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS



	Years Ended December 31,						Two Months Ended December 31,			Year Ended October 31,
(in millions)	2018			2017			2016			2016
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	129		$	139		$	54		$	193
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	161			151			25			148
Gains on sales of other assets	—			—			—			(133		)
Impairment charges	—			7			—			—
Deferred income taxes	(31		)	154			26			74
Equity in (earnings) losses from unconsolidated affiliates	(7		)	6			(2		)	(29		)
Accrued pension and other post-retirement benefit costs	(4		)	23			5			3
Contributions to qualified pension plans	—			(11		)	(10		)	(14		)
Payments for asset retirement obligations	—			—			(1		)	(6		)
Provision for rate refunds	43			—			—			—
(Increase) decrease in
Receivables	7			(40		)	(157		)	12
Receivables from affiliated companies	(15		)	—			—			(7		)
Inventory	(4		)	—			(11		)	14
Other current assets	71			(20		)	8			(98		)
Increase (decrease) in
Accounts payable	15			(13		)	35			6
Accounts payable to affiliated companies	25			5			4			6
Taxes accrued	65			(48		)	(2		)	38
Other current liabilities	21			(9		)	2			28
Other assets	6			7			(7		)	(91		)
Other liabilities	(4		)	(2		)	5			180
Net cash provided by (used in) operating activities	478			349			(26		)	324
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures	(721		)	(585		)	(113		)	(522		)
Contributions to equity method investments	—			(12		)	(12		)	(47		)
Proceeds from the sales of other assets	—			—			—			175
Other	(10		)	(6		)	1			5
Net cash used in investing activities	(731		)	(603		)	(124		)	(389		)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from the:
Issuance of long-term debt	100			250			—			295
Issuance of common stock	—			—			—			122
Payments for the redemption of long-term debt	—			(35		)	—			(40		)
Notes payable and commercial paper	—			(330		)	185			(195		)
Notes payable to affiliated companies	(166		)	364			—			—
Capital contribution from parent	300			—			—			—
Dividends to parent	—			—			(27		)	—
Dividends paid	—			—			—			(114		)
Other	—			(1		)	—			—
Net cash provided by financing activities	234			248			158			68
Net (decrease) increase in cash and cash equivalents	(19		)	(6		)	8			3
Cash and cash equivalents at beginning of period	19			25			17			14
Cash and cash equivalents at end of period	$	—		$	19		$	25		$	17
Supplemental Disclosures:
Cash paid for interest, net of amount capitalized	$	79		$	78		$	11		$	81
Cash received from income taxes	(16		)	(12		)	—			(25		)
Significant non-cash transactions:
Accrued capital expenditures	96			34			48			63
Transfer of ownership interest of certain equity method investees to parent	—			149			—			—

See Notes to Consolidated Financial Statements



FINANCIAL STATEMENTS

PIEDMONT NATURAL GAS COMPANY, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY



						Accumulated
						Other
						Comprehensive
						Income (Loss)
						Net Gain on
						Hedging Activities
	Common		Retained			of Unconsolidated			Total
(in millions)	Stock		Earnings			Affiliates			Equity
Balance at October 31, 2015	$	721	$	706		$	(1	)	$	1,426
Net income	—		193			—			193
Other comprehensive income	—		—			1			1
Common stock issuances, including dividend reinvestment and employee benefits	139		—			—			139
Common stock dividends	—		(114		)	—			(114		)
Balance at October 31, 2016	$	860	$	785		$	—		$	1,645
Net income	—		54			—			54
Dividends to parent	—		(27		)	—			(27		)
Balance at December 31, 2016	$	860	$	812		$	—		$	1,672
Net income	—		139			—			139
Transfer of ownership interest of certain equity method investees to parent	—		(149		)	—			(149		)
Balance at December 31, 2017	$	860	$	802		$	—		$	1,662
Net income	—		129			—			129
Contribution from parent	300		—			—			300
Balance at December 31, 2018	$	1,160	$	931		$	—		$	2,091

See Notes to Consolidated Financial Statements



FINANCIAL STATEMENTS	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Index to Combined Notes To Consolidated Financial Statements

The notes to the consolidated financial statements are a combined presentation. The following table indicates the registrants to which the notes apply.

Applicable Notes

Registrant

Duke Energy

•

Duke Energy Carolinas

•

Progress Energy

•

Duke Energy Progress

•

Duke Energy Florida

•

Duke Energy Ohio

•

Duke Energy Indiana

•

Piedmont

•

Tables within the notes may not sum across due to (i) Progress Energy's consolidation of Duke Energy Progress, Duke Energy Florida and other subsidiaries that are not registrants and (ii) subsidiaries that are not registrants but included in the consolidated Duke Energy balances.

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Operations and Basis of Consolidation

Duke Energy is an energy company headquartered in Charlotte, North Carolina, subject to regulation by the FERC and other regulatory agencies listed below. Duke Energy operates in the U.S. primarily through its direct and indirect subsidiaries. Certain Duke Energy subsidiaries are also subsidiary registrants, including Duke Energy Carolinas; Progress Energy; Duke Energy Progress; Duke Energy Florida; Duke Energy Ohio; Duke Energy Indiana and Piedmont. When discussing Duke Energy’s consolidated financial information, it necessarily includes the results of its separate Subsidiary Registrants, which along with Duke Energy, are collectively referred to as the Duke Energy Registrants.

In October 2016, Duke Energy completed the acquisition of Piedmont. Duke Energy's consolidated financial statements include Piedmont's results of operations and cash flows activity subsequent to the acquisition date. Effective November 1, 2016, Piedmont's fiscal year-end was changed from October 31 to December 31, the year-end of Duke Energy. A transition report was filed on Form 10-Q (Form 10-QT) for the transition period from November 1, 2016, to December 31, 2016. See Note 2 for additional information regarding the acquisition.

In December 2016, Duke Energy completed an exit of the Latin American market to focus on its domestic regulated business, which was further bolstered by the acquisition of Piedmont. The sale of the International Energy business segment, excluding an equity method investment in NMC, was completed through two transactions including a sale of assets in Brazil to CTG and a sale of Duke Energy's remaining Latin American assets in Peru, Chile, Ecuador, Guatemala, El Salvador and Argentina to I Squared (collectively, the International Disposal Group). See Note 2 for additional information on the sale of International Energy.

The information in these combined notes relates to each of the Duke Energy Registrants as noted in the Index to Combined Notes to Consolidated Financial Statements. However, none of the Subsidiary Registrants make any representation as to information related solely to Duke Energy or the Subsidiary Registrants of Duke Energy other than itself.

These Consolidated Financial Statements include, after eliminating intercompany transactions and balances, the accounts of the Duke Energy Registrants and subsidiaries or VIEs where the respective Duke Energy Registrants have control. See Note 17 for additional information on VIEs. These Consolidated Financial Statements also reflect the Duke Energy Registrants’ proportionate share of certain jointly owned generation and transmission facilities. See Note 8 for additional information on joint ownership. Substantially all of the Subsidiary Registrants' operations qualify for regulatory accounting.

Progress Energy is a public utility holding company, which conducts operations through its wholly owned subsidiaries, Duke Energy Progress and Duke Energy Florida. Progress Energy is subject to regulation by FERC and other regulatory agencies listed below.

Duke Energy Progress is a regulated public utility primarily engaged in the generation, transmission, distribution and sale of electricity in portions of North Carolina and South Carolina. Duke Energy Progress is subject to the regulatory provisions of the NCUC, PSCSC, NRC and FERC.

Duke Energy Florida is a regulated public utility primarily engaged in the generation, transmission, distribution and sale of electricity in portions of Florida. Duke Energy Florida is subject to the regulatory provisions of the FPSC, NRC and FERC.



FINANCIAL STATEMENTS	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Duke Energy Indiana is a regulated public utility primarily engaged in the generation, transmission, distribution and sale of electricity in portions of Indiana. Duke Energy Indiana is subject to the regulatory provisions of the IURC and FERC.

Piedmont is a regulated public utility primarily engaged in the distribution of natural gas in portions of North Carolina, South Carolina and Tennessee. Piedmont is subject to the regulatory provisions of the NCUC, PSCSC, TPUC and FERC.

Certain prior year amounts have been reclassified to conform to the current year presentation.

Other Current Assets and Liabilities

The following table provides a description of amounts included in Other within Current Assets or Current Liabilities that exceed 5 percent of total Current Assets or Current Liabilities on the Duke Energy Registrants' Consolidated Balance Sheets at either December 31, 2018, or 2017.



		December 31,
(in millions)	Location	2018		2017
Duke Energy
Income taxes receivable	Current Assets	$	729	$	330
Accrued compensation	Current Liabilities	793		757
Duke Energy Carolinas
Accrued compensation	Current Liabilities	$	251	$	252
Progress Energy
Income taxes receivable	Current Assets	$	66	$	278
Customer deposits	Current Liabilities	345		338
Duke Energy Progress
Customer deposits	Current Liabilities	$	137	$	129
Accrued compensation	Current Liabilities	130		132
Duke Energy Florida
Customer deposits	Current Liabilities	$	208	$	208
Other accrued liabilities	Current Liabilities	85		16
Duke Energy Ohio
Income taxes receivable	Current Assets	$	13	$	36
Customer deposits	Current Liabilities	44		46
Duke Energy Indiana
Customer deposits	Current Liabilities	$	47	$	45
Piedmont
Income taxes receivable	Current Assets	$	11	$	43

Discontinued Operations

The results of operations of the International Disposal Group have been classified as Discontinued Operations on Duke Energy's Consolidated Statements of Operations. Duke Energy has elected to present cash flows of discontinued operations combined with cash flows of continuing operations. Unless otherwise noted, the notes to these consolidated financial statements exclude amounts related to discontinued operations for all periods presented. See Note 2 for additional information.

Amounts Attributable to Controlling Interests



FINANCIAL STATEMENTS	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Significant Accounting Policies

Use of Estimates

In preparing financial statements that conform to GAAP, the Duke Energy Registrants must make estimates and assumptions that affect the reported amounts of assets and liabilities, the reported amounts of revenues and expenses and the disclosure of contingent assets and liabilities at the date of the financial statements. Actual results could differ from those estimates.

Regulatory Accounting

The majority of the Duke Energy Registrants’ operations are subject to price regulation for the sale of electricity and natural gas by state utility commissions or FERC. When prices are set on the basis of specific costs of the regulated operations and an effective franchise is in place such that sufficient natural gas or electric services can be sold to recover those costs, the Duke Energy Registrants apply regulatory accounting. Regulatory accounting changes the timing of the recognition of costs or revenues relative to a company that does not apply regulatory accounting. As a result, regulatory assets and regulatory liabilities are recognized on the Consolidated Balance Sheets. Regulatory assets and liabilities are amortized consistent with the treatment of the related cost in the ratemaking process. See Note 4 for further information.

Regulatory accounting rules also require recognition of a disallowance (also called "impairment") loss if it becomes probable that part of the cost of a plant under construction (or a recently completed plant or an abandoned plant) will be disallowed for ratemaking purposes and a reasonable estimate of the amount of the disallowance can be made. For example, if a cost cap is set for a plant still under construction, the amount of the disallowance is a result of a judgment as to the ultimate cost of the plant. These disallowances can require judgments on allowed future rate recovery.

When it becomes probable that regulated generation, transmission or distribution assets will be abandoned, the cost of the asset is removed from plant in service. The value that may be retained as a regulatory asset on the balance sheet for the abandoned property is dependent upon amounts that may be recovered through regulated rates, including any return. As such, an impairment charge could be partially or fully offset by the establishment of a regulatory asset if rate recovery is probable. The impairment charge for a disallowance of costs for regulated plants under construction, recently completed or abandoned is based on discounted cash flows.

The Duke Energy Registrants utilize cost-tracking mechanisms, commonly referred to as fuel adjustment clauses or PGA clauses. These clauses allow for the recovery of fuel and fuel-related costs, portions of purchased power, natural gas costs and hedging costs through surcharges on customer rates. The difference between the costs incurred and the surcharge revenues is recorded either as an adjustment to Operating Revenues, Operating Expenses – Fuel used in electric generation or Operating Expenses – Cost of natural gas on the Consolidated Statements of Operations, with an off-setting impact on regulatory assets or liabilities.



FINANCIAL STATEMENTS	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Cash, Cash Equivalents and Restricted Cash

All highly liquid investments with maturities of three months or less at the date of acquisition are considered cash equivalents. Duke Energy, Progress Energy and Duke Energy Florida have restricted cash balances related primarily to collateral assets, escrow deposits and VIEs. See Note 17 for additional information. Restricted cash amounts are included in Other within Current Assets and Other Noncurrent Assets on the Consolidated Balance Sheets. The following table presents the components of cash, cash equivalents and restricted cash included in the Consolidated Balance Sheets.



	December 31, 2018						December 31, 2017
					Duke						Duke
	Duke		Progress		Energy		Duke		Progress		Energy
	Energy		Energy		Florida		Energy		Energy		Florida
Current Assets
Cash and cash equivalents	$	442	$	67	$	36	$	358	$	40	$	13
Other	141		39		39		138		40		40
Other Noncurrent Assets
Other	8		6		—		9		7		—
Total cash, cash equivalents and restricted cash	$	591	$	112	$	75	$	505	$	87	$	53

Inventory

Inventory is used for operations and is recorded primarily using the average cost method. Inventory related to regulated operations is valued at historical cost. Inventory related to nonregulated operations is valued at the lower of cost or market. Materials and supplies are recorded as inventory when purchased and subsequently charged to expense or capitalized to property, plant and equipment when installed. Inventory, including excess or obsolete inventory, is written-down to the lower of cost or market value. Once inventory has been written-down, it creates a new cost basis for the inventory that is not subsequently written-up. Provisions for inventory write-offs were not material at December 31, 2018, and 2017. The components of inventory are presented in the tables below.



	December 31, 2018
			Duke				Duke		Duke		Duke		Duke
	Duke		Energy		Progress		Energy		Energy		Energy		Energy
(in millions)	Energy		Carolinas		Energy		Progress		Florida		Ohio		Indiana		Piedmont
Materials and supplies	$	2,238	$	731	$	1,049	$	734	$	315	$	84	$	312	$	2
Coal	491		175		192		106		86		14		109		—
Natural gas, oil and other	355		42		218		114		103		28		1		68
Total inventory	$	3,084	$	948	$	1,459	$	954	$	504	$	126	$	422	$	70



	December 31, 2017
			Duke				Duke		Duke		Duke		Duke
	Duke		Energy		Progress		Energy		Energy		Energy		Energy
(in millions)	Energy		Carolinas		Energy		Progress		Florida		Ohio		Indiana		Piedmont
Materials and supplies	$	2,293	$	744	$	1,118	$	774	$	343	$	82	$	309	$	2
Coal	603		192		255		139		116		17		139		—
Natural gas, oil and other	354		35		219		104		115		34		2		64
Total inventory	$	3,250	$	971	$	1,592	$	1,017	$	574	$	133	$	450	$	66

Investments in Debt and Equity Securities

The Duke Energy Registrants classify investments in equity securities as FV-NI and investments in debt securities as AFS. Both categories are recorded at fair value on the Consolidated Balance Sheets. Realized and unrealized gains and losses on securities classified as FV-NI are reported through net income. Unrealized gains and losses for debt securities classified as AFS are included in AOCI until realized, except OTTIs that are included in earnings immediately. At the time gains and losses for debt securities are realized, they are reported through net income. For certain investments of regulated operations, such as substantially all of the NDTF, realized and unrealized gains and losses (including any OTTIs) on debt securities are recorded as a regulatory asset or liability. The credit loss portion of debt securities of nonregulated operations are included in earnings. Investments in debt and equity securities are classified as either current or noncurrent based on management’s intent and ability to sell these securities, taking into consideration current market liquidity. See Note 15 for further information.



FINANCIAL STATEMENTS	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Goodwill and Intangible Assets

Goodwill

Duke Energy, Progress Energy, Duke Energy Ohio and Piedmont perform annual goodwill impairment tests as of August 31 each year at the reporting unit level, which is determined to be a business segment or one level below. Duke Energy, Progress Energy, Duke Energy Ohio and Piedmont update these tests between annual tests if events or circumstances occur that would more likely than not reduce the fair value of a reporting unit below its carrying value. See Note 11 for further information.

Intangible Assets

Intangible assets are included in Other in Other Noncurrent Assets on the Consolidated Balance Sheets. Generally, intangible assets are amortized using an amortization method that reflects the pattern in which the economic benefits of the intangible asset are consumed or on a straight-line basis if that pattern is not readily determinable. Amortization of intangibles is reflected in Depreciation and amortization on the Consolidated Statements of Operations. Intangible assets are subject to impairment testing and if impaired, the carrying value is accordingly reduced.

Emission allowances permit the holder of the allowance to emit certain gaseous byproducts of fossil fuel combustion, including SO₂ and NO_X. Allowances are issued by the EPA at zero cost and may also be bought and sold via third-party transactions. Allowances allocated to or acquired by the Duke Energy Registrants are held primarily for consumption. Carrying amounts for emission allowances are based on the cost to acquire the allowances or, in the case of a business combination, on the fair value assigned in the allocation of the purchase price of the acquired business. Emission allowances are expensed to Fuel used in electric generation and purchased power on the Consolidated Statements of Operations.

RECs are used to measure compliance with renewable energy standards and are held primarily for consumption. See Note 11 for further information.

Long-Lived Asset Impairments

The Duke Energy Registrants evaluate long-lived assets, excluding goodwill, for impairment when circumstances indicate the carrying value of those assets may not be recoverable. An impairment exists when a long-lived asset’s carrying value exceeds the estimated undiscounted cash flows expected to result from the use and eventual disposition of the asset. The estimated cash flows may be based on alternative expected outcomes that are probability weighted. If the carrying value of the long-lived asset is not recoverable based on these estimated future undiscounted cash flows, the carrying value of the asset is written-down to its then-current estimated fair value and an impairment charge is recognized.

The Duke Energy Registrants assess fair value of long-lived assets using various methods, including recent comparable third-party sales, internally developed discounted cash flow analysis and analysis from outside advisors. Triggering events to reassess cash flows may include, but are not limited to, significant changes in commodity prices, the condition of an asset or management’s interest in selling the asset.

Equity Method Investment Impairments

Investments in affiliates that are not controlled by Duke Energy, but over which it has significant influence, are accounted for using the equity method. Equity method investments are assessed for impairment ~~when conditions exist that~~whenever events or changes in circumstances indicate that the ~~fair value~~carrying amount of the investment ~~is less than book value. It~~may not be recoverable. If the decline in value is considered to be other than temporary, the investment is written down to its estimated fair value, which establishes a new cost basis in the investment.

Impairment assessments use a discounted cash flow income approach and include consideration of the severity and duration of any decline in the fair value of the investments. The estimated cash flows may be based on alternative expected outcomes that are probability weighted. Key inputs that involve estimates and significant management judgment include cash flow projections, selection of a discount rate, probability weighting of potential outcomes, and whether any decline in value is considered temporary.



FINANCIAL STATEMENTS	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Property, Plant and Equipment

Property, plant and equipment are stated at the lower of depreciated historical cost net of any disallowances or fair value, if impaired. The Duke Energy Registrants capitalize all construction-related direct labor and material costs, as well as indirect construction costs such as general engineering, taxes and financing costs. See “Allowance for Funds Used During Construction and Interest Capitalized” for information on capitalized financing costs. Costs of renewals and betterments that extend the useful life of property, plant and equipment are also capitalized. The cost of repairs, replacements and major maintenance projects, which do not extend the useful life or increase the expected output of the asset, are expensed as incurred. Depreciation is generally computed over the estimated useful life of the asset using the composite straight-line method. Depreciation studies are conducted periodically to update composite rates and are approved by state utility commissions and/or the FERC when required. The composite weighted average depreciation rates, excluding nuclear fuel, are included in the table that follows.



	Years Ended December 31,
	2018		2017		2016
Duke Energy	3.0	%	2.8	%	2.8	%
Duke Energy Carolinas	2.8	%	2.8	%	2.8	%
Progress Energy	2.9	%	2.6	%	2.7	%
Duke Energy Progress	2.9	%	2.6	%	2.6	%
Duke Energy Florida	3.0	%	2.8	%	2.8	%
Duke Energy Ohio	2.8	%	2.8	%	2.6	%
Duke Energy Indiana	3.3	%	3.0	%	3.1	%
Piedmont^(a)	2.5	%	2.3	%


(a)	Piedmont's weighted average depreciation rate was 2.4 percent for the annualized two months ended December 31, 2016, and for the year ended October 31, 2016.

In general, when the Duke Energy Registrants retire regulated property, plant and equipment, the original cost plus the cost of retirement, less salvage value and any depreciation already recognized, is charged to accumulated depreciation. However, when it becomes probable the asset will be retired substantially in advance of its original expected useful life or is abandoned, the cost of the asset and the corresponding accumulated depreciation is recognized as a separate asset. If the asset is still in operation, the net amount is classified as Generation facilities to be retired, net on the Consolidated Balance Sheets. If the asset is no longer operating, the net amount is classified in Regulatory assets on the Consolidated Balance Sheets if deemed recoverable (see discussion of long-lived asset impairments above). When it becomes probable an asset will be abandoned, the cost of the asset and accumulated depreciation is reclassified to Regulatory assets on the Consolidated Balance Sheets for amounts recoverable in rates. The carrying value of the asset is based on historical cost if the Duke Energy Registrants are allowed to recover the remaining net book value and a return equal to at least the incremental borrowing rate. If not, an impairment is recognized to the extent the net book value of the asset exceeds the present value of future revenues discounted at the incremental borrowing rate.

When the Duke Energy Registrants sell entire regulated operating units, or retire or sell nonregulated properties, the original cost and accumulated depreciation and amortization balances are removed from Property, Plant and Equipment on the Consolidated Balance Sheets. Any gain or loss is recorded in earnings, unless otherwise required by the applicable regulatory body. See Note 10 for additional information.

Nuclear Fuel

Nuclear fuel is classified as Property, Plant and Equipment on the Consolidated Balance Sheets.

Nuclear fuel in the front-end fuel processing phase is considered work in progress and not amortized until placed in service. Amortization of nuclear fuel is included within Fuel used in electric generation and purchased power on the Consolidated Statements of Operations. Amortization is recorded using the units-of-production method.

Allowance for Funds Used During Construction and Interest Capitalized

For ~~further information, see Notes 10~~regulated operations, the debt and 12equity costs of financing the construction of property, plant and equipment are reflected as AFUDC and capitalized as a component of the cost of property, plant and equipment. AFUDC equity is reported on the Consolidated Statements of Operations as non-cash income in Other income and expenses, net. AFUDC debt is reported as a non-cash offset to Interest Expense. After construction is completed, the Duke Energy Registrants are permitted to recover these costs through their inclusion in rate base and the corresponding subsequent depreciation or amortization of those regulated assets.

AFUDC equity, a permanent difference for income taxes, reduces the ETR when capitalized and increases the ETR when depreciated or amortized. See Note 23 for additional information.

For nonregulated operations, interest is capitalized during the construction phase with an offsetting non-cash credit to Interest Expense on the Consolidated Statements of Operations.

Asset Retirement Obligations

AROs are recognized for legal obligations associated with the retirement of property, plant and equipment. Substantially all AROs are related to regulated operations. When recording an ARO, the present value of the projected liability is recognized in the period in which it is incurred, if a reasonable estimate of fair value can be made. The liability is accreted over time. For operating plants, the present value of the liability is added to the ~~Consolidated Financial Statements, "Property, Plant~~cost of the associated asset and ~~Equipment"~~depreciated over the remaining life of the asset. For retired plants, the present value of the liability is recorded as a regulatory asset unless determined not to be probable of recovery.



FINANCIAL STATEMENTS	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The present value of the initial obligation and ~~“Investments~~subsequent updates are based on discounted cash flows, which include estimates regarding timing of future cash flows, selection of discount rates and cost escalation rates, among other factors. These estimates are subject to change. Depreciation expense is adjusted prospectively for any changes to the carrying amount of the associated asset. The Duke Energy Registrants receive amounts to fund the cost of the ARO for regulated operations through a combination of regulated revenues and earnings on the NDTF. As a result, amounts recovered in ~~Unconsolidated Affiliates,” respectively.~~regulated revenues, earnings on the NDTF, accretion expense and depreciation of the associated asset are netted and deferred as a regulatory asset or liability.

~~Revenue Recognition~~LIQUIDITY AND CAPITAL RESOURCES

~~Revenues~~Sources and Uses of Cash



MD&A	LIQUIDITY AND CAPITAL RESOURCES

Equity Issuance

Credit Facilities and Registration Statements

CAPITAL EXPENDITURES



(in millions)	2019		2020		2021
New generation	$	375	$	125	$	220
Regulated renewables	415		410		710
Environmental	240		125		35
Nuclear fuel	430		505		390
Major nuclear	305		315		250
Customer additions	505		480		475
Grid modernization and other transmission and distribution projects	2,835		3,160		2,980
Maintenance and other	3,395		2,605		2,390
Total Electric Utilities and Infrastructure	8,500		7,725		7,450
Gas Utilities and Infrastructure	1,675		2,000		1,600
Commercial Renewables and Other	925		825		625
Total projected capital and investment expenditures	$	11,100	$	10,550	$	9,675

DEBT MATURITIES

DIVIDEND PAYMENTS

Dividend and Other Funding Restrictions of Duke Energy Subsidiaries



MD&A	LIQUIDITY AND CAPITAL RESOURCES

CASH FLOWS FROM OPERATING ACTIVITIES

Cash flows from operations of Electric Utilities and Infrastructure and Gas Utilities and Infrastructure are primarily driven by sales of electricity and natural gas, respectively, and costs of operations. These cash flows from operations are ~~recognized~~relatively stable and comprise a substantial portion of Duke Energy’s operating cash flows. Weather conditions, working capital and commodity price fluctuations and unanticipated expenses including unplanned plant outages, storms, legal costs and related settlements can affect the timing and level of cash flows from operations.

At December 31, 2018, Duke Energy had cash and cash equivalents and short-term investments of $442 million.

DEBT ISSUANCES

Duke Energy’s capitalization is balanced between debt and equity as shown in the table below.



	Projected 2019		Actual 2018		Actual 2017
Equity	44	%	43	%	43	%
Debt	56	%	57	%	57	%

Restrictive Debt Covenants



MD&A	LIQUIDITY AND CAPITAL RESOURCES

Credit Ratings



	Moody's	S&P	Fitch
Duke Energy Corporation	Stable	Stable	Stable
Issuer Credit Rating	Baa1	A-	BBB+
Senior Unsecured Debt	Baa1	BBB+	BBB+
Commercial Paper	P-2	A-2	F-2
Duke Energy Carolinas	Stable	Stable	N/A
Senior Secured Debt	Aa2	A	N/A
Senior Unsecured Debt	A1	A-	N/A
Progress Energy	Stable	Stable	N/A
Senior Unsecured Debt	Baa1	BBB+	N/A
Duke Energy Progress	Stable	Stable	N/A
Senior Secured Debt	Aa3	A	N/A
Duke Energy Florida	Stable	Stable	N/A
Senior Secured Debt	A1	A	N/A
Senior Unsecured Debt	A3	A-	N/A
Duke Energy Ohio	Stable	Stable	N/A
Senior Secured Debt	A2	A	N/A
Senior Unsecured Debt	Baa1	A-	N/A
Duke Energy Indiana	Stable	Stable	N/A
Senior Secured Debt	Aa3	A	N/A
Senior Unsecured Debt	A2	A-	N/A
Duke Energy Kentucky	Stable	Stable	N/A
Senior Unsecured Debt	Baa1	A-	N/A
Piedmont Natural Gas	Stable	Stable	N/A
Senior Unsecured	A3	A-	N/A

Credit ratings are intended to provide credit lenders a framework for comparing the credit quality of securities and are not a recommendation to buy, sell or hold. The Duke Energy Registrants’ credit ratings are dependent on the rating agencies’ assessments of their ability to meet their debt principal and interest obligations when ~~service~~they come due. If, as a result of market conditions or other factors, the Duke Energy Registrants are unable to maintain current balance sheet strength, or if earnings and cash flow outlook materially deteriorates, credit ratings could be negatively impacted.

Cash Flow Information

The following table summarizes Duke Energy’s cash flows for the three most recently completed fiscal years.



	Years Ended December 31,
(in millions)	2018			2017			2016
Cash flows provided by (used in):
Operating activities	$	7,186		$	6,624		$	6,863
Investing activities	(10,060		)	(8,442		)	(11,528		)
Financing activities	2,960			1,782			4,251
Changes in cash and cash equivalents included in assets held for sale	—			—			474
Net increase (decrease) in cash, cash equivalents and restricted cash	86			(36		)	60
Cash, cash equivalents and restricted cash at beginning of period	505			541			481
Cash, cash equivalents and restricted cash at end of period	$	591		$	505		$	541



MD&A	LIQUIDITY AND CAPITAL RESOURCES

OPERATING CASH FLOWS

The following table summarizes key components of Duke Energy’s operating cash flows for the three most recently completed fiscal years.



	Years Ended December 31,
							Variance						Variance
							2018 vs.						2017 vs.
(in millions)	2018			2017			2017			2016			2016
Net income	$	2,644		$	3,064		$	(420	)	$	2,170		$	894
Non-cash adjustments to net income	6,484			5,380			1,104			5,305			75
Contributions to qualified pension plans	(141		)	(19		)	(122		)	(155		)	136
Payments for AROs	(533		)	(571		)	38			(608		)	37
Payment for disposal of other assets	(105		)	—			(105		)	—			—
Working capital	(1,163		)	(1,230		)	67			151			(1,381		)
Net cash provided by operating activities	$	7,186		$	6,624		$	562		$	6,863		$	(239	)

For the year ended December 31, 2018, compared to 2017, the variance was driven primarily by:

a $684 million increase in net income after adjustment for non-cash items primarily due to favorable weather and increased pricing and volumes in the current period; and

a $38 million decrease in payments to AROs.

Offset by:

a $122 million increase in contributions to qualified pension plans; and

a $105 million payment for disposal of Beckjord.

For the year ended December 31, 2017, compared to 2016, the variance was driven primarily by:

a $1,381 million decrease in working capital due to weather, payment of merger transaction and integration related costs and increased property tax payments in 2017.

Offset by:

a $136 million decrease in contributions to qualified pension plans; and

a $37 million decrease in payments to AROs.

INVESTING CASH FLOWS

The following table summarizes key components of Duke Energy’s investing cash flows for the three most recently completed fiscal years.



	Years Ended December 31,
							Variance						Variance
							2018 vs.						2017 vs.
(in millions)	2018			2017			2017			2016			2016
Capital, investment and acquisition expenditures	$	(9,668	)	$	(8,198	)	$	(1,470	)	$	(13,215	)	$	5,017
Debt and equity securities, net	(15		)	27			(42		)	83			(56		)
Net proceeds from the sales of discontinued operations and other assets, net of cash divested	41			—			41			1,418			(1,418		)
Other investing items	(418		)	(271		)	(147		)	186			(457		)
Net cash used in investing activities	$	(10,060	)	$	(8,442	)	$	(1,618	)	$	(11,528	)	$	3,086



MD&A	LIQUIDITY AND CAPITAL RESOURCES

The primary use of cash related to investing activities is ~~provided~~capital, investment and acquisition expenditures, detailed by reportable business segment in the following table.



	Years Ended December 31,
(in millions)	2018		2017		2016
Electric Utilities and Infrastructure	$	8,086	$	7,024	$	6,649
Gas Utilities and Infrastructure	1,133		907		5,519
Commercial Renewables	193		92		857
Other	256		175		190
Total capital, investment and acquisition expenditures	$	9,668	$	8,198	$	13,215

For the year ended December 31, 2018, compared to 2017, the variance was driven primarily by:

For the year ended December 31, 2017, compared to 2016, the variance was driven primarily by:

a $5,017 million decrease in capital, investment and acquisition expenditures mainly due to the Piedmont acquisition in the prior year.

Partially offset by:

a $1,418 million decrease in net proceeds from sales of discontinued operations due to the prior year sale of the International business.

FINANCING CASH FLOWS

The following table summarizes key components of Duke Energy’s financing cash flows for the three most recently completed fiscal years.



	Years Ended December 31,
							Variance						Variance
							2018 vs.						2017 vs.
(in millions)	2018			2017			2017			2016			2016
Issuance of common stock	$	1,838		$	—		$	1,838		$	731		$	(731	)
Issuances of long-term debt, net	2,393			4,593			(2,200		)	7,315			(2,722		)
Notes payable and commercial paper	1,171			(362		)	1,533			(1,447		)	1,085
Dividends paid	(2,471		)	(2,450		)	(21		)	(2,332		)	(118		)
Other financing items	29			1			28			(16		)	17
Net cash provided by financing activities	$	2,960		$	1,782		$	1,178		$	4,251		$	(2,469	)

For the year ended December 31, 2018, compared to 2017, the variance was driven primarily by:

a $1,838 million increase in proceeds from the issuance of common stock; and

a $1,533 million increase in net borrowings from notes payable and commercial paper primarily due to increased funding requirements for capital expenditures and storm costs.

Partially offset by:

a $2,200 million net decrease in proceeds from issuances of long-term debt primarily due to timing related to refinancing of existing maturities, fund growth and general corporate needs.

For the year ended December 31, 2017, compared to 2016, the variance was driven primarily by:

a $731 million decrease in proceeds from stock issuances used to fund a portion of the Piedmont acquisition in 2016; and

a $118 million current year increase in dividends paid.

Partially offset by:



MD&A	OFF-BALANCE SHEET ARRANGEMENTS AND CONTRACTUAL OBLIGATIONS

Off-Balance Sheet Arrangements

Duke Energy performs ongoing assessments of its respective guarantee obligations to determine whether any liabilities have been incurred as a result of potential increased non-performance risk by third parties for which Duke Energy has issued guarantees. See Note 7 to the Consolidated Financial Statements, “Guarantees and Indemnifications,” for further details of the guarantee arrangements. Issuance of these guarantee arrangements is ~~delivered. As retail meters~~not required for the majority of Duke Energy’s operations. Thus, if Duke Energy discontinued issuing these guarantees, there would not be a material impact to the consolidated results of operations, cash flows or financial position.

Contractual Obligations



	Payments Due By Period
									More than
			Less than		2-3 years		4-5 years		5 years
			1 year		(2020 &		(2022 &		(2024 &
(in millions)	Total		(2019)		2021)		2023)		beyond)
Long-term debt^(a)	$	52,446	$	3,291	$	8,311	$	5,861	$	34,983
Interest payments on long-term debt^(b)	32,834		2,121		3,823		3,329		23,561
Capital leases^(c)	1,428		170		351		330		577
Operating leases^(c)	1,991		239		405		330		1,017
Purchase obligations:^(d)
Fuel and purchased power^(e)(f)	20,496		4,329		5,315		3,153		7,699
Other purchase obligations^(g)	12,436		4,617		1,178		775		5,866
Nuclear decommissioning trust annual funding^(h)	482		24		48		48		362
Land easements⁽ⁱ⁾	234		10		20		20		184
Total contractual cash obligations^(j)(k)	$	122,347	$	14,801	$	19,451	$	13,846	$	74,249


(a)	See Note 6 to the Consolidated Financial Statements, “Debt and Credit Facilities.”


(b)	Interest payments on variable rate debt instruments were calculated using December 31, 2018, interest rates and holding them constant for the life of the instruments.


(c)	See Note 5 to the Consolidated Financial Statements, “Commitments and Contingencies.” Amounts in the table above include the interest component of capital leases based on the interest rates stated in the lease agreements and exclude certain related executory costs. Amounts exclude contingent lease obligations.


(d)	Current liabilities, except for current maturities of long-term debt, and purchase obligations reflected on the Consolidated Balance Sheets have been excluded from the above table.

(e)


(f)	Amounts exclude obligations under the OVEC purchase power agreement. See Note 17 to the Consolidated Financial Statements, "Variable Interest Entities," for additional information.

(g)


(h)	Related to future annual funding obligations to NDTF through nuclear power stations' relicensing dates. See Note 9 to the Consolidated Financial Statements, "Asset Retirement Obligations."


(i)	Related to Commercial Renewables wind and solar facilities.



MD&A	OFF-BALANCE SHEET ARRANGEMENTS AND CONTRACTUAL OBLIGATIONS


(j)	Unrecognized tax benefits of $24 million are not reflected in this table as Duke Energy cannot predict when open income tax years will close with completed examinations. See Note 23 to the Consolidated Financial Statements, "Income Taxes."

(k)

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Risk Management Policies

Duke Energy is exposed to market risks associated with commodity prices, interest rates and equity prices. Duke Energy has established comprehensive risk management policies to monitor and manage these market risks. Duke Energy’s Chief Executive Officer and Chief Financial Officer are ~~read, invoices are prepared~~responsible for the overall approval of market risk management policies and the ~~invoice~~delegation of approval and authorization levels. The Finance and Risk Management Committee of the Board of Directors receives periodic updates from the Chief Risk Officer and other members of management on market risk positions, corporate exposures and overall risk management activities. The Chief Risk Officer is responsible for the overall governance of managing commodity price risk, including monitoring exposure limits.

Commodity Price Risk

Hedging Strategies



MD&A	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Generation Portfolio Risks

Interest Rate Risk

See Note 14, "Derivatives and Hedging," to the Consolidated Financial Statements for additional information about the forward-starting interest rate swaps related to the Piedmont acquisition.

Credit Risk

To reduce credit exposure, the Duke Energy Registrants seek to include netting provisions with counterparties, which permit the offset of receivables and payables with such counterparties. The Duke Energy Registrants also frequently use master agreements with credit support annexes to further mitigate certain credit exposures. The master agreements provide for a counterparty to post cash or letters of credit to the exposed party for exposure in excess of an established threshold. The threshold amount represents a negotiated unsecured credit limit for each party to the agreement, determined in accordance with the Duke Energy Registrants’ internal corporate credit practices and standards. Collateral agreements generally ~~recognized as "billed" revenue. Operating revenues~~ also ~~include "unbilled"~~provide that the inability to post collateral is sufficient cause to terminate contracts and liquidate all positions.

The Duke Energy Registrants’ principal counterparties for its electric and natural gas ~~revenues~~businesses are regional transmission organizations, distribution companies, municipalities, electric cooperatives and utilities located throughout the U.S. The Duke Energy Registrants have concentrations of receivables from such entities throughout these regions. These concentrations of receivables may affect the Duke Energy Registrants’ overall credit risk in that risk factors can negatively impact the credit quality of the entire sector.

Credit risk associated with the Duke Energy Registrants’ service to residential, commercial and industrial customers is generally limited to outstanding accounts receivable. The Duke Energy Registrants mitigate this credit risk by requiring customers to provide a cash deposit, letter of credit or surety bond until a satisfactory payment history is established, subject to the rules and regulations in effect in each retail jurisdiction, at which time the deposit is typically refunded. Charge-offs for retail customers have historically been insignificant to the ~~amount~~operations of ~~service provided or product delivered after~~ the ~~last meter reading~~Duke Energy Registrants and are typically recovered through retail rates. Management continually monitors customer charge-offs and payment patterns to ensure the adequacy of bad debt reserves. Duke Energy Ohio and Duke Energy Indiana sell certain of their accounts receivable and related collections through CRC, a Duke Energy consolidated variable interest entity. Losses on collection are first absorbed by the equity of CRC and next by the subordinated retained interests held by Duke Energy Ohio, Duke Energy Kentucky and Duke Energy Indiana. See Note 17 to the Consolidated Financial Statements, “Variable Interest Entities.” Duke Energy also provides certain non-tariff services, primarily to large commercial and industrial customers, in which incurred costs are intended to be recovered from the individual customer and therefore are not subject to rate recovery in the event of customer default. Customer credit worthiness is assessed prior to the end of the accounting period. Unbilled retail revenues are estimated by applying an average revenue per kilowatt-hour (kWh), per thousand cubic feet (Mcf) or per dekatherm (dth) for all customer classes to the number of estimated kWh, Mcf or dth delivered but not yet billed.entering into these transactions.

For wholesale customers, the invoice amount is generally recognized as “billed” revenue. Although meters are read as of the end of the month, invoices have typically not been prepared. An estimate of the wholesale invoice is included in the reported amount of “unbilled” revenue.



MD&A	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

~~PART II~~

The ~~amount~~Duke Energy Registrants also have credit risk exposure through issuance of ~~unbilled revenues can vary significantly~~performance and financial guarantees, letters of credit and surety bonds on behalf of less than wholly owned entities and third parties. Where the Duke Energy Registrants have issued these guarantees, it is possible that they could be required to perform under these guarantee obligations in the event the obligor under the guarantee fails to perform. Where the Duke Energy Registrants have issued guarantees related to assets or operations that have been disposed of via sale, they attempt to secure indemnification from ~~period~~the buyer against all future performance obligations under the guarantees. See Note 7 to ~~period~~the Consolidated Financial Statements, “Guarantees and Indemnifications,” for further information on guarantees issued by the Duke Energy Registrants.

Marketable Securities Price Risk

As described further in Note 15 to the ~~change~~Consolidated Financial Statements, “Investments in Debt and Equity Securities,” Duke Energy invests in debt and equity securities as part of various investment portfolios to fund certain obligations. The vast majority of investments in equity securities are within the ~~unbilled revenue receivable balance, including seasonality, weather, customer usage patterns, customer mix, timing~~NDTF and assets of ~~rendering customer bills, meter readings schedules and~~ the ~~average price in effect for customer classes.~~

~~Pension and Other Post-Retirement Benefits~~

~~The calculation of pension expense, other post-retirement benefit expense and net~~various pension and other post-retirement assets or liabilities require the use of assumptions and election of permissible accounting alternatives. Changes in assumptions can result in different expense and reported asset or liability amounts and future actual experience can differ from the assumptions. Duke Energy believes the most critical assumptions for pension and other post-retirement benefits are the expected long-term rate of return on plan assets and the assumed discount rate applied to future projected benefit ~~payments. Additionally, the health care cost trend rate assumption is critical to Duke Energy’s estimate of other post-retirement benefits.~~plans.

Duke Energy maintains ~~and~~investments to facilitate funding the ~~Subsidiary Registrants participate in, qualified,~~costs of providing non-contributory defined benefit retirement plans. Most participants in the qualified plans earn benefits calculated using a cash balance formula. Under a cash balance formula, a plan participant accumulates a retirement benefit consisting of pay credits based upon a percentage, which varies with age and years of service, of current eligible earnings and current interest credits. Certain plan participants earn benefits that use a final average earnings formula. Certain executives are participants in non-qualified, non-contributory defined benefit retirement plans. These qualified and non-qualified, non-contributory defined benefit plans are closed to new participants.

Duke Energy provides some health care and life insurance benefits for retired employees on a contributory and non-contributory basis. Certain employees are eligible for these benefits if they have met age and service requirements at retirement, as defined in the plans.

~~Assets for Duke Energy’s qualified pension~~ and other post-retirement ~~benefits (401(h) accounts)~~benefit plans. These investments are ~~maintained~~exposed to price fluctuations in ~~the Duke Energy Master Retirement Trust (Master Trust). Duke Energy also invests other post-retirement assets~~equity markets and changes in ~~Voluntary Employees' Beneficiary Association trusts.~~interest rates. The ~~investment objective is to achieve sufficient returns, subject to a prudent level of portfolio risk, for the purpose of promoting the security of plan benefits for participants.~~

~~As of December 31, 2017, Duke Energy assumes~~equity securities held in these pension and other post-retirement plan assets will generate a long-term rate of return of 6.50 percent. The expected long-term rate of return was developed using a weighted average calculation of expected returns based primarily on future expected returns across asset classes considering the use of active asset managers, where applicable. The asset allocation targets were set after considering the investment objective and the risk profile. Equity securities are held for their higher expected returns. Debt securities are primarily held to hedge the qualified pension liability. Hedge funds, real estate and other global securities are held for diversification. Investments within asset classesplans are diversified to achieve broad market participation and reduce the impact of ~~individual managers on investments.~~

~~In 2013,~~any single investment, sector or geographic region. Duke Energy adopted a de-risking investment strategy for the Master Trust. As the funded status of the pension plans increase, the targeted allocation to fixed-income assets may be increased to better manage Duke Energy's pension liability and reduce funded status volatility. Thehas established asset allocation targets for its pension plan holdings, which take into consideration the ~~Master Trust is 63 percent fixed-income assets~~investment objectives and ~~37 percent return-seeking assets. Duke Energy regularly reviews its actual asset allocation and periodically rebalances its investments~~the risk profile with respect to the ~~targeted allocations when considered appropriate.~~

Duke Energy discounted its future U.S. pension and other post-retirement obligations using a rate of 3.6 percent as of December 31, 2017. Discount rates used to measure benefit plan obligations for financial reporting purposes reflect rates attrust in which pension benefits could be effectively settled. As of December 31, 2017, Duke Energy determined its discount rate for U.S. pension and other post-retirement obligations using a bond selection-settlement portfolio approach. This approach develops a discount rate by selecting a portfolio of high quality corporate bonds that generate sufficient cash flow to provide for projected benefit payments of the plan. The selected bond portfolio is derived from a universe of non-callable corporate bonds rated Aa quality or higher. After the bond portfolio is selected, a single interest rate is determined that equates the present value of the plan’s projected benefit payments discounted at this rate with the market value of the bonds selected.

Future changes in plan asset returns, assumed discount rates and various other factors related to the participants in Duke Energy’s pension and post-retirement plans will impact future pension expense and liabilities. Duke Energy cannot predict with certainty what these factors will be in the future. The following table presents the approximate effect on Duke Energy’s 2017 pretax pension expense, pretax other post-retirement expense, pension obligation and other post-retirement benefit obligation if a 0.25 percent change in rates were to occur.

Qualified and Non- Other Post-Retirement
Qualified Pension Plans Plans
(in millions) 0.25 % (0.25 )% 0.25 % (0.25 )%
Effect on 2017 pretax pension and other post-retirement expense
Expected long-term rate of return $ (21 ) $ 21
$ (1 ) $ 1
Discount rate (17 ) 19
(1 ) 1
Effect on pension and other post-retirement benefit obligation at December 31, 2017

Discount rate (223 ) 229
(17 ) 17

~~PART II~~

Duke Energy’s other post-retirement plan uses a health care trend rate covering both pre- and post-age 65 retired plan participants, which is comprised of a medical care trend rate, which reflects the near- and long-term expectation of increases in medical costs, and a prescription drug trend rate, which reflects the near- and long-term expectation of increases in prescription drug costs. As of December 31, 2017, the health care trend rate was 7 percent, trending down to 4.75 percent by 2024. The following table presents the approximate effect on Duke Energy’s 2017 pretax other post-retirement expense and other post-retirement benefit obligation if a 1 percentage point change in the health care trend rate were to occur. These plansassets are ~~closed to new hires.~~

Other Post-Retirement
Plans
(in millions) 1 % (1 )%
Effect on 2017 other post-retirement expense $ 5
$ (4 )
Effect on other post-retirement benefit obligation at December 31, 2017 27
(24 )

~~For further information, see~~held. See Note 2122 to the Consolidated Financial Statements, “Employee Benefit ~~Plans.~~Plans,” for additional information regarding investment strategy of pension plan assets.

~~Income Taxes~~A significant decline in the value of plan asset holdings could require Duke Energy to increase funding of its pension plans in future periods, which could adversely affect cash flows in those periods. Additionally, a decline in the fair value of plan assets, absent additional cash contributions to the plan, could increase the amount of pension cost required to be recorded in future periods, which could adversely affect Duke Energy’s results of operations in those periods.

Nuclear Decommissioning Trust Funds

OTHER MATTERS

Environmental Regulations



MD&A	OTHER MATTERS

Coal Combustion Residuals

Coal Ash Management Act of 2014



MD&A	OTHER MATTERS

The current plans for each site are listed in the table below.



NCDEQ Risk Classification	Plants/Current Closure Date	Expected Closure Method
Low	Allen – December 31, 2029^(a) Belews Creek – December 31, 2029^(a) Buck – December 31, 2029^(a)(b) Rogers – December 31, 2029^(a) Marshall – December 31, 2029^(a) Mayo – December 31, 2029^(a) Roxboro – December 31, 2029^(a)	Combination of a cap system and a groundwater monitoring system, or for selected sites, conversion for beneficial use.
Medium	H.F. Lee – December 31, 2029^(b) Cape Fear – December 31, 2029^(b) Weatherspoon – August 1, 2028	Excavation, which may include conversion of the basin to a lined industrial landfill, transferring coal ash to an engineered landfill, or for selected sites, conversion for beneficial use.
High	Sutton – August 1, 2019 Riverbend – August 1, 2019 Dan River – August 1, 2019 Asheville – August 1, 2022	Excavation, which may include a combination of transferring coal ash to an engineered landfill or for selected sites, conversion for beneficial use.


(a)	In November 2018, the closure deadline for these basins was extended to December 31, 2029 as a result of the completion of certain dam improvement projects and alternative drinking water source projects by October 15, 2018.


(b)	The Coal Ash Act requires the installation and operation of three large-scale coal ash beneficiation projects to produce reprocessed ash for use in the concrete industry. Duke Energy has selected the Buck, H.F. Lee and Cape Fear plants for these projects. Closure at these sites is required to be completed no later than December 31, 2029.

For further information on ash basins and recovery, see Notes 4 and 9 to the Consolidated Financial Statements, "Regulatory Matters" and “Asset Retirement Obligations,” respectively.

Estimated Cost and Impacts of Rulemakings



(in millions)	Five-Year Estimated Costs
Duke Energy	$	420
Duke Energy Carolinas	185
Progress Energy	200
Duke Energy Progress	80
Duke Energy Florida	120
Duke Energy Ohio	15
Duke Energy Indiana	20

Other Environmental Regulations

Clean Water Act

Steam Effluent Limitation Guidelines

Cross-State Air Pollution Rule

Carbon Pollution Standards for New, Modified and Reconstructed Power Plants

Clean Power Plan/ACE Rule



MD&A	OTHER MATTERS

Section 126 Petitions

Global Climate Change

State Legislation



MD&A	OTHER MATTERS

Liquefied Natural Gas Facility

New Accounting Standards

See Note 1 to the Consolidated Financial Statements, “Summary of Significant Accounting Policies,” for a discussion of the impact of new accounting standards.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

See “Management’s Discussion and Analysis of Results of Operations and Financial Condition – Quantitative and Qualitative Disclosures About Market Risk.”



FINANCIAL STATEMENTS

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA



Duke Energy
Report of Independent Registered Public Accounting Firm	86
Consolidated Statements of Operations	87
Consolidated Statements of Comprehensive Income	88
Consolidated Balance Sheets	89
Consolidated Statements of Cash Flows	90
Consolidated Statements of Changes in Equity	91

Duke Energy Carolinas
Report of Independent Registered Public Accounting Firm	92
Consolidated Statements of Operations and Comprehensive Income	93
Consolidated Balance Sheets	94
Consolidated Statements of Cash Flows	95
Consolidated Statements of Changes in Equity	96

Progress Energy
Report of Independent Registered Public Accounting Firm	97
Consolidated Statements of Operations and Comprehensive Income	98
Consolidated Balance Sheets	99
Consolidated Statements of Cash Flows	100
Consolidated Statements of Changes in Equity	101

Duke Energy Progress
Report of Independent Registered Public Accounting Firm	102
Consolidated Statements of Operations and Comprehensive Income	103
Consolidated Balance Sheets	104
Consolidated Statements of Cash Flows	105
Consolidated Statements of Changes in Equity	106

Duke Energy Florida
Report of Independent Registered Public Accounting Firm	107
Consolidated Statements of Operations and Comprehensive Income	108
Consolidated Balance Sheets	109
Consolidated Statements of Cash Flows	110
Consolidated Statements of Changes in Equity	111

Duke Energy Ohio
Report of Independent Registered Public Accounting Firm	112
Consolidated Statements of Operations and Comprehensive Income	113
Consolidated Balance Sheets	114
Consolidated Statements of Cash Flows	115
Consolidated Statements of Changes in Equity	116

Duke Energy Indiana
Report of Independent Registered Public Accounting Firm	117
Consolidated Statements of Operations and Comprehensive Income	118
Consolidated Balance Sheets	119
Consolidated Statements of Cash Flows	120
Consolidated Statements of Changes in Equity	121

Piedmont
Report of Independent Registered Public Accounting Firm	122
Consolidated Statements of Operations and Comprehensive Income	123
Consolidated Balance Sheets	124
Consolidated Statements of Cash Flows	125
Consolidated Statements of Changes in Equity	126



FINANCIAL STATEMENTS



Combined Notes to Consolidated Financial Statements
Note 1 – Summary of Significant Accounting Policies	127
Note 2 – Acquisitions and Dispositions	137
Note 3 – Business Segments	140
Note 4 – Regulatory Matters	144
Note 5 – Commitments and Contingencies	166
Note 6 – Debt and Credit Facilities	174
Note 7 – Guarantees and Indemnifications	181
Note 8 – Joint Ownership of Generating and Transmission Facilities	182
Note 9 – Asset Retirement Obligations	182
Note 10 – Property, Plant and Equipment	185
Note 11 – Goodwill and Intangible Assets	187
Note 12 – Investments in Unconsolidated Affiliates	189
Note 13 – Related Party Transactions	191
Note 14 – Derivatives and Hedging	192
Note 15 – Investments in Debt and Equity Securities	198
Note 16 – Fair Value Measurements	203
Note 17 – Variable Interest Entities	209
Note 18 – Revenue	213
Note 19 – Common Stock	217
Note 20 – Severance	218
Note 21 – Stock-Based Compensation	219
Note 22 – Employee Benefit Plans	221
Note 23 – Income Taxes	243
Note 24 – Other Income and Expenses, Net	251
Note 25 – Subsequent Events	252
Note 26 – Quarterly Financial Data (Unaudited)	253



REPORTS

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the shareholders and the Board of Directors of Duke Energy Corporation

Opinion on the Financial Statements

Basis for Opinion

/s/ Deloitte & Touche LLP

Charlotte, North Carolina

February 28, 2019

We have served as the Company's auditor since 1947.



FINANCIAL STATEMENTS

DUKE ENERGY CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS



	Years Ended December 31,
(in millions, except per share amounts)	2018			2017			2016
Operating Revenues
Regulated electric	$	22,097		$	21,177		$	21,221
Regulated natural gas	1,773			1,734			863
Nonregulated electric and other	651			654			659
Total operating revenues	24,521			23,565			22,743
Operating Expenses
Fuel used in electric generation and purchased power	6,831			6,350			6,625
Cost of natural gas	697			632			265
Operation, maintenance and other	6,463			5,944			6,224
Depreciation and amortization	4,074			3,527			3,294
Property and other taxes	1,280			1,233			1,142
Impairment charges	402			282			18
Total operating expenses	19,747			17,968			17,568
(Losses) Gains on Sales of Other Assets and Other, net	(89		)	28			27
Operating Income	4,685			5,625			5,202
Other Income and Expenses
Equity in earnings (losses) of unconsolidated affiliates	83			119			(15		)
Other income and expenses, net	399			508			463
Total other income and expenses	482			627			448
Interest Expense	2,094			1,986			1,916
Income From Continuing Operations Before Income Taxes	3,073			4,266			3,734
Income Tax Expense From Continuing Operations	448			1,196			1,156
Income From Continuing Operations	2,625			3,070			2,578
Income (Loss) From Discontinued Operations, net of tax	19			(6		)	(408		)
Net Income	2,644			3,064			2,170
Less: Net (Loss) Income Attributable to Noncontrolling Interests	(22		)	5			18
Net Income Attributable to Duke Energy Corporation	$	2,666		$	3,059		$	2,152

Earnings Per Share – Basic and Diluted
Income from continuing operations attributable to Duke Energy Corporation common stockholders
Basic	$	3.73		$	4.37		$	3.71
Diluted	$	3.73		$	4.37		$	3.71
Income (Loss) from discontinued operations attributable to Duke Energy Corporation common stockholders
Basic	$	0.03		$	(0.01	)	$	(0.60	)
Diluted	$	0.03		$	(0.01	)	$	(0.60	)
Net income attributable to Duke Energy Corporation common stockholders
Basic	$	3.76		$	4.36		$	3.11
Diluted	$	3.76		$	4.36		$	3.11
Weighted average shares outstanding
Basic	708			700			691
Diluted	708			700			691

See Notes to Consolidated Financial Statements



FINANCIAL STATEMENTS

DUKE ENERGY CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME



	Years Ended December 31,
(in millions)	2018			2017		2016
Net Income	$	2,644		$	3,064	$	2,170
Other Comprehensive (Loss) Income, net of tax
Foreign currency translation adjustments	—			—		694
Pension and OPEB adjustments	(6		)	3		(11		)
Net unrealized (losses) gains on cash flow hedges	(10		)	2		17
Reclassification into earnings from cash flow hedges	6			8		13
Unrealized (losses) gains on available-for-sale securities	(3		)	13		2
Other Comprehensive (Loss) Income, net of tax	(13		)	26		715
Comprehensive Income	2,631			3,090		2,885
Less: Comprehensive (Loss) Income Attributable to Noncontrolling Interests	(22		)	5		20
Comprehensive Income Attributable to Duke Energy Corporation	$	2,653		$	3,085	$	2,865

See Notes to Consolidated Financial Statements



FINANCIAL STATEMENTS

DUKE ENERGY CORPORATION

CONSOLIDATED BALANCE SHEETS



	December 31,
(in millions)	2018			2017
ASSETS
Current Assets
Cash and cash equivalents	$	442		$	358
Receivables (net of allowance for doubtful accounts of $16 at 2018 and $14 at 2017)	962			779
Receivables of VIEs (net of allowance for doubtful accounts of $55 at 2018 and $54 at 2017)	2,172			1,995
Inventory	3,084			3,250
Regulatory assets (includes $52 at 2018 and $51 at 2017 related to VIEs)	2,005			1,437
Other (includes $162 at 2018 and $214 at 2017 related to VIEs)	1,049			634
Total current assets	9,714			8,453
Property, Plant and Equipment
Cost	134,458			127,507
Accumulated depreciation and amortization	(43,126		)	(41,537		)
Generation facilities to be retired, net	362			421
Net property, plant and equipment	91,694			86,391
Other Noncurrent Assets
Goodwill	19,303			19,396
Regulatory assets (includes $1,041 at 2018 and $1,091 at 2017 related to VIEs)	13,617			12,442
Nuclear decommissioning trust funds	6,720			7,097
Investments in equity method unconsolidated affiliates	1,409			1,175
Other	2,935			2,960
Total other noncurrent assets	43,984			43,070
Total Assets	$	145,392		$	137,914
LIABILITIES AND EQUITY
Current Liabilities
Accounts payable	$	3,487		$	3,043
Notes payable and commercial paper	3,410			2,163
Taxes accrued	577			551
Interest accrued	559			525
Current maturities of long-term debt (includes $227 at 2018 and $225 at 2017 related to VIEs)	3,406			3,244
Asset retirement obligations	919			689
Regulatory liabilities	598			402
Other	2,085			1,865
Total current liabilities	15,041			12,482
Long-Term Debt (includes $3,998 at 2018 and $4,306 at 2017 related to VIEs)	51,123			49,035
Other Noncurrent Liabilities
Deferred income taxes	7,806			6,621
Asset retirement obligations	9,548			9,486
Regulatory liabilities	14,834			15,330
Accrued pension and other post-retirement benefit costs	988			1,103
Investment tax credits	568			539
Other (includes $212 at 2018 and $241 at 2017 related to VIEs)	1,650			1,581
Total other noncurrent liabilities	35,394			34,660
Commitments and Contingencies
Equity
Common stock, $0.001 par value, 2 billion shares authorized; 727 million shares outstanding at 2018 and 700 million shares outstanding at 2017	1			1
Additional paid-in capital	40,795			38,792
Retained earnings	3,113			3,013
Accumulated other comprehensive loss	(92		)	(67		)
Total Duke Energy Corporation stockholders' equity	43,817			41,739
Noncontrolling interests	17			(2		)
Total equity	43,834			41,737
Total Liabilities and Equity	$	145,392		$	137,914

See Notes to Consolidated Financial Statements



FINANCIAL STATEMENTS

DUKE ENERGY CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS



	Years Ended December 31,
(in millions)	2018			2017			2016
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	2,644		$	3,064		$	2,170
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization and accretion (including amortization of nuclear fuel)	4,696			4,046			3,880
Equity component of AFUDC	(221		)	(237		)	(200		)
Losses (Gains) on sales of other assets	88			(33		)	477
Impairment charges	402			282			212
Deferred income taxes	1,079			1,433			900
Equity in (earnings) losses of unconsolidated affiliates	(83		)	(119		)	15
Accrued pension and other post-retirement benefit costs	61			8			21
Contributions to qualified pension plans	(141		)	(19		)	(155		)
Payments for asset retirement obligations	(533		)	(571		)	(608		)
Payment for the disposal of other assets	(105		)	—			—
Other rate case adjustments	37			—			—
Provision for rate refunds	425			—			—
(Increase) decrease in
Net realized and unrealized mark-to-market and hedging transactions	22			18			34
Receivables	(345		)	(83		)	(372		)
Inventory	156			268			272
Other current assets	(721		)	(400		)	(174		)
Increase (decrease) in
Accounts payable	479			(204		)	296
Taxes accrued	23			149			236
Other current liabilities	270			(482		)	182
Other assets	(1,008		)	(436		)	(186		)
Other liabilities	(39		)	(60		)	(137		)
Net cash provided by operating activities	7,186			6,624			6,863
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures	(9,389		)	(8,052		)	(7,901		)
Contributions to equity method investments	(416		)	(414		)	(307		)
Acquisitions, net of cash acquired	—			(13		)	(4,778		)
Return of investment capital	137			281			1
Purchases of debt and equity securities	(3,762		)	(4,071		)	(5,153		)
Proceeds from sales and maturities of debt and equity securities	3,747			4,098			5,236
Proceeds from the sales of discontinued operations and other assets, net of cash divested	41			—			1,418
Other	(418		)	(271		)	(44		)
Net cash used in investing activities	(10,060		)	(8,442		)	(11,528		)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from the:
Issuance of long-term debt	5,299			6,909			9,238
Issuance of common stock	1,838			—			731
Payments for the redemption of long-term debt	(2,906		)	(2,316		)	(1,923		)
Proceeds from the issuance of short-term debt with original maturities greater than 90 days	472			319			2,081
Payments for the redemption of short-term debt with original maturities greater than 90 days	(282		)	(272		)	(2,166		)
Notes payable and commercial paper	981			(409		)	(1,362		)
Dividends paid	(2,471		)	(2,450		)	(2,332		)
Other	29			1			(16		)
Net cash provided by financing activities	2,960			1,782			4,251
Changes in cash and cash equivalents included in assets held for sale	—			—			474
Net increase (decrease) in cash, cash equivalents, and restricted cash	86			(36		)	60
Cash, cash equivalents, and restricted cash at beginning of period	505			541			481
Cash, cash equivalents, and restricted cash at end of period	$	591		$	505		$	541
Supplemental Disclosures:
Cash paid for interest, net of amount capitalized	$	2,086		$	1,963		$	1,794
Cash (received from) paid for income taxes	(266		)	4			229
Significant non-cash transactions:
Accrued capital expenditures	1,112			1,032			1,000
Non-cash dividends	107			—			—

See Notes to Consolidated Financial Statements



FINANCIAL STATEMENTS

DUKE ENERGY CORPORATION

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY



									Duke Energy Corporation Stockholders' Accumulated Other Comprehensive Loss
															Net Unrealized						Total
									Foreign			Net			Gains (Losses)						Duke Energy
	Common			Additional					Currency			Losses on			on Available-			Pension and			Corporation
	Stock	Common		Paid-in		Retained			Translation			Cash Flow			for-Sale-			OPEB			Stockholders'			Noncontrolling			Total
(in millions)	Shares	Stock		Capital		Earnings			Adjustments			Hedges			Securities			Adjustments			Equity			Interests			Equity
Balance at December 31, 2015	688	$	1	$	37,968	$	2,564		$	(692	)	$	(50	)	$	(3	)	$	(61	)	$	39,727		$	44		$	39,771
Net income	—	—		—		2,152			—			—			—			—			2,152			18			2,170
Other comprehensive income (loss)^(a)	—	—		—		—			692			30			2			(11		)	713			2			715
Common stock issuances, including dividend reinvestment and employee benefits	12	—		773		—			—			—			—			—			773			—			773
Common stock dividends	—	—		—		(2,332		)	—			—			—			—			(2,332		)	—			(2,332		)
Distributions to noncontrolling interest in subsidiaries	—	—		—		—			—			—			—			—			—			(6		)	(6		)
Other^(b)	—	—		—		—			—			—			—			—			—			(50		)	(50		)
Balance at December 31, 2016	700	$	1	$	38,741	$	2,384		$	—		$	(20	)	$	(1	)	$	(72	)	$	41,033		$	8		$	41,041
Net income	—	—		—		3,059			—			—			—			—			3,059			5			3,064
Other comprehensive income	—	—		—		—			—			10			13			3			26			—			26
Common stock issuances, including dividend reinvestment and employee benefits	—	—		51		—			—			—			—			—			51			—			51
Common stock dividends	—	—		—		(2,450		)	—			—			—			—			(2,450		)	—			(2,450		)
Distributions to noncontrolling interest in subsidiaries	—	—		—		—			—			—			—			—			—			(2		)	(2		)
Other^(c)	—	—		—		20			—			—			—			—			20			(13		)	7
Balance at December 31, 2017	700	$	1	$	38,792	$	3,013		$	—		$	(10	)	$	12		$	(69	)	$	41,739		$	(2	)	$	41,737
Net income	—	—		—		2,666			—			—			—			—			2,666			(22		)	2,644
Other comprehensive (loss) income	—	—		—		—			—			(4		)	(3		)	(6		)	(13		)	—			(13		)
Common stock issuances, including dividend reinvestment and employee benefits	27	—		2,003		—			—			—			—			—			2,003			—			2,003
Common stock dividends	—	—		—		(2,578		)	—			—			—			—			(2,578		)	—			(2,578		)
Distributions to noncontrolling interests in subsidiaries	—	—		—		—			—			—			—			—			—			(1		)	(1		)
Other^(d)	—	—		—		12			—			—			(12		)	—			—			42			42
Balance at December 31, 2018	727	$	1	$	40,795	$	3,113		$	—		$	(14	)	$	(3	)	$	(75	)	$	43,817		$	17		$	43,834


(a)	Foreign Currency Translation Adjustments amount includes $620 million of cumulative adjustment realized as a result of the sale of the Latin American generation business. See Note 2 to the Consolidated Financial Statements.


(b)	Noncontrolling Interests amount is primarily related to the sale of the Latin American generation business. See Note 2 to the Consolidated Financial Statements.


(c)	Retained Earnings relates to a cumulative-effect adjustment due to implementation of a new accounting standard related to stock-based compensation and the associated income taxes. See Note 1 to the Consolidated Financial Statements for additional information. Noncontrolling Interests relates to the purchase of remaining interest in REC Solar.


(d)	Amounts in Retained Earnings and Accumulated Other Comprehensive Loss represent a cumulative-effect adjustment due to implementation of a new accounting standard related to Financial Instruments Classification and Measurement. See Note 1 for more information. Amount in Noncontrolling Interests primarily relates to tax equity financing activity in the Commercial Renewables segment.

See Notes to Consolidated Financial Statements



REPORTS

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the shareholder and the Board of Directors of Duke Energy Carolinas, LLC

Opinion on the Financial Statements

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

/s/ Deloitte & Touche LLP

Charlotte, North Carolina

February 28, 2019

We have served as the Company's auditor since 1947.



FINANCIAL STATEMENTS

DUKE ENERGY CAROLINAS, LLC

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME



	Years Ended December 31,
(in millions)	2018			2017		2016
Operating Revenues	$	7,300		$	7,302	$	7,322
Operating Expenses
Fuel used in electric generation and purchased power	1,821			1,822		1,797
Operation, maintenance and other	2,130			2,021		2,158
Depreciation and amortization	1,201			1,090		1,075
Property and other taxes	295			281		276
Impairment charges	192			—		1
Total operating expenses	5,639			5,214		5,307
(Losses) Gains on Sales of Other Assets and Other, net	(1		)	1		(5		)
Operating Income	1,660			2,089		2,010
Other Income and Expenses, net	153			199		214
Interest Expense	439			422		424
Income Before Income Taxes	1,374			1,866		1,800
Income Tax Expense	303			652		634
Net Income	$	1,071		$	1,214	$	1,166
Other Comprehensive Income, net of tax
Reclassification into earnings from cash flow hedges	1			2		2
Other Comprehensive Income, net of tax	1			2		2
Comprehensive Income	$	1,072		$	1,216	$	1,168

See Notes to Consolidated Financial Statements



FINANCIAL STATEMENTS

DUKE ENERGY CAROLINAS, LLC

CONSOLIDATED BALANCE SHEETS



	December 31,
(in millions)	2018			2017
ASSETS
Current Assets
Cash and cash equivalents	$	33		$	16
Receivables (net of allowance for doubtful accounts of $2 at 2018 and 2017)	219			200
Receivables of VIEs (net of allowance for doubtful accounts of $7 at 2018 and 2017)	699			640
Receivables from affiliated companies	182			95
Inventory	948			971
Regulatory assets	520			299
Other	72			19
Total current assets	2,673			2,240
Property, Plant and Equipment
Cost	44,741			42,939
Accumulated depreciation and amortization	(15,496		)	(15,063		)
Net property, plant and equipment	29,245			27,876
Other Noncurrent Assets
Regulatory assets	3,457			2,853
Nuclear decommissioning trust funds	3,558			3,772
Other	1,027			979
Total other noncurrent assets	8,042			7,604
Total Assets	$	39,960		$	37,720
LIABILITIES AND EQUITY
Current Liabilities
Accounts payable	$	988		$	842
Accounts payable to affiliated companies	230			209
Notes payable to affiliated companies	439			104
Taxes accrued	171			234
Interest accrued	102			108
Current maturities of long-term debt	6			1,205
Asset retirement obligations	290			337
Regulatory liabilities	199			126
Other	571			486
Total current liabilities	2,996			3,651
Long-Term Debt	10,633			8,598
Long-Term Debt Payable to Affiliated Companies	300			300
Other Noncurrent Liabilities
Deferred income taxes	3,689			3,413
Asset retirement obligations	3,659			3,273
Regulatory liabilities	5,999			6,231
Accrued pension and other post-retirement benefit costs	99			95
Investment tax credits	231			232
Other	671			566
Total other noncurrent liabilities	14,348			13,810
Commitments and Contingencies
Equity
Member's equity	11,689			11,368
Accumulated other comprehensive loss	(6		)	(7		)
Total equity	11,683			11,361
Total Liabilities and Equity	$	39,960		$	37,720

See Notes to Consolidated Financial Statements



FINANCIAL STATEMENTS

DUKE ENERGY CAROLINAS, LLC

CONSOLIDATED STATEMENTS OF CASH FLOWS



	Years Ended December 31,
(in millions)	2018			2017			2016
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	1,071		$	1,214		$	1,166
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization (including amortization of nuclear fuel)	1,487			1,409			1,382
Equity component of AFUDC	(73		)	(106		)	(102		)
Losses (Gains) on sales of other assets	1			(1		)	5
Impairment charges	192			—			1
Deferred income taxes	305			410			470
Accrued pension and other post-retirement benefit costs	4			(4		)	4
Contributions to qualified pension plans	(46		)	—			(43		)
Payments for asset retirement obligations	(230		)	(271		)	(287		)
Provision for rate refunds	182			—			—
(Increase) decrease in
Net realized and unrealized mark-to-market and hedging transactions	2			9			5
Receivables	(86		)	(9		)	(76		)
Receivables from affiliated companies	(87		)	68			(56		)
Inventory	25			78			215
Other current assets	(161		)	7			67
Increase (decrease) in
Accounts payable	168			23			(69		)
Accounts payable to affiliated companies	21			(38		)	18
Taxes accrued	(65		)	86			187
Other current liabilities	89			(161		)	63
Other assets	(179		)	(49		)	20
Other liabilities	(90		)	(31		)	6
Net cash provided by operating activities	2,530			2,634			2,976
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures	(2,706		)	(2,524		)	(2,220		)
Purchases of debt and equity securities	(1,810		)	(2,124		)	(2,832		)
Proceeds from sales and maturities of debt and equity securities	1,810			2,128			2,832
Notes receivable from affiliated companies	—			66			97
Other	(147		)	(109		)	(83		)
Net cash used in investing activities	(2,853		)	(2,563		)	(2,206		)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from the issuance of long-term debt	1,983			569			1,587
Payments for the redemption of long-term debt	(1,205		)	(116		)	(356		)
Notes payable to affiliated companies	335			104			—
Distributions to parent	(750		)	(625		)	(2,000		)
Other	(23		)	(1		)	—
Net cash provided by (used in) financing activities	340			(69		)	(769		)
Net increase in cash and cash equivalents	17			2			1
Cash and cash equivalents at beginning of period	16			14			13
Cash and cash equivalents at end of period	$	33		$	16		$	14
Supplemental Disclosures:
Cash paid for interest, net of amount capitalized	$	452		$	398		$	393
Cash paid for (received from) income taxes	89			193			(60		)
Significant non-cash transactions:
Accrued capital expenditures	302			315			347

See Notes to Consolidated Financial Statements



FINANCIAL STATEMENTS

DUKE ENERGY CAROLINAS, LLC

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY



				Accumulated Other
				Comprehensive
				Loss
				Net Losses
				on Cash
	Member's			Flow			Total
(in millions)	Equity			Hedges			Equity
Balance at December 31, 2015	$	11,617		$	(11	)	$	11,606
Net income	1,166			—			1,166
Other comprehensive income	—			2			2
Distributions to parent	(2,000		)	—			(2,000		)
Other	(2		)	—			(2		)
Balance at December 31, 2016	$	10,781		$	(9	)	$	10,772
Net income	1,214			—			1,214
Other comprehensive income	—			2			2
Distributions to parent	(625		)	—			(625		)
Other	(2		)	—			(2		)
Balance at December 31, 2017	$	11,368		$	(7	)	$	11,361
Net income	1,071			—			1,071
Other comprehensive income	—			1			1
Distributions to parent	(750		)	—			(750		)
Balance at December 31, 2018	$	11,689		$	(6	)	$	11,683

See Notes to Consolidated Financial Statements



REPORTS

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the shareholder and the Board of Directors of Progress Energy, Inc.

Opinion on the Financial Statements

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

/s/ Deloitte & Touche LLP

Charlotte, North Carolina

February 28, 2019

We have served as the Company's auditor since 1930.



FINANCIAL STATEMENTS

PROGRESS ENERGY, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME



	Years Ended December 31,
(in millions)	2018			2017		2016
Operating Revenues	$	10,728		$	9,783	$	9,853
Operating Expenses
Fuel used in electric generation and purchased power	3,976			3,417		3,644
Operation, maintenance and other	2,613			2,301		2,458
Depreciation and amortization	1,619			1,285		1,213
Property and other taxes	529			503		487
Impairment charges	87			156		7
Total operating expenses	8,824			7,662		7,809
Gains on Sales of Other Assets and Other, net	24			26		25
Operating Income	1,928			2,147		2,069
Other Income and Expenses, net	165			209		186
Interest Expense	842			824		689
Income From Continuing Operations Before Income Taxes	1,251			1,532		1,566
Income Tax Expense From Continuing Operations	218			264		527
Income From Continuing Operations	1,033			1,268		1,039
Income From Discontinued Operations, net of tax	—			—		2
Net Income	1,033			1,268		1,041
Less: Net Income Attributable to Noncontrolling Interests	6			10		10
Net Income Attributable to Parent	$	1,027		$	1,258	$	1,031

Net Income	$	1,033		$	1,268	$	1,041
Other Comprehensive Income, net of tax
Pension and OPEB adjustments	5			4		1
Net unrealized gain on cash flow hedges	6			5		—
Reclassification into earnings from cash flow hedges	—			—		8
Unrealized (losses) gains on available-for-sale securities	(1		)	4		1
Other Comprehensive Income, net of tax	10			13		10
Comprehensive Income	1,043			1,281		1,051
Less: Comprehensive Income Attributable to Noncontrolling Interests	6			10		10
Comprehensive Income Attributable to Parent	$	1,037		$	1,271	$	1,041

See Notes to Consolidated Financial Statements



FINANCIAL STATEMENTS

PROGRESS ENERGY, INC.

CONSOLIDATED BALANCE SHEETS



	December 31,
(in millions)	2018			2017
ASSETS
Current Assets
Cash and cash equivalents	$	67		$	40
Receivables (net of allowance for doubtful accounts of $5 at 2018 and $4 at 2017)	220			123
Receivables of VIEs (net of allowance for doubtful accounts of $8 at 2018 and $7 at 2017)	909			780
Receivables from affiliated companies	168			31
Notes receivable from affiliated companies	—			240
Inventory	1,459			1,592
Regulatory assets (includes $52 at 2018 and $51 at 2017 related to VIEs)	1,137			741
Other (includes $39 at 2018 and $44 at 2017 related to VIEs)	125			334
Total current assets	4,085			3,881
Property, Plant and Equipment
Cost	50,260			47,323
Accumulated depreciation and amortization	(16,398		)	(15,857		)
Generation facilities to be retired, net	362			421
Net property, plant and equipment	34,224			31,887
Other Noncurrent Assets
Goodwill	3,655			3,655
Regulatory assets (includes $1,041 at 2018 and $1,091 at 2017 related to VIEs)	6,564			6,010
Nuclear decommissioning trust funds	3,162			3,324
Other	974			931
Total other noncurrent assets	14,355			13,920
Total Assets	$	52,664		$	49,688
LIABILITIES AND EQUITY
Current Liabilities
Accounts payable	$	1,172		$	1,006
Accounts payable to affiliated companies	360			251
Notes payable to affiliated companies	1,235			805
Taxes accrued	109			101
Interest accrued	246			212
Current maturities of long-term debt (includes $53 at 2018 and 2017 related to VIEs)	1,672			771
Asset retirement obligations	514			295
Regulatory liabilities	280			213
Other	821			729
Total current liabilities	6,409			4,383
Long-Term Debt (includes $1,636 at 2018 and $1,689 at 2017 related to VIEs)	17,089			16,916
Long-Term Debt Payable to Affiliated Companies	150			150
Other Noncurrent Liabilities
Deferred income taxes	3,941			3,502
Asset retirement obligations	4,897			5,119
Regulatory liabilities	5,049			5,306
Accrued pension and other post-retirement benefit costs	521			545
Other	351			302
Total other noncurrent liabilities	14,759			14,774
Commitments and Contingencies
Equity
Common stock, $0.01 par value, 100 shares authorized and outstanding at 2018 and 2017	—			—
Additional paid-in capital	9,143			9,143
Retained earnings	5,131			4,350
Accumulated other comprehensive loss	(20		)	(25		)
Total Progress Energy, Inc. stockholder's equity	14,254			13,468
Noncontrolling interests	3			(3		)
Total equity	14,257			13,465
Total Liabilities and Equity	$	52,664		$	49,688

See Notes to Consolidated Financial Statements



FINANCIAL STATEMENTS

PROGRESS ENERGY, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS



	Years Ended December 31,
(in millions)	2018			2017			2016
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	1,033		$	1,268		$	1,041
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization and accretion (including amortization of nuclear fuel)	1,987			1,516			1,435
Equity component of AFUDC	(104		)	(92		)	(76		)
Gains on sales of other assets	(24		)	(28		)	(34		)
Impairment charges	87			156			7
Deferred income taxes	358			703			532
Accrued pension and other post-retirement benefit costs	24			(28		)	(24		)
Contributions to qualified pension plans	(45		)	—			(43		)
Payments for asset retirement obligations	(230		)	(248		)	(270		)
Other rate case adjustments	37			—			—
Provision for rate refunds	122			—			—
(Increase) decrease in
Net realized and unrealized mark-to-market and hedging transactions	18			—			42
Receivables	(207		)	(89		)	7
Receivables from affiliated companies	(137		)	71			211
Inventory	121			125			35
Other current assets	(12		)	(397		)	50
Increase (decrease) in
Accounts payable	217			(260		)	252
Accounts payable to affiliated companies	109			(97		)	37
Taxes accrued	8			17			15
Other current liabilities	129			(166		)	(42		)
Other assets	(913		)	(300		)	(248		)
Other liabilities	(34		)	(98		)	(36		)
Net cash provided by operating activities	2,544			2,053			2,891
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures	(3,854		)	(3,152		)	(3,306		)
Asset Acquisitions	—			—			(10		)
Purchases of debt and equity securities	(1,753		)	(1,806		)	(2,143		)
Proceeds from sales and maturities of debt and equity securities	1,769			1,824			2,187
Net proceeds from sales of other assets	20			—			—
Proceeds from insurance	—			7			58
Proceeds from the sale of nuclear fuel	—			20			20
Notes receivable from affiliated companies	240			(160		)	(80		)
Other	(182		)	(86		)	47
Net cash used in investing activities	(3,760		)	(3,353		)	(3,227		)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from the issuance of long-term debt	1,833			2,118			2,375
Payments for the redemption of long-term debt	(771		)	(813		)	(327		)
Notes payable to affiliated companies	430			100			444
Dividends to parent	(250		)	(124		)	(2,098		)
Other	(1		)	(4		)	(3		)
Net cash provided by financing activities	1,241			1,277			391
Net increase (decrease) in cash, cash equivalents, and restricted cash	25			(23		)	55
Cash, cash equivalents, and restricted cash at beginning of period	87			110			55
Cash, cash equivalents, and restricted cash at end of period	$	112		$	87		$	110
Supplemental Disclosures:
Cash paid for interest, net of amount capitalized	$	798		$	773		$	673
Cash received from income taxes	(348		)	(146		)	(187		)
Significant non-cash transactions:
Accrued capital expenditures	478			391			317
Equitization of certain notes payable to affiliates	—			1,047			—
Dividend to parent related to a legal entity restructuring	—			547			—

See Notes to Consolidated Financial Statements



FINANCIAL STATEMENTS

PROGRESS ENERGY, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY



						Accumulated Other Comprehensive Loss
						Net			Net Unrealized						Total Progress
	Additional					Losses on			Gains (Losses)			Pension and			Energy, Inc.
	Paid-in		Retained			Cash Flow			on Available-for-			OPEB			Stockholder's			Noncontrolling			Total
(in millions)	Capital		Earnings			Hedges			Sale Securities			Adjustments			Equity			Interests			Equity
Balance at December 31, 2015	$	8,092	$	4,831		$	(31	)	$	—		$	(17	)	$	12,875		$	(22	)	$	12,853
Net income	—		1,031			—			—			—			1,031			10			1,041
Other comprehensive income	—		—			8			1			1			10			—			10
Distributions to noncontrolling interests	—		—			—			—			—			—			(1		)	(1		)
Dividends to parent	—		(2,098		)	—			—			—			(2,098		)	—			(2,098		)
Other	2		—			—			—			—			2			—			2
Balance at December 31, 2016	$	8,094	$	3,764		$	(23	)	$	1		$	(16	)	$	11,820		$	(13	)	$	11,807
Net income	—		1,258			—			—			—			1,258			10			1,268
Other comprehensive income	—		—			5			4			4			13			—			13
Dividends to parent^(a)	—		(672		)	—			—			—			(672		)	—			(672		)
Equitization of certain notes payable to affiliates	1,047		—			—			—			—			1,047			—			1,047
Other	2		—			—			—			—			2			—			2
Balance at December 31, 2017	$	9,143	$	4,350		$	(18	)	$	5		$	(12	)	$	13,468		$	(3	)	$	13,465
Net income	—		1,027			—			—			—			1,027			6			1,033
Other comprehensive income (loss)	—		—			6			(1		)	5			10			—			10
Distributions to noncontrolling interests	—		—			—			—			—			—			(1		)	(1		)
Dividends to parent	—		(250		)	—			—			—			(250		)	—			(250		)
Other^(b)	—		4			—			(5		)	—			(1		)	1			—
Balance at December 31, 2018	$	9,143	$	5,131		$	(12	)	$	(1	)	$	(7	)	$	14,254		$	3		$	14,257


(a)	Includes a $547 million non-cash dividend related to a legal entity restructuring.


(b)	Amounts in Retained Earnings and Accumulated Other Comprehensive Loss represent a cumulative-effect adjustment due to implementation of a new accounting standard related to Financial Instruments Classification and Measurement. See Note 1 for more information.

See Notes to Consolidated Financial Statements



REPORTS

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the shareholder and the Board of Directors of Duke Energy Progress, LLC

Opinion on the Financial Statements

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

/s/ Deloitte & Touche LLP

Charlotte, North Carolina

February 28, 2019

We have served as the Company's auditor since 1930.



FINANCIAL STATEMENTS

DUKE ENERGY PROGRESS, LLC

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME



	Years Ended December 31,
(in millions)	2018		2017		2016
Operating Revenues	$	5,699	$	5,129	$	5,277
Operating Expenses
Fuel used in electric generation and purchased power	1,892		1,609		1,830
Operation, maintenance and other	1,578		1,439		1,565
Depreciation and amortization	991		725		703
Property and other taxes	155		156		156
Impairment charges	33		19		1
Total operating expenses	4,649		3,948		4,255
Gains on Sales of Other Assets and Other, net	9		4		3
Operating Income	1,059		1,185		1,025
Other Income and Expenses, net	87		115		132
Interest Expense	319		293		257
Income Before Income Taxes	827		1,007		900
Income Tax Expense	160		292		301
Net Income and Comprehensive Income	$	667	$	715	$	599

See Notes to Consolidated Financial Statements



FINANCIAL STATEMENTS

DUKE ENERGY PROGRESS, LLC

CONSOLIDATED BALANCE SHEETS



	December 31,
(in millions)	2018			2017
ASSETS
Current Assets
Cash and cash equivalents	$	23		$	20
Receivables (net of allowance for doubtful accounts of $2 at 2018 and $1 at 2017)	75			56
Receivables of VIEs (net of allowance for doubtful accounts of $5 at 2018 and 2017)	547			459
Receivables from affiliated companies	23			3
Inventory	954			1,017
Regulatory assets	703			352
Other	62			97
Total current assets	2,387			2,004
Property, Plant and Equipment
Cost	31,459			29,583
Accumulated depreciation and amortization	(11,423		)	(10,903		)
Generation facilities to be retired, net	362			421
Net property, plant and equipment	20,398			19,101
Other Noncurrent Assets
Regulatory assets	4,111			3,507
Nuclear decommissioning trust funds	2,503			2,588
Other	612			599
Total other noncurrent assets	7,226			6,694
Total Assets	$	30,011		$	27,799
LIABILITIES AND EQUITY
Current Liabilities
Accounts payable	$	660		$	402
Accounts payable to affiliated companies	278			179
Notes payable to affiliated companies	294			240
Taxes accrued	53			64
Interest accrued	116			102
Current maturities of long-term debt	603			3
Asset retirement obligations	509			295
Regulatory liabilities	178			139
Other	408			376
Total current liabilities	3,099			1,800
Long-Term Debt	7,451			7,204
Long-Term Debt Payable to Affiliated Companies	150			150
Other Noncurrent Liabilities
Deferred income taxes	2,119			1,883
Asset retirement obligations	4,311			4,378
Regulatory liabilities	3,955			3,999
Accrued pension and other post-retirement benefit costs	237			248
Investment tax credits	142			143
Other	106			45
Total other noncurrent liabilities	10,870			10,696
Commitments and Contingencies
Equity
Member's Equity	8,441			7,949
Total Liabilities and Equity	$	30,011		$	27,799

See Notes to Consolidated Financial Statements



FINANCIAL STATEMENTS

DUKE ENERGY PROGRESS, LLC

CONSOLIDATED STATEMENTS OF CASH FLOWS



	Years Ended December 31,
(in millions)	2018			2017			2016
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	667		$	715		$	599
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization (including amortization of nuclear fuel)	1,183			936			907
Equity component of AFUDC	(57		)	(47		)	(50		)
Gains on sales of other assets	(9		)	(5		)	(6		)
Impairment charges	33			19			1
Deferred income taxes	236			384			384
Accrued pension and other post-retirement benefit costs	15			(20		)	(32		)
Contributions to qualified pension plans	(25		)	—			(24		)
Payments for asset retirement obligations	(195		)	(192		)	(212		)
Other rate case adjustments	37			—			—
Provisions for rate refunds	122			—			—
(Increase) decrease in
Net realized and unrealized mark-to-market and hedging transactions	5			(4		)	4
Receivables	(107		)	(58		)	(17		)
Receivables from affiliated companies	(20		)	2			11
Inventory	63			59			12
Other current assets	(201		)	(75		)	84
Increase (decrease) in
Accounts payable	219			(230		)	181
Accounts payable to affiliated companies	99			(48		)	37
Taxes accrued	(11		)	(39		)	90
Other current liabilities	46			(131		)	114
Other assets	(484		)	(53		)	(163		)
Other liabilities	12			(18		)	12
Net cash provided by operating activities	1,628			1,195			1,932
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures	(2,220		)	(1,715		)	(1,733		)
Purchases of debt and equity securities	(1,236		)	(1,249		)	(1,658		)
Proceeds from sales and maturities of debt and equity securities	1,206			1,207			1,615
Net proceeds from the sales of other assets	20			—			—
Proceeds from insurance	—			4			—
Notes receivable from affiliated companies	—			165			(165		)
Other	(115		)	(55		)	26
Net cash used in investing activities	(2,345		)	(1,643		)	(1,915		)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from the issuance of long-term debt	845			812			505
Payments for the redemption of long-term debt	(3		)	(470		)	(15		)
Notes payable to affiliated companies	54			240			(209		)
Distributions to parent	(175		)	(124		)	(300		)
Other	(1		)	(1		)	(2		)
Net cash provided by (used in) financing activities	720			457			(21		)
Net increase (decrease) in cash and cash equivalents	3			9			(4		)
Cash and cash equivalents at beginning of period	20			11			15
Cash and cash equivalents at end of period	$	23		$	20		$	11
Supplemental Disclosures:
Cash paid for interest, net of amount capitalized	$	303		$	291		$	248
Cash (received from) paid for income taxes	(112		)	59			(287		)
Significant non-cash transactions:
Accrued capital expenditures	220			191			147

See Notes to Consolidated Financial Statements



FINANCIAL STATEMENTS

DUKE ENERGY PROGRESS, LLC

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY



	Member's
(in millions)	Equity
Balance at December 31, 2015	$	7,059
Net income	599
Distribution to parent	(300		)
Balance at December 31, 2016	$	7,358
Net income	715
Distribution to parent	(124		)
Balance at December 31, 2017	$	7,949
Net income	667
Distribution to parent	(175		)
Balance at December 31, 2018	$	8,441

See Notes to Consolidated Financial Statements



REPORTS

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the shareholder and the Board of Directors of Duke Energy Florida, LLC

Opinion on the Financial Statements

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

/s/ Deloitte & Touche LLP

Charlotte, North Carolina

February 28, 2019

We have served as the Company's auditor since 2001.



FINANCIAL STATEMENTS

DUKE ENERGY FLORIDA, LLC

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME



	Years Ended December 31,
(in millions)	2018			2017		2016
Operating Revenues	$	5,021		$	4,646	$	4,568
Operating Expenses
Fuel used in electric generation and purchased power	2,085			1,808		1,814
Operation, maintenance and other	1,025			853		884
Depreciation and amortization	628			560		509
Property and other taxes	374			347		333
Impairment charges	54			138		6
Total operating expenses	4,166			3,706		3,546
Gains on Sales of Other Assets and Other, net	1			1		—
Operating Income	856			941		1,022
Other Income and Expenses, net	86			96		63
Interest Expense	287			279		212
Income Before Income Taxes	655			758		873
Income Tax Expense	101			46		322
Net Income	$	554		$	712	$	551
Other Comprehensive (Loss) Income, net of tax
Unrealized (losses) gains on available-for-sale securities	(1		)	3		1
Other Comprehensive (Loss) Income, net of tax	(1		)	3		1
Comprehensive Income	$	553		$	715	$	552

See Notes to Consolidated Financial Statements



FINANCIAL STATEMENTS

DUKE ENERGY FLORIDA, LLC

CONSOLIDATED BALANCE SHEETS



	December 31,
(in millions)	2018			2017
ASSETS
Current Assets
Cash and cash equivalents	$	36		$	13
Receivables (net of allowance for doubtful accounts of $3 at 2018 and 2017)	143			65
Receivables of VIEs (net of allowance for doubtful accounts of $3 at 2018 and $2 at 2017)	362			321
Receivables from affiliated companies	28			2
Notes receivable from affiliated companies	—			313
Inventory	504			574
Regulatory assets (includes $52 at 2018 and $51 at 2017 related to VIEs)	434			389
Other (includes $39 at 2018 and $40 at 2017 related to VIEs)	46			86
Total current assets	1,553			1,763
Property, Plant and Equipment
Cost	18,792			17,730
Accumulated depreciation and amortization	(4,968		)	(4,947		)
Net property, plant and equipment	13,824			12,783
Other Noncurrent Assets
Regulatory assets (includes $1,041 at 2018 and $1,091 at 2017 related to VIEs)	2,454			2,503
Nuclear decommissioning trust funds	659			736
Other	311			284
Total other noncurrent assets	3,424			3,523
Total Assets	$	18,801		$	18,069
LIABILITIES AND EQUITY
Current Liabilities
Accounts payable	$	511		$	602
Accounts payable to affiliated companies	91			74
Notes payable to affiliated companies	108			—
Taxes accrued	74			34
Interest accrued	75			56
Current maturities of long-term debt (includes $53 at 2018 and 2017 related to VIEs)	270			768
Asset retirement obligations	5			—
Regulatory liabilities	102			74
Other	406			334
Total current liabilities	1,642			1,942
Long-Term Debt (includes $1,336 at 2018 and $1,389 at 2017 related to VIEs)	7,051			6,327
Other Noncurrent Liabilities
Deferred income taxes	1,986			1,761
Asset retirement obligations	586			742
Regulatory liabilities	1,094			1,307
Accrued pension and other post-retirement benefit costs	254			264
Other	93			108
Total other noncurrent liabilities	4,013			4,182
Commitments and Contingencies
Equity
Member's equity	6,097			5,614
Accumulated other comprehensive income	(2		)	4
Total equity	6,095			5,618
Total Liabilities and Equity	$	18,801		$	18,069

See Notes to Consolidated Financial Statements



FINANCIAL STATEMENTS

DUKE ENERGY FLORIDA, LLC

CONSOLIDATED STATEMENTS OF CASH FLOWS



	Years Ended December 31,
(in millions)	2018			2017			2016
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	554		$	712		$	551
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization and accretion	793			570			516
Equity component of AFUDC	(47		)	(45		)	(26		)
Gains on sales of other assets	(1		)	(1		)	—
Impairment charges	54			138			6
Deferred income taxes	159			245			224
Accrued pension and other post-retirement benefit costs	5			(13		)	2
Contributions to qualified pension plans	(20		)	—			(20		)
Payments for asset retirement obligations	(35		)	(56		)	(58		)
(Increase) decrease in
Net realized and unrealized mark-to-market and hedging transactions	7			5			38
Receivables	(100		)	(38		)	23
Receivables from affiliated companies	(26		)	—			21
Inventory	58			66			23
Other current assets	59			(138		)	(86		)
Increase (decrease) in
Accounts payable	(1		)	(32		)	71
Accounts payable to affiliated companies	17			(51		)	9
Taxes accrued	40			1			(117		)
Other current liabilities	82			(37		)	(149		)
Other assets	(428		)	(229		)	(84		)
Other liabilities	(61		)	(82		)	(53		)
Net cash provided by operating activities	1,109			1,015			891
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures	(1,634		)	(1,437		)	(1,583		)
Purchases of debt and equity securities	(517		)	(557		)	(485		)
Proceeds from sales and maturities of debt and equity securities	563			617			572
Proceeds from insurance	—			4			58
Proceeds from the sale of nuclear fuel	—			20			20
Notes receivable from affiliated companies	313			(313		)	—
Other	(65		)	(31		)	21
Net cash used in investing activities	(1,340		)	(1,697		)	(1,397		)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from the issuance of long-term debt	988			1,306			1,870
Payments for the redemption of long-term debt	(769		)	(342		)	(12		)
Notes payable to affiliated companies	108			(297		)	(516		)
Distribution to parent	(75		)	—			(775		)
Other	1			(1		)	—
Net cash provided by financing activities	253			666			567
Net increase (decrease) in cash, cash equivalents, and restricted cash	22			(16		)	61
Cash, cash equivalents, and restricted cash at beginning of period	53			69			8
Cash, cash equivalents, and restricted cash at end of period	$	75		$	53		$	69
Supplemental Disclosures:
Cash paid for interest, net of amount capitalized	$	270		$	274		$	208
Cash (received from) paid for income taxes	(120		)	(197		)	216
Significant non-cash transactions:
Accrued capital expenditures	258			199			170

See Notes to Consolidated Financial Statements



FINANCIAL STATEMENTS

DUKE ENERGY FLORIDA, LLC

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY



				Accumulated
				Other
				Comprehensive
				Income (Loss)
				Net Unrealized
				Gains (Losses) on
	Member's			Available-for-			Total
(in millions)	Equity			Sale Securities			Equity
Balance at December 31, 2015	$	5,121		$	—		$	5,121
Net income	551			—			551
Other comprehensive income	—			1			1
Distribution to parent	(775		)	—			(775		)
Other	2			—			2
Balance at December 31, 2016	$	4,899		$	1		$	4,900
Net income	712			—			712
Other comprehensive income	—			3			3
Other	3			—			3
Balance at December 31, 2017	$	5,614		$	4		$	5,618
Net income	554			—			554
Other comprehensive loss	—			(1		)	(1		)
Distribution to parent	(75		)	—			(75		)
Other^(a)	4			(5		)	(1		)
Balance at December 31, 2018	$	6,097		$	(2	)	$	6,095


(a)	Amounts represent a cumulative-effect adjustment due to implementation of a new accounting standard related to Financial Instruments Classification and Measurement. See Note 1 for more information.

See Notes to Consolidated Financial Statements



REPORTS

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the shareholder and the Board of Directors of Duke Energy Ohio, Inc.

Opinion on the Financial Statements

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

/s/ Deloitte & Touche LLP

Charlotte, North Carolina

February 28, 2019

We have served as the Company's auditor since 2002.



FINANCIAL STATEMENTS

DUKE ENERGY OHIO, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME



	Years Ended December 31,
(in millions)	2018			2017			2016
Operating Revenues
Regulated electric	$	1,450		$	1,373		$	1,410
Regulated natural gas	506			508			503
Nonregulated electric and other	1			42			31
Total operating revenues	1,957			1,923			1,944
Operating Expenses
Fuel used in electric generation and purchased power – regulated	412			369			442
Fuel used in electric generation and purchased power – nonregulated	—			58			51
Cost of natural gas	113			107			103
Operation, maintenance and other	480			530			514
Depreciation and amortization	268			261			233
Property and other taxes	290			278			258
Impairment charges	—			1			—
Total operating expenses	1,563			1,604			1,601
(Losses) Gains on Sales of Other Assets and Other, net	(106		)	1			2
Operating Income	288			320			345
Other Income and Expenses, net	23			23			11
Interest Expense	92			91			86
Income From Continuing Operations Before Income Taxes	219			252			270
Income Tax Expense From Continuing Operations	43			59			78
Income From Continuing Operations	176			193			192
(Loss) Income From Discontinued Operations, net of tax	—			(1		)	36
Net Income and Comprehensive Income	$	176		$	192		$	228

See Notes to Consolidated Financial Statements



FINANCIAL STATEMENTS

DUKE ENERGY OHIO, INC.

CONSOLIDATED BALANCE SHEETS



	December 31,
(in millions)	2018			2017
ASSETS
Current Assets
Cash and cash equivalents	$	21		$	12
Receivables (net of allowance for doubtful accounts of $2 at 2018 and $3 at 2017)	102			68
Receivables from affiliated companies	114			133
Notes receivable from affiliated companies	—			14
Inventory	126			133
Regulatory assets	33			49
Other	24			39
Total current assets	420			448
Property, Plant and Equipment
Cost	9,360			8,732
Accumulated depreciation and amortization	(2,717		)	(2,691		)
Net property, plant and equipment	6,643			6,041
Other Noncurrent Assets
Goodwill	920			920
Regulatory assets	531			445
Other	41			21
Total other noncurrent assets	1,492			1,386
Total Assets	$	8,555		$	7,875
LIABILITIES AND EQUITY
Current Liabilities
Accounts payable	$	316		$	313
Accounts payable to affiliated companies	78			62
Notes payable to affiliated companies	274			29
Taxes accrued	202			190
Interest accrued	22			21
Current maturities of long-term debt	551			3
Asset retirement obligations	6			3
Regulatory liabilities	57			36
Other	74			71
Total current liabilities	1,580			728
Long-Term Debt	1,589			2,039
Long-Term Debt Payable to Affiliated Companies	25			25
Other Noncurrent Liabilities
Deferred income taxes	817			781
Asset retirement obligations	87			81
Regulatory liabilities	840			891
Accrued pension and other post-retirement benefit costs	79			59
Other	93			108
Total other noncurrent liabilities	1,916			1,920
Commitments and Contingencies
Equity
Common stock, $8.50 par value, 120 million shares authorized; 90 million shares outstanding at 2018 and 2017	762			762
Additional paid-in capital	2,776			2,670
Accumulated deficit	(93		)	(269		)
Total equity	3,445			3,163
Total Liabilities and Equity	$	8,555		$	7,875

See Notes to Consolidated Financial Statements



FINANCIAL STATEMENTS

DUKE ENERGY OHIO, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS



	Years Ended December 31,
(in millions)	2018			2017			2016
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	176		$	192		$	228
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization and accretion	271			265			237
Equity component of AFUDC	(11		)	(11		)	(6		)
Losses (Gains) on sales of other assets	106			(1		)	(2		)
Impairment charges	—			1			—
Deferred income taxes	25			90			55
Accrued pension and other post-retirement benefit costs	3			2			6
Contributions to qualified pension plans	—			(4		)	(5		)
Payments for asset retirement obligations	(3		)	(7		)	(5		)
Provision for rate refunds	24			—			—
(Increase) decrease in
Net realized and unrealized mark-to-market and hedging transactions	—			—			(2		)
Receivables	(33		)	2			(4		)
Receivables from affiliated companies	19			(4		)	(36		)
Inventory	7			6			(32		)
Other current assets	16			(22		)	79
Increase (decrease) in
Accounts payable	(19		)	12			19
Accounts payable to affiliated companies	16			(1		)	10
Taxes accrued	12			11			3
Other current liabilities	14			(19		)	(54		)
Other assets	(26		)	(28		)	(35		)
Other liabilities	(27		)	(5		)	(31		)
Net cash provided by operating activities	570			479			425
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures	(827		)	(686		)	(476		)
Notes receivable from affiliated companies	14			80			(94		)
Other	(89		)	(41		)	(30		)
Net cash used in investing activities	(902		)	(647		)	(600		)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from the issuance of long-term debt	99			182			341
Payments for the redemption of long-term debt	(3		)	(2		)	(53		)
Notes payable to affiliated companies	245			13			(87		)
Dividends to parent	—			(25		)	(25		)
Other	—			(1		)	(2		)
Net cash provided by financing activities	341			167			174
Net increase (decrease) in cash and cash equivalents	9			(1		)	(1		)
Cash and cash equivalents at beginning of period	12			13			14
Cash and cash equivalents at end of period	$	21		$	12		$	13
Supplemental Disclosures:
Cash paid for interest, net of amount capitalized	$	87		$	85		$	81
Cash received from income taxes	(6		)	(8		)	(46		)
Significant non-cash transactions:
Accrued capital expenditures	95			82			83
Non-cash equity contribution from parent	106			—			—

See Notes to Consolidated Financial Statements



FINANCIAL STATEMENTS

DUKE ENERGY OHIO, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY



			Additional
	Common		Paid-in			Accumulated			Total
(in millions)	Stock		Capital			Deficit			Equity
Balance at December 31, 2015	$	762	$	2,720		$	(698	)	$	2,784
Net income	—		—			228			228
Contribution from parent	—		—			9			9
Dividends to parent	—		(25		)	—			(25		)
Balance at December 31, 2016	$	762	$	2,695		$	(461	)	$	2,996
Net income	—		—			192			192
Dividends to parent	—		(25		)	—			(25		)
Balance at December 31, 2017	$	762	$	2,670		$	(269	)	$	3,163
Net income	—		—			176			176
Contribution from parent	—		106			—			106
Balance at December 31, 2018	$	762	$	2,776		$	(93	)	$	3,445

See Notes to Consolidated Financial Statements



REPORTS

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the shareholder and the Board of Directors of Duke Energy Indiana, LLC

Opinion on the Financial Statements

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

/s/ Deloitte & Touche LLP

Charlotte, North Carolina

February 28, 2019

We have served as the Company's auditor since 2002.



FINANCIAL STATEMENTS

DUKE ENERGY INDIANA, LLC

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME



	Years Ended December 31,
(in millions)	2018		2017		2016
Operating Revenues	$	3,059	$	3,047	$	2,958
Operating Expenses
Fuel used in electric generation and purchased power	1,000		966		909
Operation, maintenance and other	788		743		727
Depreciation and amortization	520		458		496
Property and other taxes	78		76		58
Impairment charges	30		18		8
Total operating expenses	2,416		2,261		2,198
Gains on Sales of Other Assets and Other, net	—		—		1
Operating Income	643		786		761
Other Income and Expenses, net	45		47		26
Interest Expense	167		178		181
Income Before Income Taxes	521		655		606
Income Tax Expense	128		301		225
Net Income	$	393	$	354	$	381
Other Comprehensive Loss, net of tax
Reclassification into earnings from cash flow hedges	—		—		(1		)
Comprehensive Income	$	393	$	354	$	380

See Notes to Consolidated Financial Statements



FINANCIAL STATEMENTS

DUKE ENERGY INDIANA, LLC

CONSOLIDATED BALANCE SHEETS



	December 31,
(in millions)	2018			2017
ASSETS
Current Assets
Cash and cash equivalents	$	24		$	9
Receivables (net of allowance for doubtful accounts of $2 at 2018 and 2017)	52			57
Receivables from affiliated companies	122			125
Inventory	422			450
Regulatory assets	175			165
Other	35			30
Total current assets	830			836
Property, Plant and Equipment
Cost	15,443			14,948
Accumulated depreciation and amortization	(4,914		)	(4,662		)
Net property, plant and equipment	10,529			10,286
Other Noncurrent Assets
Regulatory assets	982			978
Other	194			189
Total other noncurrent assets	1,176			1,167
Total Assets	$	12,535		$	12,289
LIABILITIES AND EQUITY
Current Liabilities
Accounts payable	$	200		$	196
Accounts payable to affiliated companies	83			78
Notes payable to affiliated companies	167			161
Taxes accrued	43			95
Interest accrued	58			57
Current maturities of long-term debt	63			3
Asset retirement obligations	109			54
Regulatory liabilities	25			24
Other	107			104
Total current liabilities	855			772
Long-Term Debt	3,569			3,630
Long-Term Debt Payable to Affiliated Companies	150			150
Other Noncurrent Liabilities
Deferred income taxes	1,009			925
Asset retirement obligations	613			727
Regulatory liabilities	1,722			1,723
Accrued pension and other post-retirement benefit costs	115			76
Investment tax credits	147			147
Other	16			18
Total other noncurrent liabilities	3,622			3,616
Commitments and Contingencies
Equity
Member's Equity	4,339			4,121
Total Liabilities and Equity	$	12,535		$	12,289

See Notes to Consolidated Financial Statements



FINANCIAL STATEMENTS

DUKE ENERGY INDIANA, LLC

CONSOLIDATED STATEMENTS OF CASH FLOWS



	Years Ended December 31,
(in millions)	2018			2017			2016
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	393		$	354		$	381
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization, and accretion	524			462			499
Equity component of AFUDC	(32		)	(28		)	(16		)
Impairment charges	30			18			8
Deferred income taxes	95			152			213
Accrued pension and other post-retirement benefit costs	7			2			8
Contributions to qualified pension plans	(8		)	—			(9		)
Payments for asset retirement obligations	(69		)	(45		)	(46		)
Provision for rate refunds	53			—			—
(Increase) decrease in
Receivables	7			59			(2		)
Receivables from affiliated companies	3			(11		)	(43		)
Inventory	28			54			66
Other current assets	(25		)	28			(67		)
Increase (decrease) in
Accounts payable	37			(86		)	8
Accounts payable to affiliated companies	5			4			(9		)
Taxes accrued	(52		)	64			(4		)
Other current liabilities	14			(10		)	(81		)
Other assets	29			(28		)	(27		)
Other liabilities	(33		)	(20		)	(8		)
Net cash provided by operating activities	1,006			969			871
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures	(832		)	(840		)	(755		)
Purchases of debt and equity securities	(48		)	(20		)	(14		)
Proceeds from sales and maturities of debt and equity securities	44			7			11
Proceeds from the sales of other assets	15			—			—
Notes receivable from affiliated companies	—			86			(3		)
Other	3			(65		)	32
Net cash used in investing activities	(818		)	(832		)	(729		)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from the issuance of long-term debt	—			—			494
Payments for the redemption of long-term debt	(3		)	(5		)	(478		)
Notes payable to affiliated companies	6			161			—
Distributions to parent	(175		)	(300		)	(149		)
Other	(1		)	(1		)	(1		)
Net cash used in financing activities	(173		)	(145		)	(134		)
Net increase (decrease) in cash and cash equivalents	15			(8		)	8
Cash and cash equivalents at beginning of period	9			17			9
Cash and cash equivalents at end of period	$	24		$	9		$	17
Supplemental Disclosures:
Cash paid for interest, net of amount capitalized	$	162		$	179		$	171
Cash paid for (received from) income taxes	75			117			(7		)
Significant non-cash transactions:
Accrued capital expenditures	88			125			99

See Notes to Consolidated Financial Statements



FINANCIAL STATEMENTS

DUKE ENERGY INDIANA, LLC

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY



													Accumulated
													Other
													Comprehensive
													Income
				Additional									Net Gains on
	Common			Paid-in			Retained			Member's			Cash Flow			Total
(in millions)	Stock			Capital			Earnings			Equity			Hedges			Equity
Balance at December 31, 2015	$	1		$	1,384		$	2,450		$	—		$	1		$	3,836
Net income	—			—			—			381			—			381
Other comprehensive loss	—			—			—			—			(1		)	(1		)
Distributions to parent	—			—			—			(149		)	—			(149		)
Transfer to Member's Equity	(1		)	(1,384		)	(2,450		)	3,835			—			—
Balance at December 31, 2016	$	—		$	—		$	—		$	4,067		$	—		$	4,067
Net income	—			—			—			354			—			354
Distributions to parent	—			—			—			(300		)	—			(300		)
Balance at December 31, 2017	$	—		$	—		$	—		$	4,121		$	—		$	4,121
Net income	—			—			—			393			—			393
Distributions to parent	—			—			—			(175		)	—			(175		)
Balance at December 31, 2018	$	—		$	—		$	—		$	4,339		$	—		$	4,339

See Notes to Consolidated Financial Statements



REPORTS

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the shareholder and the Board of Directors of Piedmont Natural Gas Company, Inc.

Opinion on the Financial Statements

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Emphasis of Matter

/s/ Deloitte & Touche LLP

Charlotte, North Carolina

February 28, 2019

We have served as the Company's auditor since 1951.



FINANCIAL STATEMENTS

PIEDMONT NATURAL GAS COMPANY, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME



	Years Ended December 31,					Two Months Ended December 31,			Year Ended October 31,
(in millions)	2018		2017			2016			2016
Operating Revenues
Regulated natural gas	$	1,365	$	1,319		$	320		$	1,139
Nonregulated natural gas and other	10		9			2			10
Total operating revenues	1,375		1,328			322			1,149
Operating Expenses
Cost of natural gas	584		524			144			391
Operation, maintenance and other	357		304			50			353
Depreciation and amortization	159		148			23			137
Property and other taxes	49		48			7			43
Impairment charges	—		7			—			—
Total operating expenses	1,149		1,031			224			924
Operating Income	226		297			98			225
Equity in earnings (losses) of unconsolidated affiliates	7		(6		)	2			29
Gain on sale of unconsolidated affiliates	—		—			—			133
Other income and expense, net	14		(11		)	(2		)	(1		)
Total other income and expenses	21		(17		)	—			161
Interest Expense	81		79			12			69
Income Before Income Taxes	166		201			86			317
Income Tax Expense	37		62			32			124
Net Income	$	129	$	139		$	54		$	193
Other Comprehensive Income, net of tax
Unrealized loss from hedging activities of equity method investments	—		—			—			(3		)
Reclassification into earnings from hedging activities of equity method investments	—		—			—			4
Other Comprehensive Income, net of tax	—		—			—			1
Comprehensive Income	$	129	$	139		$	54		$	194

See Notes to Consolidated Financial Statements



FINANCIAL STATEMENTS

PIEDMONT NATURAL GAS COMPANY, INC.

CONSOLIDATED BALANCE SHEETS



	December 31,
(in millions)	2018			2017
ASSETS
Current Assets
Cash and cash equivalents	$	—		$	19
Receivables (net of allowance for doubtful accounts of $2 at 2018 and 2017)	266			275
Receivables from affiliated companies	22			7
Inventory	70			66
Regulatory assets	54			95
Other	19			52
Total current assets	431			514
Property, Plant and Equipment
Cost	7,486			6,725
Accumulated depreciation and amortization	(1,575		)	(1,479		)
Net property, plant and equipment	5,911			5,246
Other Noncurrent Assets
Goodwill	49			49
Regulatory assets	303			283
Investments in equity method unconsolidated affiliates	64			61
Other	52			65
Total other noncurrent assets	468			458
Total Assets	$	6,810		$	6,218
LIABILITIES AND EQUITY
Current Liabilities
Accounts payable	$	203		$	125
Accounts payable to affiliated companies	38			13
Notes payable to affiliated companies	198			364
Taxes accrued	84			19
Interest accrued	31			31
Current maturities of long-term debt	350			250
Regulatory liabilities	37			3
Other	58			69
Total current liabilities	999			874
Long-Term Debt	1,788			1,787
Other Noncurrent Liabilities
Deferred income taxes	551			564
Asset retirement obligations	19			15
Regulatory liabilities	1,181			1,141
Accrued pension and other post-retirement benefit costs	4			5
Other	177			170
Total other noncurrent liabilities	1,932			1,895
Commitments and Contingencies
Equity
Common stock, no par value: 100 shares authorized and outstanding at 2018 and 2017	1,160			860
Retained earnings	931			802
Total equity	2,091			1,662
Total Liabilities and Equity	$	6,810		$	6,218

See Notes to Consolidated Financial Statements



FINANCIAL STATEMENTS

PIEDMONT NATURAL GAS COMPANY, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS



	Years Ended December 31,						Two Months Ended December 31,			Year Ended October 31,
(in millions)	2018			2017			2016			2016
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	129		$	139		$	54		$	193
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	161			151			25			148
Gains on sales of other assets	—			—			—			(133		)
Impairment charges	—			7			—			—
Deferred income taxes	(31		)	154			26			74
Equity in (earnings) losses from unconsolidated affiliates	(7		)	6			(2		)	(29		)
Accrued pension and other post-retirement benefit costs	(4		)	23			5			3
Contributions to qualified pension plans	—			(11		)	(10		)	(14		)
Payments for asset retirement obligations	—			—			(1		)	(6		)
Provision for rate refunds	43			—			—			—
(Increase) decrease in
Receivables	7			(40		)	(157		)	12
Receivables from affiliated companies	(15		)	—			—			(7		)
Inventory	(4		)	—			(11		)	14
Other current assets	71			(20		)	8			(98		)
Increase (decrease) in
Accounts payable	15			(13		)	35			6
Accounts payable to affiliated companies	25			5			4			6
Taxes accrued	65			(48		)	(2		)	38
Other current liabilities	21			(9		)	2			28
Other assets	6			7			(7		)	(91		)
Other liabilities	(4		)	(2		)	5			180
Net cash provided by (used in) operating activities	478			349			(26		)	324
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures	(721		)	(585		)	(113		)	(522		)
Contributions to equity method investments	—			(12		)	(12		)	(47		)
Proceeds from the sales of other assets	—			—			—			175
Other	(10		)	(6		)	1			5
Net cash used in investing activities	(731		)	(603		)	(124		)	(389		)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from the:
Issuance of long-term debt	100			250			—			295
Issuance of common stock	—			—			—			122
Payments for the redemption of long-term debt	—			(35		)	—			(40		)
Notes payable and commercial paper	—			(330		)	185			(195		)
Notes payable to affiliated companies	(166		)	364			—			—
Capital contribution from parent	300			—			—			—
Dividends to parent	—			—			(27		)	—
Dividends paid	—			—			—			(114		)
Other	—			(1		)	—			—
Net cash provided by financing activities	234			248			158			68
Net (decrease) increase in cash and cash equivalents	(19		)	(6		)	8			3
Cash and cash equivalents at beginning of period	19			25			17			14
Cash and cash equivalents at end of period	$	—		$	19		$	25		$	17
Supplemental Disclosures:
Cash paid for interest, net of amount capitalized	$	79		$	78		$	11		$	81
Cash received from income taxes	(16		)	(12		)	—			(25		)
Significant non-cash transactions:
Accrued capital expenditures	96			34			48			63
Transfer of ownership interest of certain equity method investees to parent	—			149			—			—

See Notes to Consolidated Financial Statements



FINANCIAL STATEMENTS

PIEDMONT NATURAL GAS COMPANY, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY



						Accumulated
						Other
						Comprehensive
						Income (Loss)
						Net Gain on
						Hedging Activities
	Common		Retained			of Unconsolidated			Total
(in millions)	Stock		Earnings			Affiliates			Equity
Balance at October 31, 2015	$	721	$	706		$	(1	)	$	1,426
Net income	—		193			—			193
Other comprehensive income	—		—			1			1
Common stock issuances, including dividend reinvestment and employee benefits	139		—			—			139
Common stock dividends	—		(114		)	—			(114		)
Balance at October 31, 2016	$	860	$	785		$	—		$	1,645
Net income	—		54			—			54
Dividends to parent	—		(27		)	—			(27		)
Balance at December 31, 2016	$	860	$	812		$	—		$	1,672
Net income	—		139			—			139
Transfer of ownership interest of certain equity method investees to parent	—		(149		)	—			(149		)
Balance at December 31, 2017	$	860	$	802		$	—		$	1,662
Net income	—		129			—			129
Contribution from parent	300		—			—			300
Balance at December 31, 2018	$	1,160	$	931		$	—		$	2,091

See Notes to Consolidated Financial Statements



FINANCIAL STATEMENTS	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Index to Combined Notes To Consolidated Financial Statements

The notes to the consolidated financial statements are a combined presentation. The following table indicates the registrants to which the notes apply.

Applicable Notes

Registrant

Duke Energy

•

Duke Energy Carolinas

•

Progress Energy

•

Duke Energy Progress

•

Duke Energy Florida

•

Duke Energy Ohio

•

Duke Energy Indiana

•

Piedmont

•

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Operations and Basis of Consolidation



FINANCIAL STATEMENTS	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Duke Energy Indiana is a ~~consolidated federal income tax return~~regulated public utility primarily engaged in the generation, transmission, distribution and ~~other state returns. The Subsidiary Registrants entered into~~sale of electricity in portions of Indiana. Duke Energy Indiana is subject to the regulatory provisions of the IURC and FERC.

Piedmont is a ~~tax-sharing agreement with Duke Energy. Income taxes recorded represent~~regulated public utility primarily engaged in the distribution of natural gas in portions of North Carolina, South Carolina and Tennessee. Piedmont is subject to the regulatory provisions of the NCUC, PSCSC, TPUC and FERC.

Certain prior year amounts ~~the Subsidiary Registrants would incur as separate C-Corporations. Deferred income taxes~~ have been ~~provided~~reclassified to conform to the current year presentation.

Other Current Assets and Liabilities



		December 31,
(in millions)	Location	2018		2017
Duke Energy
Income taxes receivable	Current Assets	$	729	$	330
Accrued compensation	Current Liabilities	793		757
Duke Energy Carolinas
Accrued compensation	Current Liabilities	$	251	$	252
Progress Energy
Income taxes receivable	Current Assets	$	66	$	278
Customer deposits	Current Liabilities	345		338
Duke Energy Progress
Customer deposits	Current Liabilities	$	137	$	129
Accrued compensation	Current Liabilities	130		132
Duke Energy Florida
Customer deposits	Current Liabilities	$	208	$	208
Other accrued liabilities	Current Liabilities	85		16
Duke Energy Ohio
Income taxes receivable	Current Assets	$	13	$	36
Customer deposits	Current Liabilities	44		46
Duke Energy Indiana
Customer deposits	Current Liabilities	$	47	$	45
Piedmont
Income taxes receivable	Current Assets	$	11	$	43

Discontinued Operations

The results of operations of the International Disposal Group have been classified as Discontinued Operations on Duke Energy's Consolidated Statements of Operations. Duke Energy has elected to present cash flows of discontinued operations combined with cash flows of continuing operations. Unless otherwise noted, the notes to these consolidated financial statements exclude amounts related to discontinued operations for ~~temporary differences between~~all periods presented. See Note 2 for additional information.

Amounts Attributable to Controlling Interests



FINANCIAL STATEMENTS	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Significant Accounting Policies

Use of Estimates

In preparing financial statements that conform to GAAP, the Duke Energy Registrants must make estimates and ~~tax bases~~assumptions that affect the reported amounts of assets and liabilities, ~~because~~ the ~~differences create taxable~~reported amounts of revenues and expenses and the disclosure of contingent assets and liabilities at the date of the financial statements. Actual results could differ from those estimates.

Regulatory Accounting

The majority of the Duke Energy Registrants’ operations are subject to price regulation for the sale of electricity and natural gas by state utility commissions or ~~tax-deductible~~FERC. When prices are set on the basis of specific costs of the regulated operations and an effective franchise is in place such that sufficient natural gas or electric services can be sold to recover those costs, the Duke Energy Registrants apply regulatory accounting. Regulatory accounting changes the timing of the recognition of costs or revenues relative to a company that does not apply regulatory accounting. As a result, regulatory assets and regulatory liabilities are recognized on the Consolidated Balance Sheets. Regulatory assets and liabilities are amortized consistent with the treatment of the related cost in the ratemaking process. See Note 4 for further information.



FINANCIAL STATEMENTS	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Cash, Cash Equivalents and Restricted Cash



	December 31, 2018						December 31, 2017
					Duke						Duke
	Duke		Progress		Energy		Duke		Progress		Energy
	Energy		Energy		Florida		Energy		Energy		Florida
Current Assets
Cash and cash equivalents	$	442	$	67	$	36	$	358	$	40	$	13
Other	141		39		39		138		40		40
Other Noncurrent Assets
Other	8		6		—		9		7		—
Total cash, cash equivalents and restricted cash	$	591	$	112	$	75	$	505	$	87	$	53

Inventory



	December 31, 2018
			Duke				Duke		Duke		Duke		Duke
	Duke		Energy		Progress		Energy		Energy		Energy		Energy
(in millions)	Energy		Carolinas		Energy		Progress		Florida		Ohio		Indiana		Piedmont
Materials and supplies	$	2,238	$	731	$	1,049	$	734	$	315	$	84	$	312	$	2
Coal	491		175		192		106		86		14		109		—
Natural gas, oil and other	355		42		218		114		103		28		1		68
Total inventory	$	3,084	$	948	$	1,459	$	954	$	504	$	126	$	422	$	70



	December 31, 2017
			Duke				Duke		Duke		Duke		Duke
	Duke		Energy		Progress		Energy		Energy		Energy		Energy
(in millions)	Energy		Carolinas		Energy		Progress		Florida		Ohio		Indiana		Piedmont
Materials and supplies	$	2,293	$	744	$	1,118	$	774	$	343	$	82	$	309	$	2
Coal	603		192		255		139		116		17		139		—
Natural gas, oil and other	354		35		219		104		115		34		2		64
Total inventory	$	3,250	$	971	$	1,592	$	1,017	$	574	$	133	$	450	$	66

Investments in Debt and Equity Securities



FINANCIAL STATEMENTS	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Goodwill and Intangible Assets

Goodwill

Intangible Assets

RECs are used to measure compliance with renewable energy standards and are held primarily for consumption. See Note 11 for further information.

Long-Lived Asset Impairments

The Duke Energy Registrants evaluate long-lived assets, excluding goodwill, for impairment when circumstances indicate the carrying value of those assets may not be recoverable. An impairment exists when a long-lived asset’s carrying value exceeds the estimated undiscounted cash flows expected to result from the use and eventual disposition of the asset. The estimated cash flows may be based on alternative expected outcomes that are probability weighted. If the carrying value of the long-lived asset is not recoverable based on these estimated future ~~periods. ITCs associated with regulated operations~~undiscounted cash flows, the carrying value of the asset is written-down to its then-current estimated fair value and an impairment charge is recognized.

The Duke Energy Registrants assess fair value of long-lived assets using various methods, including recent comparable third-party sales, internally developed discounted cash flow analysis and analysis from outside advisors. Triggering events to reassess cash flows may include, but are ~~deferred~~not limited to, significant changes in commodity prices, the condition of an asset or management’s interest in selling the asset.

Equity Method Investment Impairments

Investments in affiliates that are not controlled by Duke Energy, but over which it has significant influence, are accounted for using the equity method. Equity method investments are assessed for impairment whenever events or changes in circumstances indicate that the carrying amount of the investment may not be recoverable. If the decline in value is considered to be other than temporary, the investment is written down to its estimated fair value, which establishes a new cost basis in the investment.

Impairment assessments use a discounted cash flow income approach and ~~amortized~~include consideration of the severity and duration of any decline in the fair value of the investments. The estimated cash flows may be based on alternative expected outcomes that are probability weighted. Key inputs that involve estimates and significant management judgment include cash flow projections, selection of a discount rate, probability weighting of potential outcomes, and whether any decline in value is considered temporary.



FINANCIAL STATEMENTS	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Property, Plant and Equipment

Property, plant and equipment are stated at the lower of depreciated historical cost net of any disallowances or fair value, if impaired. The Duke Energy Registrants capitalize all construction-related direct labor and material costs, as ~~a reduction~~well as indirect construction costs such as general engineering, taxes and financing costs. See “Allowance for Funds Used During Construction and Interest Capitalized” for information on capitalized financing costs. Costs of ~~income tax expense~~renewals and betterments that extend the useful life of property, plant and equipment are also capitalized. The cost of repairs, replacements and major maintenance projects, which do not extend the useful life or increase the expected output of the asset, are expensed as incurred. Depreciation is generally computed over the estimated useful ~~lives~~life of the ~~related properties.~~



	Years Ended December 31,
	2018		2017		2016
Duke Energy	3.0	%	2.8	%	2.8	%
Duke Energy Carolinas	2.8	%	2.8	%	2.8	%
Progress Energy	2.9	%	2.6	%	2.7	%
Duke Energy Progress	2.9	%	2.6	%	2.6	%
Duke Energy Florida	3.0	%	2.8	%	2.8	%
Duke Energy Ohio	2.8	%	2.8	%	2.6	%
Duke Energy Indiana	3.3	%	3.0	%	3.1	%
Piedmont^(a)	2.5	%	2.3	%


(a)	Piedmont's weighted average depreciation rate was 2.4 percent for the annualized two months ended December 31, 2016, and for the year ended October 31, 2016.

In general, when the Duke Energy Registrants retire regulated property, plant and equipment, the original cost plus the cost of retirement, less salvage value and any depreciation already recognized, is charged to accumulated depreciation. However, when it becomes probable the asset will be retired substantially in ~~which~~advance of its original expected useful life or is abandoned, the ~~deferred tax~~cost of the asset ~~or liability~~and the corresponding accumulated depreciation is ~~expected~~recognized as a separate asset. If the asset is still in operation, the net amount is classified as Generation facilities to be ~~settled or realized. In~~retired, net on the ~~event~~Consolidated Balance Sheets. If the asset is no longer operating, the net amount is classified in Regulatory assets on the Consolidated Balance Sheets if deemed recoverable (see discussion of ~~a change in tax rates, deferred tax assets and liabilities are remeasured as~~long-lived asset impairments above). When it becomes probable an asset will be abandoned, the cost of the ~~enactment date of~~asset and accumulated depreciation is reclassified to Regulatory assets on the ~~new rate. To the extent that the change~~Consolidated Balance Sheets for amounts recoverable in ~~the~~rates. The carrying value of the ~~deferred tax represents~~asset is based on historical cost if the Duke Energy Registrants are allowed to recover the remaining net book value and a return equal to at least the incremental borrowing rate. If not, an ~~obligation~~impairment is recognized to ~~customers,~~ the ~~impact~~extent the net book value of the ~~remeasurement~~asset exceeds the present value of future revenues discounted at the incremental borrowing rate.

Nuclear Fuel

Nuclear fuel is classified as Property, Plant and Equipment on the Consolidated Balance Sheets.

Allowance for Funds Used During Construction and Interest Capitalized

For regulated operations, the debt and equity costs of financing the construction of property, plant and equipment are reflected as AFUDC and capitalized as a component of the cost of property, plant and equipment. AFUDC equity is reported on the Consolidated Statements of Operations as non-cash income in Other income and expenses, net. AFUDC debt is reported as a non-cash offset to Interest Expense. After construction is completed, the Duke Energy Registrants are permitted to recover these costs through their inclusion in rate base and the corresponding subsequent depreciation or amortization of those regulated assets.

AFUDC equity, a permanent difference for income taxes, reduces the ETR when capitalized and increases the ETR when depreciated or amortized. See Note 23 for additional information.

For nonregulated operations, interest is capitalized during the construction phase with an offsetting non-cash credit to Interest Expense on the Consolidated Statements of Operations.

Asset Retirement Obligations

AROs are recognized for legal obligations associated with the retirement of property, plant and equipment. Substantially all AROs are related to regulated operations. When recording an ARO, the present value of the projected liability is recognized in the period in which it is incurred, if a reasonable estimate of fair value can be made. The liability is accreted over time. For operating plants, the present value of the liability is added to the cost of the associated asset and depreciated over the remaining life of the asset. For retired plants, the present value of the liability is recorded as a regulatory asset unless determined not to be probable of recovery.



FINANCIAL STATEMENTS	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The present value of the initial obligation and subsequent updates are based on discounted cash flows, which include estimates regarding timing of future cash flows, selection of discount rates and cost escalation rates, among other factors. These estimates are subject to change. Depreciation expense is adjusted prospectively for any changes to the carrying amount of the associated asset. The Duke Energy Registrants receive amounts to fund the cost of the ARO for regulated operations through a combination of regulated revenues and earnings on the NDTF. As a result, amounts recovered in regulated revenues, earnings on the NDTF, accretion expense and depreciation of the associated asset are netted and deferred as a regulatory asset or liability.

Obligations for nuclear decommissioning are based on site-specific cost studies. Duke Energy Carolinas and Duke Energy Progress assume prompt dismantlement of the nuclear facilities after operations are ceased. Duke Energy Florida assumes Crystal River Unit 3 will be placed into a safe storage configuration until eventual dismantlement is completed by 2074. Duke Energy Carolinas, Duke Energy Progress and Duke Energy Florida also assume that spent fuel will be stored on-site until such time that it can be transferred to a ~~regulatory liability. Remaining impacts~~yet to be built DOE facility.

Obligations for closure of ash basins are ~~recorded in income from continuing operations. Other impacts~~based upon discounted cash flows of estimated costs for site-specific plans, if known, or probability weightings of the ~~Tax Act have been recorded~~potential closure methods if the closure plans are under development and multiple closure options are being considered and evaluated on a ~~provisional basis, see~~site-by-site basis. See Note ~~22, “Income Taxes,”~~9 for additional information. If Duke Energy's estimate of the tax effect of reversing temporary differences is not reflective of actual outcomes, is modified to reflect new developments or interpretations of the tax law, revised to incorporate new accounting principles, or changes in the expected timing or manner of the reversal then Duke Energy's results of operations could be impacted.

LIQUIDITY AND CAPITAL RESOURCES

Sources and Uses of Cash

(in millions) 2018
2019
2020
Uses:

Capital expenditures $ 10,950
$ 10,975
$ 9,050
Debt maturities and reduction in short-term debt^(a)
3,135
3,500
2,850
Dividend payments^(b)
2,575
2,750
2,875
Sources:

Net cash flows from operations $ 7,945
$ 9,150
$ 9,390
Debt issuances and increase in short-term debt^(c)
6,000
7,100
3,050
Equity issuances^(d)
2,000
350
350


~~(a)~~	~~Excludes capital leases. Duke Energy projects a reduction in short-term debt in 2020.~~


~~(b)~~	~~Subject to approval by the Board of Directors.~~


~~(c)~~	~~Duke Energy projects an increase in short-term debt in 2018 and 2019.~~


~~(d)~~	2018 equity issuances to be achieved through a public offering and through issuances under the Equity Distribution Agreement and the Dividend Reinvestment Program (DRIP). See Note 18 to the Consolidated Financial Statements, "Common Stock" for additional information.

~~PART II~~

Among other provisions, the Tax Act lowers the corporate federal income tax rate from 35 ~~percent~~ to 21 percent and eliminates bonus depreciation for regulated utilities. For Duke Energy’s regulated operations, the reduction in federal income taxes is expected to result in lower regulated customer rates. However, due to its existing NOL ~~(Net operating loss)~~ position and other tax credits, Duke Energy does not expect to be a significant federal cash tax payer through at least 2022. As a result, any reduction in customer rates could cause a material reduction in consolidated cash flows from operations in the ~~short-term.~~short term. Over time, the reduction in deferred tax liabilities resulting from the Tax Act will increase Duke Energy’s regulated rate base investments and customer rates. ~~See the Credit Ratings section below for additional information on the impact of the Tax Act on the Duke Energy Registrants' credit ratings.~~ Impacts of Tax Act to Duke Energy’s cash flows and credit metrics are subject to the regulatory actions of its state commissions and the ~~FERC, which are currently pending.~~FERC. See Note 4 to the Consolidated Financial Statements, “Regulatory Matters,” for additional information.

In order to strengthen its balance sheet and credit metrics and bolster cash flows, Duke Energy plans to issue $2 billion of common stock equity during 2018, including its previous plan to issue $350 million annually through its DRIP beginning in 2018, as well as reduce its capital expenditures during 2018-2022 by approximately $1 billion.



MD&A	LIQUIDITY AND CAPITAL RESOURCES

Equity Issuance

Credit Facilities and Registration Statements

CAPITAL EXPENDITURES


(in millions)	2018		2019		2020		2019		2020		2021
New generation	$	780	$	260	$	135	$	375	$	125	$	220
Regulated renewables	155		415		365		415		410		710
Environmental	610		35		30		240		125		35
Nuclear fuel	500		410		455		430		505		390
Major nuclear	390		335		230		305		315		250
Customer additions	490		485		515		505		480		475
Grid modernization and other transmission and distribution projects	2,585		3,515		3,415		2,835		3,160		2,980
Maintenance and other	2,665		2,445		2,230		3,395		2,605		2,390
Total Electric Utilities and Infrastructure	8,175		7,900		7,375		8,500		7,725		7,450
Gas Utilities and Infrastructure	2,350		2,275		950		1,675		2,000		1,600
Commercial Renewables and Other	425		800		725		925		825		625
Total projected capital and investment expenditures	$	10,950	$	10,975	$	9,050	$	11,100	$	10,550	$	9,675



FINANCIAL STATEMENTS

~~PART II~~

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA



Duke Energy ~~Corporation (Duke Energy)~~
Report of Independent Registered Public Accounting Firm	8786
Consolidated Statements of Operations	8887
Consolidated Statements of Comprehensive Income	8988
Consolidated Balance Sheets	9089
Consolidated Statements of Cash Flows	9190
Consolidated Statements of Changes in Equity	9291

Duke Energy Carolinas ~~LLC (Duke Energy Carolinas)~~
Report of Independent Registered Public Accounting Firm	9392
Consolidated Statements of Operations and Comprehensive Income	9493
Consolidated Balance Sheets	9594
Consolidated Statements of Cash Flows	9695
Consolidated Statements of Changes in Equity	9796

Progress Energy ~~Inc. (Progress Energy)~~
Report of Independent Registered Public Accounting Firm	9897
Consolidated Statements of Operations and Comprehensive Income	9998
Consolidated Balance Sheets	~~100~~99
Consolidated Statements of Cash Flows	~~101~~100
Consolidated Statements of Changes in Equity	~~102~~101

Duke Energy Progress ~~LLC (Duke Energy Progress)~~
Report of Independent Registered Public Accounting Firm	~~103~~102
Consolidated Statements of Operations and Comprehensive Income	~~104~~103
Consolidated Balance Sheets	~~105~~104
Consolidated Statements of Cash Flows	~~106~~105
Consolidated Statements of Changes in Equity	~~107~~106

Duke Energy Florida ~~LLC (Duke Energy Florida)~~
Report of Independent Registered Public Accounting Firm	~~108~~107
Consolidated Statements of Operations and Comprehensive Income	~~109~~108
Consolidated Balance Sheets	~~110~~109
Consolidated Statements of Cash Flows	~~111~~110
Consolidated Statements of Changes in Equity	~~112~~111

Duke Energy Ohio ~~Inc. (Duke Energy Ohio)~~
Report of Independent Registered Public Accounting Firm	~~113~~112
Consolidated Statements of Operations and Comprehensive Income	~~114~~113
Consolidated Balance Sheets	~~115~~114
Consolidated Statements of Cash Flows	~~116~~115
Consolidated Statements of Changes in Equity	~~117~~116

Duke Energy Indiana ~~LLC (Duke Energy Indiana)~~
Report of Independent Registered Public Accounting Firm	~~118~~117
Consolidated Statements of Operations and Comprehensive Income	~~119~~118
Consolidated Balance Sheets	~~120~~119
Consolidated Statements of Cash Flows	~~121~~120
Consolidated Statements of Changes in Equity	~~122~~121

Piedmont ~~Natural Gas Company, Inc. (Piedmont)~~
Report of Independent Registered Public Accounting Firm	~~123~~122
Consolidated Statements of Operations and Comprehensive Income	~~124~~123
Consolidated Balance Sheets	~~125~~124
Consolidated Statements of Cash Flows	~~126~~125
Consolidated Statements of Changes in Equity	~~127~~126



FINANCIAL STATEMENTS

~~PART II~~



Combined Notes to Consolidated Financial Statements
Note 1 – Summary of Significant Accounting Policies	~~128~~127
Note 2 – Acquisitions and Dispositions	~~138~~137
Note 3 – Business Segments	~~142~~140
Note 4 – Regulatory Matters	~~145~~144
Note 5 – Commitments and Contingencies	~~165~~166
Note 6 – Debt and Credit Facilities	~~175~~174
Note 7 – Guarantees and Indemnifications	181
Note 8 – Joint Ownership of Generating and Transmission Facilities	182
Note 9 – Asset Retirement Obligations	182
Note 10 – Property, Plant and Equipment	~~186~~185
Note 11 – Goodwill and Intangible Assets	~~188~~187
Note 12 – Investments in Unconsolidated Affiliates	~~191~~189
Note 13 – Related Party Transactions	~~193~~191
Note 14 – Derivatives and Hedging	~~194~~192
Note 15 – Investments in Debt and Equity Securities	~~200~~198
Note 16 – Fair Value Measurements	~~207~~203
Note 17 – Variable Interest Entities	209
Note 18 – Revenue	213
Note 1819 – Common Stock	217
Note 1920 – Severance	218
Note 2021 – Stock-Based Compensation	~~218~~219
Note 2122 – Employee Benefit Plans	221
Note 2223 – Income Taxes	~~244~~243
Note 2324 – Other Income and Expenses, Net	251
Note 25 – Subsequent Events	252
Note ~~24 – Subsequent Events~~	~~253~~
~~Note 25~~26 – Quarterly Financial Data (Unaudited)	~~254~~253



REPORTS

~~PART II~~

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the shareholders and the Board of Directors of Duke Energy Corporation

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Duke Energy Corporation and subsidiaries (the "Company") as of December 31, ~~2017~~2018 and ~~2016,~~2017, the related consolidated statements of operations, comprehensive income, changes in equity, and cash flows, for each of the three years in the period ended December 31, ~~2017,~~2018, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, ~~2017~~2018 and ~~2016,~~2017, and the results of its operations and its cash flows for each of the three years in the period ended December 31, ~~2017,~~2018, in conformity with ~~the~~ accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, ~~2017,~~2018, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February ~~23, 2018,~~28, 2019, expressed an unqualified opinion on the ~~Company’s~~Company's internal control over financial reporting.

Basis for Opinion

/s/Deloitte & Touche LLP

Charlotte, North Carolina

February ~~21, 2018~~28, 2019

We have served as the Company's auditor since 1947.



FINANCIAL STATEMENTS

~~PART II~~

DUKE ENERGY CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS


	Years Ended December 31,								Years Ended December 31,
(in millions, except per share amounts)	2017			2016			2015		2018			2017			2016
Operating Revenues
Regulated electric	$	21,177		$	21,221		$	21,379	$	22,097		$	21,177		$	21,221
Regulated natural gas	1,734			863			536		1,773			1,734			863
Nonregulated electric and other	654			659			456		651			654			659
Total operating revenues	23,565			22,743			22,371		24,521			23,565			22,743
Operating Expenses
Fuel used in electric generation and purchased power	6,350			6,625			7,355		6,831			6,350			6,625
Cost of natural gas	632			265			141		697			632			265
Operation, maintenance and other	5,788			6,085			5,539		6,463			5,944			6,224
Depreciation and amortization	3,527			3,294			3,053		4,074			3,527			3,294
Property and other taxes	1,233			1,142			1,129		1,280			1,233			1,142
Impairment charges	282			18			106		402			282			18
Total operating expenses	17,812			17,429			17,323		19,747			17,968			17,568
Gains on Sales of Other Assets and Other, net	28			27			30
(Losses) Gains on Sales of Other Assets and Other, net									(89		)	28			27
Operating Income	5,781			5,341			5,078		4,685			5,625			5,202
Other Income and Expenses
Equity in earnings (losses) of unconsolidated affiliates	119			(15		)	69		83			119			(15		)
Other income and expenses, net	352			324			290		399			508			463
Total other income and expenses	471			309			359		482			627			448
Interest Expense	1,986			1,916			1,527		2,094			1,986			1,916
Income From Continuing Operations Before Income Taxes	4,266			3,734			3,910		3,073			4,266			3,734
Income Tax Expense From Continuing Operations	1,196			1,156			1,256		448			1,196			1,156
Income From Continuing Operations	3,070			2,578			2,654		2,625			3,070			2,578
(Loss) Income From Discontinued Operations, net of tax	(6		)	(408		)	177
Income (Loss) From Discontinued Operations, net of tax									19			(6		)	(408		)
Net Income	3,064			2,170			2,831		2,644			3,064			2,170
Less: Net Income Attributable to Noncontrolling Interests	5			18			15
Less: Net (Loss) Income Attributable to Noncontrolling Interests									(22		)	5			18
Net Income Attributable to Duke Energy Corporation	$	3,059		$	2,152		$	2,816	$	2,666		$	3,059		$	2,152

Earnings Per Share – Basic and Diluted
Income from continuing operations attributable to Duke Energy Corporation common stockholders
Basic	$	4.37		$	3.71		$	3.80	$	3.73		$	4.37		$	3.71
Diluted	$	4.37		$	3.71		$	3.80	$	3.73		$	4.37		$	3.71
(Loss) Income from discontinued operations attributable to Duke Energy Corporation common stockholders
Income (Loss) from discontinued operations attributable to Duke Energy Corporation common stockholders
Basic	$	(0.01	)	$	(0.60	)	$	0.25	$	0.03		$	(0.01	)	$	(0.60	)
Diluted	$	(0.01	)	$	(0.60	)	$	0.25	$	0.03		$	(0.01	)	$	(0.60	)
Net income attributable to Duke Energy Corporation common stockholders
Basic	$	4.36		$	3.11		$	4.05	$	3.76		$	4.36		$	3.11
Diluted	$	4.36		$	3.11		$	4.05	$	3.76		$	4.36		$	3.11
Weighted average shares outstanding
Basic	700			691			694		708			700			691
Diluted	700			691			694		708			700			691

See Notes to Consolidated Financial Statements



FINANCIAL STATEMENTS

~~PART II~~

DUKE ENERGY CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME


	Years Ended December 31,								Years Ended December 31,
(in millions)	2017		2016			2015			2018			2017		2016
Net Income	$	3,064	$	2,170		$	2,831		$	2,644		$	3,064	$	2,170
Other Comprehensive Income (Loss), net of tax
Other Comprehensive (Loss) Income, net of tax
Foreign currency translation adjustments	—		694			(264		)	—			—		694
Pension and OPEB adjustments	3		(11		)	(13		)	(6		)	3		(11		)
Net unrealized gains on cash flow hedges	2		17			—
Net unrealized (losses) gains on cash flow hedges									(10		)	2		17
Reclassification into earnings from cash flow hedges	8		13			9			6			8		13
Unrealized gains (losses) on available-for-sale securities	13		2			(6		)
Other Comprehensive Income (Loss), net of tax	26		715			(274		)
Unrealized (losses) gains on available-for-sale securities									(3		)	13		2
Other Comprehensive (Loss) Income, net of tax									(13		)	26		715
Comprehensive Income	3,090		2,885			2,557			2,631			3,090		2,885
Less: Comprehensive Income Attributable to Noncontrolling Interests	5		20			4
Less: Comprehensive (Loss) Income Attributable to Noncontrolling Interests									(22		)	5		20
Comprehensive Income Attributable to Duke Energy Corporation	$	3,085	$	2,865		$	2,553		$	2,653		$	3,085	$	2,865

See Notes to Consolidated Financial Statements



FINANCIAL STATEMENTS

~~PART II~~

DUKE ENERGY CORPORATION

CONSOLIDATED BALANCE SHEETS


	December 31,						December 31,
(in millions)	2017			2016			2018			2017
ASSETS
Current Assets
Cash and cash equivalents	$	358		$	392		$	442		$	358
Receivables (net of allowance for doubtful accounts of $14 at 2017 and 2016)	779			751
Receivables of VIEs (net of allowance for doubtful accounts of $54 at 2017 and 2016)	1,995			1,893
Receivables (net of allowance for doubtful accounts of $16 at 2018 and $14 at 2017)							962			779
Receivables of VIEs (net of allowance for doubtful accounts of $55 at 2018 and $54 at 2017)							2,172			1,995
Inventory	3,250			3,522			3,084			3,250
Regulatory assets (includes $51 at 2017 and $50 at 2016 related to VIEs)	1,437			1,023
Other	634			458
Regulatory assets (includes $52 at 2018 and $51 at 2017 related to VIEs)							2,005			1,437
Other (includes $162 at 2018 and $214 at 2017 related to VIEs)							1,049			634
Total current assets	8,453			8,039			9,714			8,453
Property, Plant and Equipment
Cost	127,507			121,397			134,458			127,507
Accumulated depreciation and amortization	(41,537		)	(39,406		)	(43,126		)	(41,537		)
Generation facilities to be retired, net	421			529			362			421
Net property, plant and equipment	86,391			82,520			91,694			86,391
Other Noncurrent Assets
Goodwill	19,396			19,425			19,303			19,396
Regulatory assets (includes $1,091 at 2017 and $1,142 at 2016 related to VIEs)	12,442			12,878
Regulatory assets (includes $1,041 at 2018 and $1,091 at 2017 related to VIEs)							13,617			12,442
Nuclear decommissioning trust funds	7,097			6,205			6,720			7,097
Investments in equity method unconsolidated affiliates	1,175			925			1,409			1,175
Other	2,960			2,769			2,935			2,960
Total other noncurrent assets	43,070			42,202			43,984			43,070
Total Assets	$	137,914		$	132,761		$	145,392		$	137,914
LIABILITIES AND EQUITY
Current Liabilities
Accounts payable	$	3,043		$	2,994		$	3,487		$	3,043
Notes payable and commercial paper	2,163			2,487			3,410			2,163
Taxes accrued	551			384			577			551
Interest accrued	525			503			559			525
Current maturities of long-term debt (includes $225 at 2017 and $260 at 2016 related to VIEs)	3,244			2,319
Current maturities of long-term debt (includes $227 at 2018 and $225 at 2017 related to VIEs)							3,406			3,244
Asset retirement obligations	689			411			919			689
Regulatory liabilities	402			409			598			402
Other	1,865			2,044			2,085			1,865
Total current liabilities	12,482			11,551			15,041			12,482
Long-Term Debt (includes $4,306 at 2017 and $3,587 at 2016 related to VIEs)	49,035			45,576
Long-Term Debt (includes $3,998 at 2018 and $4,306 at 2017 related to VIEs)							51,123			49,035
Other Noncurrent Liabilities
Deferred income taxes	6,621			14,155			7,806			6,621
Asset retirement obligations	9,486			10,200			9,548			9,486
Regulatory liabilities	15,330			6,881			14,834			15,330
Accrued pension and other post-retirement benefit costs	1,103			1,111			988			1,103
Investment tax credits	539			493			568			539
Other	1,581			1,753
Other (includes $212 at 2018 and $241 at 2017 related to VIEs)							1,650			1,581
Total other noncurrent liabilities	34,660			34,593			35,394			34,660
Commitments and Contingencies
Equity
Common stock, $0.001 par value, 2 billion shares authorized; 700 million shares outstanding at 2017 and 2016	1			1
Common stock, $0.001 par value, 2 billion shares authorized; 727 million shares outstanding at 2018 and 700 million shares outstanding at 2017							1			1
Additional paid-in capital	38,792			38,741			40,795			38,792
Retained earnings	3,013			2,384			3,113			3,013
Accumulated other comprehensive loss	(67		)	(93		)	(92		)	(67		)
Total Duke Energy Corporation stockholders' equity	41,739			41,033			43,817			41,739
Noncontrolling interests	(2		)	8			17			(2		)
Total equity	41,737			41,041			43,834			41,737
Total Liabilities and Equity	$	137,914		$	132,761		$	145,392		$	137,914

See Notes to Consolidated Financial Statements



FINANCIAL STATEMENTS

~~PART II~~

DUKE ENERGY CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS


	Years Ended December 31,									Years Ended December 31,
(in millions)	2017			2016			2015			2018			2017			2016
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	3,064		$	2,170		$	2,831		$	2,644		$	3,064		$	2,170
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization and accretion (including amortization of nuclear fuel)	4,046			3,880			3,613			4,696			4,046			3,880
Equity component of AFUDC	(237		)	(200		)	(164		)	(221		)	(237		)	(200		)
(Gains) Losses on sales of other assets	(33		)	477			(48		)
Losses (Gains) on sales of other assets										88			(33		)	477
Impairment charges	282			212			153			402			282			212
Deferred income taxes	1,433			900			1,244			1,079			1,433			900
Equity in (earnings) losses of unconsolidated affiliates	(119		)	15			(69		)	(83		)	(119		)	15
Accrued pension and other post-retirement benefit costs	8			21			71			61			8			21
Contributions to qualified pension plans	(19		)	(155		)	(302		)	(141		)	(19		)	(155		)
Payments for asset retirement obligations	(571		)	(608		)	(346		)	(533		)	(571		)	(608		)
Payment for the disposal of other assets										(105		)	—			—
Other rate case adjustments										37			—			—
Provision for rate refunds										425			—			—
(Increase) decrease in
Net realized and unrealized mark-to-market and hedging transactions	18			34			(29		)	22			18			34
Receivables	(83		)	(372		)	383			(345		)	(83		)	(372		)
Inventory	268			272			(237		)	156			268			272
Other current assets	(388		)	(220		)	(65		)	(721		)	(400		)	(174		)
Increase (decrease) in
Accounts payable	(204		)	296			(6		)	479			(204		)	296
Taxes accrued	149			236			(38		)	23			149			236
Other current liabilities	(482		)	182			168			270			(482		)	182
Other assets	(438		)	(186		)	(216		)	(1,008		)	(436		)	(186		)
Other liabilities	(60		)	(137		)	(243		)	(39		)	(60		)	(137		)
Net cash provided by operating activities	6,634			6,817			6,700			7,186			6,624			6,863
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures	(8,052		)	(7,901		)	(6,766		)	(9,389		)	(8,052		)	(7,901		)
Contributions to equity method investments	(414		)	(307		)	(263		)	(416		)	(414		)	(307		)
Acquisitions, net of cash acquired	(13		)	(4,778		)	(1,334		)	—			(13		)	(4,778		)
Return of investment capital	281			1			3			137			281			1
Purchases of available-for-sale securities	(4,071		)	(5,153		)	(4,037		)
Proceeds from sales and maturities of available-for-sale securities	4,098			5,236			4,040
Purchases of debt and equity securities										(3,762		)	(4,071		)	(5,153		)
Proceeds from sales and maturities of debt and equity securities										3,747			4,098			5,236
Proceeds from the sales of discontinued operations and other assets, net of cash divested	—			1,418			2,968			41			—			1,418
Change in restricted cash	(10		)	(4		)	191
Other	(269		)	(45		)	(79		)	(418		)	(271		)	(44		)
Net cash used in investing activities	(8,450		)	(11,533		)	(5,277		)	(10,060		)	(8,442		)	(11,528		)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from the:
Issuance of long-term debt	6,909			9,238			2,955			5,299			6,909			9,238
Issuance of common stock	—			731			17			1,838			—			731
Payments for the redemption of long-term debt	(2,316		)	(1,923		)	(3,029		)	(2,906		)	(2,316		)	(1,923		)
Proceeds from the issuance of short-term debt with original maturities greater than 90 days	319			2,081			379			472			319			2,081
Payments for the redemption of short-term debt with original maturities greater than 90 days	(272		)	(2,166		)	(931		)	(282		)	(272		)	(2,166		)
Notes payable and commercial paper	(409		)	(1,362		)	1,797			981			(409		)	(1,362		)
Dividends paid	(2,450		)	(2,332		)	(2,254		)	(2,471		)	(2,450		)	(2,332		)
Repurchase of common shares	—			—			(1,500		)
Other	1			(16		)	(36		)	29			1			(16		)
Net cash provided by (used in) financing activities	1,782			4,251			(2,602		)
Net cash provided by financing activities										2,960			1,782			4,251
Changes in cash and cash equivalents included in assets held for sale	—			474			1,099			—			—			474
Net (decrease) increase in cash and cash equivalents	(34		)	9			(80		)
Cash and cash equivalents at beginning of period	392			383			463
Cash and cash equivalents at end of period	$	358		$	392		$	383
Net increase (decrease) in cash, cash equivalents, and restricted cash										86			(36		)	60
Cash, cash equivalents, and restricted cash at beginning of period										505			541			481
Cash, cash equivalents, and restricted cash at end of period										$	591		$	505		$	541
Supplemental Disclosures:
Cash paid for interest, net of amount capitalized	$	1,963		$	1,794		$	1,607		$	2,086		$	1,963		$	1,794
Cash paid for income taxes	4			229			170
Cash (received from) paid for income taxes										(266		)	4			229
Significant non-cash transactions:
Accrued capital expenditures	1,032			1,000			771			1,112			1,032			1,000
Non-cash dividends										107			—			—

See Notes to Consolidated Financial Statements



FINANCIAL STATEMENTS

~~PART II~~

DUKE ENERGY CORPORATION

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY


											Duke Energy Corporation Stockholders' Accumulated Other Comprehensive Loss																													Duke Energy Corporation Stockholders' Accumulated Other Comprehensive Loss
																	Net Unrealized						Total																							Net Unrealized						Total
											Foreign			Net			Gains (Losses)						Duke Energy																	Foreign			Net			Gains (Losses)						Duke Energy
	Common				Additional						Currency			Losses on			on Available-			Pension and			Corporation									Common			Additional					Currency			Losses on			on Available-			Pension and			Corporation
	Stock		Common		Paid-in			Retained			Translation			Cash Flow			for-Sale-			OPEB			Stockholders'			Noncontrolling			Total			Stock	Common		Paid-in		Retained			Translation			Cash Flow			for-Sale-			OPEB			Stockholders'			Noncontrolling			Total
(in millions)	Shares		Stock		Capital			Earnings			Adjustments			Hedges			Securities			Adjustments			Equity			Interests			Equity			Shares	Stock		Capital		Earnings			Adjustments			Hedges			Securities			Adjustments			Equity			Interests			Equity
Balance at December 31, 2014	707		$	1	$	39,405		$	2,012		$	(439	)	$	(59	)	$	3		$	(48	)	$	40,875		$	24		$	40,899
Balance at December 31, 2015																																688	$	1	$	37,968	$	2,564		$	(692	)	$	(50	)	$	(3	)	$	(61	)	$	39,727		$	44		$	39,771
Net income	—		—		—			2,816			—			—			—			—			2,816			15			2,831			—	—		—		2,152			—			—			—			—			2,152			18			2,170
Other comprehensive (loss) income	—		—		—			—			(253		)	9			(6		)	(13		)	(263		)	(11		)	(274		)
Other comprehensive income (loss)^(a)																																—	—		—		—			692			30			2			(11		)	713			2			715
Common stock issuances, including dividend reinvestment and employee benefits	1		—		63			—			—			—			—			—			63			—			63			12	—		773		—			—			—			—			—			773			—			773
Stock repurchase	(20	)	—		(1,500		)	—			—			—			—			—			(1,500		)	—			(1,500		)
Common stock dividends	—		—		—			(2,254		)	—			—			—			—			(2,254		)	—			(2,254		)	—	—		—		(2,332		)	—			—			—			—			(2,332		)	—			(2,332		)
Distributions to noncontrolling interest in subsidiaries	—		—		—			—			—			—			—			—			—			(9		)	(9		)	—	—		—		—			—			—			—			—			—			(6		)	(6		)
Other^(a)	—		—		—			(10		)	—			—			—			—			(10		)	25			15
Balance at December 31, 2015	688		$	1	$	37,968		$	2,564		$	(692	)	$	(50	)	$	(3	)	$	(61	)	$	39,727		$	44		$	39,771
Other^(b)																																—	—		—		—			—			—			—			—			—			(50		)	(50		)
Balance at December 31, 2016																																700	$	1	$	38,741	$	2,384		$	—		$	(20	)	$	(1	)	$	(72	)	$	41,033		$	8		$	41,041
Net income	—		—		—			2,152			—			—			—			—			2,152			18			2,170			—	—		—		3,059			—			—			—			—			3,059			5			3,064
Other comprehensive (loss) income^(b)	—		—		—			—			692			30			2			(11		)	713			2			715
Other comprehensive income																																—	—		—		—			—			10			13			3			26			—			26
Common stock issuances, including dividend reinvestment and employee benefits	12		—		773			—			—			—			—			—			773			—			773			—	—		51		—			—			—			—			—			51			—			51
Common stock dividends	—		—		—			(2,332		)	—			—			—			—			(2,332		)	—			(2,332		)	—	—		—		(2,450		)	—			—			—			—			(2,450		)	—			(2,450		)
Distributions to noncontrolling interest in subsidiaries	—		—		—			—			—			—			—			—			—			(6		)	(6		)	—	—		—		—			—			—			—			—			—			(2		)	(2		)
Other^(c)	—		—		—			—			—			—			—			—			—			(50		)	(50		)	—	—		—		20			—			—			—			—			20			(13		)	7
Balance at December 31, 2016	700		$	1	$	38,741		$	2,384		$	—		$	(20	)	$	(1	)	$	(72	)	$	41,033		$	8		$	41,041
Balance at December 31, 2017																																700	$	1	$	38,792	$	3,013		$	—		$	(10	)	$	12		$	(69	)	$	41,739		$	(2	)	$	41,737
Net income	—		—		—			3,059			—			—			—			—			3,059			5			3,064			—	—		—		2,666			—			—			—			—			2,666			(22		)	2,644
Other comprehensive income (loss)	—		—		—			—			—			10			13			3			26			—			26
Other comprehensive (loss) income																																—	—		—		—			—			(4		)	(3		)	(6		)	(13		)	—			(13		)
Common stock issuances, including dividend reinvestment and employee benefits	—		—		51			—			—			—			—			—			51			—			51			27	—		2,003		—			—			—			—			—			2,003			—			2,003
Common stock dividends	—		—		—			(2,450		)	—			—			—			—			(2,450		)	—			(2,450		)	—	—		—		(2,578		)	—			—			—			—			(2,578		)	—			(2,578		)
Distributions to noncontrolling interests in subsidiaries	—		—		—			—			—			—			—			—			—			(2		)	(2		)	—	—		—		—			—			—			—			—			—			(1		)	(1		)
Other^(d)	—		—		—			20			—			—			—			—			20			(13		)	7			—	—		—		12			—			—			(12		)	—			—			42			42
Balance at December 31, 2017	700		$	1	$	38,792		$	3,013		$	—		$	(10	)	$	12		$	(69	)	$	41,739		$	(2	)	$	41,737
Balance at December 31, 2018																																727	$	1	$	40,795	$	3,113		$	—		$	(14	)	$	(3	)	$	(75	)	$	43,817		$	17		$	43,834


(a)	~~Noncontrolling Interests amount is primarily related to the acquisitions of a majority interest in a provider of energy management systems and services for commercial customers and a solar company.~~


~~(b)~~	Foreign Currency Translation Adjustments amount includes $620 million of cumulative adjustment realized as a result of the sale of the Latin American generation business. See Note 2 to the Consolidated Financial Statements.


~~(c)~~(b)	Noncontrolling Interests amount is primarily related to the sale of the Latin American generation business. See Note 2 to the Consolidated Financial Statements.


~~(d)~~(c)	Retained Earnings relates to a cumulative-effect adjustment due to implementation of a new accounting standard related to stock-based compensation and the associated income taxes. See Note 1 to the Consolidated Financial Statements for additional information. Noncontrolling Interests relates to the purchase of remaining interest in REC Solar.


(d)	Amounts in Retained Earnings and Accumulated Other Comprehensive Loss represent a cumulative-effect adjustment due to implementation of a new accounting standard related to Financial Instruments Classification and Measurement. See Note 1 for more information. Amount in Noncontrolling Interests primarily relates to tax equity financing activity in the Commercial Renewables segment.

See Notes to Consolidated Financial Statements



REPORTS

~~PART II~~

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the shareholder and the Board of Directors of Duke Energy Carolinas, LLC

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Duke Energy Carolinas, LLC and subsidiaries (the "Company") as of December 31, ~~2017~~2018 and ~~2016,~~2017, the related consolidated statements of operations and comprehensive income, changes in equity, and cash flows, for each of the three years in the period ended December 31, ~~2017,~~2018, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, ~~2017~~2018 and ~~2016,~~2017, and the results of its operations and its cash flows for each of the three years in the period ended December 31, ~~2017,~~2018, in conformity with ~~the~~ accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

/s/Deloitte & Touche LLP

Charlotte, North Carolina

February ~~21, 2018~~28, 2019

We have served as the Company's auditor since 1947.



FINANCIAL STATEMENTS

~~PART II~~

DUKE ENERGY CAROLINAS, LLC

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME


	Years Ended December 31,								Years Ended December 31,
(in millions)	2017		2016			2015			2018			2017		2016
Operating Revenues	$	7,302	$	7,322		$	7,229		$	7,300		$	7,302	$	7,322
Operating Expenses
Fuel used in electric generation and purchased power	1,822		1,797			1,881			1,821			1,822		1,797
Operation, maintenance and other	1,961		2,106			2,066			2,130			2,021		2,158
Depreciation and amortization	1,090		1,075			1,051			1,201			1,090		1,075
Property and other taxes	281		276			269			295			281		276
Impairment charges	—		1			1			192			—		1
Total operating expenses	5,154		5,255			5,268			5,639			5,214		5,307
Gain (Loss) on Sales of Other Assets and Other, net	1		(5		)	(1		)
(Losses) Gains on Sales of Other Assets and Other, net									(1		)	1		(5		)
Operating Income	2,149		2,062			1,960			1,660			2,089		2,010
Other Income and Expenses, net	139		162			160			153			199		214
Interest Expense	422		424			412			439			422		424
Income Before Income Taxes	1,866		1,800			1,708			1,374			1,866		1,800
Income Tax Expense	652		634			627			303			652		634
Net Income	$	1,214	$	1,166		$	1,081		$	1,071		$	1,214	$	1,166
Other Comprehensive Income, net of tax
Reclassification into earnings from cash flow hedges	2		2			1			1			2		2
Unrealized gains on available-for-sale securities	—		—			1
Other Comprehensive Income, net of tax	2		2			2			1			2		2
Comprehensive Income	$	1,216	$	1,168		$	1,083		$	1,072		$	1,216	$	1,168

See Notes to Consolidated Financial Statements



FINANCIAL STATEMENTS

~~PART II~~

DUKE ENERGY CAROLINAS, LLC

CONSOLIDATED BALANCE SHEETS


	December 31,						December 31,
(in millions)	2017			2016			2018			2017
ASSETS
Current Assets
Cash and cash equivalents	$	16		$	14		$	33		$	16
Receivables (net of allowance for doubtful accounts of $2 at 2017 and 2016)	200			160
Receivables of VIEs (net of allowance for doubtful accounts of $7 at 2017 and 2016)	640			645
Receivables (net of allowance for doubtful accounts of $2 at 2018 and 2017)							219			200
Receivables of VIEs (net of allowance for doubtful accounts of $7 at 2018 and 2017)							699			640
Receivables from affiliated companies	95			163			182			95
Notes receivable from affiliated companies	—			66
Inventory	971			1,055			948			971
Regulatory assets	299			238			520			299
Other	19			37			72			19
Total current assets	2,240			2,378			2,673			2,240
Property, Plant and Equipment
Cost	42,939			41,127			44,741			42,939
Accumulated depreciation and amortization	(15,063		)	(14,365		)	(15,496		)	(15,063		)
Net property, plant and equipment	27,876			26,762			29,245			27,876
Other Noncurrent Assets
Regulatory assets	2,853			3,159			3,457			2,853
Nuclear decommissioning trust funds	3,772			3,273			3,558			3,772
Other	979			943			1,027			979
Total other noncurrent assets	7,604			7,375			8,042			7,604
Total Assets	$	37,720		$	36,515		$	39,960		$	37,720
LIABILITIES AND EQUITY
Current Liabilities
Accounts payable	$	842		$	833		$	988		$	842
Accounts payable to affiliated companies	209			247			230			209
Notes payable to affiliated companies	104			—			439			104
Taxes accrued	234			143			171			234
Interest accrued	108			102			102			108
Current maturities of long-term debt	1,205			116			6			1,205
Asset retirement obligations	337			222			290			337
Regulatory liabilities	126			161			199			126
Other	486			468			571			486
Total current liabilities	3,651			2,292			2,996			3,651
Long-Term Debt	8,598			9,187			10,633			8,598
Long-Term Debt Payable to Affiliated Companies	300			300			300			300
Other Noncurrent Liabilities
Deferred income taxes	3,413			6,544			3,689			3,413
Asset retirement obligations	3,273			3,673			3,659			3,273
Regulatory liabilities	6,231			2,840			5,999			6,231
Accrued pension and other post-retirement benefit costs	95			97			99			95
Investment tax credits	232			203			231			232
Other	566			607			671			566
Total other noncurrent liabilities	13,810			13,964			14,348			13,810
Commitments and Contingencies
Equity
Member's equity	11,368			10,781			11,689			11,368
Accumulated other comprehensive loss	(7		)	(9		)	(6		)	(7		)
Total equity	11,361			10,772			11,683			11,361
Total Liabilities and Equity	$	37,720		$	36,515		$	39,960		$	37,720

See Notes to Consolidated Financial Statements



FINANCIAL STATEMENTS

~~PART II~~

DUKE ENERGY CAROLINAS, LLC

CONSOLIDATED STATEMENTS OF CASH FLOWS


	Years Ended December 31,									Years Ended December 31,
(in millions)	2017			2016			2015			2018			2017			2016
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	1,214		$	1,166		$	1,081		$	1,071		$	1,214		$	1,166
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization (including amortization of nuclear fuel)	1,409			1,382			1,361			1,487			1,409			1,382
Equity component of AFUDC	(106		)	(102		)	(96		)	(73		)	(106		)	(102		)
(Gains) Losses on sales of other assets	(1		)	5			1
Losses (Gains) on sales of other assets										1			(1		)	5
Impairment charges	—			1			1			192			—			1
Deferred income taxes	410			470			397			305			410			470
Accrued pension and other post-retirement benefit costs	(4		)	4			15			4			(4		)	4
Contributions to qualified pension plans	—			(43		)	(91		)	(46		)	—			(43		)
Payments for asset retirement obligations	(271		)	(287		)	(167		)	(230		)	(271		)	(287		)
Provision for rate refunds										182			—			—
(Increase) decrease in
Net realized and unrealized mark-to-market and hedging transactions	9			5			—			2			9			5
Receivables	(9		)	(76		)	42			(86		)	(9		)	(76		)
Receivables from affiliated companies	68			(56		)	(32		)	(87		)	68			(56		)
Inventory	78			215			(157		)	25			78			215
Other current assets	7			67			(51		)	(161		)	7			67
Increase (decrease) in
Accounts payable	23			(69		)	(4		)	168			23			(69		)
Accounts payable to affiliated companies	(38		)	18			75			21			(38		)	18
Taxes accrued	86			187			(128		)	(65		)	86			187
Other current liabilities	(161		)	63			127			89			(161		)	63
Other assets	(49		)	20			76			(179		)	(49		)	20
Other liabilities	(31		)	6			(77		)	(90		)	(31		)	6
Net cash provided by operating activities	2,634			2,976			2,373			2,530			2,634			2,976
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures	(2,524		)	(2,220		)	(1,933		)	(2,706		)	(2,524		)	(2,220		)
Purchases of available-for-sale securities	(2,124		)	(2,832		)	(2,555		)
Proceeds from sales and maturities of available-for-sale securities	2,128			2,832			2,555
Purchases of debt and equity securities										(1,810		)	(2,124		)	(2,832		)
Proceeds from sales and maturities of debt and equity securities										1,810			2,128			2,832
Notes receivable from affiliated companies	66			97			(13		)	—			66			97
Other	(109		)	(83		)	(35		)	(147		)	(109		)	(83		)
Net cash used in investing activities	(2,563		)	(2,206		)	(1,981		)	(2,853		)	(2,563		)	(2,206		)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from the issuance of long-term debt	569			1,587			516			1,983			569			1,587
Payments for the redemption of long-term debt	(116		)	(356		)	(506		)	(1,205		)	(116		)	(356		)
Notes payable to affiliated companies	104			—			—			335			104			—
Distributions to parent	(625		)	(2,000		)	(401		)	(750		)	(625		)	(2,000		)
Other	(1		)	—			(1		)	(23		)	(1		)	—
Net cash used in financing activities	(69		)	(769		)	(392		)
Net cash provided by (used in) financing activities										340			(69		)	(769		)
Net increase in cash and cash equivalents	2			1			—			17			2			1
Cash and cash equivalents at beginning of period	14			13			13			16			14			13
Cash and cash equivalents at end of period	$	16		$	14		$	13		$	33		$	16		$	14
Supplemental Disclosures:
Cash paid for interest, net of amount capitalized	$	398		$	393		$	389		$	452		$	398		$	393
Cash paid for (received from) income taxes	193			(60		)	342			89			193			(60		)
Significant non-cash transactions:
Accrued capital expenditures	315			347			239			302			315			347

See Notes to Consolidated Financial Statements



FINANCIAL STATEMENTS

~~PART II~~

DUKE ENERGY CAROLINAS, LLC

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY


																Accumulated Other
				Accumulated Other												Comprehensive
				Comprehensive Loss												Loss
				Net Losses			Net Losses									Net Losses
				on Cash			Available-									on Cash
	Member's			Flow			for-Sale			Total			Member's			Flow			Total
(in millions)	Equity			Hedges			Securities			Equity			Equity			Hedges			Equity
Balance at December 31, 2014	$	10,937		$	(12	)	$	(1	)	$	10,924
Net income	1,081			—			—			1,081
Other comprehensive income	—			1			1			2
Distributions to parent	(401		)	—			—			(401		)
Balance at December 31, 2015	$	11,617		$	(11	)	$	—		$	11,606		$	11,617		$	(11	)	$	11,606
Net income	1,166			—			—			1,166			1,166			—			1,166
Other comprehensive income	—			2			—			2			—			2			2
Distributions to parent	(2,000		)	—			—			(2,000		)	(2,000		)	—			(2,000		)
Other	(2		)	—			—			(2		)	(2		)	—			(2		)
Balance at December 31, 2016	$	10,781		$	(9	)	$	—		$	10,772		$	10,781		$	(9	)	$	10,772
Net income	1,214			—			—			1,214			1,214			—			1,214
Other comprehensive income	—			2			—			2			—			2			2
Distributions to parent	(625		)	—			—			(625		)	(625		)	—			(625		)
Other	(2		)	—			—			(2		)	(2		)	—			(2		)
Balance at December 31, 2017	$	11,368		$	(7	)	$	—		$	11,361		$	11,368		$	(7	)	$	11,361
Net income													1,071			—			1,071
Other comprehensive income													—			1			1
Distributions to parent													(750		)	—			(750		)
Balance at December 31, 2018													$	11,689		$	(6	)	$	11,683

See Notes to Consolidated Financial Statements



REPORTS

~~PART II~~

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the shareholder and the Board of Directors of Progress Energy, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Progress Energy, Inc. and subsidiaries (the "Company") as of December 31, ~~2017~~2018 and ~~2016,~~2017, the related consolidated statements of operations and comprehensive income, changes in equity, and cash flows, for each of the three years in the period ended December 31, ~~2017,~~2018, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, ~~2017~~2018 and ~~2016,~~2017, and the results of its operations and its cash flows for each of the three years in the period ended December 31, ~~2017,~~2018, in conformity with ~~the~~ accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

/s/Deloitte & Touche LLP

Charlotte, North Carolina

February ~~21, 2018~~28, 2019

We have served as the Company's auditor since 1930.



FINANCIAL STATEMENTS

~~PART II~~

PROGRESS ENERGY, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME


	Years Ended December 31,							Years Ended December 31,
(in millions)	2017		2016		2015			2018			2017		2016
Operating Revenues	$	9,783	$	9,853	$	10,277		$	10,728		$	9,783	$	9,853
Operating Expenses
Fuel used in electric generation and purchased power	3,417		3,644		4,224			3,976			3,417		3,644
Operation, maintenance and other	2,220		2,386		2,298			2,613			2,301		2,458
Depreciation and amortization	1,285		1,213		1,116			1,619			1,285		1,213
Property and other taxes	503		487		492			529			503		487
Impairment charges	156		7		12			87			156		7
Total operating expenses	7,581		7,737		8,142			8,824			7,662		7,809
Gains on Sales of Other Assets and Other, net	26		25		25			24			26		25
Operating Income	2,228		2,141		2,160			1,928			2,147		2,069
Other Income and Expenses, net	128		114		97			165			209		186
Interest Expense	824		689		670			842			824		689
Income From Continuing Operations Before Income Taxes	1,532		1,566		1,587			1,251			1,532		1,566
Income Tax Expense From Continuing Operations	264		527		522			218			264		527
Income From Continuing Operations	1,268		1,039		1,065			1,033			1,268		1,039
Income (Loss) From Discontinued Operations, net of tax	—		2		(3		)
Income From Discontinued Operations, net of tax								—			—		2
Net Income	1,268		1,041		1,062			1,033			1,268		1,041
Less: Net Income Attributable to Noncontrolling Interests	10		10		11			6			10		10
Net Income Attributable to Parent	$	1,258	$	1,031	$	1,051		$	1,027		$	1,258	$	1,031

Net Income	$	1,268	$	1,041	$	1,062		$	1,033		$	1,268	$	1,041
Other Comprehensive Income (Loss), net of tax
Other Comprehensive Income, net of tax
Pension and OPEB adjustments	4		1		(10		)	5			4		1
Net unrealized gain on cash flow hedges	5		—		—			6			5		—
Reclassification into earnings from cash flow hedges	—		8		4			—			—		8
Unrealized gains (losses) on available-for-sale securities	4		1		(1		)
Other Comprehensive Income (Loss), net of tax	13		10		(7		)
Unrealized (losses) gains on available-for-sale securities								(1		)	4		1
Other Comprehensive Income, net of tax								10			13		10
Comprehensive Income	1,281		1,051		1,055			1,043			1,281		1,051
Less: Comprehensive Income Attributable to Noncontrolling Interests	10		10		11			6			10		10
Comprehensive Income Attributable to Parent	$	1,271	$	1,041	$	1,044		$	1,037		$	1,271	$	1,041

See Notes to Consolidated Financial Statements



FINANCIAL STATEMENTS

~~PART II~~

PROGRESS ENERGY, INC.

CONSOLIDATED BALANCE SHEETS


	December 31,						December 31,
(in millions)	2017			2016			2018			2017
ASSETS
Current Assets
Cash and cash equivalents	$	40		$	46		$	67		$	40
Receivables (net of allowance for doubtful accounts of $4 at 2017 and $6 at 2016)	123			114
Receivables of VIEs (net of allowance for doubtful accounts of $7 at 2017 and 2016)	780			692
Receivables (net of allowance for doubtful accounts of $5 at 2018 and $4 at 2017)							220			123
Receivables of VIEs (net of allowance for doubtful accounts of $8 at 2018 and $7 at 2017)							909			780
Receivables from affiliated companies	31			106			168			31
Notes receivable from affiliated companies	240			80			—			240
Inventory	1,592			1,717			1,459			1,592
Regulatory assets (includes $51 at 2017 and $50 at 2016 related to VIEs)	741			401
Other	334			148
Regulatory assets (includes $52 at 2018 and $51 at 2017 related to VIEs)							1,137			741
Other (includes $39 at 2018 and $44 at 2017 related to VIEs)							125			334
Total current assets	3,881			3,304			4,085			3,881
Property, Plant and Equipment
Cost	47,323			44,864			50,260			47,323
Accumulated depreciation and amortization	(15,857		)	(15,212		)	(16,398		)	(15,857		)
Generation facilities to be retired, net	421			529			362			421
Net property, plant and equipment	31,887			30,181			34,224			31,887
Other Noncurrent Assets
Goodwill	3,655			3,655			3,655			3,655
Regulatory assets (includes $1,091 at 2017 and $1,142 at 2016 related to VIEs)	6,010			5,722
Regulatory assets (includes $1,041 at 2018 and $1,091 at 2017 related to VIEs)							6,564			6,010
Nuclear decommissioning trust funds	3,324			2,932			3,162			3,324
Other	931			856			974			931
Total other noncurrent assets	13,920			13,165			14,355			13,920
Total Assets	$	49,688		$	46,650		$	52,664		$	49,688
LIABILITIES AND EQUITY
Current Liabilities
Accounts payable	$	1,006		$	1,003		$	1,172		$	1,006
Accounts payable to affiliated companies	251			348			360			251
Notes payable to affiliated companies	805			729			1,235			805
Taxes accrued	101			83			109			101
Interest accrued	212			201			246			212
Current maturities of long-term debt (includes $53 at 2017 and $62 at 2016 related to VIEs)	771			778
Current maturities of long-term debt (includes $53 at 2018 and 2017 related to VIEs)							1,672			771
Asset retirement obligations	295			189			514			295
Regulatory liabilities	213			189			280			213
Other	729			745			821			729
Total current liabilities	4,383			4,265			6,409			4,383
Long-Term Debt (includes $1,689 at 2017 and $1,741 at 2016 related to VIEs)	16,916			15,590
Long-Term Debt (includes $1,636 at 2018 and $1,689 at 2017 related to VIEs)							17,089			16,916
Long-Term Debt Payable to Affiliated Companies	150			1,173			150			150
Other Noncurrent Liabilities
Deferred income taxes	3,502			5,246			3,941			3,502
Asset retirement obligations	5,119			5,286			4,897			5,119
Regulatory liabilities	5,306			2,395			5,049			5,306
Accrued pension and other post-retirement benefit costs	545			547			521			545
Other	302			341			351			302
Total other noncurrent liabilities	14,774			13,815			14,759			14,774
Commitments and Contingencies
Equity
Common stock, $0.01 par value, 100 shares authorized and outstanding at 2017 and 2016	—			—
Common stock, $0.01 par value, 100 shares authorized and outstanding at 2018 and 2017							—			—
Additional paid-in capital	9,143			8,094			9,143			9,143
Retained earnings	4,350			3,764			5,131			4,350
Accumulated other comprehensive loss	(25		)	(38		)	(20		)	(25		)
Total Progress Energy, Inc. stockholder's equity	13,468			11,820			14,254			13,468
Noncontrolling interests	(3		)	(13		)	3			(3		)
Total equity	13,465			11,807			14,257			13,465
Total Liabilities and Equity	$	49,688		$	46,650		$	52,664		$	49,688

See Notes to Consolidated Financial Statements

~~100~~



FINANCIAL STATEMENTS

~~PART II~~

PROGRESS ENERGY, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS


	Years Ended December 31,									Years Ended December 31,
(in millions)	2017			2016			2015			2018			2017			2016
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	1,268		$	1,041		$	1,062		$	1,033		$	1,268		$	1,041
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization and accretion (including amortization of nuclear fuel)	1,516			1,435			1,312			1,987			1,516			1,435
Equity component of AFUDC	(92		)	(76		)	(54		)	(104		)	(92		)	(76		)
Gains on sales of other assets	(28		)	(34		)	(31		)	(24		)	(28		)	(34		)
Impairment charges	156			7			12			87			156			7
Deferred income taxes	703			532			714			358			703			532
Accrued pension and other post-retirement benefit costs	(28		)	(24		)	(5		)	24			(28		)	(24		)
Contributions to qualified pension plans	—			(43		)	(83		)	(45		)	—			(43		)
Payments for asset retirement obligations	(248		)	(270		)	(156		)	(230		)	(248		)	(270		)
Other rate case adjustments										37			—			—
Provision for rate refunds										122			—			—
(Increase) decrease in
Net realized and unrealized mark-to-market and hedging transactions	—			42			(6		)	18			—			42
Receivables	(89		)	7			105			(207		)	(89		)	7
Receivables from affiliated companies	71			211			(316		)	(137		)	71			211
Inventory	125			35			(67		)	121			125			35
Other current assets	(384		)	3			553			(12		)	(397		)	50
Increase (decrease) in
Accounts payable	(260		)	252			(193		)	217			(260		)	252
Accounts payable to affiliated companies	(97		)	37			108			109			(97		)	37
Taxes accrued	17			15			(63		)	8			17			15
Other current liabilities	(166		)	(42		)	136			129			(166		)	(42		)
Other assets	(301		)	(248		)	(167		)	(913		)	(300		)	(248		)
Other liabilities	(98		)	(36		)	(112		)	(34		)	(98		)	(36		)
Net cash provided by operating activities	2,065			2,844			2,749			2,544			2,053			2,891
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures	(3,152		)	(3,306		)	(2,698		)	(3,854		)	(3,152		)	(3,306		)
Asset Acquisitions	—			(10		)	(1,249		)	—			—			(10		)
Purchases of available-for-sale securities	(1,806		)	(2,143		)	(1,174		)
Proceeds from sales and maturities of available-for-sale securities	1,824			2,187			1,211
Purchases of debt and equity securities										(1,753		)	(1,806		)	(2,143		)
Proceeds from sales and maturities of debt and equity securities										1,769			1,824			2,187
Net proceeds from sales of other assets										20			—			—
Proceeds from insurance	7			58			—			—			7			58
Proceeds from the sale of nuclear fuel	20			20			102			—			20			20
Notes receivable from affiliated companies	(160		)	(80		)	220			240			(160		)	(80		)
Change in restricted cash	5			(6		)	—
Other	(86		)	47			(34		)	(182		)	(86		)	47
Net cash used in investing activities	(3,348		)	(3,233		)	(3,622		)	(3,760		)	(3,353		)	(3,227		)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from the issuance of long-term debt	2,118			2,375			1,186			1,833			2,118			2,375
Payments for the redemption of long-term debt	(813		)	(327		)	(1,553		)	(771		)	(813		)	(327		)
Notes payable to affiliated companies	100			444			623			430			100			444
Capital contribution from parent	—			—			625
Dividends to parent	(124		)	(2,098		)	—			(250		)	(124		)	(2,098		)
Other	(4		)	(3		)	(6		)	(1		)	(4		)	(3		)
Net cash provided by financing activities	1,277			391			875			1,241			1,277			391
Net (decrease) increase in cash and cash equivalents	(6		)	2			2
Cash and cash equivalents at beginning of period	46			44			42
Cash and cash equivalents at end of period	$	40		$	46		$	44
Net increase (decrease) in cash, cash equivalents, and restricted cash										25			(23		)	55
Cash, cash equivalents, and restricted cash at beginning of period										87			110			55
Cash, cash equivalents, and restricted cash at end of period										$	112		$	87		$	110
Supplemental Disclosures:
Cash paid for interest, net of amount capitalized	$	773		$	673		$	649		$	798		$	773		$	673
Cash (received from) paid for income taxes	(146		)	(187		)	(426		)
Cash received from income taxes										(348		)	(146		)	(187		)
Significant non-cash transactions:
Accrued capital expenditures	391			317			329			478			391			317
Equitization of certain notes payable to affiliates	1,047			—			—			—			1,047			—
Dividend to parent related to a legal entity restructuring	547			—			—			—			547			—

See Notes to Consolidated Financial Statements

~~101~~



FINANCIAL STATEMENTS

~~PART II~~

PROGRESS ENERGY, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY


						Accumulated Other Comprehensive Loss																							Accumulated Other Comprehensive Loss
						Net			Net Unrealized						Total Progress														Net			Net Unrealized						Total Progress
	Additional					Losses on			Gains on			Pension and			Energy, Inc.									Additional					Losses on			Gains (Losses)			Pension and			Energy, Inc.
	Paid-in		Retained			Cash Flow			Available-for-			OPEB			Stockholder's			Noncontrolling			Total			Paid-in		Retained			Cash Flow			on Available-for-			OPEB			Stockholder's			Noncontrolling			Total
(in millions)	Capital		Earnings			Hedges			Sale Securities			Adjustments			Equity			Interests			Equity			Capital		Earnings			Hedges			Sale Securities			Adjustments			Equity			Interests			Equity
Balance at December 31, 2014	$	7,467	$	3,782		$	(35	)	$	1		$	(7	)	$	11,208		$	(32	)	$	11,176
Net income	—		1,051			—			—			—			1,051			11			1,062
Other comprehensive income (loss)	—		—			4			(1		)	(10		)	(7		)	—			(7		)
Distributions to noncontrolling interests	—		—			—			—			—			—			(4		)	(4		)
Capital contribution from parent	625		—			—			—			—			625			—			625
Other	—		(2		)	—			—			—			(2		)	3			1
Balance at December 31, 2015	$	8,092	$	4,831		$	(31	)	$	—		$	(17	)	$	12,875		$	(22	)	$	12,853		$	8,092	$	4,831		$	(31	)	$	—		$	(17	)	$	12,875		$	(22	)	$	12,853
Net income	—		1,031			—			—			—			1,031			10			1,041			—		1,031			—			—			—			1,031			10			1,041
Other comprehensive income	—		—			8			1			1			10			—			10			—		—			8			1			1			10			—			10
Distributions to noncontrolling interests	—		—			—			—			—			—			(1		)	(1		)	—		—			—			—			—			—			(1		)	(1		)
Dividends to parent	—		(2,098		)	—			—			—			(2,098		)	—			(2,098		)	—		(2,098		)	—			—			—			(2,098		)	—			(2,098		)
Other	2		—			—			—			—			2			—			2			2		—			—			—			—			2			—			2
Balance at December 31, 2016	$	8,094	$	3,764		$	(23	)	$	1		$	(16	)	$	11,820		$	(13	)	$	11,807		$	8,094	$	3,764		$	(23	)	$	1		$	(16	)	$	11,820		$	(13	)	$	11,807
Net income	—		1,258			—			—			—			1,258			10			1,268			—		1,258			—			—			—			1,258			10			1,268
Other comprehensive income	—		—			5			4			4			13			—			13			—		—			5			4			4			13			—			13
Dividends to parent^(a)	—		(672		)	—			—			—			(672		)	—			(672		)	—		(672		)	—			—			—			(672		)	—			(672		)
Equitization of certain notes payable to affiliates	1,047		—			—			—			—			1,047			—			1,047			1,047		—			—			—			—			1,047			—			1,047
Other	2		—			—			—			—			2			—			2			2		—			—			—			—			2			—			2
Balance at December 31, 2017	$	9,143	$	4,350		$	(18	)	$	5		$	(12	)	$	13,468		$	(3	)	$	13,465		$	9,143	$	4,350		$	(18	)	$	5		$	(12	)	$	13,468		$	(3	)	$	13,465
Net income																								—		1,027			—			—			—			1,027			6			1,033
Other comprehensive income (loss)																								—		—			6			(1		)	5			10			—			10
Distributions to noncontrolling interests																								—		—			—			—			—			—			(1		)	(1		)
Dividends to parent																								—		(250		)	—			—			—			(250		)	—			(250		)
Other^(b)																								—		4			—			(5		)	—			(1		)	1			—
Balance at December 31, 2018																								$	9,143	$	5,131		$	(12	)	$	(1	)	$	(7	)	$	14,254		$	3		$	14,257

~~(a) Includes a $547 million non-cash dividend related to a legal entity restructuring.~~


(a)	Includes a $547 million non-cash dividend related to a legal entity restructuring.


(b)	Amounts in Retained Earnings and Accumulated Other Comprehensive Loss represent a cumulative-effect adjustment due to implementation of a new accounting standard related to Financial Instruments Classification and Measurement. See Note 1 for more information.

See Notes to Consolidated Financial Statements

~~102~~



REPORTS

~~PART II~~

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the shareholder and the Board of Directors of Duke Energy Progress, LLC

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Duke Energy Progress, LLC and subsidiaries (the "Company") as of December 31, ~~2017~~2018 and ~~2016,~~2017, the related consolidated statements of operations and comprehensive income, changes in equity, and cash flows, for each of the three years in the period ended December 31, ~~2017,~~2018, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, ~~2017~~2018 and ~~2016,~~2017, and the results of its operations and its cash flows for each of the three years in the period ended December 31, ~~2017,~~2018, in conformity with ~~the~~ accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

/s/Deloitte & Touche LLP

Charlotte, North Carolina

February ~~21, 2018~~28, 2019

We have served as the Company's auditor since 1930.

~~103~~



FINANCIAL STATEMENTS

~~PART II~~

DUKE ENERGY PROGRESS, LLC

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME


	Years Ended December 31,						Years Ended December 31,
(in millions)	2017		2016		2015		2018		2017		2016
Operating Revenues	$	5,129	$	5,277	$	5,290	$	5,699	$	5,129	$	5,277
Operating Expenses
Fuel used in electric generation and purchased power	1,609		1,830		2,029		1,892		1,609		1,830
Operation, maintenance and other	1,389		1,504		1,452		1,578		1,439		1,565
Depreciation and amortization	725		703		643		991		725		703
Property and other taxes	156		156		140		155		156		156
Impairment charges	19		1		5		33		19		1
Total operating expenses	3,898		4,194		4,269		4,649		3,948		4,255
Gains on Sales of Other Assets and Other, net	4		3		3		9		4		3
Operating Income	1,235		1,086		1,024		1,059		1,185		1,025
Other Income and Expenses, net	65		71		71		87		115		132
Interest Expense	293		257		235		319		293		257
Income Before Income Taxes	1,007		900		860		827		1,007		900
Income Tax Expense	292		301		294		160		292		301
Net Income and Comprehensive Income	$	715	$	599	$	566	$	667	$	715	$	599

See Notes to Consolidated Financial Statements



FINANCIAL STATEMENTS

~~104~~

~~PART II~~

DUKE ENERGY PROGRESS, LLC

CONSOLIDATED BALANCE SHEETS


	December 31,						December 31,
(in millions)	2017			2016			2018			2017
ASSETS
Current Assets
Cash and cash equivalents	$	20		$	11		$	23		$	20
Receivables (net of allowance for doubtful accounts of $1 at 2017 and $4 at 2016)	56			51
Receivables of VIEs (net of allowance for doubtful accounts of $5 at 2017 and 2016)	459			404
Receivables (net of allowance for doubtful accounts of $2 at 2018 and $1 at 2017)							75			56
Receivables of VIEs (net of allowance for doubtful accounts of $5 at 2018 and 2017)							547			459
Receivables from affiliated companies	3			5			23			3
Notes receivable from affiliated companies	—			165
Inventory	1,017			1,076			954			1,017
Regulatory assets	352			188			703			352
Other	97			57			62			97
Total current assets	2,004			1,957			2,387			2,004
Property, Plant and Equipment
Cost	29,583			28,419			31,459			29,583
Accumulated depreciation and amortization	(10,903		)	(10,561		)	(11,423		)	(10,903		)
Generation facilities to be retired, net	421			529			362			421
Net property, plant and equipment	19,101			18,387			20,398			19,101
Other Noncurrent Assets
Regulatory assets	3,507			3,243			4,111			3,507
Nuclear decommissioning trust funds	2,588			2,217			2,503			2,588
Other	599			525			612			599
Total other noncurrent assets	6,694			5,985			7,226			6,694
Total Assets	$	27,799		$	26,329		$	30,011		$	27,799
LIABILITIES AND EQUITY
Current Liabilities
Accounts payable	$	402		$	589		$	660		$	402
Accounts payable to affiliated companies	179			227			278			179
Notes payable to affiliated companies	240			—			294			240
Taxes accrued	64			104			53			64
Interest accrued	102			102			116			102
Current maturities of long-term debt	3			452			603			3
Asset retirement obligations	295			189			509			295
Regulatory liabilities	139			158			178			139
Other	376			365			408			376
Total current liabilities	1,800			2,186			3,099			1,800
Long-Term Debt	7,204			6,409			7,451			7,204
Long-Term Debt Payable to Affiliated Companies	150			150			150			150
Other Noncurrent Liabilities
Deferred income taxes	1,883			3,323			2,119			1,883
Asset retirement obligations	4,378			4,508			4,311			4,378
Regulatory liabilities	3,999			1,946			3,955			3,999
Accrued pension and other post-retirement benefit costs	248			252			237			248
Investment tax credits	143			146			142			143
Other	45			51			106			45
Total other noncurrent liabilities	10,696			10,226			10,870			10,696
Commitments and Contingencies
Equity
Member's Equity	7,949			7,358			8,441			7,949
Total Liabilities and Equity	$	27,799		$	26,329		$	30,011		$	27,799

See Notes to Consolidated Financial Statements



FINANCIAL STATEMENTS

~~105~~

~~PART II~~

DUKE ENERGY PROGRESS, LLC

CONSOLIDATED STATEMENTS OF CASH FLOWS


	Years Ended December 31,										Years Ended December 31,
(in millions)	2017				2016			2015			2018			2017			2016
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	715			$	599		$	566		$	667		$	715		$	599
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization and accretion (including amortization of nuclear fuel)	936				907			821
Depreciation and amortization (including amortization of nuclear fuel)											1,183			936			907
Equity component of AFUDC	(47		)		(50		)	(47		)	(57		)	(47		)	(50		)
Gains on sales of other assets	(5		)		(6		)	(7		)	(9		)	(5		)	(6		)
Impairment charges	19				1			5			33			19			1
Deferred income taxes	384				384			354			236			384			384
Accrued pension and other post-retirement benefit costs	(20		)		(32		)	(14		)	15			(20		)	(32		)
Contributions to qualified pension plans	—				(24		)	(42		)	(25		)	—			(24		)
Payments for asset retirement obligations	(192		)		(212		)	(109		)	(195		)	(192		)	(212		)
Other rate case adjustments											37			—			—
Provisions for rate refunds											122			—			—
(Increase) decrease in
Net realized and unrealized mark-to-market and hedging transactions	(4		)		4			(3		)	5			(4		)	4
Receivables	(58		)		(17		)	43			(107		)	(58		)	(17		)
Receivables from affiliated companies	2				11			(6		)	(20		)	2			11
Inventory	59				12			(50		)	63			59			12
Other current assets	(75		)		84			185			(201		)	(75		)	84
Increase (decrease) in
Accounts payable	(230		)		181			(65		)	219			(230		)	181
Accounts payable to affiliated companies	(48		)		37			70			99			(48		)	37
Taxes accrued	(39		)		90			(34		)	(11		)	(39		)	90
Other current liabilities	(131		)		114			76			46			(131		)	114
Other assets	(53		)		(163		)	(83		)	(484		)	(53		)	(163		)
Other liabilities	(18		)		12			(66		)	12			(18		)	12
Net cash provided by operating activities	1,195				1,932			1,594			1,628			1,195			1,932
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures	(1,715		)		(1,733		)	(1,669		)	(2,220		)	(1,715		)	(1,733		)
Asset acquisition	—				—			(1,249		)
Purchases of available-for-sale securities	(1,249		)		(1,658		)	(727		)
Proceeds from sales and maturities of available-for-sale securities	1,207				1,615			672
Purchases of debt and equity securities											(1,236		)	(1,249		)	(1,658		)
Proceeds from sales and maturities of debt and equity securities											1,206			1,207			1,615
Net proceeds from the sales of other assets											20			—			—
Proceeds from insurance	4			—	—			—			—			4			—
Notes receivable from affiliated companies	165				(165		)	237			—			165			(165		)
Other	(55		)		26			(30		)	(115		)	(55		)	26
Net cash used in investing activities	(1,643		)		(1,915		)	(2,766		)	(2,345		)	(1,643		)	(1,915		)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from the issuance of long-term debt	812				505			1,186			845			812			505
Payments for the redemption of long-term debt	(470		)		(15		)	(991		)	(3		)	(470		)	(15		)
Notes payable to affiliated companies	240				(209		)	359			54			240			(209		)
Capital contribution from parent	—				—			626
Distributions to parent	(124		)		(300		)	—			(175		)	(124		)	(300		)
Other	(1		)		(2		)	(2		)	(1		)	(1		)	(2		)
Net cash provided by (used in) financing activities	457				(21		)	1,178			720			457			(21		)
Net increase (decrease) in cash and cash equivalents	9				(4		)	6			3			9			(4		)
Cash and cash equivalents at beginning of period	11				15			9			20			11			15
Cash and cash equivalents at end of period	$	20			$	11		$	15		$	23		$	20		$	11
Supplemental Disclosures:
Cash paid for interest, net of amount capitalized	$	291			$	248		$	218		$	303		$	291		$	248
Cash paid for (received from) income taxes	59				(287		)	(197		)
Cash (received from) paid for income taxes											(112		)	59			(287		)
Significant non-cash transactions:
Accrued capital expenditures	191				147			143			220			191			147

See Notes to Consolidated Financial Statements

~~106~~



FINANCIAL STATEMENTS

~~PART II~~

DUKE ENERGY PROGRESS, LLC

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY


	Common			Retained			Member's			Total			Member's
(in millions)	Stock			Earnings			Equity			Equity			Equity
Balance at December 31, 2014	$	2,159		$	3,708		$	—		$	5,867
Net income	—			355			211			566
Transfer to Member's Equity	(2,159		)	(4,063		)	6,222			—
Capital contribution from parent	—			—			626			626
Balance at December 31, 2015	$	—		$	—		$	7,059		$	7,059		$	7,059
Net income	—			—			599			599			599
Distribution to parent	—			—			(300		)	(300		)	(300		)
Balance at December 31, 2016	$	—		$	—		$	7,358		$	7,358		$	7,358
Net income	—			—			715			715			715
Distribution to parent	—			—			(124		)	(124		)	(124		)
Balance at December 31, 2017	$	—		$	—		$	7,949		$	7,949		$	7,949
Net income													667
Distribution to parent													(175		)
Balance at December 31, 2018													$	8,441

See Notes to Consolidated Financial Statements

~~107~~



REPORTS

~~PART II~~

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the shareholder and the Board of Directors of Duke Energy Florida, LLC

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Duke Energy Florida, LLC and subsidiaries (the "Company") as of December 31, ~~2017~~2018 and ~~2016,~~2017, the related consolidated statements of operations and comprehensive income, changes in equity, and cash flows, for each of the three years in the period ended December 31, ~~2017,~~2018, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, ~~2017~~2018 and ~~2016,~~2017, and the results of its operations and its cash flows for each of the three years in the period ended December 31, ~~2017,~~2018, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

/s/ Deloitte & Touche LLP

Charlotte, North Carolina

February 28, 2019

We have served as the Company's auditor since 2001.



FINANCIAL STATEMENTS

DUKE ENERGY FLORIDA, LLC

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME



	Years Ended December 31,
(in millions)	2018			2017		2016
Operating Revenues	$	5,021		$	4,646	$	4,568
Operating Expenses
Fuel used in electric generation and purchased power	2,085			1,808		1,814
Operation, maintenance and other	1,025			853		884
Depreciation and amortization	628			560		509
Property and other taxes	374			347		333
Impairment charges	54			138		6
Total operating expenses	4,166			3,706		3,546
Gains on Sales of Other Assets and Other, net	1			1		—
Operating Income	856			941		1,022
Other Income and Expenses, net	86			96		63
Interest Expense	287			279		212
Income Before Income Taxes	655			758		873
Income Tax Expense	101			46		322
Net Income	$	554		$	712	$	551
Other Comprehensive (Loss) Income, net of tax
Unrealized (losses) gains on available-for-sale securities	(1		)	3		1
Other Comprehensive (Loss) Income, net of tax	(1		)	3		1
Comprehensive Income	$	553		$	715	$	552

See Notes to Consolidated Financial Statements



FINANCIAL STATEMENTS

DUKE ENERGY FLORIDA, LLC

CONSOLIDATED BALANCE SHEETS



	December 31,
(in millions)	2018			2017
ASSETS
Current Assets
Cash and cash equivalents	$	36		$	13
Receivables (net of allowance for doubtful accounts of $3 at 2018 and 2017)	143			65
Receivables of VIEs (net of allowance for doubtful accounts of $3 at 2018 and $2 at 2017)	362			321
Receivables from affiliated companies	28			2
Notes receivable from affiliated companies	—			313
Inventory	504			574
Regulatory assets (includes $52 at 2018 and $51 at 2017 related to VIEs)	434			389
Other (includes $39 at 2018 and $40 at 2017 related to VIEs)	46			86
Total current assets	1,553			1,763
Property, Plant and Equipment
Cost	18,792			17,730
Accumulated depreciation and amortization	(4,968		)	(4,947		)
Net property, plant and equipment	13,824			12,783
Other Noncurrent Assets
Regulatory assets (includes $1,041 at 2018 and $1,091 at 2017 related to VIEs)	2,454			2,503
Nuclear decommissioning trust funds	659			736
Other	311			284
Total other noncurrent assets	3,424			3,523
Total Assets	$	18,801		$	18,069
LIABILITIES AND EQUITY
Current Liabilities
Accounts payable	$	511		$	602
Accounts payable to affiliated companies	91			74
Notes payable to affiliated companies	108			—
Taxes accrued	74			34
Interest accrued	75			56
Current maturities of long-term debt (includes $53 at 2018 and 2017 related to VIEs)	270			768
Asset retirement obligations	5			—
Regulatory liabilities	102			74
Other	406			334
Total current liabilities	1,642			1,942
Long-Term Debt (includes $1,336 at 2018 and $1,389 at 2017 related to VIEs)	7,051			6,327
Other Noncurrent Liabilities
Deferred income taxes	1,986			1,761
Asset retirement obligations	586			742
Regulatory liabilities	1,094			1,307
Accrued pension and other post-retirement benefit costs	254			264
Other	93			108
Total other noncurrent liabilities	4,013			4,182
Commitments and Contingencies
Equity
Member's equity	6,097			5,614
Accumulated other comprehensive income	(2		)	4
Total equity	6,095			5,618
Total Liabilities and Equity	$	18,801		$	18,069

See Notes to Consolidated Financial Statements



FINANCIAL STATEMENTS

DUKE ENERGY FLORIDA, LLC

CONSOLIDATED STATEMENTS OF CASH FLOWS



	Years Ended December 31,
(in millions)	2018			2017			2016
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	554		$	712		$	551
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization and accretion	793			570			516
Equity component of AFUDC	(47		)	(45		)	(26		)
Gains on sales of other assets	(1		)	(1		)	—
Impairment charges	54			138			6
Deferred income taxes	159			245			224
Accrued pension and other post-retirement benefit costs	5			(13		)	2
Contributions to qualified pension plans	(20		)	—			(20		)
Payments for asset retirement obligations	(35		)	(56		)	(58		)
(Increase) decrease in
Net realized and unrealized mark-to-market and hedging transactions	7			5			38
Receivables	(100		)	(38		)	23
Receivables from affiliated companies	(26		)	—			21
Inventory	58			66			23
Other current assets	59			(138		)	(86		)
Increase (decrease) in
Accounts payable	(1		)	(32		)	71
Accounts payable to affiliated companies	17			(51		)	9
Taxes accrued	40			1			(117		)
Other current liabilities	82			(37		)	(149		)
Other assets	(428		)	(229		)	(84		)
Other liabilities	(61		)	(82		)	(53		)
Net cash provided by operating activities	1,109			1,015			891
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures	(1,634		)	(1,437		)	(1,583		)
Purchases of debt and equity securities	(517		)	(557		)	(485		)
Proceeds from sales and maturities of debt and equity securities	563			617			572
Proceeds from insurance	—			4			58
Proceeds from the sale of nuclear fuel	—			20			20
Notes receivable from affiliated companies	313			(313		)	—
Other	(65		)	(31		)	21
Net cash used in investing activities	(1,340		)	(1,697		)	(1,397		)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from the issuance of long-term debt	988			1,306			1,870
Payments for the redemption of long-term debt	(769		)	(342		)	(12		)
Notes payable to affiliated companies	108			(297		)	(516		)
Distribution to parent	(75		)	—			(775		)
Other	1			(1		)	—
Net cash provided by financing activities	253			666			567
Net increase (decrease) in cash, cash equivalents, and restricted cash	22			(16		)	61
Cash, cash equivalents, and restricted cash at beginning of period	53			69			8
Cash, cash equivalents, and restricted cash at end of period	$	75		$	53		$	69
Supplemental Disclosures:
Cash paid for interest, net of amount capitalized	$	270		$	274		$	208
Cash (received from) paid for income taxes	(120		)	(197		)	216
Significant non-cash transactions:
Accrued capital expenditures	258			199			170

See Notes to Consolidated Financial Statements



FINANCIAL STATEMENTS

DUKE ENERGY FLORIDA, LLC

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY



				Accumulated
				Other
				Comprehensive
				Income (Loss)
				Net Unrealized
				Gains (Losses) on
	Member's			Available-for-			Total
(in millions)	Equity			Sale Securities			Equity
Balance at December 31, 2015	$	5,121		$	—		$	5,121
Net income	551			—			551
Other comprehensive income	—			1			1
Distribution to parent	(775		)	—			(775		)
Other	2			—			2
Balance at December 31, 2016	$	4,899		$	1		$	4,900
Net income	712			—			712
Other comprehensive income	—			3			3
Other	3			—			3
Balance at December 31, 2017	$	5,614		$	4		$	5,618
Net income	554			—			554
Other comprehensive loss	—			(1		)	(1		)
Distribution to parent	(75		)	—			(75		)
Other^(a)	4			(5		)	(1		)
Balance at December 31, 2018	$	6,097		$	(2	)	$	6,095


(a)	Amounts represent a cumulative-effect adjustment due to implementation of a new accounting standard related to Financial Instruments Classification and Measurement. See Note 1 for more information.

See Notes to Consolidated Financial Statements



REPORTS

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the shareholder and the Board of Directors of Duke Energy Ohio, Inc.

Opinion on the Financial Statements

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

/s/ Deloitte & Touche LLP

Charlotte, North Carolina

February 28, 2019

We have served as the Company's auditor since 2002.



FINANCIAL STATEMENTS

DUKE ENERGY OHIO, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME



	Years Ended December 31,
(in millions)	2018			2017			2016
Operating Revenues
Regulated electric	$	1,450		$	1,373		$	1,410
Regulated natural gas	506			508			503
Nonregulated electric and other	1			42			31
Total operating revenues	1,957			1,923			1,944
Operating Expenses
Fuel used in electric generation and purchased power – regulated	412			369			442
Fuel used in electric generation and purchased power – nonregulated	—			58			51
Cost of natural gas	113			107			103
Operation, maintenance and other	480			530			514
Depreciation and amortization	268			261			233
Property and other taxes	290			278			258
Impairment charges	—			1			—
Total operating expenses	1,563			1,604			1,601
(Losses) Gains on Sales of Other Assets and Other, net	(106		)	1			2
Operating Income	288			320			345
Other Income and Expenses, net	23			23			11
Interest Expense	92			91			86
Income From Continuing Operations Before Income Taxes	219			252			270
Income Tax Expense From Continuing Operations	43			59			78
Income From Continuing Operations	176			193			192
(Loss) Income From Discontinued Operations, net of tax	—			(1		)	36
Net Income and Comprehensive Income	$	176		$	192		$	228

See Notes to Consolidated Financial Statements



FINANCIAL STATEMENTS

DUKE ENERGY OHIO, INC.

CONSOLIDATED BALANCE SHEETS



	December 31,
(in millions)	2018			2017
ASSETS
Current Assets
Cash and cash equivalents	$	21		$	12
Receivables (net of allowance for doubtful accounts of $2 at 2018 and $3 at 2017)	102			68
Receivables from affiliated companies	114			133
Notes receivable from affiliated companies	—			14
Inventory	126			133
Regulatory assets	33			49
Other	24			39
Total current assets	420			448
Property, Plant and Equipment
Cost	9,360			8,732
Accumulated depreciation and amortization	(2,717		)	(2,691		)
Net property, plant and equipment	6,643			6,041
Other Noncurrent Assets
Goodwill	920			920
Regulatory assets	531			445
Other	41			21
Total other noncurrent assets	1,492			1,386
Total Assets	$	8,555		$	7,875
LIABILITIES AND EQUITY
Current Liabilities
Accounts payable	$	316		$	313
Accounts payable to affiliated companies	78			62
Notes payable to affiliated companies	274			29
Taxes accrued	202			190
Interest accrued	22			21
Current maturities of long-term debt	551			3
Asset retirement obligations	6			3
Regulatory liabilities	57			36
Other	74			71
Total current liabilities	1,580			728
Long-Term Debt	1,589			2,039
Long-Term Debt Payable to Affiliated Companies	25			25
Other Noncurrent Liabilities
Deferred income taxes	817			781
Asset retirement obligations	87			81
Regulatory liabilities	840			891
Accrued pension and other post-retirement benefit costs	79			59
Other	93			108
Total other noncurrent liabilities	1,916			1,920
Commitments and Contingencies
Equity
Common stock, $8.50 par value, 120 million shares authorized; 90 million shares outstanding at 2018 and 2017	762			762
Additional paid-in capital	2,776			2,670
Accumulated deficit	(93		)	(269		)
Total equity	3,445			3,163
Total Liabilities and Equity	$	8,555		$	7,875

See Notes to Consolidated Financial Statements



FINANCIAL STATEMENTS

DUKE ENERGY OHIO, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS



	Years Ended December 31,
(in millions)	2018			2017			2016
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	176		$	192		$	228
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization and accretion	271			265			237
Equity component of AFUDC	(11		)	(11		)	(6		)
Losses (Gains) on sales of other assets	106			(1		)	(2		)
Impairment charges	—			1			—
Deferred income taxes	25			90			55
Accrued pension and other post-retirement benefit costs	3			2			6
Contributions to qualified pension plans	—			(4		)	(5		)
Payments for asset retirement obligations	(3		)	(7		)	(5		)
Provision for rate refunds	24			—			—
(Increase) decrease in
Net realized and unrealized mark-to-market and hedging transactions	—			—			(2		)
Receivables	(33		)	2			(4		)
Receivables from affiliated companies	19			(4		)	(36		)
Inventory	7			6			(32		)
Other current assets	16			(22		)	79
Increase (decrease) in
Accounts payable	(19		)	12			19
Accounts payable to affiliated companies	16			(1		)	10
Taxes accrued	12			11			3
Other current liabilities	14			(19		)	(54		)
Other assets	(26		)	(28		)	(35		)
Other liabilities	(27		)	(5		)	(31		)
Net cash provided by operating activities	570			479			425
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures	(827		)	(686		)	(476		)
Notes receivable from affiliated companies	14			80			(94		)
Other	(89		)	(41		)	(30		)
Net cash used in investing activities	(902		)	(647		)	(600		)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from the issuance of long-term debt	99			182			341
Payments for the redemption of long-term debt	(3		)	(2		)	(53		)
Notes payable to affiliated companies	245			13			(87		)
Dividends to parent	—			(25		)	(25		)
Other	—			(1		)	(2		)
Net cash provided by financing activities	341			167			174
Net increase (decrease) in cash and cash equivalents	9			(1		)	(1		)
Cash and cash equivalents at beginning of period	12			13			14
Cash and cash equivalents at end of period	$	21		$	12		$	13
Supplemental Disclosures:
Cash paid for interest, net of amount capitalized	$	87		$	85		$	81
Cash received from income taxes	(6		)	(8		)	(46		)
Significant non-cash transactions:
Accrued capital expenditures	95			82			83
Non-cash equity contribution from parent	106			—			—

See Notes to Consolidated Financial Statements



FINANCIAL STATEMENTS

DUKE ENERGY OHIO, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY



			Additional
	Common		Paid-in			Accumulated			Total
(in millions)	Stock		Capital			Deficit			Equity
Balance at December 31, 2015	$	762	$	2,720		$	(698	)	$	2,784
Net income	—		—			228			228
Contribution from parent	—		—			9			9
Dividends to parent	—		(25		)	—			(25		)
Balance at December 31, 2016	$	762	$	2,695		$	(461	)	$	2,996
Net income	—		—			192			192
Dividends to parent	—		(25		)	—			(25		)
Balance at December 31, 2017	$	762	$	2,670		$	(269	)	$	3,163
Net income	—		—			176			176
Contribution from parent	—		106			—			106
Balance at December 31, 2018	$	762	$	2,776		$	(93	)	$	3,445

See Notes to Consolidated Financial Statements



REPORTS

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the shareholder and the Board of Directors of Duke Energy Indiana, LLC

Opinion on the Financial Statements

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

/s/Deloitte & Touche LLP

Charlotte, North Carolina

February ~~21, 2018~~28, 2019

We have served as the Company's auditor since ~~2001.~~2002.

~~108~~



FINANCIAL STATEMENTS

~~PART II~~

DUKE ENERGY ~~FLORIDA,~~INDIANA, LLC

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME


	Years Ended December 31,						Years Ended December 31,
(in millions)	2017		2016		2015		2018		2017		2016
Operating Revenues	$	4,646	$	4,568	$	4,977	$	3,059	$	3,047	$	2,958
Operating Expenses
Fuel used in electric generation and purchased power	1,808		1,814		2,195		1,000		966		909
Operation, maintenance and other	818		865		835		788		743		727
Depreciation and amortization	560		509		473		520		458		496
Property and other taxes	347		333		352		78		76		58
Impairment charges	138		6		7		30		18		8
Total operating expenses	3,671		3,527		3,862		2,416		2,261		2,198
Gains on Sales of Other Assets and Other, net	1		—		—		—		—		1
Operating Income	976		1,041		1,115		643		786		761
Other Income and Expenses, net	61		44		24		45		47		26
Interest Expense	279		212		198		167		178		181
Income Before Income Taxes	758		873		941		521		655		606
Income Tax Expense	46		322		342		128		301		225
Net Income	$	712	$	551	$	599	$	393	$	354	$	381
Other Comprehensive Income, net of tax
Unrealized gains on available-for-sale securities	3		1		—
Other Comprehensive Income, net of tax	3		1		—
Other Comprehensive Loss, net of tax
Reclassification into earnings from cash flow hedges							—		—		(1		)
Comprehensive Income	$	715	$	552	$	599	$	393	$	354	$	380

See Notes to Consolidated Financial Statements

~~109~~



FINANCIAL STATEMENTS

~~PART II~~

DUKE ENERGY ~~FLORIDA,~~INDIANA, LLC

CONSOLIDATED BALANCE SHEETS


	December 31,						December 31,
(in millions)	2017			2016			2018			2017
ASSETS
Current Assets
Cash and cash equivalents	$	13		$	16		$	24		$	9
Receivables (net of allowance for doubtful accounts of $3 at 2017 and $2 at 2016)	65			61
Receivables of VIEs (net of allowance for doubtful accounts of $2 at 2017 and 2016)	321			288
Receivables (net of allowance for doubtful accounts of $2 at 2018 and 2017)							52			57
Receivables from affiliated companies	2			5			122			125
Notes receivable from affiliated companies	313			—
Inventory	574			641			422			450
Regulatory assets (includes $51 at 2017 and $50 at 2016 related to VIEs)	389			213
Other (includes $40 at 2017 and $53 at 2016 related to VIEs)	86			125
Regulatory assets							175			165
Other							35			30
Total current assets	1,763			1,349			830			836
Property, Plant and Equipment
Cost	17,730			16,434			15,443			14,948
Accumulated depreciation and amortization	(4,947		)	(4,644		)	(4,914		)	(4,662		)
Net property, plant and equipment	12,783			11,790			10,529			10,286
Other Noncurrent Assets
Regulatory assets (includes $1,091 at 2017 and $1,142 at 2016 related to VIEs)	2,503			2,480
Nuclear decommissioning trust funds	736			715
Regulatory assets							982			978
Other	284			278			194			189
Total other noncurrent assets	3,523			3,473			1,176			1,167
Total Assets	$	18,069		$	16,612		$	12,535		$	12,289
LIABILITIES AND EQUITY
Current Liabilities
Accounts payable	$	602		$	413		$	200		$	196
Accounts payable to affiliated companies	74			125			83			78
Notes payable to affiliated companies	—			297			167			161
Taxes accrued	34			33			43			95
Interest accrued	56			49			58			57
Current maturities of long-term debt (includes $53 at 2017 and $62 at 2016 related to VIEs)	768			326
Current maturities of long-term debt							63			3
Asset retirement obligations							109			54
Regulatory liabilities	74			31			25			24
Other	334			352			107			104
Total current liabilities	1,942			1,626			855			772
Long-Term Debt (includes $1,389 at 2017 and $1,442 at 2016 related to VIEs)	6,327			5,799
Long-Term Debt							3,569			3,630
Long-Term Debt Payable to Affiliated Companies							150			150
Other Noncurrent Liabilities
Deferred income taxes	1,761			2,694			1,009			925
Asset retirement obligations	742			778			613			727
Regulatory liabilities	1,307			448			1,722			1,723
Accrued pension and other post-retirement benefit costs	264			262			115			76
Investment tax credits							147			147
Other	108			105			16			18
Total other noncurrent liabilities	4,182			4,287			3,622			3,616
Commitments and Contingencies
Equity
Member's equity	5,614			4,899
Accumulated other comprehensive income	4			1
Total equity	5,618			4,900
Member's Equity							4,339			4,121
Total Liabilities and Equity	$	18,069		$	16,612		$	12,535		$	12,289

See Notes to Consolidated Financial Statements

~~110~~



FINANCIAL STATEMENTS

~~PART II~~

DUKE ENERGY ~~FLORIDA,~~INDIANA, LLC

CONSOLIDATED STATEMENTS OF CASH FLOWS


	Years Ended December 31,									Years Ended December 31,
(in millions)	2017			2016			2015			2018			2017			2016
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	712		$	551		$	599		$	393		$	354		$	381
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization and accretion	570			516			480
Depreciation, amortization, and accretion										524			462			499
Equity component of AFUDC	(45		)	(26		)	(7		)	(32		)	(28		)	(16		)
Gains on sales of other assets	(1		)	—			—
Impairment charges	138			6			7			30			18			8
Deferred income taxes	245			224			348			95			152			213
Accrued pension and other post-retirement benefit costs	(13		)	2			5			7			2			8
Contributions to qualified pension plans	—			(20		)	(40		)	(8		)	—			(9		)
Payments for asset retirement obligations	(56		)	(58		)	(47		)	(69		)	(45		)	(46		)
Provision for rate refunds										53			—			—
(Increase) decrease in
Net realized and unrealized mark-to-market and hedging transactions	5			38			(3		)
Receivables	(38		)	23			61			7			59			(2		)
Receivables from affiliated companies	—			21			(44		)	3			(11		)	(43		)
Inventory	66			23			(17		)	28			54			66
Other current assets	(125		)	(133		)	116			(25		)	28			(67		)
Increase (decrease) in
Accounts payable	(32		)	71			(127		)	37			(86		)	8
Accounts payable to affiliated companies	(51		)	9			46			5			4			(9		)
Taxes accrued	1			(117		)	67			(52		)	64			(4		)
Other current liabilities	(37		)	(149		)	57			14			(10		)	(81		)
Other assets	(229		)	(84		)	(84		)	29			(28		)	(27		)
Other liabilities	(82		)	(53		)	(44		)	(33		)	(20		)	(8		)
Net cash provided by operating activities	1,028			844			1,373			1,006			969			871
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures	(1,437		)	(1,583		)	(1,029		)	(832		)	(840		)	(755		)
Purchases of available-for-sale securities	(557		)	(485		)	(447		)
Proceeds from sales and maturities of available-for-sale securities	617			572			538
Proceeds from insurance	4			58			—
Proceeds from the sale of nuclear fuel	20			20			102
Purchases of debt and equity securities										(48		)	(20		)	(14		)
Proceeds from sales and maturities of debt and equity securities										44			7			11
Proceeds from the sales of other assets										15			—			—
Notes receivable from affiliated companies	(313		)	—			—			—			86			(3		)
Change in restricted cash	—			(6		)	—
Other	(31		)	21			(3		)	3			(65		)	32
Net cash used in investing activities	(1,697		)	(1,403		)	(839		)	(818		)	(832		)	(729		)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from the issuance of long-term debt	1,306			1,870			—			—			—			494
Payments for the redemption of long-term debt	(342		)	(12		)	(562		)	(3		)	(5		)	(478		)
Notes payable to affiliated companies	(297		)	(516		)	729			6			161			—
Dividends to parent	—			—			(350		)
Distribution to parent	—			(775		)	(350		)
Distributions to parent										(175		)	(300		)	(149		)
Other	(1		)	—			(1		)	(1		)	(1		)	(1		)
Net cash provided by (used in) financing activities	666			567			(534		)
Net (decrease) increase in cash and cash equivalents	(3		)	8			—
Net cash used in financing activities										(173		)	(145		)	(134		)
Net increase (decrease) in cash and cash equivalents										15			(8		)	8
Cash and cash equivalents at beginning of period	16			8			8			9			17			9
Cash and cash equivalents at end of period	$	13		$	16		$	8		$	24		$	9		$	17
Supplemental Disclosures:
Cash paid for interest, net of amount capitalized	$	274		$	208		$	205		$	162		$	179		$	171
Cash (received from) paid for income taxes	(197		)	216			(229		)
Cash paid for (received from) income taxes										75			117			(7		)
Significant non-cash transactions:
Accrued capital expenditures	199			170			186			88			125			99

See Notes to Consolidated Financial Statements

~~111~~



FINANCIAL STATEMENTS

~~PART II~~

DUKE ENERGY ~~FLORIDA,~~INDIANA, LLC

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY


										Accumulated
										Other																	Accumulated
										Comprehensive																	Other
										Income																	Comprehensive
										Net Unrealized																	Income
										Gains on								Additional									Net Gains on
	Common			Retained			Member's			Available-for-		Total			Common			Paid-in			Retained			Member's			Cash Flow			Total
(in millions)	Stock			Earnings			Equity			Sale Securities		Equity			Stock			Capital			Earnings			Equity			Hedges			Equity
Balance at December 31, 2014	$	1,762		$	3,460		$	—		$	—	$	5,222
Net income	—			351			248			—		599
Transfer to Member's Equity	(1,762		)	(3,461		)	5,223			—		—
Dividends to parent	—			(350		)	—			—		(350		)
Distribution to parent	—			—			(350		)	—		(350		)
Balance at December 31, 2015	$	—		$	—		$	5,121		$	—	$	5,121		$	1		$	1,384		$	2,450		$	—		$	1		$	3,836
Net income	—			—			551			—		551			—			—			—			381			—			381
Other comprehensive income	—			—			—			1		1
Distribution to parent	—			—			(775		)	—		(775		)
Other	—			—			2			—		2
Other comprehensive loss															—			—			—			—			(1		)	(1		)
Distributions to parent															—			—			—			(149		)	—			(149		)
Transfer to Member's Equity															(1		)	(1,384		)	(2,450		)	3,835			—			—
Balance at December 31, 2016	$	—		$	—		$	4,899		$	1	$	4,900		$	—		$	—		$	—		$	4,067		$	—		$	4,067
Net income	—			—			712			—		712			—			—			—			354			—			354
Other comprehensive income	—			—			—			3		3
Other	—			—			3			—		3
Distributions to parent															—			—			—			(300		)	—			(300		)
Balance at December 31, 2017	$	—		$	—		$	5,614		$	4	$	5,618		$	—		$	—		$	—		$	4,121		$	—		$	4,121
Net income															—			—			—			393			—			393
Distributions to parent															—			—			—			(175		)	—			(175		)
Balance at December 31, 2018															$	—		$	—		$	—		$	4,339		$	—		$	4,339

See Notes to Consolidated Financial Statements

~~112~~



REPORTS

~~PART II~~

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the shareholder and the Board of Directors of ~~Duke Energy Ohio,~~Piedmont Natural Gas Company, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of ~~Duke Energy Ohio,~~Piedmont Natural Gas Company, Inc. and subsidiaries (the "Company") as of December 31, ~~2017~~2018 and ~~2016,~~2017, the related consolidated statements of operations and comprehensive income, changes in equity, and cash flows, for each of the three years in the ~~period~~periods ended December 31, 2018, December 31, 2017, October 31 2016, and for the two months ended December 31, 2016 and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, ~~2017~~2018 and ~~2016,~~2017, and the results of its operations and its cash flows for each of the three years in the ~~period~~periods ended December 31, 2018, December 31, 2017, October 31, 2016, and for the two months ended December 31, 2016, in conformity with ~~the~~ accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

~~/s/Deloitte & Touche LLP~~

~~Charlotte, North Carolina~~

~~February 21, 2018~~

~~We have served as the Company's auditor since 2002.~~

~~113~~

~~PART II~~

~~DUKE ENERGY OHIO, INC.~~

~~CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME~~

Years Ended December 31,
(in millions) 2017
2016
2015
Operating Revenues
Regulated electric $ 1,373
$ 1,410
$ 1,331
Nonregulated electric and other 42
31
33
Regulated natural gas 508
503
541
Total operating revenues 1,923
1,944
1,905
Operating Expenses

Fuel used in electric generation and purchased power – regulated 369
442
446
Fuel used in electric generation and purchased power – nonregulated 58
51
47
Cost of natural gas 107
103
141
Operation, maintenance and other 524
512
495
Depreciation and amortization 261
233
227
Property and other taxes 278
258
254
Impairment charges 1
—
—
Total operating expenses 1,598
1,599
1,610
Gains on Sales of Other Assets and Other, net 1
2
8
Operating Income 326
347
303
Other Income and Expenses, net 17
9
6
Interest Expense 91
86
79
Income From Continuing Operations Before Income Taxes 252
270
230
Income Tax Expense From Continuing Operations 59
78
81
Income From Continuing Operations 193
192
149
(Loss) Income From Discontinued Operations, net of tax (1 ) 36
23
Net Income and Comprehensive Income $ 192
$ 228
$ 172

~~See Notes to Consolidated Financial Statements~~

~~114~~

~~PART II~~

~~DUKE ENERGY OHIO, INC.~~

~~CONSOLIDATED BALANCE SHEETS~~

December 31,
(in millions) 2017
2016
ASSETS
Current Assets
Cash and cash equivalents $ 12
$ 13
Receivables (net of allowance for doubtful accounts of $3 at 2017 and $2 at 2016) 68
71
Receivables from affiliated companies 133
129
Notes receivable from affiliated companies 14
94
Inventory 133

137
Regulatory assets 49
37
Other 39
37
Total current assets 448
518
Property, Plant and Equipment
Cost 8,732
8,126
Accumulated depreciation and amortization (2,691 ) (2,579 )
Net property, plant and equipment 6,041
5,547
Other Noncurrent Assets
Goodwill 920
920
Regulatory assets 445
520
Other 21
23
Total other noncurrent assets 1,386
1,463
Total Assets $ 7,875
$ 7,528
LIABILITIES AND EQUITY
Current Liabilities
Accounts payable $ 313
$ 282
Accounts payable to affiliated companies 62
63
Notes payable to affiliated companies 29
16
Taxes accrued 190
178
Interest accrued 21
19
Current maturities of long-term debt 3
1
Asset retirement obligations 3
—
Regulatory liabilities 36
21
Other 71
91
Total current liabilities 728
671
Long-Term Debt 2,039
1,858
Long-Term Debt Payable to Affiliated Companies 25
25
Other Noncurrent Liabilities
Deferred income taxes 781
1,443
Asset retirement obligations 81
77
Regulatory liabilities 891
236
Accrued pension and other post-retirement benefit costs 59
56
Other 108
166
Total other noncurrent liabilities 1,920
1,978
Commitments and Contingencies
Equity
Common stock, $8.50 par value, 120 million shares authorized; 90 million shares outstanding at 2017 and 2016 762
762
Additional paid-in capital 2,670
2,695
Accumulated deficit (269 ) (461 )
Total equity 3,163
2,996
Total Liabilities and Equity $ 7,875
$ 7,528

~~See Notes to Consolidated Financial Statements~~

~~115~~

~~PART II~~

~~DUKE ENERGY OHIO, INC.~~

~~CONSOLIDATED STATEMENTS OF CASH FLOWS~~

Years Ended December 31,
(in millions) 2017
2016
2015
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 192
$ 228
$ 172
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization and accretion 265
237
230
Equity component of AFUDC (11 ) (6 ) (3 )
Gains on sales of other assets (1 ) (2 ) (8 )
Impairment charges 1
—
40
Deferred income taxes 90
55
206
Accrued pension and other post-retirement benefit costs 2
6
9
Contributions to qualified pension plans (4 ) (5 ) (8 )
Payments for asset retirement obligations (7 ) (5 ) (4 )
(Increase) decrease in
Net realized and unrealized mark-to-market and hedging transactions —
(2 ) (10 )
Receivables 2
(4 ) 23
Receivables from affiliated companies (4 ) (36 ) 23
Inventory 6
(32 ) —
Other current assets (22 ) 79
—
Increase (decrease) in
Accounts payable 12
19
(1 )
Accounts payable to affiliated companies (1 ) 10
(21 )
Taxes accrued 11
3
(21 )
Other current liabilities (19 ) (54 ) 88
Other assets (28 ) (35 ) 25
Other liabilities (5 ) (31 ) (73 )
Net cash provided by operating activities 479
425
667
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (686 ) (476 ) (399 )
Notes receivable from affiliated companies 80
(94 ) 145
Other (41 ) (30 ) (15 )
Net cash used in investing activities (647 ) (600 ) (269 )
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from the issuance of long-term debt 182
341
—
Payments for the redemption of long-term debt (2 ) (53 ) (157 )
Notes payable to affiliated companies 13
(87 ) (95 )
Dividends to parent (25 ) (25 ) (150 )
Other (1 ) (2 ) (2 )
Net cash provided by (used in) financing activities 167
174
(404 )
Net decrease in cash and cash equivalents (1 ) (1 ) (6 )
Cash and cash equivalents at beginning of period 13
14
20
Cash and cash equivalents at end of period $ 12
$ 13
$ 14
Supplemental Disclosures:
Cash paid for interest, net of amount capitalized $ 85
$ 81
$ 76
Cash (received from) paid for income taxes (8 ) (46 ) 410
Significant non-cash transactions:
Accrued capital expenditures 82
83
20
Distribution of membership interest of Duke Energy SAM, LLC to parent —
—
1,912

~~See Notes to Consolidated Financial Statements~~

~~116~~

~~PART II~~

~~DUKE ENERGY OHIO, INC.~~

~~CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY~~

Additional

Common
Paid-in
Accumulated
Total
(in millions) Stock
Capital
Deficit
Equity
Balance at December 31, 2014 $ 762
$ 4,782
$ (870 ) $ 4,674
Net income —
—
172
172
Dividends to parent —
(150 ) —
(150 )
Distribution of membership interest of Duke Energy SAM, LLC to parent —
(1,912 ) —
(1,912 )
Balance at December 31, 2015 $ 762
$ 2,720
$ (698 ) $ 2,784
Net income —
—
228
228
Contribution from parent —
—
9
9
Dividends to parent —
(25 ) —
(25 )
Balance at December 31, 2016 $ 762

$ 2,695

$ (461 )
$ 2,996
Net income —
—
192
192
Dividends to parent —
(25 ) —
(25 )
Balance at December 31, 2017 $ 762
$ 2,670
$ (269 ) $ 3,163

~~See Notes to Consolidated Financial Statements~~

~~117~~

~~PART II~~

~~REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM~~

~~To the shareholder and the Board of Directors of Duke Energy Indiana, LLC~~

~~Opinion on the Financial Statements~~

We have audited the accompanying consolidated balance sheets of Duke Energy Indiana, LLC and subsidiaries (the "Company") as of December 31, 2017 and 2016, the related consolidated statements of operations and comprehensive income, changes in equity, and cash flows, for each of the three years in the period ended December 31, 2017, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2017 and 2016, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2017, in conformity with the accounting principles generally accepted in the United States of America.

~~Basis for Opinion~~

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

~~/s/Deloitte & Touche LLP~~

~~Charlotte, North Carolina~~

~~February 21, 2018~~

~~We have served as the Company's auditor since 2002.~~

~~118~~

~~PART II~~

~~DUKE ENERGY INDIANA, LLC~~

~~CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME~~

Years Ended December 31,
(in millions) 2017
2016
2015
Operating Revenues $ 3,047
$ 2,958
$ 2,890
Operating Expenses
Fuel used in electric generation and purchased power 966

909
982
Operation, maintenance and other 733

723
682
Depreciation and amortization 458

496
434
Property and other taxes 76

58
61
Impairment charges 18

8
88
Total operating expenses 2,251
2,194
2,247
Gains on Sales of Other Assets and Other, net —
1
1
Operating Income 796
765
644
Other Income and Expenses, net 37
22
11
Interest Expense 178
181
176
Income Before Income Taxes 655

606

479
Income Tax Expense 301
225
163
Net Income $ 354

$ 381

$ 316
Other Comprehensive Loss, net of tax
Reclassification into earnings from cash flow hedges —
(1 ) (2 )
Comprehensive Income $ 354

$ 380

$ 314

~~See Notes to Consolidated Financial Statements~~

~~119~~

~~PART II~~

~~DUKE ENERGY INDIANA, LLC~~

~~CONSOLIDATED BALANCE SHEETS~~

December 31,
(in millions) 2017
2016
ASSETS
Current Assets
Cash and cash equivalents $ 9
$ 17
Receivables (net of allowance for doubtful accounts of $2 at 2017 and $1 at 2016) 57
105
Receivables from affiliated companies 125
114
Notes receivable from affiliated companies —
86
Inventory 450

504
Regulatory assets 165
149
Other 30
45
Total current assets 836
1,020
Property, Plant and Equipment
Cost 14,948
14,241
Accumulated depreciation and amortization (4,662 ) (4,317 )
Net property, plant and equipment 10,286
9,924
Other Noncurrent Assets
Regulatory assets 978
1,073
Other 189
147
Total other noncurrent assets 1,167
1,220
Total Assets $ 12,289
$ 12,164
LIABILITIES AND EQUITY
Current Liabilities
Accounts payable $ 196
$ 263
Accounts payable to affiliated companies 78
74
Notes payable to affiliated companies 161
—
Taxes accrued 95
31
Interest accrued 57
61
Current maturities of long-term debt 3
3
Asset retirement obligations 54
—
Regulatory liabilities 24
40
Other 104
93
Total current liabilities 772
565
Long-Term Debt 3,630
3,633
Long-Term Debt Payable to Affiliated Companies 150
150
Other Noncurrent Liabilities
Deferred income taxes 925
1,900
Asset retirement obligations 727
866
Regulatory liabilities 1,723
748
Accrued pension and other post-retirement benefit costs 76
71
Investment tax credits 147
137
Other 18
27
Total other noncurrent liabilities 3,616
3,749
Commitments and Contingencies
Equity
Member's Equity 4,121
4,067
Total Liabilities and Equity $ 12,289
$ 12,164

~~See Notes to Consolidated Financial Statements~~

~~120~~

~~PART II~~

~~DUKE ENERGY INDIANA, LLC~~

~~CONSOLIDATED STATEMENTS OF CASH FLOWS~~

Years Ended December 31,
(in millions) 2017
2016
2015
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 354
$ 381
$ 316
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 462
499
439
Equity component of AFUDC (28 ) (16 ) (11 )
Gains on sales of other assets —
—
(1 )
Impairment charges 18
8
88
Deferred income taxes 152
213
262
Accrued pension and other post-retirement benefit costs 2
8
13
Contributions to qualified pension plans —
(9 ) (19 )
Payments for asset retirement obligations (45 ) (46 ) (19 )
(Increase) decrease in
Receivables 59
(2 ) (7 )
Receivables from affiliated companies (11 ) (43 ) 44
Inventory 54
66
(21 )
Other current assets 28
(67 ) 90
Increase (decrease) in
Accounts payable (86 ) 8
33
Accounts payable to affiliated companies 4
(9 ) 25
Taxes accrued 64
(4 ) 35
Other current liabilities (10 ) (81 ) 26
Other assets (28 ) (27 ) (82 )
Other liabilities (20 ) (8 ) (35 )
Net cash provided by operating activities 969
871
1,176
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (840 ) (755 ) (690 )
Purchases of available-for-sale securities (20 ) (14 ) (9 )
Proceeds from sales and maturities of available-for-sale securities 7
11
11
Proceeds from the sales of other assets —
—
17
Notes receivable from affiliated companies 86
(3 ) (83 )
Other (65 ) 32
(17 )
Net cash used in investing activities (832 ) (729 ) (771 )
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from the issuance of long-term debt —
494
—
Payments for the redemption of long-term debt (5 ) (478 ) (5 )
Notes payable to affiliated companies 161
—
(71 )
Dividends to parent —
—
(326 )
Distributions to parent (300 ) (149 ) —
Other (1 ) (1 ) —
Net cash used in financing activities (145 ) (134 ) (402 )
Net (decrease) increase in cash and cash equivalents (8 ) 8
3
Cash and cash equivalents at beginning of period 17
9
6
Cash and cash equivalents at end of period $ 9
$ 17
$ 9
Supplemental Disclosures:
Cash paid for interest, net of amount capitalized $ 179
$ 171
$ 175
Cash paid for (received from) income taxes 117
(7 ) (253 )
Significant non-cash transactions:
Accrued capital expenditures 125
99
64

~~See Notes to Consolidated Financial Statements~~

~~121~~

~~PART II~~

~~DUKE ENERGY INDIANA, LLC~~

~~CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY~~

Accumulated
Other
Comprehensive
Income
Additional
Net Gains on

Common
Paid-in
Retained
Member's
Cash Flow
Total
(in millions) Stock
Capital
Earnings
Equity
Hedges
Equity
Balance at December 31, 2014 $ 1
$ 1,384
$ 2,460
$ —
$ 3
$ 3,848
Net income —
—
316
—
—
316
Other comprehensive loss —
—
—
—
(2 ) (2 )
Dividends to parent —
—
(326 ) —
—
(326 )
Balance at December 31, 2015 $ 1

$ 1,384

$ 2,450

$ —
$ 1

$ 3,836
Net income —
—
—
381
—
381
Other comprehensive loss —
—
—
—
(1 ) (1 )
Distributions to parent —
—
—
(149 ) —
(149 )
Transfer to Member's Equity (1 ) (1,384 ) (2,450 ) 3,835
—
—
Balance at December 31, 2016 $ —

$ —

$ —

$ 4,067
$ —

$ 4,067
Net income —
—
—
354
—
354
Distributions to parent —
—
—
(300 ) —
(300 )
Balance at December 31, 2017 $ —

$ —

$ —

$ 4,121
$ —

$ 4,121

~~See Notes to Consolidated Financial Statements~~

~~122~~

~~PART II~~

~~REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM~~

~~To the shareholder and the Board of Directors of Piedmont Natural Gas Company, Inc.~~

~~Opinion on the Financial Statements~~

We have audited the accompanying consolidated balance sheets of Piedmont Natural Gas Company, Inc. and subsidiaries (the "Company") as of December 31, 2017 and 2016, the related consolidated statements of operations and comprehensive income, changes in equity, and cash flows, for each of the three years in the periods ended December 31, 2017, October 31, 2016, October 31, 2015 and for the 2 months ended December 31, 2016 and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2017 and 2016, and the results of its operations and its cash flows for each of the three years in the periods ended December 31, 2017, October 31, 2016, October 31, 2015 and for the 2 months ended December 31, 2016, in conformity with the accounting principles generally accepted in the United States of America.

~~Basis for Opinion~~

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Emphasis of Matter

As discussed in Note 1 to the financial statements, effective for fiscal year 2016, the Company changed its fiscal year end from October 31 to December 31. This resulted in a ~~2-month~~two-month transition period beginning November 1, 2016 through December 31, 2016.

/s/Deloitte & Touche LLP

Charlotte, North Carolina

February ~~21, 2018~~28, 2019

We have served as the Company's auditor since 1951.

~~123~~



FINANCIAL STATEMENTS

~~PART II~~

PIEDMONT NATURAL GAS COMPANY, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME


	Year Ended			Two Months Ended		Years Ended October 31,						Years Ended December 31,					Two Months Ended December 31,			Year Ended October 31,
(in millions)	December 31, 2017			December 31, 2016		2016			2015			2018		2017			2016			2016
Operating Revenues
Regulated natural gas	$	1,319		$	320	$	1,139		$	1,372		$	1,365	$	1,319		$	320		$	1,139
Nonregulated natural gas and other	9			2		10			11			10		9			2			10
Total operating revenues	1,328			322		1,149			1,383			1,375		1,328			322			1,149
Operating Expenses
Cost of natural gas	524			144		391			644			584		524			144			391
Operation, maintenance and other	315			52		353			305			357		304			50			353
Depreciation and amortization	148			23		137			129			159		148			23			137
Property and other taxes	48			7		43			42			49		48			7			43
Impairment charges	7			—		—			—			—		7			—			—
Total operating expenses	1,042			226		924			1,120			1,149		1,031			224			924
Operating Income	286			96		225			263			226		297			98			225
Equity in (losses) earnings of unconsolidated affiliates	(6		)	2		29			34
Equity in earnings (losses) of unconsolidated affiliates												7		(6		)	2			29
Gain on sale of unconsolidated affiliates	—			—		133			—			—		—			—			133
Other income and expense, net	—			—		(1		)	(1		)	14		(11		)	(2		)	(1		)
Total other income and expenses	(6		)	2		161			33			21		(17		)	—			161
Interest Expense	79			12		69			69			81		79			12			69
Income Before Income Taxes	201			86		317			227			166		201			86			317
Income Tax Expense	62			32		124			90			37		62			32			124
Net Income	$	139		$	54	$	193		$	137		$	129	$	139		$	54		$	193
Other Comprehensive Income (Loss), net of tax
Other Comprehensive Income, net of tax
Unrealized loss from hedging activities of equity method investments	—			—		(3		)	(2		)	—		—			—			(3		)
Reclassification into earnings from hedging activities of equity method investments	—			—		4			1			—		—			—			4
Other Comprehensive Income (Loss), net of tax	—			—		1			(1		)
Other Comprehensive Income, net of tax												—		—			—			1
Comprehensive Income	$	139		$	54	$	194		$	136		$	129	$	139		$	54		$	194

See Notes to Consolidated Financial Statements

~~124~~



FINANCIAL STATEMENTS

~~PART II~~

PIEDMONT NATURAL GAS COMPANY, INC.

CONSOLIDATED BALANCE SHEETS


	December 31,						December 31,
(in millions)	2017			2016			2018			2017
ASSETS
Current Assets
Cash and cash equivalents	$	19		$	25		$	—		$	19
Receivables (net of allowance for doubtful accounts of $2 at 2017 and $3 at 2016)	275			232
Receivables (net of allowance for doubtful accounts of $2 at 2018 and 2017)							266			275
Receivables from affiliated companies	7			7			22			7
Inventory	66			66			70			66
Regulatory assets	95			124			54			95
Other	52			21			19			52
Total current assets	514			475			431			514
Property, Plant and Equipment
Cost	6,725			6,174			7,486			6,725
Accumulated depreciation and amortization	(1,479		)	(1,360		)	(1,575		)	(1,479		)
Net property, plant and equipment	5,246			4,814			5,911			5,246
Other Noncurrent Assets
Goodwill	49			49			49			49
Regulatory assets	283			373			303			283
Investments in equity method unconsolidated affiliates	61			212			64			61
Other	65			21			52			65
Total other noncurrent assets	458			655			468			458
Total Assets	$	6,218		$	5,944		$	6,810		$	6,218
LIABILITIES AND EQUITY
Current Liabilities
Accounts payable	$	125		$	155		$	203		$	125
Accounts payable to affiliated companies	13			8			38			13
Notes payable and commercial paper	—			330
Notes payable to affiliated companies	364			—			198			364
Taxes accrued	19			67			84			19
Interest accrued	31			33			31			31
Current maturities of long-term debt	250			35			350			250
Regulatory liabilities	3			—			37			3
Other	69			102			58			69
Total current liabilities	874			730			999			874
Long-Term Debt	1,787			1,786			1,788			1,787
Other Noncurrent Liabilities
Deferred income taxes	564			931			551			564
Asset retirement obligations	15			14			19			15
Regulatory liabilities	1,141			608			1,181			1,141
Accrued pension and other post-retirement benefit costs	5			14			4			5
Other	170			189			177			170
Total other noncurrent liabilities	1,895			1,756			1,932			1,895
Commitments and Contingencies
Equity
Common stock, no par value: 100 shares authorized and outstanding at 2017 and 2016	860			860
Common stock, no par value: 100 shares authorized and outstanding at 2018 and 2017							1,160			860
Retained earnings	802			812			931			802
Total equity	1,662			1,672			2,091			1,662
Total Liabilities and Equity	$	6,218		$	5,944		$	6,810		$	6,218

See Notes to Consolidated Financial Statements

~~125~~



FINANCIAL STATEMENTS

~~PART II~~

PIEDMONT NATURAL GAS COMPANY, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS


	Year Ended			Two Months Ended			Years Ended October 31,						Years Ended December 31,						Two Months Ended December 31,			Year Ended October 31,
(in millions)	December 31, 2017			December 31, 2016			2016			2015			2018			2017			2016			2016
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	139		$	54		$	193		$	137		$	129		$	139		$	54		$	193
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	151			25			148			140			161			151			25			148
Gains on sales of other assets	—			—			(133		)	—			—			—			—			(133		)
Impairment charges	7			—			—			—			—			7			—			—
Deferred income taxes	154			26			74			73			(31		)	154			26			74
Equity in losses (earnings) from unconsolidated affiliates	6			(2		)	(29		)	(34		)
Equity in (earnings) losses from unconsolidated affiliates													(7		)	6			(2		)	(29		)
Accrued pension and other post-retirement benefit costs	23			5			3			8			(4		)	23			5			3
Contributions to qualified pension plans	(11		)	(10		)	(14		)	(13		)	—			(11		)	(10		)	(14		)
Payments for asset retirement obligations	—			(1		)	(6		)	(6		)	—			—			(1		)	(6		)
Provision for rate refunds													43			—			—			—
(Increase) decrease in
Receivables	(40		)	(157		)	12			3			7			(40		)	(157		)	12
Receivables from affiliated companies	—			—			(7		)	—			(15		)	—			—			(7		)
Inventory	—			(11		)	14			16			(4		)	—			(11		)	14
Other current assets	(20		)	8			(98		)	46			71			(20		)	8			(98		)
Increase (decrease) in
Accounts payable	(13		)	35			6			(5		)	15			(13		)	35			6
Accounts payable to affiliated companies	5			4			6			—			25			5			4			6
Taxes accrued	(48		)	(2		)	38			4			65			(48		)	(2		)	38
Other current liabilities	(9		)	2			28			(21		)	21			(9		)	2			28
Other assets	7			(7		)	(107		)	(5		)	6			7			(7		)	(91		)
Other liabilities	(2		)	5			180			29			(4		)	(2		)	5			180
Net cash provided by (used in) operating activities	349			(26		)	308			372			478			349			(26		)	324
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures	(585		)	(113		)	(522		)	(444		)	(721		)	(585		)	(113		)	(522		)
Contributions to equity method investments	(12		)	(12		)	(47		)	(30		)	—			(12		)	(12		)	(47		)
Proceeds from the sales of other assets	—			—			175			—			—			—			—			175
Other	(6		)	1			21			(5		)	(10		)	(6		)	1			5
Net cash used in investing activities	(603		)	(124		)	(373		)	(479		)	(731		)	(603		)	(124		)	(389		)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from the:
Issuance of long-term debt	250			—			295			148			100			250			—			295
Issuance of common stock	—			—			122			81			—			—			—			122
Payments for the redemption of long-term debt	(35		)	—			(40		)	—			—			(35		)	—			(40		)
Notes payable and commercial paper	(330		)	185			(195		)	(15		)	—			(330		)	185			(195		)
Notes payable to affiliated companies	364			—			—			—			(166		)	364			—			—
Capital contribution from parent													300			—			—			—
Dividends to parent	—			(27		)	—			—			—			—			(27		)	—
Dividends paid	—			—			(114		)	(103		)	—			—			—			(114		)
Other	(1		)	—			—			—			—			(1		)	—			—
Net cash provided by financing activities	248			158			68			111			234			248			158			68
Net (decrease) increase in cash and cash equivalents	(6		)	8			3			4			(19		)	(6		)	8			3
Cash and cash equivalents at beginning of period	25			17			14			10			19			25			17			14
Cash and cash equivalents at end of period	$	19		$	25		$	17		$	14		$	—		$	19		$	25		$	17
Supplemental Disclosures:
Cash paid for interest, net of amount capitalized	$	78		$	11		$	81		$	72		$	79		$	78		$	11		$	81
Cash (received from) paid for income taxes	(12		)	—			(25		)	3
Cash received from income taxes													(16		)	(12		)	—			(25		)
Significant non-cash transactions:
Accrued capital expenditures	34			48			63			59			96			34			48			63
Transfer of ownership interest of certain equity method investees to parent	149			—			—			—			—			149			—			—

See Notes to Consolidated Financial Statements

~~126~~



FINANCIAL STATEMENTS

~~PART II~~

PIEDMONT NATURAL GAS COMPANY, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY


							Accumulated											Accumulated
							Other											Other
							Comprehensive											Comprehensive
							Income (Loss)											Income (Loss)
							Net Loss on											Net Gain on
							Hedging Activities											Hedging Activities
	Common			Retained			of Unconsolidated			Total			Common		Retained			of Unconsolidated			Total
(in millions)	Stock			Earnings			Affiliates			Equity			Stock		Earnings			Affiliates			Equity
Balance at October 31, 2014	$	637		$	672		$	—		$	1,309
Net income	—			137			—			137
Other comprehensive loss	—			—			(1		)	(1		)
Common stock issuances, including dividend reinvestment and employee benefits	85			—			—			85
Expenses from issuance of common stock	(1		)	—			—			(1		)
Common stock dividends	—			(103		)	—			(103		)
Balance at October 31, 2015	$	721		$	706		$	(1	)	$	1,426		$	721	$	706		$	(1	)	$	1,426
Net income	—			193			—			193			—		193			—			193
Other comprehensive income	—			—			1			1			—		—			1			1
Common stock issuances, including dividend reinvestment and employee benefits	139			—			—			139			139		—			—			139
Common stock dividends	—			(114		)	—			(114		)	—		(114		)	—			(114		)
Balance at October 31, 2016	$	860		$	785		$	—		$	1,645		$	860	$	785		$	—		$	1,645
Net income	—			54			—			54			—		54			—			54
Dividends to parent	—			(27		)	—			(27		)	—		(27		)	—			(27		)
Balance at December 31, 2016	$	860		$	812		$	—		$	1,672		$	860	$	812		$	—		$	1,672
Net income	—			139			—			139			—		139			—			139
Transfer of ownership interest of certain equity method investees to parent	—			(149		)	—			(149		)	—		(149		)	—			(149		)
Balance at December 31, 2017	$	860		$	802		$	—		$	1,662		$	860	$	802		$	—		$	1,662
Net income													—		129			—			129
Contribution from parent													300		—			—			300
Balance at December 31, 2018													$	1,160	$	931		$	—		$	2,091

See Notes to Consolidated Financial Statements

~~127~~



FINANCIAL STATEMENTS	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

~~PART II~~

~~DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –~~

~~DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC– PIEDMONT NATURAL GAS COMPANY, INC.~~

~~Combined Notes To Consolidated Financial Statements~~

~~For the Years Ended December 31, 2017, 2016 and 2015~~

Index to Combined Notes To Consolidated Financial Statements

The notes to the consolidated financial statements are a combined presentation. The following table indicates the registrants to which the notes apply.

Applicable Notes
Registrant 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25
Duke Energy Corporation • • • • • • • • • • • • • • • • • • • • • • • •
Duke Energy Carolinas, LLC • • • • • • • • • • • • • • • • • • • • •
Progress Energy, Inc. • • • • • • • • • • • • • • • • • • • • •
Duke Energy Progress, LLC • • • • • • • • • • • • • • • • • • • •
Duke Energy Florida, LLC • • • • • • • • • • • • • • • • • • • •
Duke Energy Ohio, Inc. • • • • • • • • • • • • • • • • • • • • •
Duke Energy Indiana, LLC • • • • • • • • • • • • • • • • • • • • •
Piedmont Natural Gas Company, Inc. • • • • • • • • • • • • • • • • • • • • • •

Applicable Notes

Registrant

Duke Energy

•

Duke Energy Carolinas

•

Progress Energy

•

Duke Energy Progress

•

Duke Energy Florida

•

Duke Energy Ohio

•

Duke Energy Indiana

•

Piedmont

•

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Operations and Basis of Consolidation

Duke Energy ~~Corporation (collectively with its subsidiaries, Duke Energy)~~ is an energy company headquartered in Charlotte, North Carolina, subject to regulation by the ~~Federal Energy Regulatory Commission (FERC).~~FERC and other regulatory agencies listed below. Duke Energy operates in the ~~United States (U.S.)~~U.S. primarily through its direct and indirect subsidiaries. Certain Duke Energy subsidiaries are also subsidiary registrants, including Duke Energy ~~Carolinas, LLC (Duke Energy Carolinas);~~Carolinas; Progress ~~Energy, Inc. (Progress Energy);~~Energy; Duke Energy ~~Progress, LLC (Duke Energy Progress);~~Progress; Duke Energy ~~Florida, LLC (Duke Energy Florida);~~Florida; Duke Energy ~~Ohio, Inc. (Duke Energy Ohio);~~Ohio; Duke Energy Indiana ~~LLC (Duke Energy Indiana)~~ and ~~Piedmont Natural Gas Company, Inc. (Piedmont).~~Piedmont. When discussing Duke Energy’s consolidated financial information, it necessarily includes the results of its ~~seven~~ separate ~~subsidiary registrants (collectively referred to as the~~ Subsidiary ~~Registrants),~~Registrants, which along with Duke Energy, are collectively referred to as the Duke Energy Registrants.

In October 2016, Duke Energy completed the acquisition of Piedmont. Duke Energy's consolidated financial statements include Piedmont's results of operations and cash flows activity subsequent to the acquisition date. Effective November 1, 2016, Piedmont's fiscal year-end was changed from October 31 to December 31, the year-end of Duke Energy. A transition report was filed on Form 10-Q (Form 10-QT) ~~as of December 31, 2016,~~ for the transition period from November 1, 2016, to December 31, 2016. See Note 2 for additional information regarding the acquisition.

In December 2016, Duke Energy completed an exit of the Latin American market to focus on its domestic regulated business, which was further bolstered by the acquisition of Piedmont. The sale of the International Energy business segment, excluding an equity method investment in ~~National Methanol Company (NMC),~~NMC, was completed through two transactions including a sale of assets in Brazil to ~~China Three Gorges (Luxembourg) Energy S.à.r.l. (CTG)~~CTG and a sale of Duke Energy's remaining Latin American assets in Peru, Chile, Ecuador, Guatemala, El Salvador and Argentina to ~~ISQ Enerlam Aggregator, L.P. and Enerlam (UK) Holding Ltd. (I Squared)~~I Squared (collectively, the International Disposal Group). See Note 2 for additional information on the sale of International Energy.

Duke Energy Carolinas is a regulated public utility primarily engaged in the generation, transmission, distribution and sale of electricity in portions of North Carolina and South Carolina. Duke Energy Carolinas is subject to the regulatory provisions of the ~~North Carolina Utilities Commission (NCUC), Public Service Commission of South Carolina (PSCSC), U.S. Nuclear Regulatory Commission (NRC)~~NCUC, PSCSC, NRC and FERC.

Progress Energy is a public utility holding company, ~~headquartered in Raleigh, North Carolina, subject to regulation by FERC. Progress Energy~~which conducts operations through its wholly owned subsidiaries, Duke Energy Progress and Duke Energy Florida. Progress Energy is subject to regulation by FERC and other regulatory agencies listed below.

~~128~~

~~PART II~~



FINANCIAL STATEMENTS	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

~~DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –~~

~~DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC– PIEDMONT NATURAL GAS COMPANY, INC.~~

~~Combined Notes To Consolidated Financial Statements – (Continued)~~

Duke Energy Ohio is a regulated public utility primarily engaged in the transmission and distribution of electricity in portions of Ohio and Kentucky, the generation and sale of electricity in portions of Kentucky and the transportation and sale of natural gas in portions of Ohio and Kentucky. Duke Energy Ohio conducts competitive auctions for retail electricity supply in Ohio whereby the energy price is recovered from retail customers and recorded in Operating Revenues on the Consolidated Statements of Operations and Comprehensive Income. Operations in Kentucky are conducted through its wholly owned subsidiary, Duke Energy ~~Kentucky, Inc. (Duke Energy Kentucky).~~Kentucky. References herein to Duke Energy Ohio collectively include Duke Energy Ohio and its subsidiaries, unless otherwise noted. Duke Energy Ohio is subject to the regulatory provisions of the ~~Public Utilities Commission of Ohio (PUCO), Kentucky Public Service Commission (KPSC)~~PUCO, KPSC and FERC. On April 2, 2015, Duke Energy completed the sale of its nonregulated Midwest generation business, which sold power into wholesale energy markets, to a subsidiary of Dynegy Inc. (Dynegy). For further information about the sale of the Midwest Generation business, refer to Note 2. Substantially all of Duke Energy Ohio's operations that remain after the sale qualify for regulatory accounting.

Certain prior year amounts have been reclassified to conform to the current year presentation.

Other Current Assets and Liabilities


		December 31,					December 31,
(in millions)	Location	2017		2016		Location	2018		2017
Duke Energy
Income taxes receivable						Current Assets	$	729	$	330
Accrued compensation	Current Liabilities	$	757	$	765	Current Liabilities	793		757
Duke Energy Carolinas
Accrued compensation	Current Liabilities	$	252	$	248	Current Liabilities	$	251	$	252
Customer deposits	Current Liabilities	121		155
Progress Energy
Income taxes receivable	Current Assets	$	278	$	19	Current Assets	$	66	$	278
Customer deposits	Current Liabilities	338		363		Current Liabilities	345		338
Duke Energy Progress
Customer deposits	Current Liabilities	$	129	$	141	Current Liabilities	$	137	$	129
Accrued compensation	Current Liabilities	132		135		Current Liabilities	130		132
Duke Energy Florida
Customer deposits	Current Liabilities	$	208	$	222	Current Liabilities	$	208	$	208
Other accrued liabilities						Current Liabilities	85		16
Duke Energy Ohio
Income taxes receivable	Current Assets	$	36	$	16	Current Assets	$	13	$	36
Customer deposits	Current Liabilities	46		62		Current Liabilities	44		46
Duke Energy Indiana
Customer deposits	Current Liabilities	$	45	$	44	Current Liabilities	$	47	$	45
Piedmont
Income taxes receivable	Current Assets	$	43	$	9	Current Assets	$	11	$	43

Discontinued Operations

The results of operations of the International Disposal Group ~~as well as Duke Energy Ohio's nonregulated Midwest Generation business and Duke Energy Retail Sales, LLC (collectively, Midwest Generation Disposal Group)~~ have been classified as Discontinued Operations on Duke Energy's Consolidated Statements of Operations. Duke Energy has elected to present cash flows of discontinued operations combined with cash flows of continuing operations. Unless otherwise noted, the notes to these consolidated financial statements exclude amounts related to discontinued operations for all periods presented. See Note 2 for additional information.

~~129~~

~~PART II~~

~~DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –~~

~~DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC– PIEDMONT NATURAL GAS COMPANY, INC.~~

~~Combined Notes To Consolidated Financial Statements – (Continued)~~

Amounts Attributable to Controlling Interests

For the years ended December 31, 2018, and 2017, the Income (Loss) From Discontinued Operations, net of tax on Duke Energy's Consolidated Statements of Operations is entirely attributable to controlling interest. For the year ended December 31, ~~2017, the Loss~~2016, $18 million of net income is attributable to noncontrolling interests, which consisted of $7 million included in Income from Continuing Operations and $11 million included in Income (Loss) From Discontinued Operations, net of tax on Duke Energy's Consolidated Statement of Operations is entirely attributable to controlling interest. The following table presents Net Income Attributable to Duke Energy Corporation for continuing operations and discontinued operations for the years ended December 31, 2016, and 2015.Operations.

Year ended December 31,
(in millions) 2016 2015
Income from Continuing Operations $ 2,578
$ 2,654
Income from Continuing Operations Attributable to Noncontrolling Interests 7
9
Income from Continuing Operations Attributable to Duke Energy Corporation $ 2,571
$ 2,645
(Loss) Income From Discontinued Operations, net of tax $ (408 ) $ 177
Income from Discontinued Operations Attributable to Noncontrolling Interests, net of tax 11
6
(Loss) Income From Discontinued Operations Attributable to Duke Energy Corporation, net of tax $ (419 ) $ 171
Net Income $ 2,170
$ 2,831
Net Income Attributable to Noncontrolling Interests 18
15
Net Income Attributable to Duke Energy Corporation $ 2,152
$ 2,816



FINANCIAL STATEMENTS	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Significant Accounting Policies

Use of Estimates

In preparing financial statements that conform to ~~generally accepted accounting principles (GAAP) in the U.S.,~~GAAP, the Duke Energy Registrants must make estimates and assumptions that affect the reported amounts of assets and liabilities, the reported amounts of revenues and expenses and the disclosure of contingent assets and liabilities at the date of the financial statements. Actual results could differ from those estimates.

Regulatory Accounting

~~Regulated Fuel and Purchased Gas Adjustment Clauses~~

The Duke Energy Registrants utilize cost-tracking mechanisms, commonly referred to as fuel adjustment clauses or ~~purchased gas adjustment clauses (PGA).~~PGA clauses. These clauses allow for the recovery of fuel and fuel-related costs, portions of purchased power, natural gas costs and hedging costs through surcharges on customer rates. The difference between the costs incurred and the surcharge revenues is recorded either as an adjustment to Operating Revenues, Operating Expenses – Fuel used in electric generation or Operating Expenses – Cost of natural gas on the Consolidated Statements of Operations, with an off-setting impact on regulatory assets or liabilities.



FINANCIAL STATEMENTS	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Cash, ~~and~~ Cash Equivalents and Restricted Cash

All highly liquid investments with maturities of three months or less at the date of acquisition are considered cash equivalents.

~~Restricted Cash~~

~~The~~ Duke Energy, ~~Registrants~~Progress Energy and Duke Energy Florida have restricted cash balances related primarily to collateral assets, escrow deposits and ~~variable interest entities (VIEs).~~VIEs. See Note 17 for additional information. Restricted cash ~~balances~~amounts are ~~reflected~~included in Other within Current Assets and ~~in Other within~~ Other Noncurrent Assets on the Consolidated Balance Sheets. ~~At December 31, 2017,~~The following table presents the components of cash, cash equivalents and ~~2016, Duke Energy had~~ restricted cash ~~totaling $147 million and $137 million, respectively.~~

included in the Consolidated Balance Sheets.

~~130~~

~~PART II~~

~~DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –~~

~~DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC– PIEDMONT NATURAL GAS COMPANY, INC.~~

~~Combined Notes To Consolidated Financial Statements – (Continued)~~



	December 31, 2018						December 31, 2017
					Duke						Duke
	Duke		Progress		Energy		Duke		Progress		Energy
	Energy		Energy		Florida		Energy		Energy		Florida
Current Assets
Cash and cash equivalents	$	442	$	67	$	36	$	358	$	40	$	13
Other	141		39		39		138		40		40
Other Noncurrent Assets
Other	8		6		—		9		7		—
Total cash, cash equivalents and restricted cash	$	591	$	112	$	75	$	505	$	87	$	53

Inventory

Inventory is used for operations and is recorded primarily using the average cost method. Inventory related to regulated operations is valued at historical cost. Inventory related to nonregulated operations is valued at the lower of cost or market. Materials and supplies are recorded as inventory when purchased and subsequently charged to expense or capitalized to property, plant and equipment when installed. Inventory, including excess or obsolete inventory, is written-down to the lower of cost or market value. Once inventory has been written-down, it creates a new cost basis for the inventory that is not subsequently written-up. Provisions for inventory write-offs were not material at December 31, ~~2017,~~2018, and ~~2016.~~2017. The components of inventory are presented in the tables below.


	December 31, 2017																December 31, 2018
			Duke				Duke		Duke		Duke		Duke						Duke				Duke		Duke		Duke		Duke
	Duke		Energy		Progress		Energy		Energy		Energy		Energy				Duke		Energy		Progress		Energy		Energy		Energy		Energy
(in millions)	Energy		Carolinas		Energy		Progress		Florida		Ohio		Indiana		Piedmont		Energy		Carolinas		Energy		Progress		Florida		Ohio		Indiana		Piedmont
Materials and supplies	$	2,293	$	744	$	1,118	$	774	$	343	$	82	$	309	$	2	$	2,238	$	731	$	1,049	$	734	$	315	$	84	$	312	$	2
Coal	603		192		255		139		116		17		139		—		491		175		192		106		86		14		109		—
Natural gas, oil and other	354		35		219		104		115		34		2		64		355		42		218		114		103		28		1		68
Total inventory	$	3,250	$	971	$	1,592	$	1,017	$	574	$	133	$	450	$	66	$	3,084	$	948	$	1,459	$	954	$	504	$	126	$	422	$	70


	December 31, 2016																December 31, 2017
			Duke				Duke		Duke		Duke		Duke						Duke				Duke		Duke		Duke		Duke
	Duke		Energy		Progress		Energy		Energy		Energy		Energy				Duke		Energy		Progress		Energy		Energy		Energy		Energy
(in millions)	Energy		Carolinas		Energy		Progress		Florida		Ohio		Indiana		Piedmont		Energy		Carolinas		Energy		Progress		Florida		Ohio		Indiana		Piedmont
Materials and supplies	$	2,374	$	767	$	1,167	$	813	$	354	$	84	$	312	$	1	$	2,293	$	744	$	1,118	$	774	$	343	$	82	$	309	$	2
Coal	774		251		314		148		166		19		190		—		603		192		255		139		116		17		139		—
Natural gas, oil and other	374		37		236		115		121		34		2		65		354		35		219		104		115		34		2		64
Total inventory	$	3,522	$	1,055	$	1,717	$	1,076	$	641	$	137	$	504	$	66	$	3,250	$	971	$	1,592	$	1,017	$	574	$	133	$	450	$	66

Investments in Debt and Equity Securities

The Duke Energy Registrants classify investments ~~into two categories – trading~~in equity securities as FV-NI and ~~available-for-sale.~~investments in debt securities as AFS. Both categories are recorded at fair value on the Consolidated Balance Sheets. Realized and unrealized gains and losses on ~~trading~~ securities classified as FV-NI are reported through net income. Unrealized gains and losses for debt securities classified as AFS are included in ~~earnings.~~AOCI until realized, except OTTIs that are included in earnings immediately. At the time gains and losses for debt securities are realized, they are reported through net income. For certain investments of regulated operations, such as substantially all of the ~~Nuclear Decommissioning Trust Funds (NDTF),~~NDTF, realized and unrealized gains and losses (including any ~~other-than-temporary impairments (OTTIs))~~OTTIs) on ~~available-for-sale~~debt securities are recorded as a regulatory asset or liability. ~~Otherwise, unrealized gains and losses are included in Accumulated Other Comprehensive Income (AOCI), unless other-than-temporarily impaired. OTTIs for equity securities and the~~The credit loss portion of debt securities of nonregulated operations are included in earnings. Investments in debt and equity securities are classified as either current or noncurrent based on management’s intent and ability to sell these securities, taking into consideration current market liquidity. See Note 15 for further information.



FINANCIAL STATEMENTS	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Goodwill and Intangible Assets

Goodwill

Effective with Piedmont's change in fiscal year end to December 31, as discussed above, Piedmont changed the date of its annual impairment testing of goodwill from October 31 to August 31 to align with the other Duke Energy Registrants.

Duke Energy, Progress Energy, Duke Energy Ohio and Piedmont perform annual goodwill impairment tests as of August 31 each year at the reporting unit level, which is determined to be ~~an operating~~a business segment or one level below. Duke Energy, Progress Energy, Duke Energy Ohio and Piedmont update these tests between annual tests if events or circumstances occur that would more likely than not reduce the fair value of a reporting unit below its carrying value. See Note 11 for further information.

Intangible Assets

Emission allowances permit the holder of the allowance to emit certain gaseous byproducts of fossil fuel combustion, including ~~sulfur dioxide (SO~~SO₂) and ~~nitrogen oxide (NO~~NO_X). Allowances are issued by the ~~U.S. Environmental Protection Agency (EPA)~~EPA at zero cost and may also be bought and sold via third-party transactions. Allowances allocated to or acquired by the Duke Energy Registrants are held primarily for consumption. Carrying amounts for emission allowances are based on the cost to acquire the allowances or, in the case of a business combination, on the fair value assigned in the allocation of the purchase price of the acquired business. Emission allowances are expensed to Fuel used in electric generation and purchased power on the Consolidated Statements of Operations.

~~131~~

~~PART II~~

~~DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –~~

~~DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC– PIEDMONT NATURAL GAS COMPANY, INC.~~

~~Combined Notes To Consolidated Financial Statements – (Continued)~~

~~Renewable energy certificates~~RECs are used to measure compliance with renewable energy standards and are held primarily for consumption. See Note 11 for further information.

Long-Lived Asset Impairments

Equity Method Investment Impairments

Investments in affiliates that are not controlled by Duke Energy, but over which it has significant influence, are accounted for using the equity method. Equity method investments are assessed for impairment whenever events or changes in circumstances indicate that the carrying amount of the investment may not be recoverable. If the decline in value is considered to be other than temporary, the investment is written down to its estimated fair value, which establishes a new cost basis in the investment.



FINANCIAL STATEMENTS	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Property, Plant and Equipment

Property, plant and equipment are stated at the lower of depreciated historical cost net of any disallowances or fair value, if impaired. The Duke Energy Registrants capitalize all construction-related direct labor and material costs, as well as indirect construction costs such as general engineering, taxes and financing costs. See “Allowance for Funds Used During Construction ~~(AFUDC)~~ and Interest Capitalized” for information on capitalized financing costs. Costs of renewals and betterments that extend the useful life of property, plant and equipment are also capitalized. The cost of repairs, replacements and major maintenance projects, which do not extend the useful life or increase the expected output of the asset, are expensed as incurred. Depreciation is generally computed over the estimated useful life of the asset using the composite straight-line method. Depreciation studies are conducted periodically to update composite rates and are approved by state utility commissions and/or the FERC when required. The composite weighted average depreciation rates, excluding nuclear fuel, are included in the table that follows.


	Years Ended December 31,						Years Ended December 31,
	2017		2016		2015		2018		2017		2016
Duke Energy	2.8	%	2.8	%	2.9	%	3.0	%	2.8	%	2.8	%
Duke Energy Carolinas	2.8	%	2.8	%	2.8	%	2.8	%	2.8	%	2.8	%
Progress Energy	2.6	%	2.7	%	2.6	%	2.9	%	2.6	%	2.7	%
Duke Energy Progress	2.6	%	2.6	%	2.6	%	2.9	%	2.6	%	2.6	%
Duke Energy Florida	2.8	%	2.8	%	2.7	%	3.0	%	2.8	%	2.8	%
Duke Energy Ohio	2.8	%	2.6	%	2.7	%	2.8	%	2.8	%	2.6	%
Duke Energy Indiana	3.0	%	3.1	%	3.0	%	3.3	%	3.0	%	3.1	%
Piedmont^(a)	2.3	%					2.5	%	2.3	%


(a)	Piedmont's weighted average depreciation rate was 2.4 percent ~~2.4 percent, and 2.5 percent~~ for the annualized two months ended December 31, 2016, and for the ~~years~~year ended October 31, ~~2016 and 2015, respectively.~~2016.

See Note 10 for ~~further~~additional information.

Nuclear Fuel

Nuclear fuel is classified as Property, Plant and Equipment on the Consolidated Balance Sheets, except for Duke Energy Florida. Nuclear fuel amounts at Duke Energy Florida were reclassified to Regulatory assets pursuant to the Revised and Restated Stipulation and Settlement Agreement approved in November 2013 among Duke Energy Florida, the Florida Office of Public Counsel (Florida OPC) and other customer advocates (the 2013 Settlement).

~~132~~

~~PART II~~

~~DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –~~

~~DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC– PIEDMONT NATURAL GAS COMPANY, INC.~~

~~Combined Notes To Consolidated Financial Statements – (Continued)~~

Sheets.

Allowance for Funds Used During Construction and Interest Capitalized

AFUDC equity, a permanent difference for income taxes, reduces the ~~effective tax rate (ETR)~~ETR when capitalized and increases the ETR when depreciated or amortized. See Note 2223 for additional information.

For nonregulated operations, interest is capitalized during the construction phase with an offsetting non-cash credit to Interest Expense on the Consolidated Statements of Operations.

Asset Retirement Obligations

~~Asset retirement obligations (AROs)~~AROs are recognized for legal obligations associated with the retirement of property, plant and equipment. Substantially all AROs are related to regulated operations. When recording an ARO, the present value of the projected liability is recognized in the period in which it is incurred, if a reasonable estimate of fair value can be made. The liability is accreted over time. For operating plants, the present value of the liability is added to the cost of the associated asset and depreciated over the remaining life of the asset. For retired plants, the present value of the liability is recorded as a regulatory asset unless determined not to be ~~recoverable.~~probable of recovery.



FINANCIAL STATEMENTS	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The present value of the initial obligation and subsequent updates are based on discounted cash flows, which include estimates regarding timing of future cash flows, selection of discount rates and cost escalation rates, among other factors. These estimates are subject to change. Depreciation expense is adjusted prospectively for any changes to the carrying amount of the associated asset. The Duke Energy Registrants receive amounts to fund the cost of the ARO for regulated operations through a combination of regulated revenues and earnings on the NDTF. As a result, amounts recovered in regulated revenues, earnings on the NDTF, accretion expense and depreciation of the associated asset are netted and deferred as a regulatory asset or liability.

Obligations for nuclear decommissioning are based on site-specific cost studies. Duke Energy Carolinas and Duke Energy Progress assume prompt dismantlement of the nuclear facilities after operations are ceased. Duke Energy Florida assumes Crystal River Unit 3 ~~Nuclear Plant (Crystal River Unit 3)~~ will be placed into a safe storage configuration until eventual dismantlement is completed by 2074. Duke Energy Carolinas, Duke Energy Progress and Duke Energy Florida also assume that spent fuel will be stored on-site until such time that it can be transferred to a yet to be built ~~U.S. Department of Energy (DOE)~~DOE facility.

Revenue Recognition

Duke Energy recognizes revenue as customers obtain control of promised goods and ~~Unbilled Revenue~~

~~Revenues on sales~~services in an amount that reflects consideration expected in exchange for those goods or services. Generally, the delivery of electricity and natural gas ~~are~~results in the transfer of control to customers at the time the commodity is delivered and the amount of revenue recognized ~~when service~~ is ~~provided or the product is delivered. Unbilled revenues are recognized by applying customer billing rates~~equal to the amount billed to each customer, including estimated volumes ~~of energy or natural gas~~ delivered ~~but~~when billings have not yet billed. Unbilled revenues can vary significantly from period to period as a result of seasonality, weather, customer usage patterns, customer mix, average price in effect for customer classes, timing of rendering customer bills and meter reading schedules, and the impact of weather normalization or margin decoupling mechanisms.

~~Unbilled revenues are included within Receivables and Receivables of VIEs on the Consolidated Balance Sheets as shown in the following table.~~

December 31,
(in millions) 2017
2016
Duke Energy $ 944
$ 831
Duke Energy Carolinas 342
313
Progress Energy 228
161
Duke Energy Progress 143
102
Duke Energy Florida 85
59
Duke Energy Ohio 4
2
Duke Energy Indiana 21
32
Piedmont 86
77

~~133~~

~~PART II~~

~~DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –~~

~~DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC– PIEDMONT NATURAL GAS COMPANY, INC.~~

~~Combined Notes To Consolidated Financial Statements – (Continued)~~

Additionally, Duke Energy Ohio and Duke Energy Indiana sell, on a revolving basis, nearly all of their retail accounts receivable, including receivables for unbilled revenues, to an affiliate, Cinergy Receivables Company LLC (CRC) and account for the transfers of receivables as sales. Accordingly, the receivables sold are not reflected on the Consolidated Balance Sheets of Duke Energy Ohio and Duke Energy Indiana.occurred. See Note 1718 for further information. ~~These receivables for unbilled revenues are shown in the table below.~~

December 31,
(in millions) 2017
2016
Duke Energy Ohio $ 104
$ 97
Duke Energy Indiana 132
123

~~Allowance for Doubtful Accounts~~

~~Allowances for doubtful accounts are presented in the following table.~~

December 31,
(in millions) 2017
2016
2015
Allowance for Doubtful Accounts
Duke Energy $ 14
$ 14
$ 12
Duke Energy Carolinas 2
2
3
Progress Energy 4
6
6
Duke Energy Progress 1
4
4
Duke Energy Florida 3
2
2
Duke Energy Ohio 3
2
2
Duke Energy Indiana 2
1
1
Piedmont^(a)
2
3

Allowance for Doubtful Accounts – VIEs

Duke Energy $ 54
$ 54
$ 53
Duke Energy Carolinas 7
7
7
Progress Energy 7
7
8
Duke Energy Progress 5
5
5
Duke Energy Florida 2
2
3

~~(a) Piedmont's allowance for doubtful accounts was $2 million as of October 31, 2016, and 2015.~~

Derivatives and Hedging

Derivative and non-derivative instruments may be used in connection with commodity price and interest rate activities, including swaps, futures, forwards and options. All derivative instruments, except those that qualify for the ~~normal purchase/normal sale (NPNS)~~NPNS exception, are recorded on the Consolidated Balance Sheets at fair value. Qualifying derivative instruments may be designated as either cash flow hedges or fair value hedges. Other derivative instruments (undesignated contracts) either have not been designated or do not qualify as hedges. The effective portion of the change in the fair value of cash flow hedges is recorded in AOCI. The effective portion of the change in the fair value of a fair value hedge is offset in net income by changes in the hedged item. For activity subject to regulatory accounting, gains and losses on derivative contracts are reflected as regulatory assets or liabilities and not as other comprehensive income or current period income. As a result, changes in fair value of these derivatives have no immediate earnings impact.

Formal documentation, including transaction type and risk management strategy, is maintained for all contracts accounted for as a hedge. At inception and at least every three months thereafter, the hedge contract is assessed to see if it is highly effective in offsetting changes in cash flows or fair values of hedged items.

See Note 14 for further information.

~~Captive Insurance Reserves~~New Accounting Standards

See Note 1 to the Consolidated Financial Statements, “Summary of Significant Accounting Policies,” for a discussion of the impact of new accounting standards.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

See “Management’s Discussion and Analysis of Results of Operations and Financial Condition – Quantitative and Qualitative Disclosures About Market Risk.”



FINANCIAL STATEMENTS

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA



Duke Energy
Report of Independent Registered Public Accounting Firm	86
Consolidated Statements of Operations	87
Consolidated Statements of Comprehensive Income	88
Consolidated Balance Sheets	89
Consolidated Statements of Cash Flows	90
Consolidated Statements of Changes in Equity	91

Duke Energy Carolinas
Report of Independent Registered Public Accounting Firm	92
Consolidated Statements of Operations and Comprehensive Income	93
Consolidated Balance Sheets	94
Consolidated Statements of Cash Flows	95
Consolidated Statements of Changes in Equity	96

Progress Energy
Report of Independent Registered Public Accounting Firm	97
Consolidated Statements of Operations and Comprehensive Income	98
Consolidated Balance Sheets	99
Consolidated Statements of Cash Flows	100
Consolidated Statements of Changes in Equity	101

Duke Energy Progress
Report of Independent Registered Public Accounting Firm	102
Consolidated Statements of Operations and Comprehensive Income	103
Consolidated Balance Sheets	104
Consolidated Statements of Cash Flows	105
Consolidated Statements of Changes in Equity	106

Duke Energy Florida
Report of Independent Registered Public Accounting Firm	107
Consolidated Statements of Operations and Comprehensive Income	108
Consolidated Balance Sheets	109
Consolidated Statements of Cash Flows	110
Consolidated Statements of Changes in Equity	111

Duke Energy Ohio
Report of Independent Registered Public Accounting Firm	112
Consolidated Statements of Operations and Comprehensive Income	113
Consolidated Balance Sheets	114
Consolidated Statements of Cash Flows	115
Consolidated Statements of Changes in Equity	116

Duke Energy Indiana
Report of Independent Registered Public Accounting Firm	117
Consolidated Statements of Operations and Comprehensive Income	118
Consolidated Balance Sheets	119
Consolidated Statements of Cash Flows	120
Consolidated Statements of Changes in Equity	121

Piedmont
Report of Independent Registered Public Accounting Firm	122
Consolidated Statements of Operations and Comprehensive Income	123
Consolidated Balance Sheets	124
Consolidated Statements of Cash Flows	125
Consolidated Statements of Changes in Equity	126



FINANCIAL STATEMENTS



Combined Notes to Consolidated Financial Statements
Note 1 – Summary of Significant Accounting Policies	127
Note 2 – Acquisitions and Dispositions	137
Note 3 – Business Segments	140
Note 4 – Regulatory Matters	144
Note 5 – Commitments and Contingencies	166
Note 6 – Debt and Credit Facilities	174
Note 7 – Guarantees and Indemnifications	181
Note 8 – Joint Ownership of Generating and Transmission Facilities	182
Note 9 – Asset Retirement Obligations	182
Note 10 – Property, Plant and Equipment	185
Note 11 – Goodwill and Intangible Assets	187
Note 12 – Investments in Unconsolidated Affiliates	189
Note 13 – Related Party Transactions	191
Note 14 – Derivatives and Hedging	192
Note 15 – Investments in Debt and Equity Securities	198
Note 16 – Fair Value Measurements	203
Note 17 – Variable Interest Entities	209
Note 18 – Revenue	213
Note 19 – Common Stock	217
Note 20 – Severance	218
Note 21 – Stock-Based Compensation	219
Note 22 – Employee Benefit Plans	221
Note 23 – Income Taxes	243
Note 24 – Other Income and Expenses, Net	251
Note 25 – Subsequent Events	252
Note 26 – Quarterly Financial Data (Unaudited)	253



REPORTS

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the shareholders and the Board of Directors of Duke Energy ~~has captive insurance~~Corporation

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Duke Energy Corporation and subsidiaries ~~that provide coverage,~~(the "Company") as of December 31, 2018 and 2017, the related consolidated statements of operations, comprehensive income, changes in equity, and cash flows, for each of the three years in the period ended December 31, 2018, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2018 and 2017, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2018, in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2018, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 28, 2019, expressed an ~~indemnity basis,~~unqualified opinion on the Company's internal control over financial reporting.

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the ~~Subsidiary Registrants~~Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as ~~certain third parties,~~evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

/s/ Deloitte & Touche LLP

Charlotte, North Carolina

February 28, 2019

We have served as the Company's auditor since 1947.



FINANCIAL STATEMENTS

DUKE ENERGY CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS



	Years Ended December 31,
(in millions, except per share amounts)	2018			2017			2016
Operating Revenues
Regulated electric	$	22,097		$	21,177		$	21,221
Regulated natural gas	1,773			1,734			863
Nonregulated electric and other	651			654			659
Total operating revenues	24,521			23,565			22,743
Operating Expenses
Fuel used in electric generation and purchased power	6,831			6,350			6,625
Cost of natural gas	697			632			265
Operation, maintenance and other	6,463			5,944			6,224
Depreciation and amortization	4,074			3,527			3,294
Property and other taxes	1,280			1,233			1,142
Impairment charges	402			282			18
Total operating expenses	19,747			17,968			17,568
(Losses) Gains on Sales of Other Assets and Other, net	(89		)	28			27
Operating Income	4,685			5,625			5,202
Other Income and Expenses
Equity in earnings (losses) of unconsolidated affiliates	83			119			(15		)
Other income and expenses, net	399			508			463
Total other income and expenses	482			627			448
Interest Expense	2,094			1,986			1,916
Income From Continuing Operations Before Income Taxes	3,073			4,266			3,734
Income Tax Expense From Continuing Operations	448			1,196			1,156
Income From Continuing Operations	2,625			3,070			2,578
Income (Loss) From Discontinued Operations, net of tax	19			(6		)	(408		)
Net Income	2,644			3,064			2,170
Less: Net (Loss) Income Attributable to Noncontrolling Interests	(22		)	5			18
Net Income Attributable to Duke Energy Corporation	$	2,666		$	3,059		$	2,152

Earnings Per Share – Basic and Diluted
Income from continuing operations attributable to Duke Energy Corporation common stockholders
Basic	$	3.73		$	4.37		$	3.71
Diluted	$	3.73		$	4.37		$	3.71
Income (Loss) from discontinued operations attributable to Duke Energy Corporation common stockholders
Basic	$	0.03		$	(0.01	)	$	(0.60	)
Diluted	$	0.03		$	(0.01	)	$	(0.60	)
Net income attributable to Duke Energy Corporation common stockholders
Basic	$	3.76		$	4.36		$	3.11
Diluted	$	3.76		$	4.36		$	3.11
Weighted average shares outstanding
Basic	708			700			691
Diluted	708			700			691

See Notes to Consolidated Financial Statements



FINANCIAL STATEMENTS

DUKE ENERGY CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME



	Years Ended December 31,
(in millions)	2018			2017		2016
Net Income	$	2,644		$	3,064	$	2,170
Other Comprehensive (Loss) Income, net of tax
Foreign currency translation adjustments	—			—		694
Pension and OPEB adjustments	(6		)	3		(11		)
Net unrealized (losses) gains on cash flow hedges	(10		)	2		17
Reclassification into earnings from cash flow hedges	6			8		13
Unrealized (losses) gains on available-for-sale securities	(3		)	13		2
Other Comprehensive (Loss) Income, net of tax	(13		)	26		715
Comprehensive Income	2,631			3,090		2,885
Less: Comprehensive (Loss) Income Attributable to Noncontrolling Interests	(22		)	5		20
Comprehensive Income Attributable to Duke Energy Corporation	$	2,653		$	3,085	$	2,865

See Notes to Consolidated Financial Statements



FINANCIAL STATEMENTS

DUKE ENERGY CORPORATION

CONSOLIDATED BALANCE SHEETS



	December 31,
(in millions)	2018			2017
ASSETS
Current Assets
Cash and cash equivalents	$	442		$	358
Receivables (net of allowance for doubtful accounts of $16 at 2018 and $14 at 2017)	962			779
Receivables of VIEs (net of allowance for doubtful accounts of $55 at 2018 and $54 at 2017)	2,172			1,995
Inventory	3,084			3,250
Regulatory assets (includes $52 at 2018 and $51 at 2017 related to VIEs)	2,005			1,437
Other (includes $162 at 2018 and $214 at 2017 related to VIEs)	1,049			634
Total current assets	9,714			8,453
Property, Plant and Equipment
Cost	134,458			127,507
Accumulated depreciation and amortization	(43,126		)	(41,537		)
Generation facilities to be retired, net	362			421
Net property, plant and equipment	91,694			86,391
Other Noncurrent Assets
Goodwill	19,303			19,396
Regulatory assets (includes $1,041 at 2018 and $1,091 at 2017 related to VIEs)	13,617			12,442
Nuclear decommissioning trust funds	6,720			7,097
Investments in equity method unconsolidated affiliates	1,409			1,175
Other	2,935			2,960
Total other noncurrent assets	43,984			43,070
Total Assets	$	145,392		$	137,914
LIABILITIES AND EQUITY
Current Liabilities
Accounts payable	$	3,487		$	3,043
Notes payable and commercial paper	3,410			2,163
Taxes accrued	577			551
Interest accrued	559			525
Current maturities of long-term debt (includes $227 at 2018 and $225 at 2017 related to VIEs)	3,406			3,244
Asset retirement obligations	919			689
Regulatory liabilities	598			402
Other	2,085			1,865
Total current liabilities	15,041			12,482
Long-Term Debt (includes $3,998 at 2018 and $4,306 at 2017 related to VIEs)	51,123			49,035
Other Noncurrent Liabilities
Deferred income taxes	7,806			6,621
Asset retirement obligations	9,548			9,486
Regulatory liabilities	14,834			15,330
Accrued pension and other post-retirement benefit costs	988			1,103
Investment tax credits	568			539
Other (includes $212 at 2018 and $241 at 2017 related to VIEs)	1,650			1,581
Total other noncurrent liabilities	35,394			34,660
Commitments and Contingencies
Equity
Common stock, $0.001 par value, 2 billion shares authorized; 727 million shares outstanding at 2018 and 700 million shares outstanding at 2017	1			1
Additional paid-in capital	40,795			38,792
Retained earnings	3,113			3,013
Accumulated other comprehensive loss	(92		)	(67		)
Total Duke Energy Corporation stockholders' equity	43,817			41,739
Noncontrolling interests	17			(2		)
Total equity	43,834			41,737
Total Liabilities and Equity	$	145,392		$	137,914

See Notes to Consolidated Financial Statements



FINANCIAL STATEMENTS

DUKE ENERGY CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS



	Years Ended December 31,
(in millions)	2018			2017			2016
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	2,644		$	3,064		$	2,170
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization and accretion (including amortization of nuclear fuel)	4,696			4,046			3,880
Equity component of AFUDC	(221		)	(237		)	(200		)
Losses (Gains) on sales of other assets	88			(33		)	477
Impairment charges	402			282			212
Deferred income taxes	1,079			1,433			900
Equity in (earnings) losses of unconsolidated affiliates	(83		)	(119		)	15
Accrued pension and other post-retirement benefit costs	61			8			21
Contributions to qualified pension plans	(141		)	(19		)	(155		)
Payments for asset retirement obligations	(533		)	(571		)	(608		)
Payment for the disposal of other assets	(105		)	—			—
Other rate case adjustments	37			—			—
Provision for rate refunds	425			—			—
(Increase) decrease in
Net realized and unrealized mark-to-market and hedging transactions	22			18			34
Receivables	(345		)	(83		)	(372		)
Inventory	156			268			272
Other current assets	(721		)	(400		)	(174		)
Increase (decrease) in
Accounts payable	479			(204		)	296
Taxes accrued	23			149			236
Other current liabilities	270			(482		)	182
Other assets	(1,008		)	(436		)	(186		)
Other liabilities	(39		)	(60		)	(137		)
Net cash provided by operating activities	7,186			6,624			6,863
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures	(9,389		)	(8,052		)	(7,901		)
Contributions to equity method investments	(416		)	(414		)	(307		)
Acquisitions, net of cash acquired	—			(13		)	(4,778		)
Return of investment capital	137			281			1
Purchases of debt and equity securities	(3,762		)	(4,071		)	(5,153		)
Proceeds from sales and maturities of debt and equity securities	3,747			4,098			5,236
Proceeds from the sales of discontinued operations and other assets, net of cash divested	41			—			1,418
Other	(418		)	(271		)	(44		)
Net cash used in investing activities	(10,060		)	(8,442		)	(11,528		)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from the:
Issuance of long-term debt	5,299			6,909			9,238
Issuance of common stock	1,838			—			731
Payments for the redemption of long-term debt	(2,906		)	(2,316		)	(1,923		)
Proceeds from the issuance of short-term debt with original maturities greater than 90 days	472			319			2,081
Payments for the redemption of short-term debt with original maturities greater than 90 days	(282		)	(272		)	(2,166		)
Notes payable and commercial paper	981			(409		)	(1,362		)
Dividends paid	(2,471		)	(2,450		)	(2,332		)
Other	29			1			(16		)
Net cash provided by financing activities	2,960			1,782			4,251
Changes in cash and cash equivalents included in assets held for sale	—			—			474
Net increase (decrease) in cash, cash equivalents, and restricted cash	86			(36		)	60
Cash, cash equivalents, and restricted cash at beginning of period	505			541			481
Cash, cash equivalents, and restricted cash at end of period	$	591		$	505		$	541
Supplemental Disclosures:
Cash paid for interest, net of amount capitalized	$	2,086		$	1,963		$	1,794
Cash (received from) paid for income taxes	(266		)	4			229
Significant non-cash transactions:
Accrued capital expenditures	1,112			1,032			1,000
Non-cash dividends	107			—			—

See Notes to Consolidated Financial Statements



FINANCIAL STATEMENTS

DUKE ENERGY CORPORATION

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY



									Duke Energy Corporation Stockholders' Accumulated Other Comprehensive Loss
															Net Unrealized						Total
									Foreign			Net			Gains (Losses)						Duke Energy
	Common			Additional					Currency			Losses on			on Available-			Pension and			Corporation
	Stock	Common		Paid-in		Retained			Translation			Cash Flow			for-Sale-			OPEB			Stockholders'			Noncontrolling			Total
(in millions)	Shares	Stock		Capital		Earnings			Adjustments			Hedges			Securities			Adjustments			Equity			Interests			Equity
Balance at December 31, 2015	688	$	1	$	37,968	$	2,564		$	(692	)	$	(50	)	$	(3	)	$	(61	)	$	39,727		$	44		$	39,771
Net income	—	—		—		2,152			—			—			—			—			2,152			18			2,170
Other comprehensive income (loss)^(a)	—	—		—		—			692			30			2			(11		)	713			2			715
Common stock issuances, including dividend reinvestment and employee benefits	12	—		773		—			—			—			—			—			773			—			773
Common stock dividends	—	—		—		(2,332		)	—			—			—			—			(2,332		)	—			(2,332		)
Distributions to noncontrolling interest in subsidiaries	—	—		—		—			—			—			—			—			—			(6		)	(6		)
Other^(b)	—	—		—		—			—			—			—			—			—			(50		)	(50		)
Balance at December 31, 2016	700	$	1	$	38,741	$	2,384		$	—		$	(20	)	$	(1	)	$	(72	)	$	41,033		$	8		$	41,041
Net income	—	—		—		3,059			—			—			—			—			3,059			5			3,064
Other comprehensive income	—	—		—		—			—			10			13			3			26			—			26
Common stock issuances, including dividend reinvestment and employee benefits	—	—		51		—			—			—			—			—			51			—			51
Common stock dividends	—	—		—		(2,450		)	—			—			—			—			(2,450		)	—			(2,450		)
Distributions to noncontrolling interest in subsidiaries	—	—		—		—			—			—			—			—			—			(2		)	(2		)
Other^(c)	—	—		—		20			—			—			—			—			20			(13		)	7
Balance at December 31, 2017	700	$	1	$	38,792	$	3,013		$	—		$	(10	)	$	12		$	(69	)	$	41,739		$	(2	)	$	41,737
Net income	—	—		—		2,666			—			—			—			—			2,666			(22		)	2,644
Other comprehensive (loss) income	—	—		—		—			—			(4		)	(3		)	(6		)	(13		)	—			(13		)
Common stock issuances, including dividend reinvestment and employee benefits	27	—		2,003		—			—			—			—			—			2,003			—			2,003
Common stock dividends	—	—		—		(2,578		)	—			—			—			—			(2,578		)	—			(2,578		)
Distributions to noncontrolling interests in subsidiaries	—	—		—		—			—			—			—			—			—			(1		)	(1		)
Other^(d)	—	—		—		12			—			—			(12		)	—			—			42			42
Balance at December 31, 2018	727	$	1	$	40,795	$	3,113		$	—		$	(14	)	$	(3	)	$	(75	)	$	43,817		$	17		$	43,834


(a)	Foreign Currency Translation Adjustments amount includes $620 million of cumulative adjustment realized as a result of the sale of the Latin American generation business. See Note 2 to the Consolidated Financial Statements.


(b)	Noncontrolling Interests amount is primarily related to the sale of the Latin American generation business. See Note 2 to the Consolidated Financial Statements.


(c)	Retained Earnings relates to a cumulative-effect adjustment due to implementation of a new accounting standard related to stock-based compensation and the associated income taxes. See Note 1 to the Consolidated Financial Statements for additional information. Noncontrolling Interests relates to the purchase of remaining interest in REC Solar.


(d)	Amounts in Retained Earnings and Accumulated Other Comprehensive Loss represent a cumulative-effect adjustment due to implementation of a new accounting standard related to Financial Instruments Classification and Measurement. See Note 1 for more information. Amount in Noncontrolling Interests primarily relates to tax equity financing activity in the Commercial Renewables segment.

See Notes to Consolidated Financial Statements



REPORTS

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the shareholder and the Board of Directors of Duke Energy Carolinas, LLC

Opinion on the Financial Statements

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a ~~limited~~test basis, ~~for~~evidence regarding the amounts and disclosures in the financial ~~losses, primarily related to property, workers’ compensation~~statements. Our audits also included evaluating the accounting principles used and ~~general liability. Liabilities include provisions for estimated losses incurred but not yet reported (IBNR),~~significant estimates made by management, as well as ~~estimated provisions~~evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for ~~known claims. IBNR reserve estimates are primarily based upon historical loss experience, industry data and other actuarial assumptions. Reserve estimates are adjusted in future periods~~our opinion.

/s/ Deloitte & Touche LLP

Charlotte, North Carolina

February 28, 2019

We have served as ~~actual losses differ from experience.~~the Company's auditor since 1947.

Duke Energy, through its captive insurance entities, also has reinsurance coverage with third parties for certain losses above a per occurrence and/or aggregate retention. Receivables for reinsurance coverage are recognized when realization is deemed probable.

~~134~~

~~PART II~~



FINANCIAL STATEMENTS

~~DUKE ENERGY CORPORATION –~~

DUKE ENERGY CAROLINAS, LLC –

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME



	Years Ended December 31,
(in millions)	2018			2017		2016
Operating Revenues	$	7,300		$	7,302	$	7,322
Operating Expenses
Fuel used in electric generation and purchased power	1,821			1,822		1,797
Operation, maintenance and other	2,130			2,021		2,158
Depreciation and amortization	1,201			1,090		1,075
Property and other taxes	295			281		276
Impairment charges	192			—		1
Total operating expenses	5,639			5,214		5,307
(Losses) Gains on Sales of Other Assets and Other, net	(1		)	1		(5		)
Operating Income	1,660			2,089		2,010
Other Income and Expenses, net	153			199		214
Interest Expense	439			422		424
Income Before Income Taxes	1,374			1,866		1,800
Income Tax Expense	303			652		634
Net Income	$	1,071		$	1,214	$	1,166
Other Comprehensive Income, net of tax
Reclassification into earnings from cash flow hedges	1			2		2
Other Comprehensive Income, net of tax	1			2		2
Comprehensive Income	$	1,072		$	1,216	$	1,168

See Notes to Consolidated Financial Statements



FINANCIAL STATEMENTS

DUKE ENERGY CAROLINAS, LLC

CONSOLIDATED BALANCE SHEETS



	December 31,
(in millions)	2018			2017
ASSETS
Current Assets
Cash and cash equivalents	$	33		$	16
Receivables (net of allowance for doubtful accounts of $2 at 2018 and 2017)	219			200
Receivables of VIEs (net of allowance for doubtful accounts of $7 at 2018 and 2017)	699			640
Receivables from affiliated companies	182			95
Inventory	948			971
Regulatory assets	520			299
Other	72			19
Total current assets	2,673			2,240
Property, Plant and Equipment
Cost	44,741			42,939
Accumulated depreciation and amortization	(15,496		)	(15,063		)
Net property, plant and equipment	29,245			27,876
Other Noncurrent Assets
Regulatory assets	3,457			2,853
Nuclear decommissioning trust funds	3,558			3,772
Other	1,027			979
Total other noncurrent assets	8,042			7,604
Total Assets	$	39,960		$	37,720
LIABILITIES AND EQUITY
Current Liabilities
Accounts payable	$	988		$	842
Accounts payable to affiliated companies	230			209
Notes payable to affiliated companies	439			104
Taxes accrued	171			234
Interest accrued	102			108
Current maturities of long-term debt	6			1,205
Asset retirement obligations	290			337
Regulatory liabilities	199			126
Other	571			486
Total current liabilities	2,996			3,651
Long-Term Debt	10,633			8,598
Long-Term Debt Payable to Affiliated Companies	300			300
Other Noncurrent Liabilities
Deferred income taxes	3,689			3,413
Asset retirement obligations	3,659			3,273
Regulatory liabilities	5,999			6,231
Accrued pension and other post-retirement benefit costs	99			95
Investment tax credits	231			232
Other	671			566
Total other noncurrent liabilities	14,348			13,810
Commitments and Contingencies
Equity
Member's equity	11,689			11,368
Accumulated other comprehensive loss	(6		)	(7		)
Total equity	11,683			11,361
Total Liabilities and Equity	$	39,960		$	37,720

See Notes to Consolidated Financial Statements



FINANCIAL STATEMENTS

DUKE ENERGY CAROLINAS, LLC

CONSOLIDATED STATEMENTS OF CASH FLOWS



	Years Ended December 31,
(in millions)	2018			2017			2016
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	1,071		$	1,214		$	1,166
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization (including amortization of nuclear fuel)	1,487			1,409			1,382
Equity component of AFUDC	(73		)	(106		)	(102		)
Losses (Gains) on sales of other assets	1			(1		)	5
Impairment charges	192			—			1
Deferred income taxes	305			410			470
Accrued pension and other post-retirement benefit costs	4			(4		)	4
Contributions to qualified pension plans	(46		)	—			(43		)
Payments for asset retirement obligations	(230		)	(271		)	(287		)
Provision for rate refunds	182			—			—
(Increase) decrease in
Net realized and unrealized mark-to-market and hedging transactions	2			9			5
Receivables	(86		)	(9		)	(76		)
Receivables from affiliated companies	(87		)	68			(56		)
Inventory	25			78			215
Other current assets	(161		)	7			67
Increase (decrease) in
Accounts payable	168			23			(69		)
Accounts payable to affiliated companies	21			(38		)	18
Taxes accrued	(65		)	86			187
Other current liabilities	89			(161		)	63
Other assets	(179		)	(49		)	20
Other liabilities	(90		)	(31		)	6
Net cash provided by operating activities	2,530			2,634			2,976
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures	(2,706		)	(2,524		)	(2,220		)
Purchases of debt and equity securities	(1,810		)	(2,124		)	(2,832		)
Proceeds from sales and maturities of debt and equity securities	1,810			2,128			2,832
Notes receivable from affiliated companies	—			66			97
Other	(147		)	(109		)	(83		)
Net cash used in investing activities	(2,853		)	(2,563		)	(2,206		)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from the issuance of long-term debt	1,983			569			1,587
Payments for the redemption of long-term debt	(1,205		)	(116		)	(356		)
Notes payable to affiliated companies	335			104			—
Distributions to parent	(750		)	(625		)	(2,000		)
Other	(23		)	(1		)	—
Net cash provided by (used in) financing activities	340			(69		)	(769		)
Net increase in cash and cash equivalents	17			2			1
Cash and cash equivalents at beginning of period	16			14			13
Cash and cash equivalents at end of period	$	33		$	16		$	14
Supplemental Disclosures:
Cash paid for interest, net of amount capitalized	$	452		$	398		$	393
Cash paid for (received from) income taxes	89			193			(60		)
Significant non-cash transactions:
Accrued capital expenditures	302			315			347

See Notes to Consolidated Financial Statements



FINANCIAL STATEMENTS

DUKE ENERGY CAROLINAS, LLC

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY



				Accumulated Other
				Comprehensive
				Loss
				Net Losses
				on Cash
	Member's			Flow			Total
(in millions)	Equity			Hedges			Equity
Balance at December 31, 2015	$	11,617		$	(11	)	$	11,606
Net income	1,166			—			1,166
Other comprehensive income	—			2			2
Distributions to parent	(2,000		)	—			(2,000		)
Other	(2		)	—			(2		)
Balance at December 31, 2016	$	10,781		$	(9	)	$	10,772
Net income	1,214			—			1,214
Other comprehensive income	—			2			2
Distributions to parent	(625		)	—			(625		)
Other	(2		)	—			(2		)
Balance at December 31, 2017	$	11,368		$	(7	)	$	11,361
Net income	1,071			—			1,071
Other comprehensive income	—			1			1
Distributions to parent	(750		)	—			(750		)
Balance at December 31, 2018	$	11,689		$	(6	)	$	11,683

See Notes to Consolidated Financial Statements



REPORTS

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the shareholder and the Board of Directors of Progress Energy, Inc.

Opinion on the Financial Statements

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

/s/ Deloitte & Touche LLP

Charlotte, North Carolina

February 28, 2019

We have served as the Company's auditor since 1930.



FINANCIAL STATEMENTS

PROGRESS ENERGY, INC. –

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME



	Years Ended December 31,
(in millions)	2018			2017		2016
Operating Revenues	$	10,728		$	9,783	$	9,853
Operating Expenses
Fuel used in electric generation and purchased power	3,976			3,417		3,644
Operation, maintenance and other	2,613			2,301		2,458
Depreciation and amortization	1,619			1,285		1,213
Property and other taxes	529			503		487
Impairment charges	87			156		7
Total operating expenses	8,824			7,662		7,809
Gains on Sales of Other Assets and Other, net	24			26		25
Operating Income	1,928			2,147		2,069
Other Income and Expenses, net	165			209		186
Interest Expense	842			824		689
Income From Continuing Operations Before Income Taxes	1,251			1,532		1,566
Income Tax Expense From Continuing Operations	218			264		527
Income From Continuing Operations	1,033			1,268		1,039
Income From Discontinued Operations, net of tax	—			—		2
Net Income	1,033			1,268		1,041
Less: Net Income Attributable to Noncontrolling Interests	6			10		10
Net Income Attributable to Parent	$	1,027		$	1,258	$	1,031

Net Income	$	1,033		$	1,268	$	1,041
Other Comprehensive Income, net of tax
Pension and OPEB adjustments	5			4		1
Net unrealized gain on cash flow hedges	6			5		—
Reclassification into earnings from cash flow hedges	—			—		8
Unrealized (losses) gains on available-for-sale securities	(1		)	4		1
Other Comprehensive Income, net of tax	10			13		10
Comprehensive Income	1,043			1,281		1,051
Less: Comprehensive Income Attributable to Noncontrolling Interests	6			10		10
Comprehensive Income Attributable to Parent	$	1,037		$	1,271	$	1,041

See Notes to Consolidated Financial Statements



FINANCIAL STATEMENTS

PROGRESS ENERGY, INC.

CONSOLIDATED BALANCE SHEETS



	December 31,
(in millions)	2018			2017
ASSETS
Current Assets
Cash and cash equivalents	$	67		$	40
Receivables (net of allowance for doubtful accounts of $5 at 2018 and $4 at 2017)	220			123
Receivables of VIEs (net of allowance for doubtful accounts of $8 at 2018 and $7 at 2017)	909			780
Receivables from affiliated companies	168			31
Notes receivable from affiliated companies	—			240
Inventory	1,459			1,592
Regulatory assets (includes $52 at 2018 and $51 at 2017 related to VIEs)	1,137			741
Other (includes $39 at 2018 and $44 at 2017 related to VIEs)	125			334
Total current assets	4,085			3,881
Property, Plant and Equipment
Cost	50,260			47,323
Accumulated depreciation and amortization	(16,398		)	(15,857		)
Generation facilities to be retired, net	362			421
Net property, plant and equipment	34,224			31,887
Other Noncurrent Assets
Goodwill	3,655			3,655
Regulatory assets (includes $1,041 at 2018 and $1,091 at 2017 related to VIEs)	6,564			6,010
Nuclear decommissioning trust funds	3,162			3,324
Other	974			931
Total other noncurrent assets	14,355			13,920
Total Assets	$	52,664		$	49,688
LIABILITIES AND EQUITY
Current Liabilities
Accounts payable	$	1,172		$	1,006
Accounts payable to affiliated companies	360			251
Notes payable to affiliated companies	1,235			805
Taxes accrued	109			101
Interest accrued	246			212
Current maturities of long-term debt (includes $53 at 2018 and 2017 related to VIEs)	1,672			771
Asset retirement obligations	514			295
Regulatory liabilities	280			213
Other	821			729
Total current liabilities	6,409			4,383
Long-Term Debt (includes $1,636 at 2018 and $1,689 at 2017 related to VIEs)	17,089			16,916
Long-Term Debt Payable to Affiliated Companies	150			150
Other Noncurrent Liabilities
Deferred income taxes	3,941			3,502
Asset retirement obligations	4,897			5,119
Regulatory liabilities	5,049			5,306
Accrued pension and other post-retirement benefit costs	521			545
Other	351			302
Total other noncurrent liabilities	14,759			14,774
Commitments and Contingencies
Equity
Common stock, $0.01 par value, 100 shares authorized and outstanding at 2018 and 2017	—			—
Additional paid-in capital	9,143			9,143
Retained earnings	5,131			4,350
Accumulated other comprehensive loss	(20		)	(25		)
Total Progress Energy, Inc. stockholder's equity	14,254			13,468
Noncontrolling interests	3			(3		)
Total equity	14,257			13,465
Total Liabilities and Equity	$	52,664		$	49,688

See Notes to Consolidated Financial Statements



FINANCIAL STATEMENTS

PROGRESS ENERGY, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS



	Years Ended December 31,
(in millions)	2018			2017			2016
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	1,033		$	1,268		$	1,041
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization and accretion (including amortization of nuclear fuel)	1,987			1,516			1,435
Equity component of AFUDC	(104		)	(92		)	(76		)
Gains on sales of other assets	(24		)	(28		)	(34		)
Impairment charges	87			156			7
Deferred income taxes	358			703			532
Accrued pension and other post-retirement benefit costs	24			(28		)	(24		)
Contributions to qualified pension plans	(45		)	—			(43		)
Payments for asset retirement obligations	(230		)	(248		)	(270		)
Other rate case adjustments	37			—			—
Provision for rate refunds	122			—			—
(Increase) decrease in
Net realized and unrealized mark-to-market and hedging transactions	18			—			42
Receivables	(207		)	(89		)	7
Receivables from affiliated companies	(137		)	71			211
Inventory	121			125			35
Other current assets	(12		)	(397		)	50
Increase (decrease) in
Accounts payable	217			(260		)	252
Accounts payable to affiliated companies	109			(97		)	37
Taxes accrued	8			17			15
Other current liabilities	129			(166		)	(42		)
Other assets	(913		)	(300		)	(248		)
Other liabilities	(34		)	(98		)	(36		)
Net cash provided by operating activities	2,544			2,053			2,891
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures	(3,854		)	(3,152		)	(3,306		)
Asset Acquisitions	—			—			(10		)
Purchases of debt and equity securities	(1,753		)	(1,806		)	(2,143		)
Proceeds from sales and maturities of debt and equity securities	1,769			1,824			2,187
Net proceeds from sales of other assets	20			—			—
Proceeds from insurance	—			7			58
Proceeds from the sale of nuclear fuel	—			20			20
Notes receivable from affiliated companies	240			(160		)	(80		)
Other	(182		)	(86		)	47
Net cash used in investing activities	(3,760		)	(3,353		)	(3,227		)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from the issuance of long-term debt	1,833			2,118			2,375
Payments for the redemption of long-term debt	(771		)	(813		)	(327		)
Notes payable to affiliated companies	430			100			444
Dividends to parent	(250		)	(124		)	(2,098		)
Other	(1		)	(4		)	(3		)
Net cash provided by financing activities	1,241			1,277			391
Net increase (decrease) in cash, cash equivalents, and restricted cash	25			(23		)	55
Cash, cash equivalents, and restricted cash at beginning of period	87			110			55
Cash, cash equivalents, and restricted cash at end of period	$	112		$	87		$	110
Supplemental Disclosures:
Cash paid for interest, net of amount capitalized	$	798		$	773		$	673
Cash received from income taxes	(348		)	(146		)	(187		)
Significant non-cash transactions:
Accrued capital expenditures	478			391			317
Equitization of certain notes payable to affiliates	—			1,047			—
Dividend to parent related to a legal entity restructuring	—			547			—

See Notes to Consolidated Financial Statements



FINANCIAL STATEMENTS

PROGRESS ENERGY, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY



						Accumulated Other Comprehensive Loss
						Net			Net Unrealized						Total Progress
	Additional					Losses on			Gains (Losses)			Pension and			Energy, Inc.
	Paid-in		Retained			Cash Flow			on Available-for-			OPEB			Stockholder's			Noncontrolling			Total
(in millions)	Capital		Earnings			Hedges			Sale Securities			Adjustments			Equity			Interests			Equity
Balance at December 31, 2015	$	8,092	$	4,831		$	(31	)	$	—		$	(17	)	$	12,875		$	(22	)	$	12,853
Net income	—		1,031			—			—			—			1,031			10			1,041
Other comprehensive income	—		—			8			1			1			10			—			10
Distributions to noncontrolling interests	—		—			—			—			—			—			(1		)	(1		)
Dividends to parent	—		(2,098		)	—			—			—			(2,098		)	—			(2,098		)
Other	2		—			—			—			—			2			—			2
Balance at December 31, 2016	$	8,094	$	3,764		$	(23	)	$	1		$	(16	)	$	11,820		$	(13	)	$	11,807
Net income	—		1,258			—			—			—			1,258			10			1,268
Other comprehensive income	—		—			5			4			4			13			—			13
Dividends to parent^(a)	—		(672		)	—			—			—			(672		)	—			(672		)
Equitization of certain notes payable to affiliates	1,047		—			—			—			—			1,047			—			1,047
Other	2		—			—			—			—			2			—			2
Balance at December 31, 2017	$	9,143	$	4,350		$	(18	)	$	5		$	(12	)	$	13,468		$	(3	)	$	13,465
Net income	—		1,027			—			—			—			1,027			6			1,033
Other comprehensive income (loss)	—		—			6			(1		)	5			10			—			10
Distributions to noncontrolling interests	—		—			—			—			—			—			(1		)	(1		)
Dividends to parent	—		(250		)	—			—			—			(250		)	—			(250		)
Other^(b)	—		4			—			(5		)	—			(1		)	1			—
Balance at December 31, 2018	$	9,143	$	5,131		$	(12	)	$	(1	)	$	(7	)	$	14,254		$	3		$	14,257


(a)	Includes a $547 million non-cash dividend related to a legal entity restructuring.


(b)	Amounts in Retained Earnings and Accumulated Other Comprehensive Loss represent a cumulative-effect adjustment due to implementation of a new accounting standard related to Financial Instruments Classification and Measurement. See Note 1 for more information.

See Notes to Consolidated Financial Statements



REPORTS

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the shareholder and the Board of Directors of Duke Energy Progress, LLC

Opinion on the Financial Statements

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

/s/ Deloitte & Touche LLP

Charlotte, North Carolina

February 28, 2019

We have served as the Company's auditor since 1930.



FINANCIAL STATEMENTS

DUKE ENERGY PROGRESS, LLC –

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME



	Years Ended December 31,
(in millions)	2018		2017		2016
Operating Revenues	$	5,699	$	5,129	$	5,277
Operating Expenses
Fuel used in electric generation and purchased power	1,892		1,609		1,830
Operation, maintenance and other	1,578		1,439		1,565
Depreciation and amortization	991		725		703
Property and other taxes	155		156		156
Impairment charges	33		19		1
Total operating expenses	4,649		3,948		4,255
Gains on Sales of Other Assets and Other, net	9		4		3
Operating Income	1,059		1,185		1,025
Other Income and Expenses, net	87		115		132
Interest Expense	319		293		257
Income Before Income Taxes	827		1,007		900
Income Tax Expense	160		292		301
Net Income and Comprehensive Income	$	667	$	715	$	599

See Notes to Consolidated Financial Statements



FINANCIAL STATEMENTS

DUKE ENERGY PROGRESS, LLC

CONSOLIDATED BALANCE SHEETS



	December 31,
(in millions)	2018			2017
ASSETS
Current Assets
Cash and cash equivalents	$	23		$	20
Receivables (net of allowance for doubtful accounts of $2 at 2018 and $1 at 2017)	75			56
Receivables of VIEs (net of allowance for doubtful accounts of $5 at 2018 and 2017)	547			459
Receivables from affiliated companies	23			3
Inventory	954			1,017
Regulatory assets	703			352
Other	62			97
Total current assets	2,387			2,004
Property, Plant and Equipment
Cost	31,459			29,583
Accumulated depreciation and amortization	(11,423		)	(10,903		)
Generation facilities to be retired, net	362			421
Net property, plant and equipment	20,398			19,101
Other Noncurrent Assets
Regulatory assets	4,111			3,507
Nuclear decommissioning trust funds	2,503			2,588
Other	612			599
Total other noncurrent assets	7,226			6,694
Total Assets	$	30,011		$	27,799
LIABILITIES AND EQUITY
Current Liabilities
Accounts payable	$	660		$	402
Accounts payable to affiliated companies	278			179
Notes payable to affiliated companies	294			240
Taxes accrued	53			64
Interest accrued	116			102
Current maturities of long-term debt	603			3
Asset retirement obligations	509			295
Regulatory liabilities	178			139
Other	408			376
Total current liabilities	3,099			1,800
Long-Term Debt	7,451			7,204
Long-Term Debt Payable to Affiliated Companies	150			150
Other Noncurrent Liabilities
Deferred income taxes	2,119			1,883
Asset retirement obligations	4,311			4,378
Regulatory liabilities	3,955			3,999
Accrued pension and other post-retirement benefit costs	237			248
Investment tax credits	142			143
Other	106			45
Total other noncurrent liabilities	10,870			10,696
Commitments and Contingencies
Equity
Member's Equity	8,441			7,949
Total Liabilities and Equity	$	30,011		$	27,799

See Notes to Consolidated Financial Statements



FINANCIAL STATEMENTS

DUKE ENERGY PROGRESS, LLC

CONSOLIDATED STATEMENTS OF CASH FLOWS



	Years Ended December 31,
(in millions)	2018			2017			2016
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	667		$	715		$	599
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization (including amortization of nuclear fuel)	1,183			936			907
Equity component of AFUDC	(57		)	(47		)	(50		)
Gains on sales of other assets	(9		)	(5		)	(6		)
Impairment charges	33			19			1
Deferred income taxes	236			384			384
Accrued pension and other post-retirement benefit costs	15			(20		)	(32		)
Contributions to qualified pension plans	(25		)	—			(24		)
Payments for asset retirement obligations	(195		)	(192		)	(212		)
Other rate case adjustments	37			—			—
Provisions for rate refunds	122			—			—
(Increase) decrease in
Net realized and unrealized mark-to-market and hedging transactions	5			(4		)	4
Receivables	(107		)	(58		)	(17		)
Receivables from affiliated companies	(20		)	2			11
Inventory	63			59			12
Other current assets	(201		)	(75		)	84
Increase (decrease) in
Accounts payable	219			(230		)	181
Accounts payable to affiliated companies	99			(48		)	37
Taxes accrued	(11		)	(39		)	90
Other current liabilities	46			(131		)	114
Other assets	(484		)	(53		)	(163		)
Other liabilities	12			(18		)	12
Net cash provided by operating activities	1,628			1,195			1,932
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures	(2,220		)	(1,715		)	(1,733		)
Purchases of debt and equity securities	(1,236		)	(1,249		)	(1,658		)
Proceeds from sales and maturities of debt and equity securities	1,206			1,207			1,615
Net proceeds from the sales of other assets	20			—			—
Proceeds from insurance	—			4			—
Notes receivable from affiliated companies	—			165			(165		)
Other	(115		)	(55		)	26
Net cash used in investing activities	(2,345		)	(1,643		)	(1,915		)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from the issuance of long-term debt	845			812			505
Payments for the redemption of long-term debt	(3		)	(470		)	(15		)
Notes payable to affiliated companies	54			240			(209		)
Distributions to parent	(175		)	(124		)	(300		)
Other	(1		)	(1		)	(2		)
Net cash provided by (used in) financing activities	720			457			(21		)
Net increase (decrease) in cash and cash equivalents	3			9			(4		)
Cash and cash equivalents at beginning of period	20			11			15
Cash and cash equivalents at end of period	$	23		$	20		$	11
Supplemental Disclosures:
Cash paid for interest, net of amount capitalized	$	303		$	291		$	248
Cash (received from) paid for income taxes	(112		)	59			(287		)
Significant non-cash transactions:
Accrued capital expenditures	220			191			147

See Notes to Consolidated Financial Statements



FINANCIAL STATEMENTS

DUKE ENERGY PROGRESS, LLC

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY



	Member's
(in millions)	Equity
Balance at December 31, 2015	$	7,059
Net income	599
Distribution to parent	(300		)
Balance at December 31, 2016	$	7,358
Net income	715
Distribution to parent	(124		)
Balance at December 31, 2017	$	7,949
Net income	667
Distribution to parent	(175		)
Balance at December 31, 2018	$	8,441

See Notes to Consolidated Financial Statements



REPORTS

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the shareholder and the Board of Directors of Duke Energy Florida, LLC

Opinion on the Financial Statements

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

/s/ Deloitte & Touche LLP

Charlotte, North Carolina

February 28, 2019

We have served as the Company's auditor since 2001.



FINANCIAL STATEMENTS

DUKE ENERGY FLORIDA, LLC –

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME



	Years Ended December 31,
(in millions)	2018			2017		2016
Operating Revenues	$	5,021		$	4,646	$	4,568
Operating Expenses
Fuel used in electric generation and purchased power	2,085			1,808		1,814
Operation, maintenance and other	1,025			853		884
Depreciation and amortization	628			560		509
Property and other taxes	374			347		333
Impairment charges	54			138		6
Total operating expenses	4,166			3,706		3,546
Gains on Sales of Other Assets and Other, net	1			1		—
Operating Income	856			941		1,022
Other Income and Expenses, net	86			96		63
Interest Expense	287			279		212
Income Before Income Taxes	655			758		873
Income Tax Expense	101			46		322
Net Income	$	554		$	712	$	551
Other Comprehensive (Loss) Income, net of tax
Unrealized (losses) gains on available-for-sale securities	(1		)	3		1
Other Comprehensive (Loss) Income, net of tax	(1		)	3		1
Comprehensive Income	$	553		$	715	$	552

See Notes to Consolidated Financial Statements



FINANCIAL STATEMENTS

DUKE ENERGY FLORIDA, LLC

CONSOLIDATED BALANCE SHEETS



	December 31,
(in millions)	2018			2017
ASSETS
Current Assets
Cash and cash equivalents	$	36		$	13
Receivables (net of allowance for doubtful accounts of $3 at 2018 and 2017)	143			65
Receivables of VIEs (net of allowance for doubtful accounts of $3 at 2018 and $2 at 2017)	362			321
Receivables from affiliated companies	28			2
Notes receivable from affiliated companies	—			313
Inventory	504			574
Regulatory assets (includes $52 at 2018 and $51 at 2017 related to VIEs)	434			389
Other (includes $39 at 2018 and $40 at 2017 related to VIEs)	46			86
Total current assets	1,553			1,763
Property, Plant and Equipment
Cost	18,792			17,730
Accumulated depreciation and amortization	(4,968		)	(4,947		)
Net property, plant and equipment	13,824			12,783
Other Noncurrent Assets
Regulatory assets (includes $1,041 at 2018 and $1,091 at 2017 related to VIEs)	2,454			2,503
Nuclear decommissioning trust funds	659			736
Other	311			284
Total other noncurrent assets	3,424			3,523
Total Assets	$	18,801		$	18,069
LIABILITIES AND EQUITY
Current Liabilities
Accounts payable	$	511		$	602
Accounts payable to affiliated companies	91			74
Notes payable to affiliated companies	108			—
Taxes accrued	74			34
Interest accrued	75			56
Current maturities of long-term debt (includes $53 at 2018 and 2017 related to VIEs)	270			768
Asset retirement obligations	5			—
Regulatory liabilities	102			74
Other	406			334
Total current liabilities	1,642			1,942
Long-Term Debt (includes $1,336 at 2018 and $1,389 at 2017 related to VIEs)	7,051			6,327
Other Noncurrent Liabilities
Deferred income taxes	1,986			1,761
Asset retirement obligations	586			742
Regulatory liabilities	1,094			1,307
Accrued pension and other post-retirement benefit costs	254			264
Other	93			108
Total other noncurrent liabilities	4,013			4,182
Commitments and Contingencies
Equity
Member's equity	6,097			5,614
Accumulated other comprehensive income	(2		)	4
Total equity	6,095			5,618
Total Liabilities and Equity	$	18,801		$	18,069

See Notes to Consolidated Financial Statements



FINANCIAL STATEMENTS

DUKE ENERGY FLORIDA, LLC

CONSOLIDATED STATEMENTS OF CASH FLOWS



	Years Ended December 31,
(in millions)	2018			2017			2016
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	554		$	712		$	551
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization and accretion	793			570			516
Equity component of AFUDC	(47		)	(45		)	(26		)
Gains on sales of other assets	(1		)	(1		)	—
Impairment charges	54			138			6
Deferred income taxes	159			245			224
Accrued pension and other post-retirement benefit costs	5			(13		)	2
Contributions to qualified pension plans	(20		)	—			(20		)
Payments for asset retirement obligations	(35		)	(56		)	(58		)
(Increase) decrease in
Net realized and unrealized mark-to-market and hedging transactions	7			5			38
Receivables	(100		)	(38		)	23
Receivables from affiliated companies	(26		)	—			21
Inventory	58			66			23
Other current assets	59			(138		)	(86		)
Increase (decrease) in
Accounts payable	(1		)	(32		)	71
Accounts payable to affiliated companies	17			(51		)	9
Taxes accrued	40			1			(117		)
Other current liabilities	82			(37		)	(149		)
Other assets	(428		)	(229		)	(84		)
Other liabilities	(61		)	(82		)	(53		)
Net cash provided by operating activities	1,109			1,015			891
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures	(1,634		)	(1,437		)	(1,583		)
Purchases of debt and equity securities	(517		)	(557		)	(485		)
Proceeds from sales and maturities of debt and equity securities	563			617			572
Proceeds from insurance	—			4			58
Proceeds from the sale of nuclear fuel	—			20			20
Notes receivable from affiliated companies	313			(313		)	—
Other	(65		)	(31		)	21
Net cash used in investing activities	(1,340		)	(1,697		)	(1,397		)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from the issuance of long-term debt	988			1,306			1,870
Payments for the redemption of long-term debt	(769		)	(342		)	(12		)
Notes payable to affiliated companies	108			(297		)	(516		)
Distribution to parent	(75		)	—			(775		)
Other	1			(1		)	—
Net cash provided by financing activities	253			666			567
Net increase (decrease) in cash, cash equivalents, and restricted cash	22			(16		)	61
Cash, cash equivalents, and restricted cash at beginning of period	53			69			8
Cash, cash equivalents, and restricted cash at end of period	$	75		$	53		$	69
Supplemental Disclosures:
Cash paid for interest, net of amount capitalized	$	270		$	274		$	208
Cash (received from) paid for income taxes	(120		)	(197		)	216
Significant non-cash transactions:
Accrued capital expenditures	258			199			170

See Notes to Consolidated Financial Statements



FINANCIAL STATEMENTS

DUKE ENERGY FLORIDA, LLC

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY



				Accumulated
				Other
				Comprehensive
				Income (Loss)
				Net Unrealized
				Gains (Losses) on
	Member's			Available-for-			Total
(in millions)	Equity			Sale Securities			Equity
Balance at December 31, 2015	$	5,121		$	—		$	5,121
Net income	551			—			551
Other comprehensive income	—			1			1
Distribution to parent	(775		)	—			(775		)
Other	2			—			2
Balance at December 31, 2016	$	4,899		$	1		$	4,900
Net income	712			—			712
Other comprehensive income	—			3			3
Other	3			—			3
Balance at December 31, 2017	$	5,614		$	4		$	5,618
Net income	554			—			554
Other comprehensive loss	—			(1		)	(1		)
Distribution to parent	(75		)	—			(75		)
Other^(a)	4			(5		)	(1		)
Balance at December 31, 2018	$	6,097		$	(2	)	$	6,095


(a)	Amounts represent a cumulative-effect adjustment due to implementation of a new accounting standard related to Financial Instruments Classification and Measurement. See Note 1 for more information.

See Notes to Consolidated Financial Statements



REPORTS

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the shareholder and the Board of Directors of Duke Energy Ohio, Inc.

Opinion on the Financial Statements

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

/s/ Deloitte & Touche LLP

Charlotte, North Carolina

February 28, 2019

We have served as the Company's auditor since 2002.



FINANCIAL STATEMENTS

DUKE ENERGY OHIO, INC. –

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME



	Years Ended December 31,
(in millions)	2018			2017			2016
Operating Revenues
Regulated electric	$	1,450		$	1,373		$	1,410
Regulated natural gas	506			508			503
Nonregulated electric and other	1			42			31
Total operating revenues	1,957			1,923			1,944
Operating Expenses
Fuel used in electric generation and purchased power – regulated	412			369			442
Fuel used in electric generation and purchased power – nonregulated	—			58			51
Cost of natural gas	113			107			103
Operation, maintenance and other	480			530			514
Depreciation and amortization	268			261			233
Property and other taxes	290			278			258
Impairment charges	—			1			—
Total operating expenses	1,563			1,604			1,601
(Losses) Gains on Sales of Other Assets and Other, net	(106		)	1			2
Operating Income	288			320			345
Other Income and Expenses, net	23			23			11
Interest Expense	92			91			86
Income From Continuing Operations Before Income Taxes	219			252			270
Income Tax Expense From Continuing Operations	43			59			78
Income From Continuing Operations	176			193			192
(Loss) Income From Discontinued Operations, net of tax	—			(1		)	36
Net Income and Comprehensive Income	$	176		$	192		$	228

See Notes to Consolidated Financial Statements



FINANCIAL STATEMENTS

DUKE ENERGY OHIO, INC.

CONSOLIDATED BALANCE SHEETS



	December 31,
(in millions)	2018			2017
ASSETS
Current Assets
Cash and cash equivalents	$	21		$	12
Receivables (net of allowance for doubtful accounts of $2 at 2018 and $3 at 2017)	102			68
Receivables from affiliated companies	114			133
Notes receivable from affiliated companies	—			14
Inventory	126			133
Regulatory assets	33			49
Other	24			39
Total current assets	420			448
Property, Plant and Equipment
Cost	9,360			8,732
Accumulated depreciation and amortization	(2,717		)	(2,691		)
Net property, plant and equipment	6,643			6,041
Other Noncurrent Assets
Goodwill	920			920
Regulatory assets	531			445
Other	41			21
Total other noncurrent assets	1,492			1,386
Total Assets	$	8,555		$	7,875
LIABILITIES AND EQUITY
Current Liabilities
Accounts payable	$	316		$	313
Accounts payable to affiliated companies	78			62
Notes payable to affiliated companies	274			29
Taxes accrued	202			190
Interest accrued	22			21
Current maturities of long-term debt	551			3
Asset retirement obligations	6			3
Regulatory liabilities	57			36
Other	74			71
Total current liabilities	1,580			728
Long-Term Debt	1,589			2,039
Long-Term Debt Payable to Affiliated Companies	25			25
Other Noncurrent Liabilities
Deferred income taxes	817			781
Asset retirement obligations	87			81
Regulatory liabilities	840			891
Accrued pension and other post-retirement benefit costs	79			59
Other	93			108
Total other noncurrent liabilities	1,916			1,920
Commitments and Contingencies
Equity
Common stock, $8.50 par value, 120 million shares authorized; 90 million shares outstanding at 2018 and 2017	762			762
Additional paid-in capital	2,776			2,670
Accumulated deficit	(93		)	(269		)
Total equity	3,445			3,163
Total Liabilities and Equity	$	8,555		$	7,875

See Notes to Consolidated Financial Statements



FINANCIAL STATEMENTS

DUKE ENERGY OHIO, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS



	Years Ended December 31,
(in millions)	2018			2017			2016
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	176		$	192		$	228
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization and accretion	271			265			237
Equity component of AFUDC	(11		)	(11		)	(6		)
Losses (Gains) on sales of other assets	106			(1		)	(2		)
Impairment charges	—			1			—
Deferred income taxes	25			90			55
Accrued pension and other post-retirement benefit costs	3			2			6
Contributions to qualified pension plans	—			(4		)	(5		)
Payments for asset retirement obligations	(3		)	(7		)	(5		)
Provision for rate refunds	24			—			—
(Increase) decrease in
Net realized and unrealized mark-to-market and hedging transactions	—			—			(2		)
Receivables	(33		)	2			(4		)
Receivables from affiliated companies	19			(4		)	(36		)
Inventory	7			6			(32		)
Other current assets	16			(22		)	79
Increase (decrease) in
Accounts payable	(19		)	12			19
Accounts payable to affiliated companies	16			(1		)	10
Taxes accrued	12			11			3
Other current liabilities	14			(19		)	(54		)
Other assets	(26		)	(28		)	(35		)
Other liabilities	(27		)	(5		)	(31		)
Net cash provided by operating activities	570			479			425
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures	(827		)	(686		)	(476		)
Notes receivable from affiliated companies	14			80			(94		)
Other	(89		)	(41		)	(30		)
Net cash used in investing activities	(902		)	(647		)	(600		)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from the issuance of long-term debt	99			182			341
Payments for the redemption of long-term debt	(3		)	(2		)	(53		)
Notes payable to affiliated companies	245			13			(87		)
Dividends to parent	—			(25		)	(25		)
Other	—			(1		)	(2		)
Net cash provided by financing activities	341			167			174
Net increase (decrease) in cash and cash equivalents	9			(1		)	(1		)
Cash and cash equivalents at beginning of period	12			13			14
Cash and cash equivalents at end of period	$	21		$	12		$	13
Supplemental Disclosures:
Cash paid for interest, net of amount capitalized	$	87		$	85		$	81
Cash received from income taxes	(6		)	(8		)	(46		)
Significant non-cash transactions:
Accrued capital expenditures	95			82			83
Non-cash equity contribution from parent	106			—			—

See Notes to Consolidated Financial Statements



FINANCIAL STATEMENTS

DUKE ENERGY OHIO, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY



			Additional
	Common		Paid-in			Accumulated			Total
(in millions)	Stock		Capital			Deficit			Equity
Balance at December 31, 2015	$	762	$	2,720		$	(698	)	$	2,784
Net income	—		—			228			228
Contribution from parent	—		—			9			9
Dividends to parent	—		(25		)	—			(25		)
Balance at December 31, 2016	$	762	$	2,695		$	(461	)	$	2,996
Net income	—		—			192			192
Dividends to parent	—		(25		)	—			(25		)
Balance at December 31, 2017	$	762	$	2,670		$	(269	)	$	3,163
Net income	—		—			176			176
Contribution from parent	—		106			—			106
Balance at December 31, 2018	$	762	$	2,776		$	(93	)	$	3,445

See Notes to Consolidated Financial Statements



REPORTS

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the shareholder and the Board of Directors of Duke Energy Indiana, LLC

Opinion on the Financial Statements

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

/s/ Deloitte & Touche LLP

Charlotte, North Carolina

February 28, 2019

We have served as the Company's auditor since 2002.



FINANCIAL STATEMENTS

DUKE ENERGY INDIANA, ~~LLC–~~ LLC

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME



	Years Ended December 31,
(in millions)	2018		2017		2016
Operating Revenues	$	3,059	$	3,047	$	2,958
Operating Expenses
Fuel used in electric generation and purchased power	1,000		966		909
Operation, maintenance and other	788		743		727
Depreciation and amortization	520		458		496
Property and other taxes	78		76		58
Impairment charges	30		18		8
Total operating expenses	2,416		2,261		2,198
Gains on Sales of Other Assets and Other, net	—		—		1
Operating Income	643		786		761
Other Income and Expenses, net	45		47		26
Interest Expense	167		178		181
Income Before Income Taxes	521		655		606
Income Tax Expense	128		301		225
Net Income	$	393	$	354	$	381
Other Comprehensive Loss, net of tax
Reclassification into earnings from cash flow hedges	—		—		(1		)
Comprehensive Income	$	393	$	354	$	380

See Notes to Consolidated Financial Statements



FINANCIAL STATEMENTS

DUKE ENERGY INDIANA, LLC

CONSOLIDATED BALANCE SHEETS



	December 31,
(in millions)	2018			2017
ASSETS
Current Assets
Cash and cash equivalents	$	24		$	9
Receivables (net of allowance for doubtful accounts of $2 at 2018 and 2017)	52			57
Receivables from affiliated companies	122			125
Inventory	422			450
Regulatory assets	175			165
Other	35			30
Total current assets	830			836
Property, Plant and Equipment
Cost	15,443			14,948
Accumulated depreciation and amortization	(4,914		)	(4,662		)
Net property, plant and equipment	10,529			10,286
Other Noncurrent Assets
Regulatory assets	982			978
Other	194			189
Total other noncurrent assets	1,176			1,167
Total Assets	$	12,535		$	12,289
LIABILITIES AND EQUITY
Current Liabilities
Accounts payable	$	200		$	196
Accounts payable to affiliated companies	83			78
Notes payable to affiliated companies	167			161
Taxes accrued	43			95
Interest accrued	58			57
Current maturities of long-term debt	63			3
Asset retirement obligations	109			54
Regulatory liabilities	25			24
Other	107			104
Total current liabilities	855			772
Long-Term Debt	3,569			3,630
Long-Term Debt Payable to Affiliated Companies	150			150
Other Noncurrent Liabilities
Deferred income taxes	1,009			925
Asset retirement obligations	613			727
Regulatory liabilities	1,722			1,723
Accrued pension and other post-retirement benefit costs	115			76
Investment tax credits	147			147
Other	16			18
Total other noncurrent liabilities	3,622			3,616
Commitments and Contingencies
Equity
Member's Equity	4,339			4,121
Total Liabilities and Equity	$	12,535		$	12,289

See Notes to Consolidated Financial Statements



FINANCIAL STATEMENTS

DUKE ENERGY INDIANA, LLC

CONSOLIDATED STATEMENTS OF CASH FLOWS



	Years Ended December 31,
(in millions)	2018			2017			2016
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	393		$	354		$	381
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization, and accretion	524			462			499
Equity component of AFUDC	(32		)	(28		)	(16		)
Impairment charges	30			18			8
Deferred income taxes	95			152			213
Accrued pension and other post-retirement benefit costs	7			2			8
Contributions to qualified pension plans	(8		)	—			(9		)
Payments for asset retirement obligations	(69		)	(45		)	(46		)
Provision for rate refunds	53			—			—
(Increase) decrease in
Receivables	7			59			(2		)
Receivables from affiliated companies	3			(11		)	(43		)
Inventory	28			54			66
Other current assets	(25		)	28			(67		)
Increase (decrease) in
Accounts payable	37			(86		)	8
Accounts payable to affiliated companies	5			4			(9		)
Taxes accrued	(52		)	64			(4		)
Other current liabilities	14			(10		)	(81		)
Other assets	29			(28		)	(27		)
Other liabilities	(33		)	(20		)	(8		)
Net cash provided by operating activities	1,006			969			871
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures	(832		)	(840		)	(755		)
Purchases of debt and equity securities	(48		)	(20		)	(14		)
Proceeds from sales and maturities of debt and equity securities	44			7			11
Proceeds from the sales of other assets	15			—			—
Notes receivable from affiliated companies	—			86			(3		)
Other	3			(65		)	32
Net cash used in investing activities	(818		)	(832		)	(729		)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from the issuance of long-term debt	—			—			494
Payments for the redemption of long-term debt	(3		)	(5		)	(478		)
Notes payable to affiliated companies	6			161			—
Distributions to parent	(175		)	(300		)	(149		)
Other	(1		)	(1		)	(1		)
Net cash used in financing activities	(173		)	(145		)	(134		)
Net increase (decrease) in cash and cash equivalents	15			(8		)	8
Cash and cash equivalents at beginning of period	9			17			9
Cash and cash equivalents at end of period	$	24		$	9		$	17
Supplemental Disclosures:
Cash paid for interest, net of amount capitalized	$	162		$	179		$	171
Cash paid for (received from) income taxes	75			117			(7		)
Significant non-cash transactions:
Accrued capital expenditures	88			125			99

See Notes to Consolidated Financial Statements



FINANCIAL STATEMENTS

DUKE ENERGY INDIANA, LLC

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY



													Accumulated
													Other
													Comprehensive
													Income
				Additional									Net Gains on
	Common			Paid-in			Retained			Member's			Cash Flow			Total
(in millions)	Stock			Capital			Earnings			Equity			Hedges			Equity
Balance at December 31, 2015	$	1		$	1,384		$	2,450		$	—		$	1		$	3,836
Net income	—			—			—			381			—			381
Other comprehensive loss	—			—			—			—			(1		)	(1		)
Distributions to parent	—			—			—			(149		)	—			(149		)
Transfer to Member's Equity	(1		)	(1,384		)	(2,450		)	3,835			—			—
Balance at December 31, 2016	$	—		$	—		$	—		$	4,067		$	—		$	4,067
Net income	—			—			—			354			—			354
Distributions to parent	—			—			—			(300		)	—			(300		)
Balance at December 31, 2017	$	—		$	—		$	—		$	4,121		$	—		$	4,121
Net income	—			—			—			393			—			393
Distributions to parent	—			—			—			(175		)	—			(175		)
Balance at December 31, 2018	$	—		$	—		$	—		$	4,339		$	—		$	4,339

See Notes to Consolidated Financial Statements



REPORTS

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the shareholder and the Board of Directors of Piedmont Natural Gas Company, Inc.

Opinion on the Financial Statements

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Emphasis of Matter

/s/ Deloitte & Touche LLP

Charlotte, North Carolina

February 28, 2019

We have served as the Company's auditor since 1951.



FINANCIAL STATEMENTS

PIEDMONT NATURAL GAS COMPANY, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME



	Years Ended December 31,					Two Months Ended December 31,			Year Ended October 31,
(in millions)	2018		2017			2016			2016
Operating Revenues
Regulated natural gas	$	1,365	$	1,319		$	320		$	1,139
Nonregulated natural gas and other	10		9			2			10
Total operating revenues	1,375		1,328			322			1,149
Operating Expenses
Cost of natural gas	584		524			144			391
Operation, maintenance and other	357		304			50			353
Depreciation and amortization	159		148			23			137
Property and other taxes	49		48			7			43
Impairment charges	—		7			—			—
Total operating expenses	1,149		1,031			224			924
Operating Income	226		297			98			225
Equity in earnings (losses) of unconsolidated affiliates	7		(6		)	2			29
Gain on sale of unconsolidated affiliates	—		—			—			133
Other income and expense, net	14		(11		)	(2		)	(1		)
Total other income and expenses	21		(17		)	—			161
Interest Expense	81		79			12			69
Income Before Income Taxes	166		201			86			317
Income Tax Expense	37		62			32			124
Net Income	$	129	$	139		$	54		$	193
Other Comprehensive Income, net of tax
Unrealized loss from hedging activities of equity method investments	—		—			—			(3		)
Reclassification into earnings from hedging activities of equity method investments	—		—			—			4
Other Comprehensive Income, net of tax	—		—			—			1
Comprehensive Income	$	129	$	139		$	54		$	194

See Notes to Consolidated Financial Statements



FINANCIAL STATEMENTS

PIEDMONT NATURAL GAS COMPANY, INC.

CONSOLIDATED BALANCE SHEETS



	December 31,
(in millions)	2018			2017
ASSETS
Current Assets
Cash and cash equivalents	$	—		$	19
Receivables (net of allowance for doubtful accounts of $2 at 2018 and 2017)	266			275
Receivables from affiliated companies	22			7
Inventory	70			66
Regulatory assets	54			95
Other	19			52
Total current assets	431			514
Property, Plant and Equipment
Cost	7,486			6,725
Accumulated depreciation and amortization	(1,575		)	(1,479		)
Net property, plant and equipment	5,911			5,246
Other Noncurrent Assets
Goodwill	49			49
Regulatory assets	303			283
Investments in equity method unconsolidated affiliates	64			61
Other	52			65
Total other noncurrent assets	468			458
Total Assets	$	6,810		$	6,218
LIABILITIES AND EQUITY
Current Liabilities
Accounts payable	$	203		$	125
Accounts payable to affiliated companies	38			13
Notes payable to affiliated companies	198			364
Taxes accrued	84			19
Interest accrued	31			31
Current maturities of long-term debt	350			250
Regulatory liabilities	37			3
Other	58			69
Total current liabilities	999			874
Long-Term Debt	1,788			1,787
Other Noncurrent Liabilities
Deferred income taxes	551			564
Asset retirement obligations	19			15
Regulatory liabilities	1,181			1,141
Accrued pension and other post-retirement benefit costs	4			5
Other	177			170
Total other noncurrent liabilities	1,932			1,895
Commitments and Contingencies
Equity
Common stock, no par value: 100 shares authorized and outstanding at 2018 and 2017	1,160			860
Retained earnings	931			802
Total equity	2,091			1,662
Total Liabilities and Equity	$	6,810		$	6,218

See Notes to Consolidated Financial Statements



FINANCIAL STATEMENTS

PIEDMONT NATURAL GAS COMPANY, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS



	Years Ended December 31,						Two Months Ended December 31,			Year Ended October 31,
(in millions)	2018			2017			2016			2016
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	129		$	139		$	54		$	193
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	161			151			25			148
Gains on sales of other assets	—			—			—			(133		)
Impairment charges	—			7			—			—
Deferred income taxes	(31		)	154			26			74
Equity in (earnings) losses from unconsolidated affiliates	(7		)	6			(2		)	(29		)
Accrued pension and other post-retirement benefit costs	(4		)	23			5			3
Contributions to qualified pension plans	—			(11		)	(10		)	(14		)
Payments for asset retirement obligations	—			—			(1		)	(6		)
Provision for rate refunds	43			—			—			—
(Increase) decrease in
Receivables	7			(40		)	(157		)	12
Receivables from affiliated companies	(15		)	—			—			(7		)
Inventory	(4		)	—			(11		)	14
Other current assets	71			(20		)	8			(98		)
Increase (decrease) in
Accounts payable	15			(13		)	35			6
Accounts payable to affiliated companies	25			5			4			6
Taxes accrued	65			(48		)	(2		)	38
Other current liabilities	21			(9		)	2			28
Other assets	6			7			(7		)	(91		)
Other liabilities	(4		)	(2		)	5			180
Net cash provided by (used in) operating activities	478			349			(26		)	324
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures	(721		)	(585		)	(113		)	(522		)
Contributions to equity method investments	—			(12		)	(12		)	(47		)
Proceeds from the sales of other assets	—			—			—			175
Other	(10		)	(6		)	1			5
Net cash used in investing activities	(731		)	(603		)	(124		)	(389		)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from the:
Issuance of long-term debt	100			250			—			295
Issuance of common stock	—			—			—			122
Payments for the redemption of long-term debt	—			(35		)	—			(40		)
Notes payable and commercial paper	—			(330		)	185			(195		)
Notes payable to affiliated companies	(166		)	364			—			—
Capital contribution from parent	300			—			—			—
Dividends to parent	—			—			(27		)	—
Dividends paid	—			—			—			(114		)
Other	—			(1		)	—			—
Net cash provided by financing activities	234			248			158			68
Net (decrease) increase in cash and cash equivalents	(19		)	(6		)	8			3
Cash and cash equivalents at beginning of period	19			25			17			14
Cash and cash equivalents at end of period	$	—		$	19		$	25		$	17
Supplemental Disclosures:
Cash paid for interest, net of amount capitalized	$	79		$	78		$	11		$	81
Cash received from income taxes	(16		)	(12		)	—			(25		)
Significant non-cash transactions:
Accrued capital expenditures	96			34			48			63
Transfer of ownership interest of certain equity method investees to parent	—			149			—			—

See Notes to Consolidated Financial Statements



FINANCIAL STATEMENTS

PIEDMONT NATURAL GAS COMPANY, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY



						Accumulated
						Other
						Comprehensive
						Income (Loss)
						Net Gain on
						Hedging Activities
	Common		Retained			of Unconsolidated			Total
(in millions)	Stock		Earnings			Affiliates			Equity
Balance at October 31, 2015	$	721	$	706		$	(1	)	$	1,426
Net income	—		193			—			193
Other comprehensive income	—		—			1			1
Common stock issuances, including dividend reinvestment and employee benefits	139		—			—			139
Common stock dividends	—		(114		)	—			(114		)
Balance at October 31, 2016	$	860	$	785		$	—		$	1,645
Net income	—		54			—			54
Dividends to parent	—		(27		)	—			(27		)
Balance at December 31, 2016	$	860	$	812		$	—		$	1,672
Net income	—		139			—			139
Transfer of ownership interest of certain equity method investees to parent	—		(149		)	—			(149		)
Balance at December 31, 2017	$	860	$	802		$	—		$	1,662
Net income	—		129			—			129
Contribution from parent	300		—			—			300
Balance at December 31, 2018	$	1,160	$	931		$	—		$	2,091

See Notes to Consolidated Financial Statements



FINANCIAL STATEMENTS	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Index to Combined Notes To Consolidated Financial Statements ~~– (Continued)~~

The notes to the consolidated financial statements are a combined presentation. The following table indicates the registrants to which the notes apply.

Applicable Notes

Registrant

Duke Energy

•

Duke Energy Carolinas

•

Progress Energy

•

Duke Energy Progress

•

Duke Energy Florida

•

Duke Energy Ohio

•

Duke Energy Indiana

•

Piedmont

•

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Operations and Basis of Consolidation



FINANCIAL STATEMENTS	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

~~Unamortized Debt Premium, Discount and Expense~~

Premiums, discounts and expenses incurred with the issuance of outstanding long-term debt are amortized over the term of the debt issue. The gain or loss on extinguishment associated with refinancing higher-cost debt obligationsDuke Energy Ohio is a regulated public utility primarily engaged in the ~~regulated operations~~transmission and distribution of electricity in portions of Ohio and Kentucky, the generation and sale of electricity in portions of Kentucky and the transportation and sale of natural gas in portions of Ohio and Kentucky. Duke Energy Ohio conducts competitive auctions for retail electricity supply in Ohio whereby the energy price is ~~amortized. Amortization expense is~~recovered from retail customers and recorded ~~as Interest Expense~~ in Operating Revenues on the Consolidated Statements of Operations and Comprehensive Income. Operations in Kentucky are conducted through its wholly owned subsidiary, Duke Energy Kentucky. References herein to Duke Energy Ohio collectively include Duke Energy Ohio and its subsidiaries, unless otherwise noted. Duke Energy Ohio is ~~reflected~~subject to the regulatory provisions of the PUCO, KPSC and FERC.

Certain prior year amounts have been reclassified to conform to the current year presentation.

Other Current Assets and Liabilities



		December 31,
(in millions)	Location	2018		2017
Duke Energy
Income taxes receivable	Current Assets	$	729	$	330
Accrued compensation	Current Liabilities	793		757
Duke Energy Carolinas
Accrued compensation	Current Liabilities	$	251	$	252
Progress Energy
Income taxes receivable	Current Assets	$	66	$	278
Customer deposits	Current Liabilities	345		338
Duke Energy Progress
Customer deposits	Current Liabilities	$	137	$	129
Accrued compensation	Current Liabilities	130		132
Duke Energy Florida
Customer deposits	Current Liabilities	$	208	$	208
Other accrued liabilities	Current Liabilities	85		16
Duke Energy Ohio
Income taxes receivable	Current Assets	$	13	$	36
Customer deposits	Current Liabilities	44		46
Duke Energy Indiana
Customer deposits	Current Liabilities	$	47	$	45
Piedmont
Income taxes receivable	Current Assets	$	11	$	43

Discontinued Operations

The results of operations of the International Disposal Group have been classified as ~~Depreciation, amortization~~Discontinued Operations on Duke Energy's Consolidated Statements of Operations. Duke Energy has elected to present cash flows of discontinued operations combined with cash flows of continuing operations. Unless otherwise noted, the notes to these consolidated financial statements exclude amounts related to discontinued operations for all periods presented. See Note 2 for additional information.

Amounts Attributable to Controlling Interests

For the years ended December 31, 2018, and ~~accretion within Net~~2017, the Income (Loss) From Discontinued Operations, net of tax on Duke Energy's Consolidated Statements of Operations is entirely attributable to controlling interest. For the year ended December 31, 2016, $18 million of net income is attributable to noncontrolling interests, which consisted of $7 million included in Income from Continuing Operations and $11 million included in Income (Loss) From Discontinued Operations, net of tax on Duke Energy's Consolidated Statement of Operations.



FINANCIAL STATEMENTS	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Significant Accounting Policies

Use of Estimates

Regulatory Accounting



FINANCIAL STATEMENTS	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Cash, ~~Flows.~~Cash Equivalents and Restricted Cash

~~Premiums, discounts~~All highly liquid investments with maturities of three months or less at the date of acquisition are considered cash equivalents. Duke Energy, Progress Energy and ~~expenses~~Duke Energy Florida have restricted cash balances related primarily to collateral assets, escrow deposits and VIEs. See Note 17 for additional information. Restricted cash amounts are included in Other within Current Assets and Other Noncurrent Assets on the Consolidated Balance Sheets. The following table presents the components of cash, cash equivalents and restricted cash included in the Consolidated Balance Sheets.



	December 31, 2018						December 31, 2017
					Duke						Duke
	Duke		Progress		Energy		Duke		Progress		Energy
	Energy		Energy		Florida		Energy		Energy		Florida
Current Assets
Cash and cash equivalents	$	442	$	67	$	36	$	358	$	40	$	13
Other	141		39		39		138		40		40
Other Noncurrent Assets
Other	8		6		—		9		7		—
Total cash, cash equivalents and restricted cash	$	591	$	112	$	75	$	505	$	87	$	53

Inventory



	December 31, 2018
			Duke				Duke		Duke		Duke		Duke
	Duke		Energy		Progress		Energy		Energy		Energy		Energy
(in millions)	Energy		Carolinas		Energy		Progress		Florida		Ohio		Indiana		Piedmont
Materials and supplies	$	2,238	$	731	$	1,049	$	734	$	315	$	84	$	312	$	2
Coal	491		175		192		106		86		14		109		—
Natural gas, oil and other	355		42		218		114		103		28		1		68
Total inventory	$	3,084	$	948	$	1,459	$	954	$	504	$	126	$	422	$	70



	December 31, 2017
			Duke				Duke		Duke		Duke		Duke
	Duke		Energy		Progress		Energy		Energy		Energy		Energy
(in millions)	Energy		Carolinas		Energy		Progress		Florida		Ohio		Indiana		Piedmont
Materials and supplies	$	2,293	$	744	$	1,118	$	774	$	343	$	82	$	309	$	2
Coal	603		192		255		139		116		17		139		—
Natural gas, oil and other	354		35		219		104		115		34		2		64
Total inventory	$	3,250	$	971	$	1,592	$	1,017	$	574	$	133	$	450	$	66

Investments in Debt and Equity Securities



FINANCIAL STATEMENTS	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Goodwill and Intangible Assets

Goodwill

Intangible Assets

Intangible assets are included in Other in Other Noncurrent Assets on the Consolidated Balance Sheets. Generally, intangible assets are amortized using an ~~adjustment~~amortization method that reflects the pattern in which the economic benefits of the intangible asset are consumed or on a straight-line basis if that pattern is not readily determinable. Amortization of intangibles is reflected in Depreciation and amortization on the Consolidated Statements of Operations. Intangible assets are subject to impairment testing and if impaired, the carrying value is accordingly reduced.

RECs are used to measure compliance with renewable energy standards and are held primarily for consumption. See Note 11 for further information.

Long-Lived Asset Impairments

The Duke Energy Registrants evaluate long-lived assets, excluding goodwill, for impairment when circumstances indicate the carrying value of those assets may not be recoverable. An impairment exists when a long-lived asset’s carrying value exceeds the estimated undiscounted cash flows expected to result from the use and eventual disposition of the asset. The estimated cash flows may be based on alternative expected outcomes that are probability weighted. If the carrying value of the ~~debt amount and included in Long-Term Debt~~long-lived asset is not recoverable based on these estimated future undiscounted cash flows, the ~~Consolidated Balance Sheets presented.~~

~~Loss Contingencies and Environmental Liabilities~~

~~Contingent losses are recorded when it is probable a loss has occurred and can be reasonably estimated. When a range~~carrying value of the ~~probable loss exists~~asset is written-down to its then-current estimated fair value and noan impairment charge is recognized.

Equity Method Investment Impairments

Investments in affiliates that are not controlled by Duke Energy, but over which it has significant influence, are accounted for using the equity method. Equity method investments are assessed for impairment whenever events or changes in circumstances indicate that the carrying amount ~~within~~of the ~~range~~investment may not be recoverable. If the decline in value is considered to be other than temporary, the investment is written down to its estimated fair value, which establishes a ~~better estimate than any other amount, the minimum amount~~new cost basis in the ~~range is recorded. Unless otherwise required by GAAP, legal fees are expensed as incurred.~~investment.

~~Environmental liabilities are recorded on an undiscounted basis when environmental remediation or other liabilities become probable~~Impairment assessments use a discounted cash flow income approach and can be reasonably estimated. Environmental expenditures related to past operations that do not generate current or future revenues are expensed. Environmental expenditures related to operations that generate current or future revenues are expensed or capitalized, as appropriate. Certain environmental expenditures receive regulatory accounting treatment and are recorded as regulatory assets.

~~See Notes 4 and 5 for further information.~~

~~Pension and Other Post-Retirement Benefit Plans~~

~~Duke Energy maintains qualified, non-qualified and other post-retirement benefit plans. Eligible employees~~include consideration of the ~~Subsidiary Registrants participate~~severity and duration of any decline in the respective qualified, non-qualified and other post-retirement benefit plans and the Subsidiary Registrants are allocated their proportionate share of benefit costs. See Note 21 for further information, including significant accounting policies associated with these plans.

~~Severance and Special Termination Benefits~~

Duke Energy has severance plans under which, in general, the longer a terminated employee worked prior to termination the greater the amount of severance benefits. A liability for involuntary severance is recorded once an involuntary severance plan is committed to by management if involuntary severances are probable and can be reasonably estimated. For involuntary severance benefits incremental to its ongoing severance plan benefits, the fair value of the ~~obligation~~investments. The estimated cash flows may be based on alternative expected outcomes that are probability weighted. Key inputs that involve estimates and significant management judgment include cash flow projections, selection of a discount rate, probability weighting of potential outcomes, and whether any decline in value is ~~expensed~~considered temporary.



FINANCIAL STATEMENTS	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Property, Plant and Equipment

Property, plant and equipment are stated at the ~~communication date~~lower of depreciated historical cost net of any disallowances or fair value, if ~~there are no future service requirements or over the required future service period. From time to time,~~impaired. The Duke Energy ~~offers special termination benefits under voluntary severance programs. Special termination benefits are recorded immediately upon employee acceptance absent a significant retention period. Otherwise,~~Registrants capitalize all construction-related direct labor and material costs, as well as indirect construction costs such as general engineering, taxes and financing costs. See “Allowance for Funds Used During Construction and Interest Capitalized” for information on capitalized financing costs. Costs of renewals and betterments that extend the cost is recorded over the remaining service period. Employee acceptance of voluntary severance benefits is determined by management based on the facts and circumstances of the benefits being offered. See Note 19 for further information.

~~Guarantees~~

If necessary, liabilities are recognized at the time of issuance or material modification of a guarantee for the estimated fair value of the obligation it assumes. Fair value is estimated using a probability-weighted approach. The obligation is reduced over the term of the guarantee or related contract in a systematic and rational method as risk is reduced. Any additional contingent loss for guarantee contracts subsequent to the initial recognition of a liability is accounted for and recognized at the time a loss is probable and can be reasonably estimated. See Note 7 for further information.

~~Stock-Based Compensation~~

Stock-based compensation represents costs related to stock-based awards granted to employees and Duke Energy Board of Directors (Board of Directors) members. Duke Energy recognizes stock-based compensation based upon the estimated fair value of awards, net of estimated forfeitures at the date of issuance. The recognition period for these costs begins at either the applicable service inception date or grant date and continues throughout the requisite service period. Compensation cost is recognized as expense or capitalized as a componentuseful life of property, plant and ~~equipment. See Note 20 for further information.~~

~~Income Taxes~~

~~Duke Energy~~equipment are also capitalized. The cost of repairs, replacements and ~~its subsidiaries file a consolidated federal income tax return and other state and foreign jurisdictional returns. The Subsidiary Registrants~~major maintenance projects, which do not extend the useful life or increase the expected output of the asset, are ~~parties to a tax-sharing agreement with Duke Energy. Income taxes recorded represent amounts the Subsidiary Registrants would incur~~expensed as separate C-Corporations. Deferred income taxes have been provided for temporary differences between GAAP and tax bases of assets and liabilities because the differences create taxable or tax-deductible amounts for future periods. Investment tax credits (ITCs) associated with regulated operations are deferred and amortized as a reduction of income tax expenseincurred. Depreciation is generally computed over the estimated useful ~~lives~~life of the ~~related properties.~~

~~Accumulated deferred income taxes are valued~~asset using the ~~enacted tax rate expected~~composite straight-line method. Depreciation studies are conducted periodically to ~~apply to taxable income~~update composite rates and are approved by state utility commissions and/or the FERC when required. The composite weighted average depreciation rates, excluding nuclear fuel, are included in the periods in which the deferred tax asset or liability is expected to be settled or realized. In the event of a change in tax rates, deferred tax assets and liabilities are remeasured as of the enactment date of the new rate. To the extenttable that the change in the value of the deferred tax represents an obligation to customers, the impact of the remeasurement is deferred to a regulatory liability. Remaining impacts are recorded in income from continuing operations. Other impacts of the Tax Act have been recorded on a provisional basis, see Note 22, “Income Taxes,” for additional information. If Duke Energy's estimate of the tax effect of reversing temporary differences is not reflective of actual outcomes, is modified to reflect new developments or interpretations of the tax law, revised to incorporate new accounting principles, or changes in the expected timing or manner of the reversal then Duke Energy's results of operations could be impacted.

~~135~~

~~PART II~~

~~DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –~~

~~DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC– PIEDMONT NATURAL GAS COMPANY, INC.~~

~~Combined Notes To Consolidated Financial Statements – (Continued)~~

~~Tax-related interest and penalties are recorded in Interest Expense and Other Income and Expenses, net in the Consolidated Statements of Operations.~~

~~See Note 22 for further information.~~

~~Accounting for Renewable Energy Tax Credits~~

When Duke Energy receives ITCs on wind or solar facilities, it reduces the basis of the property recorded on the Consolidated Balance Sheets by the amount of the ITC and, therefore, the ITC benefit is ultimately recognized in the statement of operations through reduced depreciation expense. Additionally, certain tax credits and government grants result in an initial tax depreciable base in excess of the book carrying value by an amount equal to one half of the ITC. Deferred tax benefits are recorded as a reduction to income tax expense in the period that the basis difference is created.

~~Excise Taxes~~

Certain excise taxes levied by state or local governments are required to be paid even if not collected from the customer. These taxes are recognized on a gross basis. Otherwise, the taxes are accounted for net. Excise taxes accounted for on a gross basis within both Operating Revenues and Property and other taxes in the Consolidated Statements of Operations were as follows.



	Years Ended December 31,
	2018		2017		2016
Duke Energy	3.0	%	2.8	%	2.8	%
Duke Energy Carolinas	2.8	%	2.8	%	2.8	%
Progress Energy	2.9	%	2.6	%	2.7	%
Duke Energy Progress	2.9	%	2.6	%	2.6	%
Duke Energy Florida	3.0	%	2.8	%	2.8	%
Duke Energy Ohio	2.8	%	2.8	%	2.6	%
Duke Energy Indiana	3.3	%	3.0	%	3.1	%
Piedmont^(a)	2.5	%	2.3	%

Years Ended December 31,
(in millions) 2017
2016
2015
Duke Energy $ 376
$ 362
$ 396
Duke Energy Carolinas 36
31
31
Progress Energy 220
213
229
Duke Energy Progress 19
18
16
Duke Energy Florida 201
195
213
Duke Energy Ohio 98
100
102
Duke Energy Indiana 20
17
34
Piedmont^(a)
2


(a)	Piedmont's ~~excise taxes were immaterial~~weighted average depreciation rate was 2.4 percent for the annualized two months ended December 31, 2016, and ~~$2 million~~ for the ~~years~~year ended October 31, ~~2016, and 2015.~~2016.

~~Dividend Restrictions and Unappropriated Retained Earnings~~

In general, when the Duke Energy ~~does~~Registrants retire regulated property, plant and equipment, the original cost plus the cost of retirement, less salvage value and any depreciation already recognized, is charged to accumulated depreciation. However, when it becomes probable the asset will be retired substantially in advance of its original expected useful life or is abandoned, the cost of the asset and the corresponding accumulated depreciation is recognized as a separate asset. If the asset is still in operation, the net amount is classified as Generation facilities to be retired, net on the Consolidated Balance Sheets. If the asset is no longer operating, the net amount is classified in Regulatory assets on the Consolidated Balance Sheets if deemed recoverable (see discussion of long-lived asset impairments above). When it becomes probable an asset will be abandoned, the cost of the asset and accumulated depreciation is reclassified to Regulatory assets on the Consolidated Balance Sheets for amounts recoverable in rates. The carrying value of the asset is based on historical cost if the Duke Energy Registrants are allowed to recover the remaining net book value and a return equal to at least the incremental borrowing rate. If not, ~~have~~an impairment is recognized to the extent the net book value of the asset exceeds the present value of future revenues discounted at the incremental borrowing rate.

Nuclear Fuel

Nuclear fuel is classified as Property, Plant and Equipment on the Consolidated Balance Sheets.

Allowance for Funds Used During Construction and Interest Capitalized

AFUDC equity, a permanent difference for income taxes, reduces the ETR when capitalized and increases the ETR when depreciated or amortized. See Note 23 for additional information.

For nonregulated operations, interest is capitalized during the construction phase with an offsetting non-cash credit to Interest Expense on the Consolidated Statements of Operations.

Asset Retirement Obligations

AROs are recognized for legal obligations associated with the retirement of property, plant and equipment. Substantially all AROs are related to regulated operations. When recording an ARO, the present value of the projected liability is recognized in the period in which it is incurred, if a reasonable estimate of fair value can be made. The liability is accreted over time. For operating plants, the present value of the liability is added to the cost of the associated asset and depreciated over the remaining life of the asset. For retired plants, the present value of the liability is recorded as a regulatory asset unless determined not to be probable of recovery.



FINANCIAL STATEMENTS	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The present value of the initial obligation and subsequent updates are based on discounted cash flows, which include estimates regarding timing of future cash flows, selection of discount rates and cost escalation rates, among other factors. These estimates are subject to change. Depreciation expense is adjusted prospectively for any ~~legal,~~changes to the carrying amount of the associated asset. The Duke Energy Registrants receive amounts to fund the cost of the ARO for regulated operations through a combination of regulated revenues and earnings on the NDTF. As a result, amounts recovered in regulated revenues, earnings on the NDTF, accretion expense and depreciation of the associated asset are netted and deferred as a regulatory asset or ~~other restrictions~~liability.

Obligations for nuclear decommissioning are based on ~~paying common stock dividends to shareholders. However, as further described in Note 4, due to conditions established~~site-specific cost studies. Duke Energy Carolinas and Duke Energy Progress assume prompt dismantlement of the nuclear facilities after operations are ceased. Duke Energy Florida assumes Crystal River Unit 3 will be placed into a safe storage configuration until eventual dismantlement is completed by ~~regulators in conjunction with merger transaction approvals,~~2074. Duke Energy Carolinas, Duke Energy Progress and Duke Energy ~~Ohio,~~ Florida also assume that spent fuel will be stored on-site until such time that it can be transferred to a yet to be built DOE facility.

Revenue Recognition

Duke Energy ~~Indiana~~recognizes revenue as customers obtain control of promised goods and ~~Piedmont have restrictions on paying dividends~~services in an amount that reflects consideration expected in exchange for those goods or ~~otherwise advancing funds~~services. Generally, the delivery of electricity and natural gas results in the transfer of control to ~~Duke Energy. At December 31, 2017,~~customers at the time the commodity is delivered and ~~2016, an insignificant~~the amount of ~~Duke Energy’s consolidated Retained~~revenue recognized is equal to the amount billed to each customer, including estimated volumes delivered when billings have not yet occurred. See Note 18 for further information.

Derivatives and Hedging

Derivative and non-derivative instruments may be used in connection with commodity price and interest rate activities, including swaps, futures, forwards and options. All derivative instruments, except those that qualify for the NPNS exception, are recorded on the Consolidated Balance Sheets at fair value. Qualifying derivative instruments may be designated as either cash flow hedges or fair value hedges. Other derivative instruments (undesignated contracts) either have not been designated or do not qualify as hedges. The effective portion of the change in the fair value of cash flow hedges is recorded in AOCI. The effective portion of the change in the fair value of a fair value hedge is offset in net income by changes in the hedged item. For activity subject to regulatory accounting, gains and losses on derivative contracts are reflected as regulatory assets or liabilities and not as other comprehensive income or current period income. As a result, changes in fair value of these derivatives have no immediate earnings ~~balance represents undistributed earnings~~impact.

See Note 14 for further information.

New Accounting Standards

See Note 1 to the Consolidated Financial Statements, “Summary of Significant Accounting Policies,” for a discussion of the impact of new accounting standards.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

See “Management’s Discussion and Analysis of Results of Operations and Financial Condition – Quantitative and Qualitative Disclosures About Market Risk.”



FINANCIAL STATEMENTS

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA



Duke Energy
Report of Independent Registered Public Accounting Firm	86
Consolidated Statements of Operations	87
Consolidated Statements of Comprehensive Income	88
Consolidated Balance Sheets	89
Consolidated Statements of Cash Flows	90
Consolidated Statements of Changes in Equity	91

Duke Energy Carolinas
Report of Independent Registered Public Accounting Firm	92
Consolidated Statements of Operations and Comprehensive Income	93
Consolidated Balance Sheets	94
Consolidated Statements of Cash Flows	95
Consolidated Statements of Changes in Equity	96

Progress Energy
Report of Independent Registered Public Accounting Firm	97
Consolidated Statements of Operations and Comprehensive Income	98
Consolidated Balance Sheets	99
Consolidated Statements of Cash Flows	100
Consolidated Statements of Changes in Equity	101

Duke Energy Progress
Report of Independent Registered Public Accounting Firm	102
Consolidated Statements of Operations and Comprehensive Income	103
Consolidated Balance Sheets	104
Consolidated Statements of Cash Flows	105
Consolidated Statements of Changes in Equity	106

Duke Energy Florida
Report of Independent Registered Public Accounting Firm	107
Consolidated Statements of Operations and Comprehensive Income	108
Consolidated Balance Sheets	109
Consolidated Statements of Cash Flows	110
Consolidated Statements of Changes in Equity	111

Duke Energy Ohio
Report of Independent Registered Public Accounting Firm	112
Consolidated Statements of Operations and Comprehensive Income	113
Consolidated Balance Sheets	114
Consolidated Statements of Cash Flows	115
Consolidated Statements of Changes in Equity	116

Duke Energy Indiana
Report of Independent Registered Public Accounting Firm	117
Consolidated Statements of Operations and Comprehensive Income	118
Consolidated Balance Sheets	119
Consolidated Statements of Cash Flows	120
Consolidated Statements of Changes in Equity	121

Piedmont
Report of Independent Registered Public Accounting Firm	122
Consolidated Statements of Operations and Comprehensive Income	123
Consolidated Balance Sheets	124
Consolidated Statements of Cash Flows	125
Consolidated Statements of Changes in Equity	126



FINANCIAL STATEMENTS



Combined Notes to Consolidated Financial Statements
Note 1 – Summary of Significant Accounting Policies	127
Note 2 – Acquisitions and Dispositions	137
Note 3 – Business Segments	140
Note 4 – Regulatory Matters	144
Note 5 – Commitments and Contingencies	166
Note 6 – Debt and Credit Facilities	174
Note 7 – Guarantees and Indemnifications	181
Note 8 – Joint Ownership of Generating and Transmission Facilities	182
Note 9 – Asset Retirement Obligations	182
Note 10 – Property, Plant and Equipment	185
Note 11 – Goodwill and Intangible Assets	187
Note 12 – Investments in Unconsolidated Affiliates	189
Note 13 – Related Party Transactions	191
Note 14 – Derivatives and Hedging	192
Note 15 – Investments in Debt and Equity Securities	198
Note 16 – Fair Value Measurements	203
Note 17 – Variable Interest Entities	209
Note 18 – Revenue	213
Note 19 – Common Stock	217
Note 20 – Severance	218
Note 21 – Stock-Based Compensation	219
Note 22 – Employee Benefit Plans	221
Note 23 – Income Taxes	243
Note 24 – Other Income and Expenses, Net	251
Note 25 – Subsequent Events	252
Note 26 – Quarterly Financial Data (Unaudited)	253



REPORTS

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the shareholders and the Board of Directors of Duke Energy Corporation

Opinion on the Financial Statements

Basis for Opinion

/s/ Deloitte & Touche LLP

Charlotte, North Carolina

February 28, 2019

We have served as the Company's auditor since 1947.



FINANCIAL STATEMENTS

DUKE ENERGY CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS



	Years Ended December 31,
(in millions, except per share amounts)	2018			2017			2016
Operating Revenues
Regulated electric	$	22,097		$	21,177		$	21,221
Regulated natural gas	1,773			1,734			863
Nonregulated electric and other	651			654			659
Total operating revenues	24,521			23,565			22,743
Operating Expenses
Fuel used in electric generation and purchased power	6,831			6,350			6,625
Cost of natural gas	697			632			265
Operation, maintenance and other	6,463			5,944			6,224
Depreciation and amortization	4,074			3,527			3,294
Property and other taxes	1,280			1,233			1,142
Impairment charges	402			282			18
Total operating expenses	19,747			17,968			17,568
(Losses) Gains on Sales of Other Assets and Other, net	(89		)	28			27
Operating Income	4,685			5,625			5,202
Other Income and Expenses
Equity in earnings (losses) of unconsolidated affiliates	83			119			(15		)
Other income and expenses, net	399			508			463
Total other income and expenses	482			627			448
Interest Expense	2,094			1,986			1,916
Income From Continuing Operations Before Income Taxes	3,073			4,266			3,734
Income Tax Expense From Continuing Operations	448			1,196			1,156
Income From Continuing Operations	2,625			3,070			2,578
Income (Loss) From Discontinued Operations, net of tax	19			(6		)	(408		)
Net Income	2,644			3,064			2,170
Less: Net (Loss) Income Attributable to Noncontrolling Interests	(22		)	5			18
Net Income Attributable to Duke Energy Corporation	$	2,666		$	3,059		$	2,152

Earnings Per Share – Basic and Diluted
Income from continuing operations attributable to Duke Energy Corporation common stockholders
Basic	$	3.73		$	4.37		$	3.71
Diluted	$	3.73		$	4.37		$	3.71
Income (Loss) from discontinued operations attributable to Duke Energy Corporation common stockholders
Basic	$	0.03		$	(0.01	)	$	(0.60	)
Diluted	$	0.03		$	(0.01	)	$	(0.60	)
Net income attributable to Duke Energy Corporation common stockholders
Basic	$	3.76		$	4.36		$	3.11
Diluted	$	3.76		$	4.36		$	3.11
Weighted average shares outstanding
Basic	708			700			691
Diluted	708			700			691

See Notes to Consolidated Financial Statements



FINANCIAL STATEMENTS

DUKE ENERGY CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME



	Years Ended December 31,
(in millions)	2018			2017		2016
Net Income	$	2,644		$	3,064	$	2,170
Other Comprehensive (Loss) Income, net of tax
Foreign currency translation adjustments	—			—		694
Pension and OPEB adjustments	(6		)	3		(11		)
Net unrealized (losses) gains on cash flow hedges	(10		)	2		17
Reclassification into earnings from cash flow hedges	6			8		13
Unrealized (losses) gains on available-for-sale securities	(3		)	13		2
Other Comprehensive (Loss) Income, net of tax	(13		)	26		715
Comprehensive Income	2,631			3,090		2,885
Less: Comprehensive (Loss) Income Attributable to Noncontrolling Interests	(22		)	5		20
Comprehensive Income Attributable to Duke Energy Corporation	$	2,653		$	3,085	$	2,865

See Notes to Consolidated Financial Statements



FINANCIAL STATEMENTS

DUKE ENERGY CORPORATION

CONSOLIDATED BALANCE SHEETS



	December 31,
(in millions)	2018			2017
ASSETS
Current Assets
Cash and cash equivalents	$	442		$	358
Receivables (net of allowance for doubtful accounts of $16 at 2018 and $14 at 2017)	962			779
Receivables of VIEs (net of allowance for doubtful accounts of $55 at 2018 and $54 at 2017)	2,172			1,995
Inventory	3,084			3,250
Regulatory assets (includes $52 at 2018 and $51 at 2017 related to VIEs)	2,005			1,437
Other (includes $162 at 2018 and $214 at 2017 related to VIEs)	1,049			634
Total current assets	9,714			8,453
Property, Plant and Equipment
Cost	134,458			127,507
Accumulated depreciation and amortization	(43,126		)	(41,537		)
Generation facilities to be retired, net	362			421
Net property, plant and equipment	91,694			86,391
Other Noncurrent Assets
Goodwill	19,303			19,396
Regulatory assets (includes $1,041 at 2018 and $1,091 at 2017 related to VIEs)	13,617			12,442
Nuclear decommissioning trust funds	6,720			7,097
Investments in equity method unconsolidated affiliates	1,409			1,175
Other	2,935			2,960
Total other noncurrent assets	43,984			43,070
Total Assets	$	145,392		$	137,914
LIABILITIES AND EQUITY
Current Liabilities
Accounts payable	$	3,487		$	3,043
Notes payable and commercial paper	3,410			2,163
Taxes accrued	577			551
Interest accrued	559			525
Current maturities of long-term debt (includes $227 at 2018 and $225 at 2017 related to VIEs)	3,406			3,244
Asset retirement obligations	919			689
Regulatory liabilities	598			402
Other	2,085			1,865
Total current liabilities	15,041			12,482
Long-Term Debt (includes $3,998 at 2018 and $4,306 at 2017 related to VIEs)	51,123			49,035
Other Noncurrent Liabilities
Deferred income taxes	7,806			6,621
Asset retirement obligations	9,548			9,486
Regulatory liabilities	14,834			15,330
Accrued pension and other post-retirement benefit costs	988			1,103
Investment tax credits	568			539
Other (includes $212 at 2018 and $241 at 2017 related to VIEs)	1,650			1,581
Total other noncurrent liabilities	35,394			34,660
Commitments and Contingencies
Equity
Common stock, $0.001 par value, 2 billion shares authorized; 727 million shares outstanding at 2018 and 700 million shares outstanding at 2017	1			1
Additional paid-in capital	40,795			38,792
Retained earnings	3,113			3,013
Accumulated other comprehensive loss	(92		)	(67		)
Total Duke Energy Corporation stockholders' equity	43,817			41,739
Noncontrolling interests	17			(2		)
Total equity	43,834			41,737
Total Liabilities and Equity	$	145,392		$	137,914

See Notes to Consolidated Financial Statements



FINANCIAL STATEMENTS

DUKE ENERGY CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS



	Years Ended December 31,
(in millions)	2018			2017			2016
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	2,644		$	3,064		$	2,170
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization and accretion (including amortization of nuclear fuel)	4,696			4,046			3,880
Equity component of AFUDC	(221		)	(237		)	(200		)
Losses (Gains) on sales of other assets	88			(33		)	477
Impairment charges	402			282			212
Deferred income taxes	1,079			1,433			900
Equity in (earnings) losses of unconsolidated affiliates	(83		)	(119		)	15
Accrued pension and other post-retirement benefit costs	61			8			21
Contributions to qualified pension plans	(141		)	(19		)	(155		)
Payments for asset retirement obligations	(533		)	(571		)	(608		)
Payment for the disposal of other assets	(105		)	—			—
Other rate case adjustments	37			—			—
Provision for rate refunds	425			—			—
(Increase) decrease in
Net realized and unrealized mark-to-market and hedging transactions	22			18			34
Receivables	(345		)	(83		)	(372		)
Inventory	156			268			272
Other current assets	(721		)	(400		)	(174		)
Increase (decrease) in
Accounts payable	479			(204		)	296
Taxes accrued	23			149			236
Other current liabilities	270			(482		)	182
Other assets	(1,008		)	(436		)	(186		)
Other liabilities	(39		)	(60		)	(137		)
Net cash provided by operating activities	7,186			6,624			6,863
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures	(9,389		)	(8,052		)	(7,901		)
Contributions to equity method investments	(416		)	(414		)	(307		)
Acquisitions, net of cash acquired	—			(13		)	(4,778		)
Return of investment capital	137			281			1
Purchases of debt and equity securities	(3,762		)	(4,071		)	(5,153		)
Proceeds from sales and maturities of debt and equity securities	3,747			4,098			5,236
Proceeds from the sales of discontinued operations and other assets, net of cash divested	41			—			1,418
Other	(418		)	(271		)	(44		)
Net cash used in investing activities	(10,060		)	(8,442		)	(11,528		)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from the:
Issuance of long-term debt	5,299			6,909			9,238
Issuance of common stock	1,838			—			731
Payments for the redemption of long-term debt	(2,906		)	(2,316		)	(1,923		)
Proceeds from the issuance of short-term debt with original maturities greater than 90 days	472			319			2,081
Payments for the redemption of short-term debt with original maturities greater than 90 days	(282		)	(272		)	(2,166		)
Notes payable and commercial paper	981			(409		)	(1,362		)
Dividends paid	(2,471		)	(2,450		)	(2,332		)
Other	29			1			(16		)
Net cash provided by financing activities	2,960			1,782			4,251
Changes in cash and cash equivalents included in assets held for sale	—			—			474
Net increase (decrease) in cash, cash equivalents, and restricted cash	86			(36		)	60
Cash, cash equivalents, and restricted cash at beginning of period	505			541			481
Cash, cash equivalents, and restricted cash at end of period	$	591		$	505		$	541
Supplemental Disclosures:
Cash paid for interest, net of amount capitalized	$	2,086		$	1,963		$	1,794
Cash (received from) paid for income taxes	(266		)	4			229
Significant non-cash transactions:
Accrued capital expenditures	1,112			1,032			1,000
Non-cash dividends	107			—			—

See Notes to Consolidated Financial Statements



FINANCIAL STATEMENTS

DUKE ENERGY CORPORATION

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY



									Duke Energy Corporation Stockholders' Accumulated Other Comprehensive Loss
															Net Unrealized						Total
									Foreign			Net			Gains (Losses)						Duke Energy
	Common			Additional					Currency			Losses on			on Available-			Pension and			Corporation
	Stock	Common		Paid-in		Retained			Translation			Cash Flow			for-Sale-			OPEB			Stockholders'			Noncontrolling			Total
(in millions)	Shares	Stock		Capital		Earnings			Adjustments			Hedges			Securities			Adjustments			Equity			Interests			Equity
Balance at December 31, 2015	688	$	1	$	37,968	$	2,564		$	(692	)	$	(50	)	$	(3	)	$	(61	)	$	39,727		$	44		$	39,771
Net income	—	—		—		2,152			—			—			—			—			2,152			18			2,170
Other comprehensive income (loss)^(a)	—	—		—		—			692			30			2			(11		)	713			2			715
Common stock issuances, including dividend reinvestment and employee benefits	12	—		773		—			—			—			—			—			773			—			773
Common stock dividends	—	—		—		(2,332		)	—			—			—			—			(2,332		)	—			(2,332		)
Distributions to noncontrolling interest in subsidiaries	—	—		—		—			—			—			—			—			—			(6		)	(6		)
Other^(b)	—	—		—		—			—			—			—			—			—			(50		)	(50		)
Balance at December 31, 2016	700	$	1	$	38,741	$	2,384		$	—		$	(20	)	$	(1	)	$	(72	)	$	41,033		$	8		$	41,041
Net income	—	—		—		3,059			—			—			—			—			3,059			5			3,064
Other comprehensive income	—	—		—		—			—			10			13			3			26			—			26
Common stock issuances, including dividend reinvestment and employee benefits	—	—		51		—			—			—			—			—			51			—			51
Common stock dividends	—	—		—		(2,450		)	—			—			—			—			(2,450		)	—			(2,450		)
Distributions to noncontrolling interest in subsidiaries	—	—		—		—			—			—			—			—			—			(2		)	(2		)
Other^(c)	—	—		—		20			—			—			—			—			20			(13		)	7
Balance at December 31, 2017	700	$	1	$	38,792	$	3,013		$	—		$	(10	)	$	12		$	(69	)	$	41,739		$	(2	)	$	41,737
Net income	—	—		—		2,666			—			—			—			—			2,666			(22		)	2,644
Other comprehensive (loss) income	—	—		—		—			—			(4		)	(3		)	(6		)	(13		)	—			(13		)
Common stock issuances, including dividend reinvestment and employee benefits	27	—		2,003		—			—			—			—			—			2,003			—			2,003
Common stock dividends	—	—		—		(2,578		)	—			—			—			—			(2,578		)	—			(2,578		)
Distributions to noncontrolling interests in subsidiaries	—	—		—		—			—			—			—			—			—			(1		)	(1		)
Other^(d)	—	—		—		12			—			—			(12		)	—			—			42			42
Balance at December 31, 2018	727	$	1	$	40,795	$	3,113		$	—		$	(14	)	$	(3	)	$	(75	)	$	43,817		$	17		$	43,834


(a)	Foreign Currency Translation Adjustments amount includes $620 million of cumulative adjustment realized as a result of the sale of the Latin American generation business. See Note 2 to the Consolidated Financial Statements.


(b)	Noncontrolling Interests amount is primarily related to the sale of the Latin American generation business. See Note 2 to the Consolidated Financial Statements.


(c)	Retained Earnings relates to a cumulative-effect adjustment due to implementation of a new accounting standard related to stock-based compensation and the associated income taxes. See Note 1 to the Consolidated Financial Statements for additional information. Noncontrolling Interests relates to the purchase of remaining interest in REC Solar.


(d)	Amounts in Retained Earnings and Accumulated Other Comprehensive Loss represent a cumulative-effect adjustment due to implementation of a new accounting standard related to Financial Instruments Classification and Measurement. See Note 1 for more information. Amount in Noncontrolling Interests primarily relates to tax equity financing activity in the Commercial Renewables segment.

See Notes to Consolidated Financial Statements



REPORTS

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the shareholder and the Board of Directors of Duke Energy Carolinas, LLC

Opinion on the Financial Statements

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

/s/ Deloitte & Touche LLP

Charlotte, North Carolina

February 28, 2019

We have served as the Company's auditor since 1947.



FINANCIAL STATEMENTS

DUKE ENERGY CAROLINAS, LLC

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME



	Years Ended December 31,
(in millions)	2018			2017		2016
Operating Revenues	$	7,300		$	7,302	$	7,322
Operating Expenses
Fuel used in electric generation and purchased power	1,821			1,822		1,797
Operation, maintenance and other	2,130			2,021		2,158
Depreciation and amortization	1,201			1,090		1,075
Property and other taxes	295			281		276
Impairment charges	192			—		1
Total operating expenses	5,639			5,214		5,307
(Losses) Gains on Sales of Other Assets and Other, net	(1		)	1		(5		)
Operating Income	1,660			2,089		2,010
Other Income and Expenses, net	153			199		214
Interest Expense	439			422		424
Income Before Income Taxes	1,374			1,866		1,800
Income Tax Expense	303			652		634
Net Income	$	1,071		$	1,214	$	1,166
Other Comprehensive Income, net of tax
Reclassification into earnings from cash flow hedges	1			2		2
Other Comprehensive Income, net of tax	1			2		2
Comprehensive Income	$	1,072		$	1,216	$	1,168

See Notes to Consolidated Financial Statements



FINANCIAL STATEMENTS

DUKE ENERGY CAROLINAS, LLC

CONSOLIDATED BALANCE SHEETS



	December 31,
(in millions)	2018			2017
ASSETS
Current Assets
Cash and cash equivalents	$	33		$	16
Receivables (net of allowance for doubtful accounts of $2 at 2018 and 2017)	219			200
Receivables of VIEs (net of allowance for doubtful accounts of $7 at 2018 and 2017)	699			640
Receivables from affiliated companies	182			95
Inventory	948			971
Regulatory assets	520			299
Other	72			19
Total current assets	2,673			2,240
Property, Plant and Equipment
Cost	44,741			42,939
Accumulated depreciation and amortization	(15,496		)	(15,063		)
Net property, plant and equipment	29,245			27,876
Other Noncurrent Assets
Regulatory assets	3,457			2,853
Nuclear decommissioning trust funds	3,558			3,772
Other	1,027			979
Total other noncurrent assets	8,042			7,604
Total Assets	$	39,960		$	37,720
LIABILITIES AND EQUITY
Current Liabilities
Accounts payable	$	988		$	842
Accounts payable to affiliated companies	230			209
Notes payable to affiliated companies	439			104
Taxes accrued	171			234
Interest accrued	102			108
Current maturities of long-term debt	6			1,205
Asset retirement obligations	290			337
Regulatory liabilities	199			126
Other	571			486
Total current liabilities	2,996			3,651
Long-Term Debt	10,633			8,598
Long-Term Debt Payable to Affiliated Companies	300			300
Other Noncurrent Liabilities
Deferred income taxes	3,689			3,413
Asset retirement obligations	3,659			3,273
Regulatory liabilities	5,999			6,231
Accrued pension and other post-retirement benefit costs	99			95
Investment tax credits	231			232
Other	671			566
Total other noncurrent liabilities	14,348			13,810
Commitments and Contingencies
Equity
Member's equity	11,689			11,368
Accumulated other comprehensive loss	(6		)	(7		)
Total equity	11,683			11,361
Total Liabilities and Equity	$	39,960		$	37,720

See Notes to Consolidated Financial Statements



FINANCIAL STATEMENTS

DUKE ENERGY CAROLINAS, LLC

CONSOLIDATED STATEMENTS OF CASH FLOWS



	Years Ended December 31,
(in millions)	2018			2017			2016
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	1,071		$	1,214		$	1,166
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization (including amortization of nuclear fuel)	1,487			1,409			1,382
Equity component of AFUDC	(73		)	(106		)	(102		)
Losses (Gains) on sales of other assets	1			(1		)	5
Impairment charges	192			—			1
Deferred income taxes	305			410			470
Accrued pension and other post-retirement benefit costs	4			(4		)	4
Contributions to qualified pension plans	(46		)	—			(43		)
Payments for asset retirement obligations	(230		)	(271		)	(287		)
Provision for rate refunds	182			—			—
(Increase) decrease in
Net realized and unrealized mark-to-market and hedging transactions	2			9			5
Receivables	(86		)	(9		)	(76		)
Receivables from affiliated companies	(87		)	68			(56		)
Inventory	25			78			215
Other current assets	(161		)	7			67
Increase (decrease) in
Accounts payable	168			23			(69		)
Accounts payable to affiliated companies	21			(38		)	18
Taxes accrued	(65		)	86			187
Other current liabilities	89			(161		)	63
Other assets	(179		)	(49		)	20
Other liabilities	(90		)	(31		)	6
Net cash provided by operating activities	2,530			2,634			2,976
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures	(2,706		)	(2,524		)	(2,220		)
Purchases of debt and equity securities	(1,810		)	(2,124		)	(2,832		)
Proceeds from sales and maturities of debt and equity securities	1,810			2,128			2,832
Notes receivable from affiliated companies	—			66			97
Other	(147		)	(109		)	(83		)
Net cash used in investing activities	(2,853		)	(2,563		)	(2,206		)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from the issuance of long-term debt	1,983			569			1,587
Payments for the redemption of long-term debt	(1,205		)	(116		)	(356		)
Notes payable to affiliated companies	335			104			—
Distributions to parent	(750		)	(625		)	(2,000		)
Other	(23		)	(1		)	—
Net cash provided by (used in) financing activities	340			(69		)	(769		)
Net increase in cash and cash equivalents	17			2			1
Cash and cash equivalents at beginning of period	16			14			13
Cash and cash equivalents at end of period	$	33		$	16		$	14
Supplemental Disclosures:
Cash paid for interest, net of amount capitalized	$	452		$	398		$	393
Cash paid for (received from) income taxes	89			193			(60		)
Significant non-cash transactions:
Accrued capital expenditures	302			315			347

See Notes to Consolidated Financial Statements



FINANCIAL STATEMENTS

DUKE ENERGY CAROLINAS, LLC

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY



				Accumulated Other
				Comprehensive
				Loss
				Net Losses
				on Cash
	Member's			Flow			Total
(in millions)	Equity			Hedges			Equity
Balance at December 31, 2015	$	11,617		$	(11	)	$	11,606
Net income	1,166			—			1,166
Other comprehensive income	—			2			2
Distributions to parent	(2,000		)	—			(2,000		)
Other	(2		)	—			(2		)
Balance at December 31, 2016	$	10,781		$	(9	)	$	10,772
Net income	1,214			—			1,214
Other comprehensive income	—			2			2
Distributions to parent	(625		)	—			(625		)
Other	(2		)	—			(2		)
Balance at December 31, 2017	$	11,368		$	(7	)	$	11,361
Net income	1,071			—			1,071
Other comprehensive income	—			1			1
Distributions to parent	(750		)	—			(750		)
Balance at December 31, 2018	$	11,689		$	(6	)	$	11,683

See Notes to Consolidated Financial Statements



REPORTS

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the shareholder and the Board of Directors of Progress Energy, Inc.

Opinion on the Financial Statements

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

/s/ Deloitte & Touche LLP

Charlotte, North Carolina

February 28, 2019

We have served as the Company's auditor since 1930.



FINANCIAL STATEMENTS

PROGRESS ENERGY, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME



	Years Ended December 31,
(in millions)	2018			2017		2016
Operating Revenues	$	10,728		$	9,783	$	9,853
Operating Expenses
Fuel used in electric generation and purchased power	3,976			3,417		3,644
Operation, maintenance and other	2,613			2,301		2,458
Depreciation and amortization	1,619			1,285		1,213
Property and other taxes	529			503		487
Impairment charges	87			156		7
Total operating expenses	8,824			7,662		7,809
Gains on Sales of Other Assets and Other, net	24			26		25
Operating Income	1,928			2,147		2,069
Other Income and Expenses, net	165			209		186
Interest Expense	842			824		689
Income From Continuing Operations Before Income Taxes	1,251			1,532		1,566
Income Tax Expense From Continuing Operations	218			264		527
Income From Continuing Operations	1,033			1,268		1,039
Income From Discontinued Operations, net of tax	—			—		2
Net Income	1,033			1,268		1,041
Less: Net Income Attributable to Noncontrolling Interests	6			10		10
Net Income Attributable to Parent	$	1,027		$	1,258	$	1,031

Net Income	$	1,033		$	1,268	$	1,041
Other Comprehensive Income, net of tax
Pension and OPEB adjustments	5			4		1
Net unrealized gain on cash flow hedges	6			5		—
Reclassification into earnings from cash flow hedges	—			—		8
Unrealized (losses) gains on available-for-sale securities	(1		)	4		1
Other Comprehensive Income, net of tax	10			13		10
Comprehensive Income	1,043			1,281		1,051
Less: Comprehensive Income Attributable to Noncontrolling Interests	6			10		10
Comprehensive Income Attributable to Parent	$	1,037		$	1,271	$	1,041

See Notes to Consolidated Financial Statements



FINANCIAL STATEMENTS

PROGRESS ENERGY, INC.

CONSOLIDATED BALANCE SHEETS



	December 31,
(in millions)	2018			2017
ASSETS
Current Assets
Cash and cash equivalents	$	67		$	40
Receivables (net of allowance for doubtful accounts of $5 at 2018 and $4 at 2017)	220			123
Receivables of VIEs (net of allowance for doubtful accounts of $8 at 2018 and $7 at 2017)	909			780
Receivables from affiliated companies	168			31
Notes receivable from affiliated companies	—			240
Inventory	1,459			1,592
Regulatory assets (includes $52 at 2018 and $51 at 2017 related to VIEs)	1,137			741
Other (includes $39 at 2018 and $44 at 2017 related to VIEs)	125			334
Total current assets	4,085			3,881
Property, Plant and Equipment
Cost	50,260			47,323
Accumulated depreciation and amortization	(16,398		)	(15,857		)
Generation facilities to be retired, net	362			421
Net property, plant and equipment	34,224			31,887
Other Noncurrent Assets
Goodwill	3,655			3,655
Regulatory assets (includes $1,041 at 2018 and $1,091 at 2017 related to VIEs)	6,564			6,010
Nuclear decommissioning trust funds	3,162			3,324
Other	974			931
Total other noncurrent assets	14,355			13,920
Total Assets	$	52,664		$	49,688
LIABILITIES AND EQUITY
Current Liabilities
Accounts payable	$	1,172		$	1,006
Accounts payable to affiliated companies	360			251
Notes payable to affiliated companies	1,235			805
Taxes accrued	109			101
Interest accrued	246			212
Current maturities of long-term debt (includes $53 at 2018 and 2017 related to VIEs)	1,672			771
Asset retirement obligations	514			295
Regulatory liabilities	280			213
Other	821			729
Total current liabilities	6,409			4,383
Long-Term Debt (includes $1,636 at 2018 and $1,689 at 2017 related to VIEs)	17,089			16,916
Long-Term Debt Payable to Affiliated Companies	150			150
Other Noncurrent Liabilities
Deferred income taxes	3,941			3,502
Asset retirement obligations	4,897			5,119
Regulatory liabilities	5,049			5,306
Accrued pension and other post-retirement benefit costs	521			545
Other	351			302
Total other noncurrent liabilities	14,759			14,774
Commitments and Contingencies
Equity
Common stock, $0.01 par value, 100 shares authorized and outstanding at 2018 and 2017	—			—
Additional paid-in capital	9,143			9,143
Retained earnings	5,131			4,350
Accumulated other comprehensive loss	(20		)	(25		)
Total Progress Energy, Inc. stockholder's equity	14,254			13,468
Noncontrolling interests	3			(3		)
Total equity	14,257			13,465
Total Liabilities and Equity	$	52,664		$	49,688

See Notes to Consolidated Financial Statements



FINANCIAL STATEMENTS

PROGRESS ENERGY, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS



	Years Ended December 31,
(in millions)	2018			2017			2016
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	1,033		$	1,268		$	1,041
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization and accretion (including amortization of nuclear fuel)	1,987			1,516			1,435
Equity component of AFUDC	(104		)	(92		)	(76		)
Gains on sales of other assets	(24		)	(28		)	(34		)
Impairment charges	87			156			7
Deferred income taxes	358			703			532
Accrued pension and other post-retirement benefit costs	24			(28		)	(24		)
Contributions to qualified pension plans	(45		)	—			(43		)
Payments for asset retirement obligations	(230		)	(248		)	(270		)
Other rate case adjustments	37			—			—
Provision for rate refunds	122			—			—
(Increase) decrease in
Net realized and unrealized mark-to-market and hedging transactions	18			—			42
Receivables	(207		)	(89		)	7
Receivables from affiliated companies	(137		)	71			211
Inventory	121			125			35
Other current assets	(12		)	(397		)	50
Increase (decrease) in
Accounts payable	217			(260		)	252
Accounts payable to affiliated companies	109			(97		)	37
Taxes accrued	8			17			15
Other current liabilities	129			(166		)	(42		)
Other assets	(913		)	(300		)	(248		)
Other liabilities	(34		)	(98		)	(36		)
Net cash provided by operating activities	2,544			2,053			2,891
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures	(3,854		)	(3,152		)	(3,306		)
Asset Acquisitions	—			—			(10		)
Purchases of debt and equity securities	(1,753		)	(1,806		)	(2,143		)
Proceeds from sales and maturities of debt and equity securities	1,769			1,824			2,187
Net proceeds from sales of other assets	20			—			—
Proceeds from insurance	—			7			58
Proceeds from the sale of nuclear fuel	—			20			20
Notes receivable from affiliated companies	240			(160		)	(80		)
Other	(182		)	(86		)	47
Net cash used in investing activities	(3,760		)	(3,353		)	(3,227		)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from the issuance of long-term debt	1,833			2,118			2,375
Payments for the redemption of long-term debt	(771		)	(813		)	(327		)
Notes payable to affiliated companies	430			100			444
Dividends to parent	(250		)	(124		)	(2,098		)
Other	(1		)	(4		)	(3		)
Net cash provided by financing activities	1,241			1,277			391
Net increase (decrease) in cash, cash equivalents, and restricted cash	25			(23		)	55
Cash, cash equivalents, and restricted cash at beginning of period	87			110			55
Cash, cash equivalents, and restricted cash at end of period	$	112		$	87		$	110
Supplemental Disclosures:
Cash paid for interest, net of amount capitalized	$	798		$	773		$	673
Cash received from income taxes	(348		)	(146		)	(187		)
Significant non-cash transactions:
Accrued capital expenditures	478			391			317
Equitization of certain notes payable to affiliates	—			1,047			—
Dividend to parent related to a legal entity restructuring	—			547			—

See Notes to Consolidated Financial Statements



FINANCIAL STATEMENTS

PROGRESS ENERGY, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY



						Accumulated Other Comprehensive Loss
						Net			Net Unrealized						Total Progress
	Additional					Losses on			Gains (Losses)			Pension and			Energy, Inc.
	Paid-in		Retained			Cash Flow			on Available-for-			OPEB			Stockholder's			Noncontrolling			Total
(in millions)	Capital		Earnings			Hedges			Sale Securities			Adjustments			Equity			Interests			Equity
Balance at December 31, 2015	$	8,092	$	4,831		$	(31	)	$	—		$	(17	)	$	12,875		$	(22	)	$	12,853
Net income	—		1,031			—			—			—			1,031			10			1,041
Other comprehensive income	—		—			8			1			1			10			—			10
Distributions to noncontrolling interests	—		—			—			—			—			—			(1		)	(1		)
Dividends to parent	—		(2,098		)	—			—			—			(2,098		)	—			(2,098		)
Other	2		—			—			—			—			2			—			2
Balance at December 31, 2016	$	8,094	$	3,764		$	(23	)	$	1		$	(16	)	$	11,820		$	(13	)	$	11,807
Net income	—		1,258			—			—			—			1,258			10			1,268
Other comprehensive income	—		—			5			4			4			13			—			13
Dividends to parent^(a)	—		(672		)	—			—			—			(672		)	—			(672		)
Equitization of certain notes payable to affiliates	1,047		—			—			—			—			1,047			—			1,047
Other	2		—			—			—			—			2			—			2
Balance at December 31, 2017	$	9,143	$	4,350		$	(18	)	$	5		$	(12	)	$	13,468		$	(3	)	$	13,465
Net income	—		1,027			—			—			—			1,027			6			1,033
Other comprehensive income (loss)	—		—			6			(1		)	5			10			—			10
Distributions to noncontrolling interests	—		—			—			—			—			—			(1		)	(1		)
Dividends to parent	—		(250		)	—			—			—			(250		)	—			(250		)
Other^(b)	—		4			—			(5		)	—			(1		)	1			—
Balance at December 31, 2018	$	9,143	$	5,131		$	(12	)	$	(1	)	$	(7	)	$	14,254		$	3		$	14,257


(a)	Includes a $547 million non-cash dividend related to a legal entity restructuring.


(b)	Amounts in Retained Earnings and Accumulated Other Comprehensive Loss represent a cumulative-effect adjustment due to implementation of a new accounting standard related to Financial Instruments Classification and Measurement. See Note 1 for more information.

See Notes to Consolidated Financial Statements



REPORTS

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the shareholder and the Board of Directors of Duke Energy Progress, LLC

Opinion on the Financial Statements

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

/s/ Deloitte & Touche LLP

Charlotte, North Carolina

February 28, 2019

We have served as the Company's auditor since 1930.



FINANCIAL STATEMENTS

DUKE ENERGY PROGRESS, LLC

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME



	Years Ended December 31,
(in millions)	2018		2017		2016
Operating Revenues	$	5,699	$	5,129	$	5,277
Operating Expenses
Fuel used in electric generation and purchased power	1,892		1,609		1,830
Operation, maintenance and other	1,578		1,439		1,565
Depreciation and amortization	991		725		703
Property and other taxes	155		156		156
Impairment charges	33		19		1
Total operating expenses	4,649		3,948		4,255
Gains on Sales of Other Assets and Other, net	9		4		3
Operating Income	1,059		1,185		1,025
Other Income and Expenses, net	87		115		132
Interest Expense	319		293		257
Income Before Income Taxes	827		1,007		900
Income Tax Expense	160		292		301
Net Income and Comprehensive Income	$	667	$	715	$	599

See Notes to Consolidated Financial Statements



FINANCIAL STATEMENTS

DUKE ENERGY PROGRESS, LLC

CONSOLIDATED BALANCE SHEETS



	December 31,
(in millions)	2018			2017
ASSETS
Current Assets
Cash and cash equivalents	$	23		$	20
Receivables (net of allowance for doubtful accounts of $2 at 2018 and $1 at 2017)	75			56
Receivables of VIEs (net of allowance for doubtful accounts of $5 at 2018 and 2017)	547			459
Receivables from affiliated companies	23			3
Inventory	954			1,017
Regulatory assets	703			352
Other	62			97
Total current assets	2,387			2,004
Property, Plant and Equipment
Cost	31,459			29,583
Accumulated depreciation and amortization	(11,423		)	(10,903		)
Generation facilities to be retired, net	362			421
Net property, plant and equipment	20,398			19,101
Other Noncurrent Assets
Regulatory assets	4,111			3,507
Nuclear decommissioning trust funds	2,503			2,588
Other	612			599
Total other noncurrent assets	7,226			6,694
Total Assets	$	30,011		$	27,799
LIABILITIES AND EQUITY
Current Liabilities
Accounts payable	$	660		$	402
Accounts payable to affiliated companies	278			179
Notes payable to affiliated companies	294			240
Taxes accrued	53			64
Interest accrued	116			102
Current maturities of long-term debt	603			3
Asset retirement obligations	509			295
Regulatory liabilities	178			139
Other	408			376
Total current liabilities	3,099			1,800
Long-Term Debt	7,451			7,204
Long-Term Debt Payable to Affiliated Companies	150			150
Other Noncurrent Liabilities
Deferred income taxes	2,119			1,883
Asset retirement obligations	4,311			4,378
Regulatory liabilities	3,955			3,999
Accrued pension and other post-retirement benefit costs	237			248
Investment tax credits	142			143
Other	106			45
Total other noncurrent liabilities	10,870			10,696
Commitments and Contingencies
Equity
Member's Equity	8,441			7,949
Total Liabilities and Equity	$	30,011		$	27,799

See Notes to Consolidated Financial Statements



FINANCIAL STATEMENTS

DUKE ENERGY PROGRESS, LLC

CONSOLIDATED STATEMENTS OF CASH FLOWS



	Years Ended December 31,
(in millions)	2018			2017			2016
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	667		$	715		$	599
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization (including amortization of nuclear fuel)	1,183			936			907
Equity component of AFUDC	(57		)	(47		)	(50		)
Gains on sales of other assets	(9		)	(5		)	(6		)
Impairment charges	33			19			1
Deferred income taxes	236			384			384
Accrued pension and other post-retirement benefit costs	15			(20		)	(32		)
Contributions to qualified pension plans	(25		)	—			(24		)
Payments for asset retirement obligations	(195		)	(192		)	(212		)
Other rate case adjustments	37			—			—
Provisions for rate refunds	122			—			—
(Increase) decrease in
Net realized and unrealized mark-to-market and hedging transactions	5			(4		)	4
Receivables	(107		)	(58		)	(17		)
Receivables from affiliated companies	(20		)	2			11
Inventory	63			59			12
Other current assets	(201		)	(75		)	84
Increase (decrease) in
Accounts payable	219			(230		)	181
Accounts payable to affiliated companies	99			(48		)	37
Taxes accrued	(11		)	(39		)	90
Other current liabilities	46			(131		)	114
Other assets	(484		)	(53		)	(163		)
Other liabilities	12			(18		)	12
Net cash provided by operating activities	1,628			1,195			1,932
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures	(2,220		)	(1,715		)	(1,733		)
Purchases of debt and equity securities	(1,236		)	(1,249		)	(1,658		)
Proceeds from sales and maturities of debt and equity securities	1,206			1,207			1,615
Net proceeds from the sales of other assets	20			—			—
Proceeds from insurance	—			4			—
Notes receivable from affiliated companies	—			165			(165		)
Other	(115		)	(55		)	26
Net cash used in investing activities	(2,345		)	(1,643		)	(1,915		)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from the issuance of long-term debt	845			812			505
Payments for the redemption of long-term debt	(3		)	(470		)	(15		)
Notes payable to affiliated companies	54			240			(209		)
Distributions to parent	(175		)	(124		)	(300		)
Other	(1		)	(1		)	(2		)
Net cash provided by (used in) financing activities	720			457			(21		)
Net increase (decrease) in cash and cash equivalents	3			9			(4		)
Cash and cash equivalents at beginning of period	20			11			15
Cash and cash equivalents at end of period	$	23		$	20		$	11
Supplemental Disclosures:
Cash paid for interest, net of amount capitalized	$	303		$	291		$	248
Cash (received from) paid for income taxes	(112		)	59			(287		)
Significant non-cash transactions:
Accrued capital expenditures	220			191			147

See Notes to Consolidated Financial Statements



FINANCIAL STATEMENTS

DUKE ENERGY PROGRESS, LLC

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY



	Member's
(in millions)	Equity
Balance at December 31, 2015	$	7,059
Net income	599
Distribution to parent	(300		)
Balance at December 31, 2016	$	7,358
Net income	715
Distribution to parent	(124		)
Balance at December 31, 2017	$	7,949
Net income	667
Distribution to parent	(175		)
Balance at December 31, 2018	$	8,441

See Notes to Consolidated Financial Statements



REPORTS

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the shareholder and the Board of Directors of Duke Energy Florida, LLC

Opinion on the Financial Statements

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

/s/ Deloitte & Touche LLP

Charlotte, North Carolina

February 28, 2019

We have served as the Company's auditor since 2001.



FINANCIAL STATEMENTS

DUKE ENERGY FLORIDA, LLC

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME



	Years Ended December 31,
(in millions)	2018			2017		2016
Operating Revenues	$	5,021		$	4,646	$	4,568
Operating Expenses
Fuel used in electric generation and purchased power	2,085			1,808		1,814
Operation, maintenance and other	1,025			853		884
Depreciation and amortization	628			560		509
Property and other taxes	374			347		333
Impairment charges	54			138		6
Total operating expenses	4,166			3,706		3,546
Gains on Sales of Other Assets and Other, net	1			1		—
Operating Income	856			941		1,022
Other Income and Expenses, net	86			96		63
Interest Expense	287			279		212
Income Before Income Taxes	655			758		873
Income Tax Expense	101			46		322
Net Income	$	554		$	712	$	551
Other Comprehensive (Loss) Income, net of tax
Unrealized (losses) gains on available-for-sale securities	(1		)	3		1
Other Comprehensive (Loss) Income, net of tax	(1		)	3		1
Comprehensive Income	$	553		$	715	$	552

See Notes to Consolidated Financial Statements



FINANCIAL STATEMENTS

DUKE ENERGY FLORIDA, LLC

CONSOLIDATED BALANCE SHEETS



	December 31,
(in millions)	2018			2017
ASSETS
Current Assets
Cash and cash equivalents	$	36		$	13
Receivables (net of allowance for doubtful accounts of $3 at 2018 and 2017)	143			65
Receivables of VIEs (net of allowance for doubtful accounts of $3 at 2018 and $2 at 2017)	362			321
Receivables from affiliated companies	28			2
Notes receivable from affiliated companies	—			313
Inventory	504			574
Regulatory assets (includes $52 at 2018 and $51 at 2017 related to VIEs)	434			389
Other (includes $39 at 2018 and $40 at 2017 related to VIEs)	46			86
Total current assets	1,553			1,763
Property, Plant and Equipment
Cost	18,792			17,730
Accumulated depreciation and amortization	(4,968		)	(4,947		)
Net property, plant and equipment	13,824			12,783
Other Noncurrent Assets
Regulatory assets (includes $1,041 at 2018 and $1,091 at 2017 related to VIEs)	2,454			2,503
Nuclear decommissioning trust funds	659			736
Other	311			284
Total other noncurrent assets	3,424			3,523
Total Assets	$	18,801		$	18,069
LIABILITIES AND EQUITY
Current Liabilities
Accounts payable	$	511		$	602
Accounts payable to affiliated companies	91			74
Notes payable to affiliated companies	108			—
Taxes accrued	74			34
Interest accrued	75			56
Current maturities of long-term debt (includes $53 at 2018 and 2017 related to VIEs)	270			768
Asset retirement obligations	5			—
Regulatory liabilities	102			74
Other	406			334
Total current liabilities	1,642			1,942
Long-Term Debt (includes $1,336 at 2018 and $1,389 at 2017 related to VIEs)	7,051			6,327
Other Noncurrent Liabilities
Deferred income taxes	1,986			1,761
Asset retirement obligations	586			742
Regulatory liabilities	1,094			1,307
Accrued pension and other post-retirement benefit costs	254			264
Other	93			108
Total other noncurrent liabilities	4,013			4,182
Commitments and Contingencies
Equity
Member's equity	6,097			5,614
Accumulated other comprehensive income	(2		)	4
Total equity	6,095			5,618
Total Liabilities and Equity	$	18,801		$	18,069

See Notes to Consolidated Financial Statements



FINANCIAL STATEMENTS

DUKE ENERGY FLORIDA, LLC

CONSOLIDATED STATEMENTS OF CASH FLOWS



	Years Ended December 31,
(in millions)	2018			2017			2016
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	554		$	712		$	551
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization and accretion	793			570			516
Equity component of AFUDC	(47		)	(45		)	(26		)
Gains on sales of other assets	(1		)	(1		)	—
Impairment charges	54			138			6
Deferred income taxes	159			245			224
Accrued pension and other post-retirement benefit costs	5			(13		)	2
Contributions to qualified pension plans	(20		)	—			(20		)
Payments for asset retirement obligations	(35		)	(56		)	(58		)
(Increase) decrease in
Net realized and unrealized mark-to-market and hedging transactions	7			5			38
Receivables	(100		)	(38		)	23
Receivables from affiliated companies	(26		)	—			21
Inventory	58			66			23
Other current assets	59			(138		)	(86		)
Increase (decrease) in
Accounts payable	(1		)	(32		)	71
Accounts payable to affiliated companies	17			(51		)	9
Taxes accrued	40			1			(117		)
Other current liabilities	82			(37		)	(149		)
Other assets	(428		)	(229		)	(84		)
Other liabilities	(61		)	(82		)	(53		)
Net cash provided by operating activities	1,109			1,015			891
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures	(1,634		)	(1,437		)	(1,583		)
Purchases of debt and equity securities	(517		)	(557		)	(485		)
Proceeds from sales and maturities of debt and equity securities	563			617			572
Proceeds from insurance	—			4			58
Proceeds from the sale of nuclear fuel	—			20			20
Notes receivable from affiliated companies	313			(313		)	—
Other	(65		)	(31		)	21
Net cash used in investing activities	(1,340		)	(1,697		)	(1,397		)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from the issuance of long-term debt	988			1,306			1,870
Payments for the redemption of long-term debt	(769		)	(342		)	(12		)
Notes payable to affiliated companies	108			(297		)	(516		)
Distribution to parent	(75		)	—			(775		)
Other	1			(1		)	—
Net cash provided by financing activities	253			666			567
Net increase (decrease) in cash, cash equivalents, and restricted cash	22			(16		)	61
Cash, cash equivalents, and restricted cash at beginning of period	53			69			8
Cash, cash equivalents, and restricted cash at end of period	$	75		$	53		$	69
Supplemental Disclosures:
Cash paid for interest, net of amount capitalized	$	270		$	274		$	208
Cash (received from) paid for income taxes	(120		)	(197		)	216
Significant non-cash transactions:
Accrued capital expenditures	258			199			170

See Notes to Consolidated Financial Statements



FINANCIAL STATEMENTS

DUKE ENERGY FLORIDA, LLC

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY



				Accumulated
				Other
				Comprehensive
				Income (Loss)
				Net Unrealized
				Gains (Losses) on
	Member's			Available-for-			Total
(in millions)	Equity			Sale Securities			Equity
Balance at December 31, 2015	$	5,121		$	—		$	5,121
Net income	551			—			551
Other comprehensive income	—			1			1
Distribution to parent	(775		)	—			(775		)
Other	2			—			2
Balance at December 31, 2016	$	4,899		$	1		$	4,900
Net income	712			—			712
Other comprehensive income	—			3			3
Other	3			—			3
Balance at December 31, 2017	$	5,614		$	4		$	5,618
Net income	554			—			554
Other comprehensive loss	—			(1		)	(1		)
Distribution to parent	(75		)	—			(75		)
Other^(a)	4			(5		)	(1		)
Balance at December 31, 2018	$	6,097		$	(2	)	$	6,095


(a)	Amounts represent a cumulative-effect adjustment due to implementation of a new accounting standard related to Financial Instruments Classification and Measurement. See Note 1 for more information.

See Notes to Consolidated Financial Statements



REPORTS

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the shareholder and the Board of Directors of Duke Energy Ohio, Inc.

Opinion on the Financial Statements

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

/s/ Deloitte & Touche LLP

Charlotte, North Carolina

February 28, 2019

We have served as the Company's auditor since 2002.



FINANCIAL STATEMENTS

DUKE ENERGY OHIO, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME



	Years Ended December 31,
(in millions)	2018			2017			2016
Operating Revenues
Regulated electric	$	1,450		$	1,373		$	1,410
Regulated natural gas	506			508			503
Nonregulated electric and other	1			42			31
Total operating revenues	1,957			1,923			1,944
Operating Expenses
Fuel used in electric generation and purchased power – regulated	412			369			442
Fuel used in electric generation and purchased power – nonregulated	—			58			51
Cost of natural gas	113			107			103
Operation, maintenance and other	480			530			514
Depreciation and amortization	268			261			233
Property and other taxes	290			278			258
Impairment charges	—			1			—
Total operating expenses	1,563			1,604			1,601
(Losses) Gains on Sales of Other Assets and Other, net	(106		)	1			2
Operating Income	288			320			345
Other Income and Expenses, net	23			23			11
Interest Expense	92			91			86
Income From Continuing Operations Before Income Taxes	219			252			270
Income Tax Expense From Continuing Operations	43			59			78
Income From Continuing Operations	176			193			192
(Loss) Income From Discontinued Operations, net of tax	—			(1		)	36
Net Income and Comprehensive Income	$	176		$	192		$	228

See Notes to Consolidated Financial Statements



FINANCIAL STATEMENTS

DUKE ENERGY OHIO, INC.

CONSOLIDATED BALANCE SHEETS



	December 31,
(in millions)	2018			2017
ASSETS
Current Assets
Cash and cash equivalents	$	21		$	12
Receivables (net of allowance for doubtful accounts of $2 at 2018 and $3 at 2017)	102			68
Receivables from affiliated companies	114			133
Notes receivable from affiliated companies	—			14
Inventory	126			133
Regulatory assets	33			49
Other	24			39
Total current assets	420			448
Property, Plant and Equipment
Cost	9,360			8,732
Accumulated depreciation and amortization	(2,717		)	(2,691		)
Net property, plant and equipment	6,643			6,041
Other Noncurrent Assets
Goodwill	920			920
Regulatory assets	531			445
Other	41			21
Total other noncurrent assets	1,492			1,386
Total Assets	$	8,555		$	7,875
LIABILITIES AND EQUITY
Current Liabilities
Accounts payable	$	316		$	313
Accounts payable to affiliated companies	78			62
Notes payable to affiliated companies	274			29
Taxes accrued	202			190
Interest accrued	22			21
Current maturities of long-term debt	551			3
Asset retirement obligations	6			3
Regulatory liabilities	57			36
Other	74			71
Total current liabilities	1,580			728
Long-Term Debt	1,589			2,039
Long-Term Debt Payable to Affiliated Companies	25			25
Other Noncurrent Liabilities
Deferred income taxes	817			781
Asset retirement obligations	87			81
Regulatory liabilities	840			891
Accrued pension and other post-retirement benefit costs	79			59
Other	93			108
Total other noncurrent liabilities	1,916			1,920
Commitments and Contingencies
Equity
Common stock, $8.50 par value, 120 million shares authorized; 90 million shares outstanding at 2018 and 2017	762			762
Additional paid-in capital	2,776			2,670
Accumulated deficit	(93		)	(269		)
Total equity	3,445			3,163
Total Liabilities and Equity	$	8,555		$	7,875

See Notes to Consolidated Financial Statements



FINANCIAL STATEMENTS

DUKE ENERGY OHIO, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS



	Years Ended December 31,
(in millions)	2018			2017			2016
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	176		$	192		$	228
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization and accretion	271			265			237
Equity component of AFUDC	(11		)	(11		)	(6		)
Losses (Gains) on sales of other assets	106			(1		)	(2		)
Impairment charges	—			1			—
Deferred income taxes	25			90			55
Accrued pension and other post-retirement benefit costs	3			2			6
Contributions to qualified pension plans	—			(4		)	(5		)
Payments for asset retirement obligations	(3		)	(7		)	(5		)
Provision for rate refunds	24			—			—
(Increase) decrease in
Net realized and unrealized mark-to-market and hedging transactions	—			—			(2		)
Receivables	(33		)	2			(4		)
Receivables from affiliated companies	19			(4		)	(36		)
Inventory	7			6			(32		)
Other current assets	16			(22		)	79
Increase (decrease) in
Accounts payable	(19		)	12			19
Accounts payable to affiliated companies	16			(1		)	10
Taxes accrued	12			11			3
Other current liabilities	14			(19		)	(54		)
Other assets	(26		)	(28		)	(35		)
Other liabilities	(27		)	(5		)	(31		)
Net cash provided by operating activities	570			479			425
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures	(827		)	(686		)	(476		)
Notes receivable from affiliated companies	14			80			(94		)
Other	(89		)	(41		)	(30		)
Net cash used in investing activities	(902		)	(647		)	(600		)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from the issuance of long-term debt	99			182			341
Payments for the redemption of long-term debt	(3		)	(2		)	(53		)
Notes payable to affiliated companies	245			13			(87		)
Dividends to parent	—			(25		)	(25		)
Other	—			(1		)	(2		)
Net cash provided by financing activities	341			167			174
Net increase (decrease) in cash and cash equivalents	9			(1		)	(1		)
Cash and cash equivalents at beginning of period	12			13			14
Cash and cash equivalents at end of period	$	21		$	12		$	13
Supplemental Disclosures:
Cash paid for interest, net of amount capitalized	$	87		$	85		$	81
Cash received from income taxes	(6		)	(8		)	(46		)
Significant non-cash transactions:
Accrued capital expenditures	95			82			83
Non-cash equity contribution from parent	106			—			—

See Notes to Consolidated Financial Statements



FINANCIAL STATEMENTS

DUKE ENERGY OHIO, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY



			Additional
	Common		Paid-in			Accumulated			Total
(in millions)	Stock		Capital			Deficit			Equity
Balance at December 31, 2015	$	762	$	2,720		$	(698	)	$	2,784
Net income	—		—			228			228
Contribution from parent	—		—			9			9
Dividends to parent	—		(25		)	—			(25		)
Balance at December 31, 2016	$	762	$	2,695		$	(461	)	$	2,996
Net income	—		—			192			192
Dividends to parent	—		(25		)	—			(25		)
Balance at December 31, 2017	$	762	$	2,670		$	(269	)	$	3,163
Net income	—		—			176			176
Contribution from parent	—		106			—			106
Balance at December 31, 2018	$	762	$	2,776		$	(93	)	$	3,445

See Notes to Consolidated Financial Statements



REPORTS

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the shareholder and the Board of Directors of Duke Energy Indiana, LLC

Opinion on the Financial Statements

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

/s/ Deloitte & Touche LLP

Charlotte, North Carolina

February 28, 2019

We have served as the Company's auditor since 2002.



FINANCIAL STATEMENTS

DUKE ENERGY INDIANA, LLC

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME



	Years Ended December 31,
(in millions)	2018		2017		2016
Operating Revenues	$	3,059	$	3,047	$	2,958
Operating Expenses
Fuel used in electric generation and purchased power	1,000		966		909
Operation, maintenance and other	788		743		727
Depreciation and amortization	520		458		496
Property and other taxes	78		76		58
Impairment charges	30		18		8
Total operating expenses	2,416		2,261		2,198
Gains on Sales of Other Assets and Other, net	—		—		1
Operating Income	643		786		761
Other Income and Expenses, net	45		47		26
Interest Expense	167		178		181
Income Before Income Taxes	521		655		606
Income Tax Expense	128		301		225
Net Income	$	393	$	354	$	381
Other Comprehensive Loss, net of tax
Reclassification into earnings from cash flow hedges	—		—		(1		)
Comprehensive Income	$	393	$	354	$	380

See Notes to Consolidated Financial Statements



FINANCIAL STATEMENTS

DUKE ENERGY INDIANA, LLC

CONSOLIDATED BALANCE SHEETS



	December 31,
(in millions)	2018			2017
ASSETS
Current Assets
Cash and cash equivalents	$	24		$	9
Receivables (net of allowance for doubtful accounts of $2 at 2018 and 2017)	52			57
Receivables from affiliated companies	122			125
Inventory	422			450
Regulatory assets	175			165
Other	35			30
Total current assets	830			836
Property, Plant and Equipment
Cost	15,443			14,948
Accumulated depreciation and amortization	(4,914		)	(4,662		)
Net property, plant and equipment	10,529			10,286
Other Noncurrent Assets
Regulatory assets	982			978
Other	194			189
Total other noncurrent assets	1,176			1,167
Total Assets	$	12,535		$	12,289
LIABILITIES AND EQUITY
Current Liabilities
Accounts payable	$	200		$	196
Accounts payable to affiliated companies	83			78
Notes payable to affiliated companies	167			161
Taxes accrued	43			95
Interest accrued	58			57
Current maturities of long-term debt	63			3
Asset retirement obligations	109			54
Regulatory liabilities	25			24
Other	107			104
Total current liabilities	855			772
Long-Term Debt	3,569			3,630
Long-Term Debt Payable to Affiliated Companies	150			150
Other Noncurrent Liabilities
Deferred income taxes	1,009			925
Asset retirement obligations	613			727
Regulatory liabilities	1,722			1,723
Accrued pension and other post-retirement benefit costs	115			76
Investment tax credits	147			147
Other	16			18
Total other noncurrent liabilities	3,622			3,616
Commitments and Contingencies
Equity
Member's Equity	4,339			4,121
Total Liabilities and Equity	$	12,535		$	12,289

See Notes to Consolidated Financial Statements



FINANCIAL STATEMENTS

DUKE ENERGY INDIANA, LLC

CONSOLIDATED STATEMENTS OF CASH FLOWS



	Years Ended December 31,
(in millions)	2018			2017			2016
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	393		$	354		$	381
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization, and accretion	524			462			499
Equity component of AFUDC	(32		)	(28		)	(16		)
Impairment charges	30			18			8
Deferred income taxes	95			152			213
Accrued pension and other post-retirement benefit costs	7			2			8
Contributions to qualified pension plans	(8		)	—			(9		)
Payments for asset retirement obligations	(69		)	(45		)	(46		)
Provision for rate refunds	53			—			—
(Increase) decrease in
Receivables	7			59			(2		)
Receivables from affiliated companies	3			(11		)	(43		)
Inventory	28			54			66
Other current assets	(25		)	28			(67		)
Increase (decrease) in
Accounts payable	37			(86		)	8
Accounts payable to affiliated companies	5			4			(9		)
Taxes accrued	(52		)	64			(4		)
Other current liabilities	14			(10		)	(81		)
Other assets	29			(28		)	(27		)
Other liabilities	(33		)	(20		)	(8		)
Net cash provided by operating activities	1,006			969			871
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures	(832		)	(840		)	(755		)
Purchases of debt and equity securities	(48		)	(20		)	(14		)
Proceeds from sales and maturities of debt and equity securities	44			7			11
Proceeds from the sales of other assets	15			—			—
Notes receivable from affiliated companies	—			86			(3		)
Other	3			(65		)	32
Net cash used in investing activities	(818		)	(832		)	(729		)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from the issuance of long-term debt	—			—			494
Payments for the redemption of long-term debt	(3		)	(5		)	(478		)
Notes payable to affiliated companies	6			161			—
Distributions to parent	(175		)	(300		)	(149		)
Other	(1		)	(1		)	(1		)
Net cash used in financing activities	(173		)	(145		)	(134		)
Net increase (decrease) in cash and cash equivalents	15			(8		)	8
Cash and cash equivalents at beginning of period	9			17			9
Cash and cash equivalents at end of period	$	24		$	9		$	17
Supplemental Disclosures:
Cash paid for interest, net of amount capitalized	$	162		$	179		$	171
Cash paid for (received from) income taxes	75			117			(7		)
Significant non-cash transactions:
Accrued capital expenditures	88			125			99

See Notes to Consolidated Financial Statements



FINANCIAL STATEMENTS

DUKE ENERGY INDIANA, LLC

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY



													Accumulated
													Other
													Comprehensive
													Income
				Additional									Net Gains on
	Common			Paid-in			Retained			Member's			Cash Flow			Total
(in millions)	Stock			Capital			Earnings			Equity			Hedges			Equity
Balance at December 31, 2015	$	1		$	1,384		$	2,450		$	—		$	1		$	3,836
Net income	—			—			—			381			—			381
Other comprehensive loss	—			—			—			—			(1		)	(1		)
Distributions to parent	—			—			—			(149		)	—			(149		)
Transfer to Member's Equity	(1		)	(1,384		)	(2,450		)	3,835			—			—
Balance at December 31, 2016	$	—		$	—		$	—		$	4,067		$	—		$	4,067
Net income	—			—			—			354			—			354
Distributions to parent	—			—			—			(300		)	—			(300		)
Balance at December 31, 2017	$	—		$	—		$	—		$	4,121		$	—		$	4,121
Net income	—			—			—			393			—			393
Distributions to parent	—			—			—			(175		)	—			(175		)
Balance at December 31, 2018	$	—		$	—		$	—		$	4,339		$	—		$	4,339

See Notes to Consolidated Financial Statements



REPORTS

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the shareholder and the Board of Directors of Piedmont Natural Gas Company, Inc.

Opinion on the Financial Statements

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Emphasis of Matter

/s/ Deloitte & Touche LLP

Charlotte, North Carolina

February 28, 2019

We have served as the Company's auditor since 1951.



FINANCIAL STATEMENTS

PIEDMONT NATURAL GAS COMPANY, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME



	Years Ended December 31,					Two Months Ended December 31,			Year Ended October 31,
(in millions)	2018		2017			2016			2016
Operating Revenues
Regulated natural gas	$	1,365	$	1,319		$	320		$	1,139
Nonregulated natural gas and other	10		9			2			10
Total operating revenues	1,375		1,328			322			1,149
Operating Expenses
Cost of natural gas	584		524			144			391
Operation, maintenance and other	357		304			50			353
Depreciation and amortization	159		148			23			137
Property and other taxes	49		48			7			43
Impairment charges	—		7			—			—
Total operating expenses	1,149		1,031			224			924
Operating Income	226		297			98			225
Equity in earnings (losses) of unconsolidated affiliates	7		(6		)	2			29
Gain on sale of unconsolidated affiliates	—		—			—			133
Other income and expense, net	14		(11		)	(2		)	(1		)
Total other income and expenses	21		(17		)	—			161
Interest Expense	81		79			12			69
Income Before Income Taxes	166		201			86			317
Income Tax Expense	37		62			32			124
Net Income	$	129	$	139		$	54		$	193
Other Comprehensive Income, net of tax
Unrealized loss from hedging activities of equity method investments	—		—			—			(3		)
Reclassification into earnings from hedging activities of equity method investments	—		—			—			4
Other Comprehensive Income, net of tax	—		—			—			1
Comprehensive Income	$	129	$	139		$	54		$	194

See Notes to Consolidated Financial Statements



FINANCIAL STATEMENTS

PIEDMONT NATURAL GAS COMPANY, INC.

CONSOLIDATED BALANCE SHEETS



	December 31,
(in millions)	2018			2017
ASSETS
Current Assets
Cash and cash equivalents	$	—		$	19
Receivables (net of allowance for doubtful accounts of $2 at 2018 and 2017)	266			275
Receivables from affiliated companies	22			7
Inventory	70			66
Regulatory assets	54			95
Other	19			52
Total current assets	431			514
Property, Plant and Equipment
Cost	7,486			6,725
Accumulated depreciation and amortization	(1,575		)	(1,479		)
Net property, plant and equipment	5,911			5,246
Other Noncurrent Assets
Goodwill	49			49
Regulatory assets	303			283
Investments in equity method unconsolidated affiliates	64			61
Other	52			65
Total other noncurrent assets	468			458
Total Assets	$	6,810		$	6,218
LIABILITIES AND EQUITY
Current Liabilities
Accounts payable	$	203		$	125
Accounts payable to affiliated companies	38			13
Notes payable to affiliated companies	198			364
Taxes accrued	84			19
Interest accrued	31			31
Current maturities of long-term debt	350			250
Regulatory liabilities	37			3
Other	58			69
Total current liabilities	999			874
Long-Term Debt	1,788			1,787
Other Noncurrent Liabilities
Deferred income taxes	551			564
Asset retirement obligations	19			15
Regulatory liabilities	1,181			1,141
Accrued pension and other post-retirement benefit costs	4			5
Other	177			170
Total other noncurrent liabilities	1,932			1,895
Commitments and Contingencies
Equity
Common stock, no par value: 100 shares authorized and outstanding at 2018 and 2017	1,160			860
Retained earnings	931			802
Total equity	2,091			1,662
Total Liabilities and Equity	$	6,810		$	6,218

See Notes to Consolidated Financial Statements



FINANCIAL STATEMENTS

PIEDMONT NATURAL GAS COMPANY, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS



	Years Ended December 31,						Two Months Ended December 31,			Year Ended October 31,
(in millions)	2018			2017			2016			2016
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	129		$	139		$	54		$	193
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	161			151			25			148
Gains on sales of other assets	—			—			—			(133		)
Impairment charges	—			7			—			—
Deferred income taxes	(31		)	154			26			74
Equity in (earnings) losses from unconsolidated affiliates	(7		)	6			(2		)	(29		)
Accrued pension and other post-retirement benefit costs	(4		)	23			5			3
Contributions to qualified pension plans	—			(11		)	(10		)	(14		)
Payments for asset retirement obligations	—			—			(1		)	(6		)
Provision for rate refunds	43			—			—			—
(Increase) decrease in
Receivables	7			(40		)	(157		)	12
Receivables from affiliated companies	(15		)	—			—			(7		)
Inventory	(4		)	—			(11		)	14
Other current assets	71			(20		)	8			(98		)
Increase (decrease) in
Accounts payable	15			(13		)	35			6
Accounts payable to affiliated companies	25			5			4			6
Taxes accrued	65			(48		)	(2		)	38
Other current liabilities	21			(9		)	2			28
Other assets	6			7			(7		)	(91		)
Other liabilities	(4		)	(2		)	5			180
Net cash provided by (used in) operating activities	478			349			(26		)	324
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures	(721		)	(585		)	(113		)	(522		)
Contributions to equity method investments	—			(12		)	(12		)	(47		)
Proceeds from the sales of other assets	—			—			—			175
Other	(10		)	(6		)	1			5
Net cash used in investing activities	(731		)	(603		)	(124		)	(389		)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from the:
Issuance of long-term debt	100			250			—			295
Issuance of common stock	—			—			—			122
Payments for the redemption of long-term debt	—			(35		)	—			(40		)
Notes payable and commercial paper	—			(330		)	185			(195		)
Notes payable to affiliated companies	(166		)	364			—			—
Capital contribution from parent	300			—			—			—
Dividends to parent	—			—			(27		)	—
Dividends paid	—			—			—			(114		)
Other	—			(1		)	—			—
Net cash provided by financing activities	234			248			158			68
Net (decrease) increase in cash and cash equivalents	(19		)	(6		)	8			3
Cash and cash equivalents at beginning of period	19			25			17			14
Cash and cash equivalents at end of period	$	—		$	19		$	25		$	17
Supplemental Disclosures:
Cash paid for interest, net of amount capitalized	$	79		$	78		$	11		$	81
Cash received from income taxes	(16		)	(12		)	—			(25		)
Significant non-cash transactions:
Accrued capital expenditures	96			34			48			63
Transfer of ownership interest of certain equity method investees to parent	—			149			—			—

See Notes to Consolidated Financial Statements



FINANCIAL STATEMENTS

PIEDMONT NATURAL GAS COMPANY, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY



						Accumulated
						Other
						Comprehensive
						Income (Loss)
						Net Gain on
						Hedging Activities
	Common		Retained			of Unconsolidated			Total
(in millions)	Stock		Earnings			Affiliates			Equity
Balance at October 31, 2015	$	721	$	706		$	(1	)	$	1,426
Net income	—		193			—			193
Other comprehensive income	—		—			1			1
Common stock issuances, including dividend reinvestment and employee benefits	139		—			—			139
Common stock dividends	—		(114		)	—			(114		)
Balance at October 31, 2016	$	860	$	785		$	—		$	1,645
Net income	—		54			—			54
Dividends to parent	—		(27		)	—			(27		)
Balance at December 31, 2016	$	860	$	812		$	—		$	1,672
Net income	—		139			—			139
Transfer of ownership interest of certain equity method investees to parent	—		(149		)	—			(149		)
Balance at December 31, 2017	$	860	$	802		$	—		$	1,662
Net income	—		129			—			129
Contribution from parent	300		—			—			300
Balance at December 31, 2018	$	1,160	$	931		$	—		$	2,091

See Notes to Consolidated Financial Statements



FINANCIAL STATEMENTS	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Index to Combined Notes To Consolidated Financial Statements

The notes to the consolidated financial statements are a combined presentation. The following table indicates the registrants to which the notes apply.

Applicable Notes

Registrant

Duke Energy

•

Duke Energy Carolinas

•

Progress Energy

•

Duke Energy Progress

•

Duke Energy Florida

•

Duke Energy Ohio

•

Duke Energy Indiana

•

Piedmont

•

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Operations and Basis of Consolidation



FINANCIAL STATEMENTS	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Certain prior year amounts have been reclassified to conform to the current year presentation.

Other Current Assets and Liabilities



		December 31,
(in millions)	Location	2018		2017
Duke Energy
Income taxes receivable	Current Assets	$	729	$	330
Accrued compensation	Current Liabilities	793		757
Duke Energy Carolinas
Accrued compensation	Current Liabilities	$	251	$	252
Progress Energy
Income taxes receivable	Current Assets	$	66	$	278
Customer deposits	Current Liabilities	345		338
Duke Energy Progress
Customer deposits	Current Liabilities	$	137	$	129
Accrued compensation	Current Liabilities	130		132
Duke Energy Florida
Customer deposits	Current Liabilities	$	208	$	208
Other accrued liabilities	Current Liabilities	85		16
Duke Energy Ohio
Income taxes receivable	Current Assets	$	13	$	36
Customer deposits	Current Liabilities	44		46
Duke Energy Indiana
Customer deposits	Current Liabilities	$	47	$	45
Piedmont
Income taxes receivable	Current Assets	$	11	$	43

Discontinued Operations

Amounts Attributable to Controlling Interests



FINANCIAL STATEMENTS	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Significant Accounting Policies

Use of Estimates

Regulatory Accounting



FINANCIAL STATEMENTS	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Cash, Cash Equivalents and Restricted Cash



	December 31, 2018						December 31, 2017
					Duke						Duke
	Duke		Progress		Energy		Duke		Progress		Energy
	Energy		Energy		Florida		Energy		Energy		Florida
Current Assets
Cash and cash equivalents	$	442	$	67	$	36	$	358	$	40	$	13
Other	141		39		39		138		40		40
Other Noncurrent Assets
Other	8		6		—		9		7		—
Total cash, cash equivalents and restricted cash	$	591	$	112	$	75	$	505	$	87	$	53

Inventory



	December 31, 2018
			Duke				Duke		Duke		Duke		Duke
	Duke		Energy		Progress		Energy		Energy		Energy		Energy
(in millions)	Energy		Carolinas		Energy		Progress		Florida		Ohio		Indiana		Piedmont
Materials and supplies	$	2,238	$	731	$	1,049	$	734	$	315	$	84	$	312	$	2
Coal	491		175		192		106		86		14		109		—
Natural gas, oil and other	355		42		218		114		103		28		1		68
Total inventory	$	3,084	$	948	$	1,459	$	954	$	504	$	126	$	422	$	70



	December 31, 2017
			Duke				Duke		Duke		Duke		Duke
	Duke		Energy		Progress		Energy		Energy		Energy		Energy
(in millions)	Energy		Carolinas		Energy		Progress		Florida		Ohio		Indiana		Piedmont
Materials and supplies	$	2,293	$	744	$	1,118	$	774	$	343	$	82	$	309	$	2
Coal	603		192		255		139		116		17		139		—
Natural gas, oil and other	354		35		219		104		115		34		2		64
Total inventory	$	3,250	$	971	$	1,592	$	1,017	$	574	$	133	$	450	$	66

Investments in Debt and Equity Securities



FINANCIAL STATEMENTS	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Goodwill and Intangible Assets

Goodwill

Intangible Assets

RECs are used to measure compliance with renewable energy standards and are held primarily for consumption. See Note 11 for further information.

Long-Lived Asset Impairments

Equity Method Investment Impairments

Investments in affiliates that are not controlled by Duke Energy, but over which it has significant influence, are accounted for using the equity method. Equity method investments are assessed for impairment whenever events or changes in circumstances indicate that the carrying amount of the investment may not be recoverable. If the decline in value is considered to be other than temporary, the investment is written down to its estimated fair value, which establishes a new cost basis in the investment.



FINANCIAL STATEMENTS	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Property, Plant and Equipment



	Years Ended December 31,
	2018		2017		2016
Duke Energy	3.0	%	2.8	%	2.8	%
Duke Energy Carolinas	2.8	%	2.8	%	2.8	%
Progress Energy	2.9	%	2.6	%	2.7	%
Duke Energy Progress	2.9	%	2.6	%	2.6	%
Duke Energy Florida	3.0	%	2.8	%	2.8	%
Duke Energy Ohio	2.8	%	2.8	%	2.6	%
Duke Energy Indiana	3.3	%	3.0	%	3.1	%
Piedmont^(a)	2.5	%	2.3	%


(a)	Piedmont's weighted average depreciation rate was 2.4 percent for the annualized two months ended December 31, 2016, and for the year ended October 31, 2016.

Nuclear Fuel

Nuclear fuel is classified as Property, Plant and Equipment on the Consolidated Balance Sheets.

Allowance for Funds Used During Construction and Interest Capitalized

AFUDC equity, a permanent difference for income taxes, reduces the ETR when capitalized and increases the ETR when depreciated or amortized. See Note 23 for additional information.

For nonregulated operations, interest is capitalized during the construction phase with an offsetting non-cash credit to Interest Expense on the Consolidated Statements of Operations.

Asset Retirement Obligations

AROs are recognized for legal obligations associated with the retirement of property, plant and equipment. Substantially all AROs are related to regulated operations. When recording an ARO, the present value of the projected liability is recognized in the period in which it is incurred, if a reasonable estimate of fair value can be made. The liability is accreted over time. For operating plants, the present value of the liability is added to the cost of the associated asset and depreciated over the remaining life of the asset. For retired plants, the present value of the liability is recorded as a regulatory asset unless determined not to be probable of recovery.



FINANCIAL STATEMENTS	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The present value of the initial obligation and subsequent updates are based on discounted cash flows, which include estimates regarding timing of future cash flows, selection of discount rates and cost escalation rates, among other factors. These estimates are subject to change. Depreciation expense is adjusted prospectively for any changes to the carrying amount of the associated asset. The Duke Energy Registrants receive amounts to fund the cost of the ARO for regulated operations through a combination of regulated revenues and earnings on the NDTF. As a result, amounts recovered in regulated revenues, earnings on the NDTF, accretion expense and depreciation of the associated asset are netted and deferred as a regulatory asset or liability.

Revenue Recognition

Duke Energy recognizes revenue as customers obtain control of promised goods and services in an amount that reflects consideration expected in exchange for those goods or services. Generally, the delivery of electricity and natural gas results in the transfer of control to customers at the time the commodity is delivered and the amount of revenue recognized is equal to the amount billed to each customer, including estimated volumes delivered when billings have not yet occurred. See Note 18 for further information.

Derivatives and Hedging

Derivative and non-derivative instruments may be used in connection with commodity price and interest rate activities, including swaps, futures, forwards and options. All derivative instruments, except those that qualify for the NPNS exception, are recorded on the Consolidated Balance Sheets at fair value. Qualifying derivative instruments may be designated as either cash flow hedges or fair value hedges. Other derivative instruments (undesignated contracts) either have not been designated or do not qualify as hedges. The effective portion of the change in the fair value of cash flow hedges is recorded in AOCI. The effective portion of the change in the fair value of a fair value hedge is offset in net income by changes in the hedged item. For activity subject to regulatory accounting, gains and losses on derivative contracts are reflected as regulatory assets or liabilities and not as other comprehensive income or current period income. As a result, changes in fair value of these derivatives have no immediate earnings impact.

See Note 14 for further information.

Captive Insurance Reserves

Duke Energy has captive insurance subsidiaries that provide coverage, on an indemnity basis, to the Subsidiary Registrants as well as certain third parties, on a limited basis, for financial losses, primarily related to property, workers’ compensation and general liability. Liabilities include provisions for estimated losses IBNR, as well as estimated provisions for known claims. IBNR reserve estimates are primarily based upon historical loss experience, industry data and other actuarial assumptions. Reserve estimates are adjusted in future periods as actual losses differ from experience.

Unamortized Debt Premium, Discount and Expense

Premiums, discounts and expenses incurred with the issuance of outstanding long-term debt are amortized over the term of the debt issue. The gain or loss on extinguishment associated with refinancing higher-cost debt obligations in the regulated operations is amortized. Amortization expense is recorded as Interest Expense in the Consolidated Statements of Operations and is reflected as Depreciation, amortization and accretion within Net cash provided by operating activities on the Consolidated Statements of Cash Flows.

Premiums, discounts and expenses are presented as an adjustment to the carrying value of the debt amount and included in Long-Term Debt on the Consolidated Balance Sheets presented.

Loss Contingencies and Environmental Liabilities

Contingent losses are recorded when it is probable a loss has occurred and can be reasonably estimated. When a range of the probable loss exists and no amount within the range is a better estimate than any other amount, the minimum amount in the range is recorded. Unless otherwise required by GAAP, legal fees are expensed as incurred.

Environmental liabilities are recorded on an undiscounted basis when environmental remediation or other liabilities become probable and can be reasonably estimated. Environmental expenditures related to past operations that do not generate current or future revenues are expensed. Environmental expenditures related to operations that generate current or future revenues are expensed or capitalized, as appropriate. Certain environmental expenditures receive regulatory accounting treatment and are recorded as regulatory assets.

See Notes 4 and 5 for further information.



FINANCIAL STATEMENTS	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Pension and Other Post-Retirement Benefit Plans

Duke Energy maintains qualified, non-qualified and other post-retirement benefit plans. Eligible employees of the Subsidiary Registrants participate in the respective qualified, non-qualified and other post-retirement benefit plans and the Subsidiary Registrants are allocated their proportionate share of benefit costs. See Note 22 for further information, including significant accounting policies associated with these plans.

Severance and Special Termination Benefits

Duke Energy has severance plans under which in general, the longer a terminated employee worked prior to termination the greater the amount of severance benefits. A liability for involuntary severance is recorded once an involuntary severance plan is committed to by management if involuntary severances are probable and can be reasonably estimated. For involuntary severance benefits incremental to its ongoing severance plan benefits, the fair value of the obligation is expensed at the communication date if there are no future service requirements or over the required future service period. Duke Energy also offers special termination benefits under voluntary severance programs. Special termination benefits are recorded immediately upon employee acceptance absent a significant retention period. Otherwise, the cost is recorded over the remaining service period. Employee acceptance of voluntary severance benefits is determined by management based on the facts and circumstances of the benefits being offered. See Note 20 for further information.

Guarantees

Stock-Based Compensation

Stock-based compensation represents costs related to stock-based awards granted to employees and Board of Directors members. Duke Energy recognizes stock-based compensation based upon the estimated fair value of awards, net of estimated forfeitures at the date of issuance. The recognition period for these costs begins at either the applicable service inception date or grant date and continues throughout the requisite service period. Compensation cost is recognized as expense or capitalized as a component of property, plant and equipment. See Note 21 for further information.

Income Taxes

Duke Energy and its subsidiaries file a consolidated federal income tax return and other state and foreign jurisdictional returns. The Subsidiary Registrants are parties to a tax-sharing agreement with Duke Energy. Income taxes recorded represent amounts the Subsidiary Registrants would incur as separate C-Corporations. Deferred income taxes have been provided for temporary differences between GAAP and tax bases of assets and liabilities because the differences create taxable or tax-deductible amounts for future periods. ITCs associated with regulated operations are deferred and amortized as a reduction of income tax expense over the estimated useful lives of the related properties.

Accumulated deferred income taxes are valued using the enacted tax rate expected to apply to taxable income in the periods in which the deferred tax asset or liability is expected to be settled or realized. In the event of a change in tax rates, deferred tax assets and liabilities are remeasured as of the enactment date of the new rate. To the extent that the change in the value of the deferred tax represents an obligation to customers, the impact of the remeasurement is deferred to a regulatory liability. Remaining impacts are recorded in income from continuing operations. If Duke Energy's estimate of the tax effect of reversing temporary differences is not reflective of actual outcomes, is modified to reflect new developments or interpretations of the tax law, revised to incorporate new accounting principles, or changes in the expected timing or manner of the reversal then Duke Energy's results of operations could be impacted.

Tax-related interest and penalties are recorded in Interest Expense and Other Income and Expenses, net in the Consolidated Statements of Operations.

See Note 23 for further information.

Accounting for Renewable Energy Tax Credits



FINANCIAL STATEMENTS	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Excise Taxes



	Years Ended December 31,
(in millions)	2018		2017		2016
Duke Energy	$	405	$	376	$	362
Duke Energy Carolinas	35		36		31
Progress Energy	241		220		213
Duke Energy Progress	19		19		18
Duke Energy Florida	222		201		195
Duke Energy Ohio	105		98		100
Duke Energy Indiana	22		20		17
Piedmont^(a)	2		2


(a)	Piedmont's excise taxes were immaterial for the two months ended December 31, 2016, and $2 million for the year ended October 31, 2016.

Dividend Restrictions and Unappropriated Retained Earnings

Duke Energy does not have any legal, regulatory or other restrictions on paying common stock dividends to shareholders. However, as further described in Note 4, due to conditions established by regulators in conjunction with merger transaction approvals, Duke Energy Carolinas, Duke Energy Progress, Duke Energy Ohio, Duke Energy Indiana and Piedmont have restrictions on paying dividends or otherwise advancing funds to Duke Energy. At December 31, 2018, and 2017, an insignificant amount of Duke Energy’s consolidated Retained earnings balance represents undistributed earnings of equity method investments.

New Accounting Standards

The new accounting standards adopted for ~~2017~~2018 and ~~2016~~2017 had no material impact on the presentation or results of operations, cash flows or financial position of the Duke Energy Registrants. The following accounting standards were adopted by the Duke Energy Registrants during ~~2017.~~

~~Stock-Based Compensation and Income Taxes.~~ In first quarter 2017, Duke Energy adopted Financial Accounting Standards Board (FASB) guidance, which revised the accounting for stock-based compensation and the associated income taxes. The adopted guidance changed certain aspects of accounting for stock-based payment awards to employees including the accounting for income taxes and classification on the Consolidated Statements of Cash Flows. The primary impact to Duke Energy as a result of implementing this guidance was a cumulative-effect adjustment to retained earnings for tax benefits not previously recognized and additional income tax expense for the 12 months ended December 31, 2017. See the Duke Energy Consolidated Statements of Changes in Equity for further information.

~~Goodwill Impairment.~~ In January 2017, the FASB issued revised guidance for the subsequent measurement of goodwill. Under the guidance, a company will recognize an impairment to goodwill for the amount by which a reporting unit's carrying value exceeds the reporting unit's fair value, not to exceed the amount of goodwill allocated to that reporting unit. Duke Energy early adopted this guidance for the 2017 annual goodwill impairment test.

~~The following new accounting standards have been issued, but have not yet been adopted by the Duke Energy Registrants, as of December 31, 2017.~~2018.

Revenue from Contracts with ~~Customers~~Customers.. In May 2014, the FASB issued revised accounting guidance for revenue recognition from contracts with customers. The core principle of this guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration ~~to which the entity expects to be entitled~~expected in exchange for those goods or services. The amendments ~~in this update~~ also ~~require~~required disclosure of sufficient information to allow users to understand the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers.

~~136~~

~~PART II~~

~~DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –~~

~~DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC– PIEDMONT NATURAL GAS COMPANY, INC.~~

~~Combined Notes To Consolidated Financial Statements – (Continued)~~

~~Duke Energy has identified material revenue streams, which served as the basis for accounting analysis and documentation of the impact of this guidance on revenue recognition.~~ The ~~accounting analysis included reviewing representative contracts and tariffs for each material revenue stream. Most~~majority of Duke Energy’s revenue ~~will be~~is in scope of the new guidance. The majority of our sales, including energy provided to residential customers, are from tariff offerings that provide natural gas or electricity without a defined contractual term ("at-will"). For such arrangements, revenue from contracts with customers will be equivalent to the electricity or natural gas supplied and billed in that period (including estimated billings). As such, there will not be a significant shift in the timing or pattern of revenue recognition for such sales.

Also included in the accounting analysis was the evaluation of certain long-term revenue streams including electric wholesale contracts and renewables power purchase agreements (PPAs). For such arrangements, Duke Energy does not expect material changes to the pattern of revenue recognition on the registrants. In addition, Duke Energy has monitored the activities of the power and utilities industry revenue recognition task force including draft accounting positions released in October 2017 and the impact, if any, on Duke Energy’s specific contracts and conclusions. Potential revisions to processes, policies and controls, primarily related to evaluating supplemental disclosures required as a result of adopting this guidance, will be evaluated and implemented as necessary. SomeOther revenue arrangements, such as alternative revenue programs and certain PPAs and lighting agreements accounted for as leases, are excluded from the scope of ~~the new revenue recognition~~this guidance and, therefore, ~~will be~~are accounted for and evaluated for separate presentation and disclosure under other relevant accounting guidance.

Duke Energy ~~intends to use~~elected the modified retrospective method of adoption effective January 1, 2018. Under the modified retrospective method of adoption, prior year reported results are not ~~restated~~restated. Adoption of this standard did not result in a material change in the timing or pattern of revenue recognition and a cumulative-effect adjustment ~~if applicable, is~~was not recorded ~~to retained earnings~~ at January 1, 2018, as if the standard had always been in effect. In addition, disclosures, if applicable, include a comparison to what would have been reported for 2018 under the previous revenue recognition rules to assist financial statement users in understanding how revenue recognition has changed as a result of this standard and to facilitate comparability with prior year reported results, which are not restated under the modified retrospective approach as described above.2018. Duke Energy ~~will utilize~~utilized certain practical expedients including applying this guidance to open contracts at the date of adoption, expensing costs to obtain a contract where the amortization period of the asset would have been one year or less, ignoring the effects of a significant financing when the period between transfer of the good or service and payment is one year or less and recognizing revenues for certain contracts under the invoice practical expedient, which allows revenue recognition to be consistent with invoiced amounts (including ~~estimated billings)~~unbilled estimates) provided certain criteria are met, including consideration of whether the invoiced amounts reasonably represent the value provided to customers. ~~While~~

In preparation for adoption, Duke Energy identified material revenue streams and reviewed representative contracts and tariffs, including those associated with certain long-term customer contracts such as wholesale contracts, PPAs and other customer arrangements. Duke Energy also monitored the activities of the power and utilities industry revenue recognition task force and has reviewed published positions on specific industry issues to evaluate the impact, if any, on Duke Energy’s specific contracts and conclusions. Duke Energy applied the available practical expedient to portfolios of tariffs and contracts with similar characteristics. The vast majority of sales, including energy provided to retail customers, are from tariff offerings that provide natural gas or electricity without a defined contractual term ("at-will"). In most circumstances, revenue from contracts with customers is equivalent to the electricity or natural gas supplied and billed in that period (including unbilled estimates). As such, adoption of ~~this guidance is~~the new rules did not ~~expected to have~~result in a ~~material impact on either~~shift in the timing or ~~amount~~pattern of revenue recognition for such sales. While there have been changes to the captions and descriptions of revenues ~~recognized~~ in Duke ~~Energy's~~Energy’s financial statements, ~~Duke Energy anticipates~~the most significant impact as a result of adopting the standard are additional disclosures around the nature, amount, timing and uncertainty of ~~our~~ revenues and cash flows arising from contracts with customers. ~~Duke Energy continues to evaluate what information will be most useful~~See Note 18 for users of the financial statements, including information already provided in disclosures outside of the financial statement footnotes. These additional disclosures are expected to include the disaggregation of revenues by customer class.further information.



FINANCIAL STATEMENTS	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Financial Instruments Classification and Measurement.In On January ~~2016, the~~1, 2018, Duke Energy adopted FASB ~~issued~~guidance, which revised ~~accounting guidance for~~ the classification and measurement of certain financial instruments. ~~Changes~~The adopted guidance changes the presentation of realized and unrealized gains and losses in ~~the fair value of all~~certain equity securities ~~will be required to be~~that were previously recorded in AOCI. These gains and losses are now recorded in net income. Current GAAP allows some changes in fair value for available-for-sale equity securities to be recorded in AOCI. Additional disclosures will be required to present separately the financial assets and financial liabilities by measurement category and form of financial asset. An entity's equity investments that are accounted for under the equity method of accounting are not included within the scope of the new guidance.

For Duke Energy, the revised accounting guidance is effective for interim and annual periods beginning January 1, 2018, by recording a cumulative effect adjustment to retained earnings as of January 1, 2018. This guidance ~~is expected to have~~had a minimal impact on the Duke Energy Registrant's Consolidated Statements of Operations and Comprehensive Income as changes in the fair value of most of the Duke Energy Registrants' ~~available-for-sale~~ equity securities are deferred as regulatory assets or liabilities pursuant to accounting guidance for regulated operations. The resulting adjustment of unrealized gains and losses in AOCI to retained earnings was immaterial. The primary impact to Duke Energy as a result of implementing this guidance is adding disclosure requirements to present separately the financial assets and financial liabilities by measurement category and form of financial asset. See Notes 15 and 16 for further information.

Statement of Cash Flows. In November 2016, the FASB issued revised accounting guidance to reduce diversity in practice for the presentation and classification of restricted cash on the Consolidated Statements of Cash Flows. Under the updated guidance, restricted cash and restricted cash equivalents are included within beginning-of-period and end-of-period cash and cash equivalents on the Consolidated Statements of Cash Flows. Duke Energy adopted this guidance on January 1, 2018. The guidance has been applied using a retrospective transition method to each period presented. The adoption by Duke Energy of the revised guidance resulted in a change to the amount of Cash, cash equivalents and restricted cash explained when reconciling the beginning-of-period and end-of-period total amounts shown on the Consolidated Statements of Cash Flows. In addition, a reconciliation has been provided of Cash, cash equivalents and restricted cash reported within the Consolidated Balance Sheets that sums to the total of the same such amounts in the Consolidated Statements of Cash Flows. Prior to adoption, the Duke Energy Registrants reflected changes in noncurrent restricted cash within Cash Flows from Investing Activities and changes in current restricted cash within Cash Flows from Operating Activities on the Consolidated Statements of Cash Flows.

In August 2016, the FASB issued accounting guidance addressing diversity in practice for eight separate cash flow issues. The guidance requires entities to classify distributions received from equity method investees using either the cumulative earnings approach or the nature of the distribution approach. Duke Energy adopted this guidance on January 1, 2018, and elected the nature of distribution approach. This approach requires all distributions received to be categorized based on legal documentation describing the nature of the activities generating the distribution. Cash inflows resulting in a return on investment (surplus) will be reflected in Cash Flows from Operating Activities on the Consolidated Statements of Cash Flows, whereas cash inflows resulting in a return of investment (capital) will be reflected in Cash Flows from Investing Activities on the Consolidated Statements of Cash Flows. The guidance has been applied using the retrospective transition method to each period presented. There are no changes to the Consolidated Statements of Cash Flows for the periods presented as a result of this accounting change.

Retirement Benefits. In March 2017, the FASB issued revised accounting guidance for the presentation of net periodic costs related to benefit plans. Previous guidance required the aggregation of all the components of net periodic costs on the Consolidated Statements of Operations and did not require the disclosure of the location of net periodic costs on the Consolidated Statements of Operations. Under the amended guidance, the service cost component of net periodic costs is included within Operating Income within the same line as other compensation expenses. All other components of net periodic costs are outside of Operating Income. In addition, the updated guidance permits only the service cost component of net periodic costs to be capitalized to Inventory or Property, Plant and Equipment. This represents a change from previous guidance, which permitted all components of net periodic costs to be eligible for capitalization.

Duke Energy adopted this guidance on January 1, 2018. Under previous guidance, Duke Energy presented the total non-capitalized net periodic costs within Operation, maintenance and other on the Consolidated Statements of Operations. The adoption of this guidance resulted in a retrospective change to reclassify the presentation of the non-service cost (benefit) components of net periodic costs to Other income and expenses. Duke Energy utilized the practical expedient for retrospective presentation. The change in components of net periodic costs eligible for capitalization is applicable prospectively. Since Duke Energy’s service cost component is greater than the total net periodic costs, the change results in increased capitalization of net periodic costs, higher Operation, maintenance and other and higher Other income and expenses. The resulting prospective impact to Duke Energy is an immaterial increase in Net Income. See Note 22 for further information.

For Duke Energy, the retrospective change resulted in higher Operation, maintenance and other and higher Other income and expenses, net, of $156 million and $139 million for the years ended December 31, 2017, and 2016, respectively. There was no change to Net Income for these prior periods.

The following new accounting standards have been issued, but have not yet been adopted by the Duke Energy Registrants, as of December 31, 2018.

Leases. In February 2016, the FASB issued revised accounting guidance for leases. The core principle of this guidance is that a lessee should recognize the assets and liabilities that arise from leases on the balance sheet.

For Duke Energy, this guidance is effective for interim and annual periods beginning January 1, 2019. The guidance iswill be applied using a modified retrospective approach. Under the modified retrospective approach of adoption, prior year reported results are not restated and a cumulative-effect adjustment, if applicable, is recorded to retained earnings at January 1, 2019. Upon adoption, agreements considered leases for the use of certain aircraft, space on communication towers, industrial equipment, fleet vehicles, fuel transportation (barges and railcars), land and office space will be recognized on the balance sheet. Duke Energy expects to ~~elect~~adopt the following practical ~~expedients, which would require no reassessment of whether existing contracts are~~ expedients:



FINANCIAL STATEMENTS	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES



Practical Expedient	Description	Election
Package of transition practical expedients (for leases commenced prior to adoption date and must be adopted as a package)	Do not need to 1) reassess whether any expired or existing contracts are/or contain leases, 2) reassess the lease classification for any expired or existing leases and 3) reassess initial direct costs for any existing leases.	Duke Energy plans to elect this practical expedient.
Short-term lease expedient (elect by class of underlying asset)	Elect as an accounting policy to not apply the recognition requirements to short-term leases by asset class.	Duke Energy plans to elect this practical expedient for all asset classes.
Lease and non-lease components (elect by class of underlying asset)	Elect as an accounting policy to not separate non-lease components from lease components and instead account for each lease and associated non-lease component as a single lease component by asset class.	Duke Energy plans to elect this practical expedient for all asset classes.
Hindsight expedient (when determining lease term)	Elect to use hindsight to determine the lease term.	Duke Energy plans to elect this practical expedient.
Existing and expired land easements not previously accounted for as leases	Elect to not evaluate existing or expired easements under the new guidance and carry forward current accounting treatment.	Duke Energy plans to elect this practical expedient.
Comparative reporting requirements for initial adoption	Elect to apply transition requirements at adoption date, recognize cumulative effect adjustment to retained earnings in period of adoption and not apply ASC 842 to comparative periods, including disclosures.	Duke Energy plans to elect this practical expedient.
Lessor expedient (elect by class of underlying asset)	Elect as an accounting policy to aggregate non-lease components with the related lease component when specified conditions are met by asset class. Account for the combined component based on its predominant characteristic (revenue or operating lease).	Duke Energy plans to elect this practical expedient for all asset classes.

Duke Energy currently expects to record right-of-use assets and operating lease liabilities on its balance sheet as shown in approximate amounts in the table below:



	(in millions)
Duke Energy	$	1,700
Duke Energy Carolinas	150
Progress Energy	850
Duke Energy Progress	400
Duke Energy Florida	450
Duke Energy Ohio	25
Duke Energy Indiana	60
Piedmont	30

In addition to the recognition of operating leases on the balance sheet, Duke Energy expects additional disclosures including both finance and operating lease costs, short-term lease costs, variable lease costs, weighted-average remaining lease term as well as no reassessment of lease classification for existing leases. Additionally, we expect to adopt the optional transition practical expedient allowing the entity not to reassess the accounting for land easements that currently exist at the adoption of the lease standard on January 1, 2019.weighted-average discount rates. Duke Energy ~~is currently evaluating the~~does not expect a material change to its financial statement impact of adopting this standard and is continuing to monitor industry implementation issues, including easements, pole attachments and renewable PPAs. Other than an expected increase in assets and liabilities, the ultimate impactstatements from adoption of the new standard ~~has not yet been determined. Significant system enhancements, including additional processes and controls, will be required to facilitate~~for contracts where it is the identification, tracking and reporting of potential leases based upon requirements of the new lease standard. Duke Energy has begun the implementation of a third-party software tool to help with the adoption and ongoing accounting under the new standard.

~~Statement of Cash Flows.~~ In November 2016, the FASB issued revised accounting guidance to reduce diversity in practice for the presentation and classification of restricted cash on the statement of cash flows. Under the updated guidance, restricted cash and restricted cash equivalents will be included within beginning-of-period and end-of-period cash and cash equivalents on the statement of cash flows.

For Duke Energy, this guidance is effective for the interim and annual periods beginning January 1, 2018. The guidance will be applied using a retrospective transition method to each period presented. Upon adoption by Duke Energy, the revised guidance will result in a change to the amount of cash and cash equivalents and restricted cash explained when reconciling the beginning-of-period and end-of-period total amounts shown on the Consolidated Statement of Cash Flows. Prior to adoption, the Duke Energy Registrants reflect changes in restricted cash within Cash Flows from Investing Activities and within Cash Flows from Operating Activities on the Consolidated Statement of Cash Flows. As a result of this change, our Cash and cash equivalents balance on the Consolidated Statement of Cash Flows as of December 31, 2017 will change by $147 million.

~~137~~

~~PART II~~

~~DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –~~

~~DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC– PIEDMONT NATURAL GAS COMPANY, INC.~~

~~Combined Notes To Consolidated Financial Statements – (Continued)~~

~~Retirement Benefits.~~ In March 2017, the FASB issued revised accounting guidance for the presentation of net periodic costs related to benefit plans. Current GAAP permits the aggregation of all the components of net periodic costs on the Consolidated Statement of Operations and does not require the disclosure of the location of net periodic costs on the Consolidated Statement of Operations. Under the amended guidance, the service cost component of net periodic costs must be included within Operating Income within the same line as other compensation expenses. All other components of net periodic costs must be outside of Operating Income. In addition, the updated guidance permits only the service cost component of net periodic costs to be capitalized to Inventory or Property, Plant and Equipment. This represents a change from current GAAP, which permits all components of net periodic costs to be capitalized. These amendments should be applied retrospectively for the presentation of the various components of net periodic costs and prospectively for the change in eligible costs to be capitalized. The guidance allows for a practical expedient that permits a company to use amounts disclosed in prior-period financial statements as the estimation basis for applying the retrospective presentation requirements.

For Duke Energy, this guidance is effective for interim and annual periods beginning January 1, 2018. Duke Energy currently presents the total non-capitalized net periodic costs within Operation, maintenance and other on the Consolidated Statement of Operations. The adoption of this guidance will result in a retrospective change to reclassify the presentation of the non-service cost (benefit) components of net periodic costs to Other income and expenses. Duke Energy intends to utilize the practical expedient for retrospective presentation. The change in net periodic costs eligible for capitalization is applicable prospectively. Since Duke Energy’s service cost component is expected to be greater than the total net periodic costs, the change will result in increased capitalization of net periodic costs, higher Operation, maintenance and other and higher Other income and expenses. The resulting impact to Duke Energy is expected to be an immaterial increase in Net Income resulting from the limitation of eligible capitalization of net periodic costs to the service cost component, which is larger than the total net periodic costs.lessor.

2. ACQUISITIONS AND DISPOSITIONS

ACQUISITIONS

The Duke Energy Registrants consolidate assets and liabilities from acquisitions as of the purchase date and include earnings from acquisitions in consolidated earnings after the purchase date.

2016 Acquisition of Piedmont Natural Gas

On October 3, 2016, Duke Energy acquired all outstanding common stock of Piedmont for a total cash purchase price of $5.0 billion and assumed Piedmont's existing long-term debt, which had a fair value of approximately $2.0 billion at the time of the acquisition. The acquisition provides a foundation for Duke Energy to establish a broader, long-term strategic natural gas infrastructure platform to complement its existing natural gas pipeline investments and regulated natural gas business in the Midwest. In connection with the closing of the acquisition, Piedmont became a wholly owned subsidiary of Duke Energy.

~~Purchase Price Allocation~~

~~The purchase price allocation of the Piedmont acquisition is as follows:~~

(in millions)
Current assets $ 497
Property, plant and equipment, net 4,714
Goodwill 3,353
Other long-term assets 804
Total assets 9,368
Current liabilities, including current maturities of long-term debt 576
Long-term liabilities 1,790
Long-term debt 2,002
Total liabilities 4,368
Total purchase price $ 5,000

The fair value of Piedmont's assets and liabilities was determined based on significant estimates and assumptions that are judgmental in nature, including the amount and timing of projected future cash flows, discount rates reflecting risk inherent in the future cash flows and market prices of long-term debt.

The majority of Piedmont’s operations are subject to the rate-setting authority of the NCUC, the PSCSC and the TPUC and are accounted for pursuant to accounting guidance for regulated operations. The rate-setting and cost recovery provisions currently in place for Piedmont’s regulated operations provide revenues derived from costs, including a return on investment of assets and liabilities included in rate base. Thus, the fair value of Piedmont's assets and liabilities subject to these rate-setting provisions approximates the pre-acquisition carrying values and does not reflect any net valuation adjustments.

The significant assets and liabilities for which valuation adjustments were reflected within the purchase price allocation include the acquired equity method investments and long-term debt. The difference between the fair value and the pre-merger carrying values of long-term debt for regulated operations was recorded as a regulatory asset.

The excess of the purchase price over the fair value of Piedmont's assets and liabilities on the acquisition date was recorded as goodwill. The goodwill reflects the value paid by Duke Energy primarily for establishing a broader, long-term strategic natural gas infrastructure growth platform, an improved risk profile and expected synergies resulting from the combined entities.

~~138~~

~~PART II~~



FINANCIAL STATEMENTS	ACQUISITIONS AND DISPOSITIONS

~~DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –~~

~~DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC– PIEDMONT NATURAL GAS COMPANY, INC.~~

~~Combined Notes To Consolidated Financial Statements – (Continued)~~

~~Under Securities and Exchange Commission (SEC) regulations, Duke Energy elected not to apply push down accounting to the stand-alone Piedmont financial statements.~~

Accounting Charges Related to the Acquisition

Duke Energy incurred pretax ~~non-recurring~~ transaction and integration costs associated with the acquisition of $84 million, $103 million ~~$439 million~~ and $9$439 million for the years ended December 31, 2018, 2017 ~~2016~~ and ~~2015,~~2016, respectively. Amounts recorded on the Consolidated Statements of Operations in 2018 and 2017 were primarily system integration costs of $78 million and $71 million, respectively, related to combining the various operational and financial systems of Duke Energy and Piedmont, including a one-time software impairment resulting from planned accounting system and process ~~integration.~~integration in 2017. A $7 million charge was recorded within Impairment Charges, with the remaining $64 million recorded within Operation, maintenance and ~~other.~~other in 2017.

Amounts recorded in 2016 include:

Interest expense of $234 million related to the acquisition financing, including realized losses on forward-starting interest rate swaps of $190 million. See Note 14 for additional information on the swaps.

Charges of $104 million related to commitments made in conjunction with the transaction, including charitable contributions and a one-time bill credit to Piedmont customers. $10 million was recorded as a reduction in Operating Revenues, with the remaining $94 million recorded within Operation, maintenance and other.

Other transaction and integration costs of $101 million recorded to Operation, maintenance and other, including professional fees and ~~severance.~~severance charges.

The majority of transition and integration activities ~~are expected to be~~were completed by the end of 2018.

Pro Forma Financial Information

The following unaudited pro forma financial information reflects the combined results of operations of Duke Energy and Piedmont as if the merger had occurred as of January 1, 2015. The pro forma financial information does not include potential cost savings, intercompany revenues, Piedmont’s earnings from a certain equity method investment sold immediately prior to the merger or non-recurring transaction and integration costs incurred by Duke Energy and Piedmont. The after-tax ~~non-recurring~~ transaction and integration costs incurred by Duke Energy and Piedmont were $279 million ~~and $19 million~~ for the ~~years~~year ended December 31, ~~2016, and 2015, respectively.~~2016.

This information has been presented for illustrative purposes only and is not necessarily indicative of the consolidated results of operations that would have been achieved or the future consolidated results of operations of Duke Energy.


	Years Ended December 31,				Year Ended December 31,
(in millions)	2016		2015		2016
Operating Revenues	$	23,504	$	23,570	$	23,504
Net Income Attributable to Duke Energy Corporation	2,442		2,877		2,442

Piedmont's Earnings

Piedmont's revenues and net income included in Duke Energy's Consolidated Statements of Operations for the year ended December 31, 2016, were $367 million and $20 million, respectively. Piedmont's revenues and net income for the year ended December 31, 2016, include the impact of non-recurring transaction costs of $10 million and $46 million, respectively.

~~Acquisition Related Financings and Other Matters~~

~~Duke Energy financed the Piedmont acquisition with a combination of debt and equity issuances and other cash sources, including:~~

~~$3.75 billion of long-term debt issued in August 2016.~~

~~$750 million borrowed under the $1.5 billion short-term loan facility in September 2016, which was repaid in December 2016.~~

~~10.6 million shares of common stock issued in October 2016 for net cash proceeds of approximately $723 million.~~

The $4.9 billion senior unsecured bridge financing facility (Bridge Facility) with Barclays Capital, Inc. (Barclays) was terminated following the issuance of the long-term debt. For additional information related to the debt and equity issuances, see Notes 6 and 18, respectively. For additional information regarding Duke Energy's and Piedmont's joint investment in Atlantic Coast Pipeline, LLC (ACP), see Note 4.

~~139~~

~~PART II~~

~~DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –~~

~~DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC– PIEDMONT NATURAL GAS COMPANY, INC.~~

~~Combined Notes To Consolidated Financial Statements – (Continued)~~

DISPOSITIONS

For the ~~year~~years ended December 31, 2018, and 2017, the ~~Loss~~Income (Loss) from Discontinued Operations, net of tax, was immaterial. The following table summarizes the ~~(Loss) Income~~Loss from Discontinued Operations, net of tax recorded on Duke Energy's Consolidated Statements of Operations for the ~~years~~year ended December 31, ~~2016, and 2015:~~2016:

Years Ended December 31,
(in millions) 2016
2015
International Energy Disposal Group $ (534 ) $ 157
Midwest Generation Disposal Group 36
33
Other^(a)
90
(13 )
(Loss) Income from Discontinued Operations, net of tax $ (408 ) $ 177



	Year Ended December 31,
(in millions)	2016
International Disposal Group	$	(534	)
Other^(a)	126
Loss from Discontinued Operations, net of tax	$	(408	)

(a)

~~Relates to previously sold businesses not related to the Disposal Groups. The amount for 2016~~Amount represents an income tax benefit resulting from immaterial out of period deferred tax liability ~~adjustments. The amount~~adjustments for ~~2015 includes indemnifications provided for certain legal, tax and environmental matters and foreign currency translation adjustments.~~previously sold businesses not related to the International Disposal Group.

2016 Sale of International Energy

In February 2016, Duke Energy announced it had initiated a process to divest ~~its International Energy businesses, excluding~~ the ~~equity method investment in NMC (the~~ International Disposal ~~Group),~~Group, and in October 2016, announced it had entered into two separate purchase and sale agreements to execute the divestiture. Both sales closed in December of 2016, resulting in available cash proceeds of $1.9 billion, excluding transaction costs. Proceeds were primarily used to reduce ~~Duke Energy holding company (the parent)~~the Parent debt. Existing favorable tax attributes result in no immediate U.S. federal-level cash tax impacts. Details of each transaction are as follows:



FINANCIAL STATEMENTS	ACQUISITIONS AND DISPOSITIONS

On December 20, 2016, Duke Energy closed on the sale of its ownership interests in businesses in Argentina, Chile, Ecuador, El Salvador, Guatemala and Peru to I Squared Capital. The assets sold included approximately 2,230 MW of hydroelectric and natural gas generation capacity, transmission infrastructure and natural gas processing facilities. I Squared Capital purchased the businesses for an enterprise value of $1.2 billion.

On December 29, 2016, Duke Energy closed on the sale of its Brazilian business, which included approximately 2,090 MW of hydroelectric generation capacity, to CTG for an enterprise value of $1.2 billion. With the closing of the CTG deal, Duke Energy finalized its exit from the Latin American market.

Assets Held For Sale and Discontinued Operations

As a result of the transactions, the International Disposal Group was classified as held for sale and as discontinued operations in the fourth quarter of 2016. Interest expense directly associated with the International Disposal Group was allocated to discontinued operations. No interest from corporate level debt was allocated to discontinued operations.

The following table presents the results of the International Disposal Group for the ~~years~~year ended December 31, 2016, ~~and 2015,~~ which are included in ~~(Loss) Income~~Loss from Discontinued Operations, net of tax in Duke Energy's Consolidated Statements of Operations.

Years Ended December 31,
(in millions) 2016
2015
Operating Revenues $ 988
$ 1,088
Fuel used in electric generation and purchased power 227
306
Cost of natural gas 43
53
Operation, maintenance and other 341
334
Depreciation and amortization^(a)
62
92
Property and other taxes 15
7
Impairment charges^(b)
194
13
(Loss) Gains on Sales of Other Assets and Other, net (3 ) 6
Other Income and Expenses, net 58
23
Interest Expense 82
85
Pretax loss on disposal^(c)
(514 ) —
(Loss) Income before income taxes^(d)
(435 )
227
Income tax expense^(e)(f)
99
70
(Loss) Income from discontinued operations of the International Disposal Group $ (534 )
$ 157

~~140~~

~~PART II~~

~~DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –~~

~~DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC– PIEDMONT NATURAL GAS COMPANY, INC.~~

~~Combined Notes To Consolidated Financial Statements – (Continued)~~



	Year Ended December 31,
(in millions)	2016
Operating Revenues	$	988
Fuel used in electric generation and purchased power	227
Cost of natural gas	43
Operation, maintenance and other	341
Depreciation and amortization^(a)	62
Property and other taxes	15
Impairment charges^(b)	194
(Losses) Gains on Sales of Other Assets and Other, net	(3		)
Other Income and Expenses, net	58
Interest Expense	82
Pretax loss on disposal^(c)	(514		)
Loss before income taxes^(d)	(435		)
Income tax expense^(e)(f)	99
Loss from discontinued operations of the International Disposal Group	$	(534	)


(a)	Upon meeting the criteria for assets held for sale, beginning in the fourth quarter of 2016 depreciation expense ~~was~~ ceased.

(b)

In conjunction with the advancements of marketing efforts during 2016, Duke Energy performed recoverability tests of the long-lived asset groups of International Energy. As a result, Duke Energy determined the carrying value of certain assets in Central America was not fully recoverable and recorded a pretax impairment charge of $194 million. The charge represents the excess of carrying value over the estimated fair value of the assets, which was based on a Level 3 Fair Value measurement that was primarily determined from the income approach using discounted cash flows but also considered market information obtained in 2016.


(c)	The pretax loss on disposal includes the recognition of cumulative foreign currency translation losses of $620 million as of the disposal date. See the Consolidated Statements of Changes in Equity for additional information.


(d)	Pretax ~~(Loss) Income~~Loss attributable to Duke Energy Corporation was $(445) million ~~and $221 million~~ for the ~~years~~year ended December 31, ~~2016 and 2015, respectively.~~2016.


(e)	~~2016 amount~~Amount includes $126 million of income tax expense on the disposal, which primarily reflects in-country taxes incurred as a result of the sale. The after-tax loss on disposal was $640 million.


(f)	~~2016 amount~~Amount includes an income tax benefit of $95 million. See Note ~~22,~~23, "Income Taxes," for additional information.

Duke Energy has elected not to separately disclose discontinued operations on the Consolidated Statements of Cash Flows. The following table summarizes Duke Energy's cash flows from discontinued operations related to the International Disposal Group.


	Years Ended December 31,					Year Ended December 31,
(in millions)	2016			2015		2016
Cash flows provided by (used in):
Operating activities	$	204		$	248	$	204
Investing activities	(434		)	177		(434		)

Other Sale Related Matters

During 2017, Duke Energy provided certain transition services to CTG and I Squared Capital. Cash flows related to providing the transition services were not material as of December 31, 2017. All transition services related to the International Disposal Group ended in 2017. Additionally, Duke Energy will reimburse CTG and I Squared Capital for all tax obligations arising from the period preceding consummation on the transactions, ~~totaling approximately~~and recorded a liability of $54 million and $78 ~~million.~~million as of December 31, 2018, and 2017, respectively. Duke Energy has not recorded any other liabilities, contingent liabilities or indemnifications related to the International Disposal Group.

~~2015 Midwest Generation Exit~~

Duke Energy, through indirect subsidiaries, completed the sale of the Midwest Generation Disposal Group to a subsidiary of Dynegy on April 2, 2015, for approximately $2.8 billion in cash. The nonregulated Midwest generation business included generation facilities with approximately 5,900 MW of owned capacity located in Ohio, Pennsylvania and Illinois. On April 1, 2015, prior to the sale, Duke Energy Ohio distributed its indirect ownership interest in the nonregulated Midwest generation business to a subsidiary of Duke Energy Corporation.

Duke Energy utilized a revolving credit agreement (RCA) to support the operations of the nonregulated Midwest generation business. Duke Energy Ohio had a power purchase agreement with the Midwest Generation Disposal Group for a portion of its standard service offer (SSO) supply requirement. The agreement and the SSO expired in May 2015.

The results of operations of the Midwest Generation Disposal Group prior to the date of sale are classified as discontinued operations in the accompanying Consolidated Statements of Operations. Interest expense associated with the RCA was allocated to discontinued operations. No other interest expense related to corporate level debt was allocated to discontinued operations. Certain immaterial costs that were eliminated as a result of the sale remained in continuing operations. The following table summarizes the Midwest Generation Disposal Group activity recorded within discontinued operations.

Duke Energy Duke Energy Ohio
Years Ended December 31, Years Ended December 31,
(in millions) 2016
2015
2016
2015
Operating Revenues $ —
$ 543
$ —
$ 412
Pretax Loss on disposal^(a)
—
(45 ) —
(52 )

Income (loss) before income taxes^(b)
$ —
$ 59
$ —
$ 44
Income tax (benefit) expense^(c)
(36 ) 26
(36 ) 21
Income (loss) from discontinued operations $ 36
$ 33
$ 36
$ 23



~~(a)~~FINANCIAL STATEMENTS	~~The Loss on disposal includes impairments recorded to adjust the carrying amount of the assets to the estimated fair value of the business, based on the selling price to Dynegy less cost to sell.~~BUSINESS SEGMENTS


~~(b)~~	2015 amounts include the impact of an $81 million charge for the settlement agreement reached in a lawsuit related to the Midwest Generation Disposal Group. Refer to Note 5 for further information about the lawsuit.


~~(c)~~	~~2016 amounts result from immaterial out of period deferred tax liability adjustments.~~

~~141~~

~~PART II~~

~~DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –~~

~~DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC– PIEDMONT NATURAL GAS COMPANY, INC.~~

~~Combined Notes To Consolidated Financial Statements – (Continued)~~

3. BUSINESS SEGMENTS

~~Operating~~Reportable segments are determined based on information used by the chief operating decision-maker in deciding how to allocate resources and evaluate the performance of the business. Duke Energy evaluates segment performance based on segment income. Segment income is defined as income from continuing operations net of income attributable to noncontrolling interests. Segment income, as discussed below, includes intercompany revenues and expenses that are eliminated on the Consolidated Financial Statements. Certain governance costs are allocated to each segment. In addition, direct interest expense and income taxes are included in segment income.

Products and services are sold between affiliate companies and reportable segments of Duke Energy at cost. Segment assets as presented in the tables that follow exclude all intercompany assets.

Duke Energy

Duke Energy's segment structure includes the following segments: Electric Utilities and Infrastructure, Gas Utilities and Infrastructure and Commercial Renewables.

The Electric Utilities and Infrastructure segment includes Duke Energy's regulated electric utilities in the Carolinas, Florida and the Midwest. The regulated electric utilities conduct operations through the Subsidiary Registrants that are substantially all regulated and, accordingly, qualify for regulatory accounting treatment. Electric Utilities and Infrastructure also includes Duke Energy's commercial electric transmission infrastructure investments.

The Gas Utilities and Infrastructure segment includes Piedmont, Duke Energy's natural gas local distribution companies in Ohio and Kentucky, and Duke Energy's natural gas storage and midstream pipeline investments. Gas Utilities and Infrastructure's operations are substantially all regulated and, accordingly, qualify for regulatory accounting treatment.

The Commercial Renewables segment is primarily comprised of nonregulated utility scale wind and solar generation assets located throughout the U.S.

The remainder of Duke Energy’s operations is presented as Other, which is primarily comprised of ~~corporate~~ interest expense on holding company debt, unallocated corporate costs ~~contributions to the Duke Energy Foundation~~ and ~~the operations of~~ Duke Energy’s wholly owned captive insurance ~~subsidiary, Bison Insurance Company Limited (Bison).~~company, Bison. Other also includes Duke Energy's interest in NMC. See Note 12 for additional information on the investment in NMC.

Business segment information is presented in the following tables. Segment assets presented exclude intercompany assets.


	Year Ended December 31, 2017																		Year Ended December 31, 2018
	Electric		Gas					Total											Electric		Gas					Total
	Utilities and		Utilities and		Commercial			Reportable											Utilities and		Utilities and		Commercial			Reportable
(in millions)	Infrastructure		Infrastructure		Renewables			Segments		Other			Eliminations			Total			Infrastructure		Infrastructure		Renewables			Segments		Other			Eliminations			Total
Unaffiliated Revenues	$	21,300	$	1,743	$	460		$	23,503	$	62		$	—		$	23,565		$	22,242	$	1,783	$	477		$	24,502	$	19		$	—		$	24,521
Intersegment Revenues	31		93		—			124		76			(200		)	—			31		98		—			129		70			(199		)	—
Total Revenues	$	21,331	$	1,836	$	460		$	23,627	$	138		$	(200	)	$	23,565		$	22,273	$	1,881	$	477		$	24,631	$	89		$	(199	)	$	24,521
Interest Expense	$	1,240	$	105	$	87		$	1,432	$	574		$	(20	)	$	1,986		$	1,288	$	106	$	88		$	1,482	$	657		$	(45	)	$	2,094
Depreciation and amortization	3,010		231		155			3,396		131			—			3,527			3,523		245		155			3,923		152			(1		)	4,074
Equity in earnings (losses) of unconsolidated affiliates	5		62		(5		)	62		57			—			119			5		27		(1		)	31		52			—			83
Income tax expense (benefit)^(a)	1,355		116		(628		)	843		353			—			1,196			799		78		(147		)	730		(282		)	—			448
Segment income (loss)^(d)(e)	3,210		319		441			3,970		(905		)	—			3,065			3,058		274		9			3,341		(694		)	—			2,647
Add back noncontrolling interest component																5																		(22		)
Loss from discontinued operations, net of tax																(6		)
Income from discontinued operations, net of tax																																		19
Net income																$	3,064																	$	2,644
Capital investments expenditures and acquisitions	$	7,024	$	907	$	92		$	8,023	$	175		$	—		$	8,198		$	8,086	$	1,133	$	193		$	9,412	$	256		$	—		$	9,668
Segment assets	119,423		11,462		4,156			135,041		2,685			188			137,914			125,364		12,361		4,204			141,929		3,275			188			145,392


(a)	All segments include adjustments to the December 31, 2017 estimate of the income tax effects of the Tax Act. Electric Utilities and Infrastructure includes a $24 million expense, Gas Utilities and Infrastructure includes a $1 million expense, Commercial Renewables includes a $3 million benefit and Other includes a $2 million benefit. See Note 23 for additional information.


(b)	Electric Utilities and Infrastructure includes after-tax regulatory and legislative impairment charges of $202 million related to rate case orders, settlements or other actions of regulators or legislative bodies and an after-tax impairment charge of $46 million related to the Citrus County CC at Duke Energy Florida. See Note 4 for additional information.


(c)	Gas Utilities and Infrastructure includes an after-tax impairment charge of $42 million for the investment in Constitution. See Note 12 for additional information.


(d)	Commercial Renewables includes an impairment charge of $91 million, net of $2 million Noncontrolling interests, related to goodwill. See Note 11 for additional information.



FINANCIAL STATEMENTS	BUSINESS SEGMENTS


(e)	Other includes $65 million of after-tax costs to achieve the Piedmont merger, $144 million of after-tax severance charges related to a companywide initiative and an $82 million after-tax loss on the sale of the retired Beckjord Generating Station described below. For additional information, see Note 2 for the Piedmont Merger and Note 20 for severance charges.

In February 2018, Duke Energy sold Beckjord, a nonregulated facility retired during 2014, and recorded a pretax loss of $106 million within (Losses) Gains on Sales of Other Assets and Other, net and $1 million within Operation, maintenance and other on Duke Energy's Consolidated Statements of Operations for the year ended December 31, 2018. The sale included the transfer of coal ash basins and other real property and indemnification from any and all potential future claims related to the property, whether arising under environmental laws or otherwise.



	Year Ended December 31, 2017
	Electric		Gas					Total
	Utilities and		Utilities and		Commercial			Reportable
(in millions)	Infrastructure		Infrastructure		Renewables			Segments		Other			Eliminations			Total
Unaffiliated Revenues	$	21,300	$	1,743	$	460		$	23,503	$	62		$	—		$	23,565
Intersegment Revenues	31		93		—			124		76			(200		)	—
Total Revenues	$	21,331	$	1,836	$	460		$	23,627	$	138		$	(200	)	$	23,565
Interest Expense	$	1,240	$	105	$	87		$	1,432	$	574		$	(20	)	$	1,986
Depreciation and amortization	3,010		231		155			3,396		131			—			3,527
Equity in earnings (losses) of unconsolidated affiliates	5		62		(5		)	62		57			—			119
Income tax expense (benefit)^(a)	1,355		116		(628		)	843		353			—			1,196
Segment income (loss)^(b)(c)(d)	3,210		319		441			3,970		(905		)	—			3,065
Add back noncontrolling interest component																5
Loss from discontinued operations, net of tax																(6		)
Net income																$	3,064
Capital investments expenditures and acquisitions	$	7,024	$	907	$	92		$	8,023	$	175		$	—		$	8,198
Segment assets	119,423		11,462		4,156			135,041		2,685			188			137,914


(a)	All segments include impacts of the Tax ~~Cuts and Jobs Act (the Tax Act).~~Act. Electric Utilities and Infrastructure includes a $231 million benefit, Gas Utilities and Infrastructure includes a $26 million benefit, Commercial Renewables includes a $442 million benefit and Other includes charges of $597 million.


(b)	Electric Utilities and Infrastructure includes after-tax regulatory settlement charges of $98 million. See Note 4 for additional information.


(c)	Commercial Renewables includes after-tax impairment charges of $74 million related to certain wind projects and the Energy Management Solutions reporting unit. See Notes 10 and 11 for additional information.


(d)	Other includes $64 million of after-tax costs to achieve the Piedmont merger. See Note 2 for additional information.



	Year Ended December 31, 2016
	Electric		Gas					Total
	Utilities and		Utilities and		Commercial			Reportable
(in millions)	Infrastructure		Infrastructure		Renewables			Segments			Other			Eliminations			Total
Unaffiliated Revenues	$	21,336	$	875	$	484		$	22,695		$	48		$	—		$	22,743
Intersegment Revenues	30		26		—			56			69			(125		)	—
Total Revenues	$	21,366	$	901	$	484		$	22,751		$	117		$	(125	)	$	22,743
Interest Expense	$	1,136	$	46	$	53		$	1,235		$	693		$	(12	)	$	1,916
Depreciation and amortization	2,897		115		130			3,142			152			—			3,294
Equity in earnings (losses) of unconsolidated affiliates^(a)	5		19		(82		)	(58		)	43			—			(15		)
Income tax expense (benefit)	1,672		90		(160		)	1,602			(446		)	—			1,156
Segment income (loss)^(b)(c)	3,040		152		23			3,215			(645		)	1			2,571
Add back noncontrolling interest component																	7
Loss from discontinued operations, net of tax^(d)																	(408		)
Net income																	$	2,170
Capital investments expenditures and acquisitions^(e)	$	6,649	$	5,519	$	857		$	13,025		$	190		$	—		$	13,215
Segment assets	114,993		10,760		4,377			130,130			2,443			188			132,761

~~142~~

~~PART II~~

~~DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –~~

~~DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC– PIEDMONT NATURAL GAS COMPANY, INC.~~

~~Combined Notes To Consolidated Financial Statements – (Continued)~~

Year Ended December 31, 2016
Electric
Gas
Total

Utilities and
Utilities and
Commercial
Reportable

(in millions) Infrastructure
Infrastructure
Renewables
Segments
Other
Eliminations
Total
Unaffiliated Revenues $ 21,336
$ 875
$ 484
$ 22,695
$ 48
$ —
$ 22,743
Intersegment Revenues 30
26
—
56
69
(125 ) —
Total Revenues $ 21,366
$ 901
$ 484
$ 22,751
$ 117
$ (125 ) $ 22,743
Interest Expense $ 1,136
$ 46
$ 53
$ 1,235
$ 693
$ (12 ) $ 1,916
Depreciation and amortization 2,897
115
130
3,142
152
—
3,294
Equity in earnings (losses) of unconsolidated affiliates^(a)
5
19
(82 ) (58 ) 43
—
(15 )
Income tax expense (benefit) 1,672
90
(160 ) 1,602
(446 ) —
1,156
Segment income (loss)^(b)(c)
3,040
152
23
3,215
(645 ) 1
2,571
Add back noncontrolling interest component





7
Loss from discontinued operations, net of tax^(d)






(408 )
Net income





$ 2,170
Capital investments expenditures and acquisitions^(e)
$ 6,649
$ 5,519
$ 857
$ 13,025
$ 190
$ —
$ 13,215
Segment assets 114,993
10,760
4,377
130,130
2,443
188
132,761



FINANCIAL STATEMENTS	BUSINESS SEGMENTS

~~(a) Commercial Renewables includes a pretax impairment charge of $71 million. See Note 12 for additional information.~~


(a)	Commercial Renewables includes a pretax impairment charge of $71 million. See Note 12 for additional information.


(b)	Other includes $329 million of after-tax costs to achieve mergers. ~~Refer to~~See Note 2 for additional information on costs related to the Piedmont merger.


(c)	Other includes after-tax charges of $57 million related to cost savings initiatives. ~~Refer to~~See Note 1920 for further information.


(d)	Includes a loss on sale of the International Disposal Group. Refer to Note 2 for further information.


(e)	Other includes $26 million of capital ~~investments~~investment expenditures related to the International Disposal Group. Gas Utilities and Infrastructure includes the Piedmont acquisition of $5 billion. ~~Refer to~~See Note 2 for more information on the Piedmont acquisition.

Year Ended December 31, 2015
Electric
Gas
Total

Utilities and
Utilities and
Commercial
Reportable

(in millions) Infrastructure
Infrastructure
Renewables
Segments
Other
Eliminations
Total
Unaffiliated Revenues $ 21,489
$ 536
$ 286
$ 22,311
$ 60
$ —
$ 22,371
Intersegment Revenues 32
5
—
37
75
(112 ) —
Total Revenues $ 21,521
$ 541
$ 286
$ 22,348
$ 135
$ (112 ) $ 22,371
Interest Expense $ 1,074
$ 25
$ 44
$ 1,143
$ 393
$ (9 ) $ 1,527
Depreciation and amortization 2,735
79
104
2,918
135
—
3,053
Equity in (losses) earnings of unconsolidated affiliates (2 ) 1
(6 ) (7 ) 76
—
69
Income tax expense (benefit) 1,602
44
(128 ) 1,518
(262 ) —
1,256
Segment income (loss)^(a)(b)(c)
2,819
73
52
2,944
(299 ) —
2,645
Add back noncontrolling interest component





9
Income from discontinued operations, net of tax^(d)






177
Net income





$ 2,831
Capital investments expenditures and acquisitions^(e)
$ 6,852
$ 234
$ 1,019
$ 8,105
$ 258
$ —
$ 8,363
Segment assets^(f)
109,097
2,637
3,861
115,595
5,373
188
121,156


~~(a)~~	~~Electric Utilities and Infrastructure includes an after-tax charge of $58 million related to the Edwardsport settlement. Refer to Note 4 for further information.~~


~~(b)~~	~~Other includes $60 million of after-tax costs to achieve mergers.~~


~~(c)~~	~~Other includes after-tax charges of $77 million related to cost savings initiatives. Refer to Note 19 for further information.~~


~~(d)~~	Includes the impact of a settlement agreement reached in a lawsuit related to the Midwest Generation Disposal Group. Refer to Note 5 for further information related to the lawsuit and Note 2 for further information on discontinued operations.


~~(e)~~	~~Other includes capital investment expenditures of $45 million related to the International Disposal Group.~~


~~(f)~~	~~Other includes Assets Held for Sale balances related to the International Disposal Group. Refer to Note 2 for further information.~~

~~143~~

~~PART II~~

~~DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –~~

~~DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC– PIEDMONT NATURAL GAS COMPANY, INC.~~

~~Combined Notes To Consolidated Financial Statements – (Continued)~~

Geographical Information

~~For the years ended December 31, 2017, 2016 and 2015, all~~All assets and revenues from continuing operations are within the U.S.

Major Customers

For the year ended December 31, ~~2017,~~2018, revenues from one customer of Duke Energy Progress are ~~$521~~$633 million. Duke Energy Progress has one reportable segment, Electric Utilities and Infrastructure. No other ~~subsidiary registrant~~Subsidiary Registrant has an individual customer representing more than 10 percent of its revenues.

Products and Services

The following table summarizes revenues of the reportable segments by type.


	Retail		Wholesale		Retail					Total		Retail		Wholesale		Retail				Total
(in millions)	Electric		Electric		Natural Gas		Other			Revenues		Electric		Electric		Natural Gas		Other		Revenues
2018
Electric Utilities and Infrastructure												$	19,013	$	2,345	$	—	$	915	$	22,273
Gas Utilities and Infrastructure												—		—		1,817		64		1,881
Commercial Renewables												—		375		—		102		477
Total Reportable Segments												$	19,013	$	2,720	$	1,817	$	1,081	$	24,631
2017
Electric Utilities and Infrastructure	$	18,177	$	2,104	$	—	$	1,050		$	21,331	$	18,177	$	2,104	$	—	$	1,050	$	21,331
Gas Utilities and Infrastructure	—		—		1,732		104			1,836		—		—		1,732		104		1,836
Commercial Renewables	—		375		—		85			460		—		375		—		85		460
Total Reportable Segments	$	18,177	$	2,479	$	1,732	$	1,239		$	23,627	$	18,177	$	2,479	$	1,732	$	1,239	$	23,627
2016
Electric Utilities and Infrastructure	$	18,338	$	2,095	$	—	$	933		$	21,366	$	18,338	$	2,095	$	—	$	933	$	21,366
Gas Utilities and Infrastructure	—		—		871		30			901		—		—		871		30		901
Commercial Renewables	—		303		—		181			484		—		303		—		181		484
Total Reportable Segments	$	18,338	$	2,398	$	871	$	1,144		$	22,751	$	18,338	$	2,398	$	871	$	1,144	$	22,751
2015
Electric Utilities and Infrastructure	$	18,695	$	2,014	$	—	$	812		$	21,521
Gas Utilities and Infrastructure	—		—		546		(5		)	541
Commercial Renewables	—		245		—		41			286
Total Reportable Segments	$	18,695	$	2,259	$	546	$	848		$	22,348

Duke Energy Ohio

Duke Energy Ohio has two reportable ~~operating~~ segments, Electric Utilities and Infrastructure and Gas Utilities and Infrastructure.

Electric Utilities and Infrastructure transmits and distributes electricity in portions of Ohio and generates, distributes and sells electricity in portions of Northern Kentucky. Gas Utilities and Infrastructure transports and sells natural gas in portions of Ohio and Northern Kentucky. ~~It conducts~~Both reportable segments conduct operations primarily through Duke Energy Ohio and its wholly owned subsidiary, Duke Energy Kentucky.

~~144~~

~~PART II~~

~~DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –~~

~~DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC– PIEDMONT NATURAL GAS COMPANY, INC.~~

~~Combined Notes To Consolidated Financial Statements – (Continued)~~

The remainder of Duke Energy Ohio's operations is presented as ~~Other,~~Other. In December 2018, the PUCO approved an order which ~~is primarily comprised~~allows the recovery or credit of ~~governance costs allocated by its parent, Duke Energy, and~~ revenues and expenses related to Duke Energy Ohio's contractual arrangement to buy power from ~~OVEC's (Ohio Valley Electric Corporation)~~OVEC power plants. Due to the change in regulatory treatment of these amounts, OVEC revenues and expenses are now reflected in the Electric Utilities and Infrastructure segment. Previously, OVEC revenues and expense were included in Other. These amounts are deemed immaterial for Duke Energy Ohio. Therefore, no prior period amounts were restated. See Note 134 for additional information on ~~related party transactions. For~~ the ~~years ended December 31, 2017, 2016 and 2015, all~~PUCO order.



FINANCIAL STATEMENTS	BUSINESS SEGMENTS

All Duke Energy Ohio assets and revenues from continuing operations are within the U.S.

Year Ended December 31, 2017
Electric
Gas
Total

Utilities and
Utilities and
Reportable

(in millions)
Infrastructure
Infrastructure
Segments
Other
Eliminations
Total
Total revenues $ 1,373
$ 508
$ 1,881
$ 42
$ —
$ 1,923
Interest expense $ 62
$ 28
$ 90
$ 1
$ —
$ 91
Depreciation and amortization 178
83
261
$ —
—
261
Income tax expense (benefit) 40
39
79
$ (20 ) —
59
Segment income (loss) 138
85
223
$ (30 ) —
193
Loss from discontinued operations, net of tax (1 )
Net income

$ 192
Capital expenditures $ 491
$ 195
$ 686
$ —
$ —
$ 686
Segment assets 5,066
2,758
7,824
66
(15 ) 7,875



	Year Ended December 31, 2018
	Electric		Gas		Total
	Utilities and		Utilities and		Reportable
(in millions)	Infrastructure		Infrastructure		Segments		Other			Total
Total revenues	$	1,450	$	506	$	1,956	$	1		$	1,957
Interest expense	$	67	$	24	$	91	$	1		$	92
Depreciation and amortization	183		85		268		—			268
Income tax expense (benefit)	47		24		71		(28		)	43
Segment income (loss)/Net income^(a)	186		93		279		(103		)	176
Capital expenditures	$	655	$	172	$	827	$	—		$	827
Segment assets	5,643		2,874		8,517		38			8,555

(a) Other includes the loss on the sale of Beckjord, see discussion above.



	Year Ended December 31, 2017
	Electric		Gas		Total
	Utilities and		Utilities and		Reportable
(in millions)	Infrastructure		Infrastructure		Segments		Other			Eliminations			Total
Total revenues	$	1,373	$	508	$	1,881	$	42		$	—		$	1,923
Interest expense	$	62	$	28	$	90	$	1		$	—		$	91
Depreciation and amortization	178		83		261		—			—			261
Income tax expense (benefit)	40		39		79		(20		)	—			59
Segment income (loss)	138		85		223		(30		)	—			193
Loss from discontinued operations, net of tax													(1		)
Net income													$	192
Capital expenditures	$	491	$	195	$	686	$	—		$	—		$	686
Segment assets	5,066		2,758		7,824		66			(15		)	7,875



	Year Ended December 31, 2016
	Electric		Gas		Total
	Utilities and		Utilities and		Reportable
(in millions)	Infrastructure		Infrastructure		Segments		Other			Eliminations			Total
Total revenues	$	1,410	$	503	$	1,913	$	31		$	—		$	1,944
Interest expense	$	58	$	27	$	85	$	1		$	—		$	86
Depreciation and amortization	151		80		231		2			—			233
Income tax expense (benefit)	55		44		99		(21		)	—			78
Segment income (loss)	154		77		231		(39		)	—			192
Income from discontinued operations, net of tax													36
Net income													$	228
Capital expenditures	$	322	$	154	$	476	$	—		$	—		$	476
Segment assets	4,782		2,696		7,478		62			(12		)	7,528

Year Ended December 31, 2015
Electric
Gas
Total

Utilities and
Utilities and
Reportable

(in millions) Infrastructure
Infrastructure
Segments
Other
Eliminations
Total
Total revenues $ 1,331
$ 541
$ 1,872
$ 33
$ —
$ 1,905
Interest expense $ 53
$ 25
$ 78
$ 1
$ —
$ 79
Depreciation and amortization 147
79
226
1
—
227
Income tax expense (benefit) 59
45
104
(23 ) —
81
Segment income (loss) 118
73
191
(41 ) (1 ) 149
Income from discontinued operations, net of tax 23
Net income

$ 172
Capital expenditures $ 264
$ 135
$ 399
$ —
$ —
$ 399
Segment assets 4,534
2,516
7,050
56
(9 ) 7,097



FINANCIAL STATEMENTS	REGULATORY MATTERS

4. REGULATORY MATTERS

REGULATORY ASSETS AND LIABILITIES

The Duke Energy Registrants record regulatory assets and liabilities that result from the ratemaking process. See Note 1 for further information.

~~145~~

~~PART II~~

~~DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –~~

~~DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC– PIEDMONT NATURAL GAS COMPANY, INC.~~

~~Combined Notes To Consolidated Financial Statements – (Continued)~~

The following tables present the regulatory assets and liabilities recorded on the Consolidated Balance Sheets of Duke Energy and Progress Energy. See separate tables below for balances by individual registrant.


	Duke Energy				Progress Energy				Duke Energy				Progress Energy
	December 31,				December 31,				December 31,				December 31,
(in millions)	2017		2016		2017		2016		2018		2017		2018		2017
Regulatory Assets
AROs – coal ash	$	4,025	$	3,761	$	1,984	$	1,830	$	4,255	$	4,025	$	2,061	$	1,984
AROs – nuclear and other	852		684		655		569		772		852		601		655
Accrued pension and OPEB	2,249		2,387		906		882		2,654		2,249		1,074		906
Retired generation facilities	480		534		386		422		445		480		367		386
Debt fair value adjustment	1,197		1,313		—		—		1,099		1,197		—		—
Net regulatory asset related to income taxes	—		894		—		231
Deferred asset – Lee COLA									383		—		—		—
Storm cost deferrals	531		153		526		148		1,117		531		953		526
Nuclear asset securitized balance, net	1,142		1,193		1,142		1,193		1,093		1,142		1,093		1,142
Hedge costs deferrals	234		217		94		91		204		234		74		94
Derivatives – natural gas supply contracts	142		187		—		—		141		142		—		—
Demand side management (DSM)/Energy efficiency (EE)	530		407		281		278		449		530		256		281
Grid modernization	39		65		—		—		31		39		—		—
Vacation accrual	213		196		42		38		213		213		41		42
Deferred fuel and purchased power	507		156		349		111		838		507		600		349
Nuclear deferral	119		226		35		134		133		119		46		35
Post-in-service carrying costs (PISCC) and deferred operating expenses	366		413		38		42		320		366		36		38
Transmission expansion obligation	46		71		—		—		39		46		—		—
Manufactured gas plant (MGP)	91		99		—		—		99		91		—		—
Advanced metering infrastructure (AMI)	362		218		150		—		367		362		127		150
NCEMPA deferrals	53		51		53		51		50		53		50		53
East Bend deferrals	45		32		—		—		47		45		—		—
Deferred pipeline integrity costs	54		36		—		—		65		54		—		—
Amounts due from customers	64		66		—		—		24		64		—		—
Other	538		542		110		103		784		538		322		110
Total regulatory assets	13,879		13,901		6,751		6,123		15,622		13,879		7,701		6,751
Less: current portion	1,437		1,023		741		401		2,005		1,437		1,137		741
Total noncurrent regulatory assets	$	12,442	$	12,878	$	6,010	$	5,722	$	13,617	$	12,442	$	6,564	$	6,010
Regulatory Liabilities
Costs of removal	$	5,968	$	5,613	$	2,537	$	2,198	$	5,421	$	5,968	$	2,135	$	2,537
ARO – nuclear and other	806		461		—		—
AROs – nuclear and other									538		806		—		—
Net regulatory liability related to income taxes	8,113		—		2,802		—		8,058		8,113		2,710		2,802
Amounts to be refunded to customers	10		45		—		—		34		10		—		—
Storm reserve	20		83		—		60		—		20		—		—
Accrued pension and OPEB	146		174		—		—		301		146		149		—
Deferred fuel and purchased power	47		192		1		81		16		47		16		1
Other	622		722		179		245		1,064		622		319		179
Total regulatory liabilities	15,732		7,290		5,519		2,584		15,432		15,732		5,329		5,519
Less: current portion	402		409		213		189		598		402		280		213
Total noncurrent regulatory liabilities	$	15,330	$	6,881	$	5,306	$	2,395	$	14,834	$	15,330	$	5,049	$	5,306

Descriptions of regulatory assets and liabilities summarized in the tables above and below follow. See tables below for recovery and amortization periods at the separate registrants.



FINANCIAL STATEMENTS	REGULATORY MATTERS

AROs – coal ash. Represents deferred depreciation and accretion related to the legal obligation to close ash basins. The costs are deferred until recovery treatment has been determined. See Notes 1 and 9 for additional information.

~~146~~

~~PART II~~

~~DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –~~

~~DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC– PIEDMONT NATURAL GAS COMPANY, INC.~~

~~Combined Notes To Consolidated Financial Statements – (Continued)~~

AROs – nuclear and other. Represents regulatory assets or liabilities, including deferred depreciation and accretion, related to legal obligations associated with the future retirement of property, plant and equipment, excluding amounts related to coal ash. The AROs relate primarily to decommissioning nuclear power facilities. The amounts also include certain deferred gains and losses on NDTF investments. See Notes 1 and 9 for additional information.

Accrued pension and OPEB. Accrued pension and ~~other post-retirement benefit obligations (OPEB)~~OPEB represent regulatory assets and liabilities related to each of the Duke Energy Registrants’ respective shares of unrecognized actuarial gains and losses and unrecognized prior service cost and credit attributable to Duke Energy’s pension plans and OPEB plans. The regulatory asset or liability is amortized with the recognition of actuarial gains and losses and prior service cost and credit to net periodic benefit costs for pension and OPEB plans. The accrued pension and OPEB regulatory asset is expected to be recovered primarily over the average remaining service periods or life expectancies of employees covered by the benefit plans. See Note 2122 for additional detail.

Retired generation facilities. Represents amounts to be recovered for facilities that have been retired and are probable of recovery.

Debt fair value adjustment. Purchase accounting adjustments recorded to state the carrying value of Progress Energy and Piedmont at fair value in connection with the 2012 and 2016 mergers, respectively. Amount is amortized over the life of the related debt.

Net regulatory asset or liability related to income taxes. Amounts for all registrants include regulatory liabilities related primarily to impacts from the Tax Act. See Note 2223 for additional information. Amounts have no immediate impact on rate base as regulatory assets are offset by deferred tax liabilities.

Deferred asset – Lee COLA. Represents deferred costs incurred for the canceled Lee nuclear project.

Storm cost deferrals. Represents deferred incremental costs incurred related to extraordinary weather-related events.

Nuclear asset securitized balance, net. Represents the balance associated with Crystal River Unit 3 retirement approved for recovery by the FPSC on September 15, 2015, and the upfront financing costs securitized in 2016 with issuance of the associated bonds. The regulatory asset balance is net of the AFUDC equity portion.

Hedge costs and other deferrals. Amounts relate to unrealized gains and losses on derivatives recorded as a regulatory asset or liability, respectively, until the contracts are settled.

Derivatives – natural gas supply contracts. Represents costs for certain long-dated, fixed quantity forward gas supply contracts, which are recoverable through PGA clauses.

DSM/EE. Deferred costs related to various DSM and EE programs recoverable through various mechanisms.

Grid modernization. Amounts represent deferred depreciation and operating expenses as well as carrying costs on the portion of capital expenditures placed in service but not yet reflected in retail rates as plant in service.

Vacation accrual. ~~Generally~~Represents.vacation entitlement, which is generally recovered ~~within one~~in the following year.

Deferred fuel and purchased power. Represents certain energy-related costs that are recoverable or refundable as approved by the applicable regulatory body.

Nuclear deferral. Includes amounts related to levelizing nuclear plant outage costs, which allows for the recognition of nuclear outage expenses over the refueling cycle rather than when the outage occurs, resulting in the deferral of operations and maintenance costs associated with refueling.

Post-in-service carrying costs and deferred operating expenses. Represents deferred depreciation and operating expenses as well as carrying costs on the portion of capital expenditures placed in service but not yet reflected in retail rates as plant in service.

~~Gasification services agreement buyout.~~ ~~The IURC authorized Duke Energy Indiana to recover costs incurred to buy out a gasification services agreement, including carrying costs through 2017.~~

Transmission expansion obligation. Represents transmission expansion obligations related to Duke Energy Ohio’s withdrawal from Midcontinent Independent System Operator, Inc. (MISO).

MGP. Represents remediation costs incurred at former MGP sites and the deferral of costs to be incurred at ~~the~~Duke Energy Ohio's East End and West End ~~sites through 2019.~~sites.

AMI. Represents deferred costs related to the installation of AMI meters and remaining net book value of non-AMI meters to be replaced at Duke Energy Carolinas, net book value of existing meters at Duke Energy Florida, Duke Energy Progress and Duke Energy Ohio and expected future recovery of net book value of electromechanical meters that have been replaced with AMI meters at Duke Energy Indiana.

NCEMPA deferrals. Represents retail allocated cost deferrals and returns associated with the additional ownership interest in assets acquired from NCEMPA in 2015.

East Bend deferrals. Represents both deferred operating expenses and deferred depreciation as well as carrying costs on the portion of East Bend ~~Generating Station (East Bend)~~ that was acquired from Dayton Power and Light and that had been previously operated as a jointly owned facility.

Deferred pipeline integrity costs. Represents pipeline integrity management costs in compliance with federal regulations recovered through a rider mechanism.



FINANCIAL STATEMENTS	REGULATORY MATTERS

Amounts due from customers. Relates primarily to margin decoupling and IMR recovery mechanisms.

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~~DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC– PIEDMONT NATURAL GAS COMPANY, INC.~~

~~Combined Notes To Consolidated Financial Statements – (Continued)~~

Costs of removal. Represents funds received from customers to cover the future removal of property, plant and equipment from retired or abandoned sites as property is retired. Also includes certain deferred gains on NDTF investments.

Amounts to be refunded to customers. Represents required rate reductions to retail customers by the applicable regulatory body.

Storm reserve. Amounts are used to offset future incurred costs for named storms as approved by regulatory commissions.

RESTRICTIONS ON THE ABILITY OF CERTAIN SUBSIDIARIES TO MAKE DIVIDENDS, ADVANCES AND LOANS TO DUKE ENERGY

As a condition to the approval of merger transactions, the NCUC, PSCSC, PUCO, KPSC and IURC imposed conditions on the ability of Duke Energy Carolinas, Duke Energy Progress, Duke Energy Ohio, Duke Energy Kentucky, Duke Energy Indiana and Piedmont to transfer funds to Duke Energy through loans or advances, as well as restricted amounts available to pay dividends to Duke Energy. Certain subsidiaries may transfer funds to the parent by obtaining approval of the respective state regulatory commissions. These conditions imposed restrictions on the ability of the public utility subsidiaries to pay cash dividends as discussed below.

Duke Energy Progress and Duke Energy Florida also have restrictions imposed by their first mortgage bond indentures, which in certain circumstances, limit their ability to make cash dividends or distributions on common stock. Amounts restricted as a result of these provisions were not material at December 31, ~~2017.~~2018.

Additionally, certain other subsidiaries of Duke Energy have restrictions on their ability to dividend, loan or advance funds to Duke Energy due to specific legal or regulatory restrictions, including, but not limited to, minimum working capital and tangible net worth requirements.

The restrictions discussed below were ~~less than 25 percent~~not a material amount of Duke Energy's and Progress Energy's net assets at December 31, ~~2017.~~2018.

Duke Energy Carolinas

Duke Energy Carolinas must limit cumulative distributions subsequent to mergers to (i) the amount of retained earnings on the day prior to the closing of the mergers, plus (ii) any future earnings recorded.

Duke Energy Progress

Duke Energy Progress must limit cumulative distributions subsequent to the mergers between Duke Energy and Progress Energy and Duke Energy and Piedmont to (i) the amount of retained earnings on the day prior to the closing of the respective mergers, plus (ii) any future earnings recorded.

Duke Energy Ohio

Duke Energy Ohio will not declare and pay dividends out of capital or unearned surplus without the prior authorization of the PUCO. Duke Energy Ohio received FERC and PUCO approval to pay dividends from its equity accounts that are reflective of the amount that it would have in its retained earnings account had push-down accounting for the Cinergy ~~Corp. (Cinergy)~~ merger not been applied to Duke Energy Ohio’s balance sheet. The conditions include a commitment from Duke Energy Ohio that equity, adjusted to remove the impacts of push-down accounting, will not fall below 30 percent of total capital.

Duke Energy Kentucky is required to pay dividends solely out of retained earnings and to maintain a minimum of 35 percent equity in its capital structure.

Duke Energy Indiana

Duke Energy Indiana must limit cumulative distributions subsequent to the merger between Duke Energy and Cinergy to (i) the amount of retained earnings on the day prior to the closing of the merger, plus (ii) any future earnings recorded. In addition, Duke Energy Indiana will not declare and pay dividends out of capital or unearned surplus without prior authorization of the IURC.

Piedmont

Piedmont must limit cumulative distributions subsequent to the acquisition of Piedmont by Duke Energy to (i) the amount of retained earnings on the day prior to the closing of the merger, plus (ii) any future earnings recorded.

~~RATE RELATED~~RATE-RELATED INFORMATION

The NCUC, PSCSC, FPSC, IURC, PUCO, TPUC and KPSC approve rates for retail electric and natural gas services within their states. The FERC approves rates for electric sales to wholesale customers served under cost-based rates (excluding Ohio and Indiana), as well as sales of transmission service. The FERC also regulates certification and siting of new interstate natural gas pipeline projects.

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~~DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC– PIEDMONT NATURAL GAS COMPANY, INC.~~

~~Combined Notes To Consolidated Financial Statements – (Continued)~~

~~All Registrants~~

~~Tax Act Impacts~~

On December 22, 2017, President Trump signed the Tax Act into law, which, among other provisions, reduces the maximum federal corporate income tax rate from 35 percent to 21 percent, effective January 1, 2018. As a result of the Tax Act, the Subsidiary Registrants revalued their deferred tax assets and deferred tax liabilities, as of December 31, 2017, to account for the future impact of lower corporate tax rates on these deferred tax amounts. For the Subsidiary Registrants regulated operations, where the reduction is expected to be accounted for and applied to customers’ rates in future commission proceedings, including rate proceedings, the net remeasurement has been deferred as a regulatory liability. Each of the Subsidiary Registrant's regulatory commissions is reviewing the Tax Act to determine the potential impacts on customer rates. Beginning in January 2018, the Subsidiary Registrants will defer the estimated ongoing impacts of the Tax Act that are expected to be returned to customers. See Note 22 for additional information.

Duke Energy Carolinas and Duke Energy Progress

~~Ash Basin Closure Costs Deferral~~Grid Improvement – South Carolina

On ~~December 30, 2016,~~June 22, 2018, Duke Energy Carolinas and Duke Energy Progress filed a joint petition with the ~~NCUC~~PSCSC seeking an accounting order authorizing deferral of certain costs incurred in connection with ~~federal~~grid reliability, resiliency and ~~state environmental remediation requirements related to~~modernization work that is being performed under the permanent closure of ash basins and other ash storage units at coal-fired generating facilities that have provided or are providing generation to customers located in North Carolina. Initial comments were received in March 2017, and reply comments were filed on April 19, 2017. The NCUC has consolidatedcompanies’ grid improvement initiative. On October 3, 2018, the PSCSC granted Duke Energy Carolinas' and Duke Energy ~~Progress’ coal ash~~Progress' joint petition, which authorizes the deferral ~~requests into their respective~~of these costs until the rate effective dates of each Company’s next general rate ~~case dockets for decision. See "2017~~case.



FINANCIAL STATEMENTS	REGULATORY MATTERS

Hurricane Florence, Hurricane Michael and Winter Storm Diego

In September 2018, Hurricane Florence made landfall and inflicted severe damage to the Duke Energy Carolinas and Duke Energy Progress territories in North Carolina ~~Rate Case" sections below~~and South Carolina. Approximately 2 million customers were impacted. The companies incurred approximately $500 million in incremental operation and maintenance expenses ($70 million and $430 million for ~~additional discussion.~~Duke Energy Carolinas and Duke Energy Progress, respectively,) and approximately $90 million in capital costs ($5 million and $85 million for Duke Energy Carolinas and Duke Energy Progress, respectively,) which are included in Net property, plant and equipment on the Consolidated Balance Sheets as of December 31, 2018, resulting from the hurricane restoration efforts. Most of the operation and maintenance expenses are deferred in Regulatory assets within Other Noncurrent Assets on the Consolidated Balance Sheets as of December 31, 2018. The balance of operation and maintenance expenses are included in Operation, maintenance and other on the Consolidated Statements of Operations for the year ended December 31, 2018.

In October 2018, the remnants of Hurricane Michael inflicted severe damage to the Duke Energy Carolinas and Duke Energy Progress territories in North Carolina and South Carolina. Approximately 1 million customers were impacted. The companies incurred approximately $100 million in incremental operation and maintenance expenses ($75 million and $25 million for Duke Energy Carolinas and Duke Energy Progress, respectively,) and approximately $21 million in capital costs ($12 million and $9 million for Duke Energy Carolinas and Duke Energy Progress, respectively,) which are included in Net property, plant and equipment on the Consolidated Balance Sheets as of December 31, 2018, resulting from the hurricane restoration efforts. Most of the operation and maintenance expenses are deferred in Regulatory assets within Other Noncurrent Assets on the Consolidated Balance Sheets as of December 31, 2018. The balance of operation and maintenance expenses are included in Operation, maintenance and other on the Consolidated Statements of Operations for the year ended December 31, 2018.

In December 2018, Winter Storm Diego inflicted severe damage to the Duke Energy Carolinas and Duke Energy Progress territories in North Carolina and South Carolina. Approximately 800,000 customers were impacted. The companies incurred approximately $85 million in incremental operation and maintenance expenses ($60 million and $25 million for Duke Energy Carolinas and Duke Energy Progress, respectively,) and approximately $9 million in capital costs ($7 million and $2 million for Duke Energy Carolinas and Duke Energy Progress, respectively,) which are included in Net property, plant and equipment on the Consolidated Balance Sheets as of December 31, 2018, resulting from the winter storm restoration efforts. Most of the operation and maintenance expenses are deferred in Regulatory assets within Other Noncurrent Assets on the Consolidated Balance Sheets as of December 31, 2018. The balance of operation and maintenance expenses are included in Operation, maintenance and other on the Consolidated Statements of Operations for the year ended December 31, 2018.

On December 21, 2018, Duke Energy Carolinas and Duke Energy Progress filed with the NCUC petitions for approval to defer the incremental costs incurred to a regulatory asset for recovery in the next base rate case. The NCUC issued an order requesting comments on the deferral positions. Duke Energy Carolinas and Duke Energy Progress cannot predict the outcome of this matter. Duke Energy Progress filed a similar request with the PSCSC on January 11, 2019, which also included a request for the continuation of prior deferrals requested for ice storms and Hurricane Matthew, and on January 30, 2019, the PSCSC issued a directive approving the deferral request.

North Carolina State Corporate Income Tax

On December 12, 2018, Duke Energy Carolinas and Duke Energy Progress filed requests to reduce their rates effective January 1, 2019, based on a reduction in North Carolina’s corporate income tax rate from 3 to 2.5 percent, as enacted by the General Assembly in Session Law 2017-57, which became law on June 28, 2017, with an effective date of January 1, 2019. On December 17, 2018, the NCUC issued orders approving the Duke Energy Carolinas and Duke Energy Progress rate decrements.



FINANCIAL STATEMENTS	REGULATORY MATTERS

Duke Energy Carolinas

Regulatory Assets and Liabilities

The following tables present the regulatory assets and liabilities recorded on Duke Energy Carolinas' Consolidated Balance Sheets.

December 31, Earns/Pays Recovery/Refund
(in millions) 2017
2016
a Return Period Ends
Regulatory Assets^(a)

AROs - coal ash $ 1,645
$ 1,536
(i) (b)
AROs - nuclear and other —
9

Accrued pension and OPEB 410
481
(j)
Retired generation facilities^(c)
29
39
X 2023
Net regulatory asset related to income taxes^(d)
—
484

Hedge costs deferrals^(c)
109
93
X 2041
DSM/EE 210
122
(h) (h)
Vacation accrual 83
76
(e) 2018
Deferred fuel and purchased power 140
—
(f) 2018
Nuclear deferral 84
92
2019
PISCC^(c)
35
70
X (b)
AMI 185
172
X (b)
Other 222
223
(b)
Total regulatory assets 3,152
3,397

Less: current portion 299
238

Total noncurrent regulatory assets $ 2,853
$ 3,159

Regulatory Liabilities^(a)

Costs of removal^(c)
$ 2,054
$ 2,015
X (g)
ARO - nuclear and other 806
461
(b)
Net regulatory liability related to income taxes^(d)
3,028
—
(b)
Storm reserve^(c)
20
22
(b)
Accrued pension and OPEB 44
46
(j)
Deferred fuel and purchased power 46
105
(f) 2018
Other 359
352
(b)
Total regulatory liabilities 6,357
3,001

Less: current portion 126
161

Total noncurrent regulatory liabilities $ 6,231
$ 2,840

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~~DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC– PIEDMONT NATURAL GAS COMPANY, INC.~~

~~Combined Notes To Consolidated Financial Statements – (Continued)~~



	December 31,				Earns/Pays	Recovery/Refund
(in millions)	2018		2017		a Return	Period Ends
Regulatory Assets^(a)
AROs – coal ash	$	1,725	$	1,645	(i)	(b)
Accrued pension and OPEB	581		410			(j)
Retired generation facilities^(c)	21		29		X	2023
Deferred Asset – Lee COLA	383		—			(b)
Storm cost deferrals	160		—		X	(b)
Hedge costs deferrals^(c)	101		109		X	2041
DSM/EE	169		210		(h)	(h)
Vacation accrual	78		83		(e)	2019
Deferred fuel and purchased power	196		140		(f)	2020
Nuclear deferral	87		84			2020
PISCC^(c)	34		35		X	(b)
AMI	176		185		X	(b)
Other	266		222			(b)
Total regulatory assets	3,977		3,152
Less: current portion	520		299
Total noncurrent regulatory assets	$	3,457	$	2,853
Regulatory Liabilities^(a)
Costs of removal^(c)	$	1,968	$	2,054	X	(g)
ARO – nuclear and other	538		806			(b)
Net regulatory liability related to income taxes^(d)	3,082		3,028			(b)
Storm reserve^(c)	—		20			(b)
Accrued pension and OPEB	38		44			(j)
Deferred fuel and purchased power	—		46		(f)	2020
Other	572		359			(b)
Total regulatory liabilities	6,198		6,357
Less: current portion	199		126
Total noncurrent regulatory liabilities	$	5,999	$	6,231


(a)	Regulatory assets and liabilities are excluded from rate base unless otherwise noted.


(b)	The expected recovery or refund period varies or has not been determined.


(c)	Included in rate base.


(d)	Includes regulatory liabilities related to the change in the federal tax rate as a result of the Tax Act and the change in the North Carolina tax rate, both discussed in Note ~~22.~~23.


(e)	Earns a return on outstanding balance in North Carolina.


(f)	Pays interest on over-recovered costs in North Carolina. Includes certain purchased power costs in North Carolina and South Carolina and costs of distributed energy in South Carolina.


(g)	Recovered over the life of the associated assets.


(h)	Includes incentives on DSM/EE investments and is recovered through an annual rider mechanism.


(i)	Earns a debt and equity return on coal ash expenditures for North Carolina and South Carolina retail ~~customers.~~customers as permitted by various regulatory orders.


(j)	Recovered primarily over the average remaining service periods or life expectancies of employees covered by the benefit plans. See Note 2122 for additional detail.

2017 North Carolina Rate Case

On August 25, 2017, Duke Energy Carolinas filed an application with the NCUC for a rate increase for retail customers of approximately $647 million, which ~~represents~~represented an approximate 13.6 percent increase in annual base revenues. The rate increase iswas driven by capital investments subsequent to the previous base rate case, including the W.S. Lee CC discussed below, grid improvement projects, AMI, investments in customer service technologies, costs of complying with ~~coal combustion residuals (CCR)~~CCR regulations and the ~~North Carolina~~ Coal Ash ~~Management~~ Act ~~of 2014 (Coal Ash Act)~~ and recovery of costs related to licensing and development of the ~~William States~~ Lee ~~III~~ Nuclear Station ~~(Lee Nuclear Station)~~ discussed below.



FINANCIAL STATEMENTS	REGULATORY MATTERS

On ~~January 23,~~February 28, 2018, Duke Energy Carolinas and the North Carolina Public Staff (Public Staff) filed ~~testimony recommending~~ an ~~overall rate decrease~~Agreement and Stipulation of Partial Settlement resolving certain portions of the proceeding. Terms of the settlement included a return on equity of 9.9 percent and a capital structure of 52 percent equity and 48 percent debt. As a result of the settlement, Duke Energy Carolinas recorded a pretax charge of approximately ~~$290 million.~~$4 million to Operation, maintenance and other on the Consolidated Statements of Operations.

On June 1, 2018, Duke Energy Carolinas and certain intervenors filed a Pilot Grid Rider Agreement and Stipulation (Grid Rider Stipulation) in which the parties agreed to the proposal Duke Energy Carolinas introduced in a post-hearing brief on April 27, 2018, along with additional commitments by Duke Energy Carolinas. Also on June 1, 2018, Duke Energy Carolinas and the Commercial Group filed a Partial Stipulation and Settlement Agreement to be considered in conjunction with the Stipulation.

Components of the Grid Rider Stipulation included:

Duke Energy Carolinas would recover grid improvement costs through a pilot, three-year Grid Rider except for costs related to targeted undergrounding of power lines, cable and conduit replacement, and power pole replacement;

Excluded costs were to be deferred with a return until Duke Energy Carolinas’ next base rate case proceeding; and

Costs incurred during the three-year pilot, both rider recoverable and deferred, were subject to a 4.5 percent cumulative cap of total annual electric service revenue.

On June 22, 2018, the NCUC issued an order approving the Stipulation of Partial Settlement and requiring a revenue reduction. The order also included the following material components not covered in the Stipulation:

Recovery of $554 million of deferred coal ash basin closure costs over a five-year period with a return at Duke Energy Carolinas' WACC;

Assessment of a $70 million management penalty ratably over a five-year period by reducing the annual recovery of the deferred coal ash costs;

Denial of Duke Energy Carolinas' request for recovery of future estimated ongoing annual coal ash costs of $201 million with approval to defer such costs with a return at Duke Energy Carolinas' WACC, to be considered for recovery in the next rate case;

Inclusion in rates of costs related to the W.S. Lee CC, two new solar facilities, and AMI deployment as requested;

Recovery of Lee Nuclear Station licensing and development cost of $347 million over a 12-year period, but denial of a return on the deferred balance of costs;

Reduction in revenue related to lower income tax expense resulting from the Tax Act, and a requirement to maintain all excess deferred income tax (EDIT) resulting from the Tax Act in a regulatory liability account pending flow back to customers as approved by the commission at the earlier of three years or Duke Energy Carolinas’ next general rate case proceeding; and

Denial of the proposed Grid Rider Stipulation related to grid improvement costs and denial of deferral accounting treatment of the costs at this time. Duke Energy Carolinas may petition for deferral of grid modernization costs outside of a general rate case proceeding if it can show financial hardship or a stipulation that includes greater consensus among intervening parties on costs being classified as grid modernization.

As a result of the Order, Duke Energy Carolinas recorded a pretax charge of approximately $150 million to Impairment charges and Operation, maintenance and other on the Consolidated Statements of Operations. The charge is primarily related to the denial of a return on the Lee Nuclear Project and for previously recognized return impacted by the coal ash management penalty described above. On July 27, 2018, NCUC approved Duke Energy Carolinas' compliance filing. As a result, revised customer rates were effective on August 1, 2018.

On July 20, 2018, the North Carolina Attorney General filed a Notice of Appeal to the North Carolina Supreme Court from the June 22, 2018, Order Accepting Stipulation, Deciding Contested Issues and Requiring Revenue Reduction issued by the NCUC. The Attorney General contends the commission’s order should be reversed and remanded, as it is in excess of the commission’s statutory authority; affected by errors of law; unsupported by competent, material and substantial evidence in view of the entire record as submitted; and arbitrary or capricious. The Sierra Club, North Carolina Sustainable Energy Association, North Carolina Justice Center, North Carolina Housing Coalition, Natural Resource Defense Council and Southern Alliance for Clean Energy have also filed Notices of Appeal to the North Carolina Supreme Court from the June 22, 2018, Order Accepting Stipulation, Deciding Contested Issues and Requiring Revenue Reduction. On August 8, 2018, the Public Staff filed a Notice of Cross Appeal to the North Carolina Supreme Court from the June 22, 2018, Order Accepting Stipulation, Deciding Contested Issues and Requiring Revenue Reduction issued by the NCUC. The Public Staff contends the commission’s order should be reversed and remanded, as it is affected by errors of law, and is unsupported by substantial evidence with regard to the commission’s failure to consider substantial evidence of coal ash related environmental violations. On November 29, 2018, the North Carolina Attorney General's Office filed a motion with the North Carolina Supreme Court requesting the court consolidate the Duke Energy Carolinas and Duke Energy Progress appeals and enter an order adopting the parties’ proposed briefing schedule as set out in the filing. On November 29, 2018, the North Carolina Supreme Court adopted a schedule for briefing set forth in the motion to consolidate the Duke Energy Carolinas and Duke Energy Progress appeals. The Appellee response briefs are due July 29, 2019. Duke Energy Carolinas cannot predict the outcome of this matter.



FINANCIAL STATEMENTS	REGULATORY MATTERS

2018 South Carolina Rate Case

On November 8, 2018, Duke Energy Carolinas filed an application with the PSCSC for a rate increase for retail customers of approximately $168 million, which represents an approximate 10.0 percent increase in retail revenues. The rate increase is driven by capital investments and environmental compliance progress made by Duke Energy Carolinas since its previous rate case, including the further implementation of Duke Energy Carolinas’ generation modernization program, which consists of retiring, replacing and upgrading generation plants, investments in customer service technologies and continued investments in base work to maintain its transmission and distribution systems. The request includes net tax benefits resulting from the Tax Act of $66 million to reflect the change in ongoing tax expense, primarily from the reduction in the federal income tax rate from 35 to 21 percent, and $46 million to return EDIT resulting from the federal tax rate change and deferred revenues since January 2018 related to the change and benefits of $17 million from a reduction in North Carolina state income taxes allocable to South Carolina.

Duke Energy Carolinas also requested approval of its proposed Grid Improvement Plan, adjustments to its Prepaid Advantage Program and a variety of accounting orders related to ongoing costs for environmental compliance, including recovery over a five-year period of $242 million of deferred coal ash related compliance costs, grid investments between rate changes, incremental depreciation expense, a result of new depreciation rates from the depreciation study approved in the 2017 North Carolina Rate Case above, and the balance of development costs associated with the cancellation of the Lee Nuclear Project. Finally, Duke Energy Carolinas sought approval to establish a reserve and accrual for end of life nuclear costs for nuclear fuel and materials and supplies. An evidentiary hearing is scheduled to begin on ~~February 27, 2018,~~March 21, 2019, and a decision and revised customer rates are expected by ~~mid-2018.~~mid-2019. Duke Energy Carolinas cannot predict the outcome of this matter.

FERC Formula Rate Matter

On July 31, 2017, ~~Piedmont Municipal Power Agency (PMPA)~~PMPA filed a complaint with FERC ~~against Duke Energy Carolinas~~ alleging that Duke Energy Carolinas misapplied the formula rate under the ~~purchase power agreement (PPA)~~PPA between the parties by including ~~regulatory amortization~~ in its rates amortization expense associated with regulatory assets and recorded in a certain account without FERC approval. ~~Duke Energy Carolinas disagreed with PMPA as it believed it was properly applying its FERC filed rate.~~ On February 15, 2018, FERC issued an order ruling in favor of PMPA and ordered Duke Energy Carolinas to refund to PMPA all amounts improperly collected under the PPA. ~~Resolution~~Duke Energy Carolinas has issued to PMPA and similarly situated wholesale customers refunds of approximately $25 million. FERC also set the matter for settlement and hearing. PMPA and other customers filed a protest to Duke Energy Carolinas' refund report claiming that the refunds are inadequate in that (1) Duke Energy Carolinas invoked the limitations periods in the contracts to limit the time period for which the refunds were paid and the customers disagree that this ~~matter is not expected~~limitation applies, and (2) Duke Energy Carolinas refunded only amounts recovered through a certain account and the customers have asserted that the order applies to ~~be material.~~

~~Lincoln County Combustion Turbine~~

all regulatory assets. On ~~December 7, 2017, the NCUC~~July 3, 2018, FERC issued an order ~~approving a Certificate of Public Convenience and Necessity (CPCN) for~~accepting Duke Energy Carolinas' ~~proposed 402-megawatt (MW) simple cycle, advanced combustion turbine natural gas-fueled electric generating unit at its existing Lincoln County site.~~refund report and ruling that these two claims are outside the scope of FERC's February order. The ~~CPCN also includes construction of related transmission~~settlement agreements and ~~natural gas pipeline interconnection facilities. Construction is scheduled~~revised formula rates for all parties to ~~begin in 2018 with an extended commissioning and validation period from 2020-2024 and an estimated commercial operation date in 2024. As a condition of~~ the ~~approval,~~proceeding were filed on December 28, 2018. Duke Energy Carolinas ~~will not seek recovery~~cannot predict the outcome of ~~costs associated with the project until it is placed into commercial operation.~~this matter.

~~Advanced Metering Infrastructure Deferral~~

On July 12, 2016, the PSCSC issued an accounting order for Duke Energy Carolinas to defer the financial effects of depreciation expense incurred for the installation of AMI meters, the carrying costs on the investment at its weighted average cost of capital (WACC) and the carrying costs on the deferred costs at its WACC not to exceed $45 million. The decision also allows Duke Energy Carolinas to continue to depreciate the non-AMI meters to be replaced. Current retail rates will not change as a result of the decision and the ability of interested parties to challenge the reasonableness of expenditures in subsequent proceedings is not limited.

~~William States~~W.S. Lee ~~Combined Cycle Facility~~CC

On April 9, 2014, the PSCSC granted Duke Energy Carolinas and ~~North Carolina Electric Membership Corporation (NCEMC)~~NCEMC a ~~Certificate of Environmental Compatibility and Public Convenience and Necessity (CECPCN)~~CECPCN for the construction and operation of a ~~750-MW~~750-megawatt (MW) combined-cycle natural gas-fired generating plant at Duke Energy Carolinas' existing William States Lee Generating Station in Anderson, South Carolina. Duke Energy Carolinas began construction in July 2015 and ~~estimates a cost to build of $600 million for~~ its share of the cost to build the facility was approximately $650 million, including ~~allowance for funds used during construction (AFUDC).~~AFUDC. Approximately $600 million is being recovered through base rate or deferral filings in North Carolina and South Carolina. The remaining amount will be included in future rate filings. The project ~~is expected to be commercially available in the first quarter of~~commenced commercial operation on April 5, 2018. NCEMC ~~will own~~owns approximately 13 percent of the project. On July 3, 2014, the South Carolina Coastal Conservation League (SCCL) and Southern Alliance for Clean Energy (SACE) jointly filed a Notice of Appeal with the Court of Appeals of South Carolina (S.C. Court of Appeals) seeking the court's review of the PSCSC's decision, claiming the PSCSC did not properly consider a request related to a proposed solar facility prior to granting approval of the CECPCN. The S.C. Court of Appeals affirmed the PSCSC's decision on February 10, 2016, and on March 24, 2016, denied a request for rehearing filed by SCCL and SACE. On April 21, 2016, SCCL and SACE petitioned the South Carolina Supreme Court for review of the S.C. Court of Appeals decision. On March 24, 2017, the South Carolina Supreme Court denied the request for review, thus concluding the matter.

Lee Nuclear Station

In December 2007, Duke Energy Carolinas applied to the NRC for ~~combined operating licenses (COLs)~~COLs for two Westinghouse AP1000 reactors for the proposed William States Lee III Nuclear Station to be located at a site in Cherokee County, South Carolina. The NCUC and PSCSC concurred with the prudency of Duke Energy Carolinas incurring certain project development and preconstruction costs through several separately issued orders, although full cost recovery is not guaranteed. In December 2016, the NRC issued a COL for each reactor. Duke Energy Carolinas is not required to build the nuclear reactors as a result of the COLs being issued.

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~~DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC– PIEDMONT NATURAL GAS COMPANY, INC.~~

~~Combined Notes To Consolidated Financial Statements – (Continued)~~

~~On March 29, 2017, Westinghouse filed for voluntary Chapter 11 bankruptcy in the U.S. Bankruptcy Court for the Southern District of New York. As part of its~~The Duke Energy Carolinas 2017 North Carolina Rate Case filing discussed above ~~Duke Energy Carolinas is seeking NCUC approval~~included a request to cancel the development of the Lee Nuclear ~~Station~~ project, recover incurred licensing and development costs and maintain the license issued by the NRC as an option for potential future development. The cancellation request was due to the Westinghouse bankruptcy filing and other market ~~activity~~activity. The NCUC Order issued on June 22, 2018, approved the cancellation of the Lee Nuclear Project, allowed Duke Energy Carolinas to continue to maintain the COLs, provided for recovery of the North Carolina retail allocation of project development costs, including AFUDC accrued through December 31, 2017, over 12 years and disallowed any return on the unamortized balance during the 12-year recovery period.

Given the repeal of certain sections of the Base Load Review Act in South Carolina combined with the cancellation of the project, Duke Energy Carolinas determined that it was no longer probable it would be allowed a return on its share of project development costs attributable to South Carolina. As a result, Duke Energy Carolinas recorded a pretax impairment in the second quarter of 2018 of $29 million within Impairment charges on the Consolidated Statements of Operations and Comprehensive Income.

South Carolina Petition

On June 22, 2018, Duke Energy Carolinas filed a petition with the PSCSC requesting an accounting order to defer certain costs incurred in connection with the addition of the W.S. Lee CC, the ongoing deployment of Duke Energy Carolinas new billing and Customer Information System and the addition of the Carolinas West Primary Distribution Control Center. This request totaling approximately $33 million was approved on July 25, 2018.



FINANCIAL STATEMENTS	REGULATORY MATTERS

Sale of Hydroelectric (Hydro) Plants

In May 2018, Duke Energy Carolinas entered an agreement for the sale of five hydro plants with a combined 18.7-MW generation capacity in the Western Carolinas region to Northbrook Energy. The completion of the transaction is subject to approval from FERC for the four FERC-licensed plants, as well as other state regulatory agencies and is ~~requesting recovery~~contingent upon regulatory approval from the NCUC and PSCSC to defer the total estimated loss on the sale of ~~incurred licensing~~approximately $40 million. On July 5, 2018, Duke Energy Carolinas filed with NCUC for approval of the sale of the five hydro plants to Northbrook, to transfer the CPCNs for the four North Carolina hydro plants and ~~development costs.~~to establish a regulatory asset for the North Carolina retail portion of the difference between sales proceeds and net book value. On September 4, 2018, the Public Staff filed comments supporting the CPCN transfer with conditions. On September 18, 2018, Duke Energy Carolinas filed reply comments opposing the Public Staff’s proposed conditions. On November 29, 2018, the NCUC issued a procedural order and held an evidentiary hearing on this matter on February 5, 2019. On August 28, 2018, Duke Energy Carolinas filed with PSCSC its Application for Approval of Transfer and Sale of Hydroelectric Generation Facilities, Acceptance for Filing of a Power Purchase Agreement and an Accounting Order to Establish a Regulatory Asset. On September 10, 2018, the ORS provided a letter to the commission stating its position on the application and on September 18, 2018, Duke Energy Carolinas requested this matter be carried over to allow Duke Energy Carolinas time to discuss certain accounting issues with the ORS. On August 9, 2018, Duke Energy Carolinas and Northbrook filed a joint Application for Transfer of Licenses with the FERC. On December 27, 2018, the FERC issued its Order Approving Transfer of Licenses (“Order”) for the four FERC-licensed hydro plants. On January 18, 2019, Duke Energy Carolinas and Northbrook Carolina Hydro II, LLC requested a six-month extension of time to comply with the requirement of the Order that Northbrook submit to FERC certified copies of all instruments of conveyance and signed acceptance sheets within 60 days of the date of the Order, given that compliance by the deadline set in the Order is not possible because the conveyance of the projects is contingent on the receipt of state regulatory approvals, which are not anticipated to be issued by February 25, 2019.

If commission approvals are not received, Duke Energy Carolinas can cancel the sales agreement and retain the hydro facilities. If commission approvals are received, the closing is expected to occur during the second quarter of 2019. After closing, Duke Energy Carolinas will ~~maintain~~purchase all the ~~license issued~~capacity and energy generated by these facilities at the ~~NRC in December 2016 as an option~~avoided cost for potential future development. As of December 31, 2017, Duke Energy Carolinas has incurred approximately $558 million of costs, including AFUDC, related to the project. These project costs are included in Net property, plant and equipment on Duke Energy Carolinas’ Consolidated Balance Sheets.five years through power purchase agreements. Duke Energy Carolinas cannot predict the outcome of this matter.

Duke Energy Progress

Regulatory Assets and Liabilities

The following tables present the regulatory assets and liabilities recorded on Duke Energy Progress' Consolidated Balance Sheets.


	December 31,				Earns/Pays	Recovery/Refund	December 31,				Earns/Pays	Recovery/Refund
(in millions)	2017		2016		a Return	Period Ends	2018		2017		a Return	Period Ends
Regulatory Assets^(a)
AROs - coal ash	$	1,975	$	1,822	(i)	(b)
AROs - nuclear and other	359		275			(c)
AROs – coal ash							$	2,051	$	1,975	(h)	(b)
AROs – nuclear and other							429		359			(c)
Accrued pension and OPEB	430		423			(l)	542		430			(k)
Retired generation facilities	170		165		X	2023	148		170		X	(b)
Net regulatory asset related to income taxes	—		7			(d)
Storm cost deferrals^(e)	150		148		X	(b)
Storm cost deferrals^(d)							571		150		X	(b)
Hedge costs deferrals	64		66			(b)	54		64			(b)
DSM/EE^(f)	264		263		(j)	2018
DSM/EE^(e)							235		264		(i)
Vacation accrual	42		38			2018	41		42			2019
Deferred fuel and purchased power	130		24		(g)	2018	397		130		(f)	2020
Nuclear deferral	35		38			2019	46		35			2020
PISCC and deferred operating expenses	38		42		X	2054	36		38		X	2054
AMI	75		—			(b)	67		75			(b)
NCEMPA deferrals	53		51		(h)	2042	50		53		(g)	2042
Other	74		69			(b)	147		74			(b)
Total regulatory assets	3,859		3,431				4,814		3,859
Less: current portion	352		188				703		352
Total noncurrent regulatory assets	$	3,507	$	3,243			$	4,111	$	3,507
Regulatory Liabilities^(a)
Costs of removal	$	2,122	$	1,840	X	(k)	$	1,878	$	2,122	X	(j)
Accrued pension and OPEB							93		—			(k)
Net regulatory liability related to income taxes(l)	1,854		—			(b)	1,863		1,854			(b)
Deferred fuel and purchased power	1		64		(g)	2018	—		1		(f)	2020
Other	161		200			(b)	299		161			(b)
Total regulatory liabilities	4,138		2,104				4,133		4,138
Less: current portion	139		158				178		139
Total noncurrent regulatory liabilities	$	3,999	$	1,946			$	3,955	$	3,999



FINANCIAL STATEMENTS	REGULATORY MATTERS


(a)	Regulatory assets and liabilities are excluded from rate base unless otherwise noted.


(b)	The expected recovery or refund period varies or has not been determined.


(c)	Recovery period for costs related to nuclear facilities runs through the decommissioning period of each unit.


(d)	~~Recovery over the life of the associated assets. Includes regulatory liabilities related to the change in the North Carolina tax rate discussed in Note 22.~~


~~(e)~~	South Carolina storm costs are included in rate base.


~~(f)~~(e)	Included in rate base.


~~(g)~~(f)	Pays interest on over-recovered costs in North Carolina. Includes certain purchased power costs in North Carolina and South Carolina and costs of distributed energy in South Carolina.


~~(h)~~(g)	South Carolina retail allocated costs are earning a return.


~~(i)~~(h)	Earns a debt and equity return on coal ash expenditures for North Carolina and South Carolina retail ~~customers.~~customers as permitted by various regulatory orders.


(i)	Includes incentives on DSM/EE investments and is recovered through an annual rider mechanism.


(j)	~~Includes incentives on DSM/EE investments.~~


~~(k)~~	Recovered over the life of the associated assets.


~~(l)~~(k)	Recovered primarily over the average remaining service periods or life expectancies of employees covered by the benefit plans. See Note 2122 for additional detail.

~~151~~

~~PART II~~

~~DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –~~

~~DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC– PIEDMONT NATURAL GAS COMPANY, INC.~~

~~Combined Notes To Consolidated Financial Statements – (Continued)~~


(l)	Includes regulatory liabilities related to the change in the federal tax rate as a result of the Tax Act and the change in the North Carolina tax rate, both discussed in Note 23.

2017 North Carolina Rate Case

On June 1, 2017, Duke Energy Progress filed an application with the NCUC for a rate increase for retail customers of approximately $477 million, which represented an approximate 14.9 percent increase in annual base revenues. Subsequent to the filing, Duke Energy Progress adjusted the requested amount to $420 million, representing an approximate 13 percent increase. The rate increase is driven by capital investments subsequent to the previous base rate case, costs of complying with CCR regulations and the Coal Ash Act, costs relating to storm recovery, investments in customer service technologies and recovery of costs associated with renewable purchased power. On November 22, 2017, Duke Energy Progress and the North Carolina Public Staff filed an Agreement and Stipulation of Partial Settlement resolving certain portions of the proceeding, pending NCUC approval. Terms of the settlement include a return on equity of 9.9 percent and a capital structure of 52 percent equity and 48 percent debt. As a result of the settlement, in 2017 Duke Energy Progress recorded pretax charges totaling approximately $25 million to Impairment charges and Operation, maintenance and other on the Consolidated Income Statements, principally related to disallowances from rate base of certain projects at the Mayo and Sutton plants. The settlement does not include agreement on portions of the rate case relating to recovery of deferred storm recovery costs and coal ash basin deferred costs, which will be decided by the NCUC separately. Taking into consideration the settled portions and Duke Energy Progress’ requested recovery of the non-settled portions, the requested rate increase is reduced to approximately $300 million. An evidentiary hearing ended December 7, 2017, and a decision and revised customer rates are expected in the first quarter of 2018. Duke Energy Progress cannot predict the outcome of this matter.

~~Storm Cost Deferral Filings~~

On December 16, 2016, Duke Energy Progress filed a petition with the NCUC requesting an accounting order to defer certain costs incurred in connection with response to Hurricane Matthew and other significant storms in 2016. The final estimate of incremental operation and maintenance and capital costs of $116 million was filed with the NCUC in September 2017. On ~~March 15, 2017, the NCUC Public Staff filed comments supporting deferral of a portion of Duke Energy Progress’ requested amount. Duke Energy Progress filed reply comments on April 12, 2017. On~~ July 10, 2017, the NCUC consolidated Duke Energy Progress' storm deferral request into the Duke Energy Progress rate case docket for decision. ~~See "2017 North Carolina Rate Case" for additional discussion. As of December 31,~~

On November 22, 2017, Duke Energy Progress ~~has~~and the Public Staff filed an Agreement and Stipulation of Partial Settlement resolving certain portions of the proceeding. Terms of the settlement included a return on equity of 9.9 percent and a capital structure of 52 percent equity and 48 percent debt. As a result of the settlement, in 2017 Duke Energy Progress recorded pretax charges totaling approximately ~~$77~~$25 million to Impairment charges and Operation, maintenance and other on the Consolidated Statements of Operations, principally related to disallowances from rate base of certain projects at the Mayo and Sutton plants. On February 23, 2018, the NCUC issued an order approving the stipulation. The order also included the following material components not covered in ~~Regulatory assets~~the stipulation:

Recovery of the remaining $234 million of deferred coal ash basin closure costs over a five-year period with a return at Duke Energy Progress' WACC, excluding $10 million of retail deferred coal ash basin costs related to ash hauling at Duke Energy Progress' Asheville Plant;

Assessment of a $30 million management penalty ratably over a five-year period by reducing the annual recovery of the deferred coal ash costs;

Denial of Duke Energy Progress' request for recovery of future estimated ongoing annual coal ash costs of $129 million with approval to defer such costs with a return at Duke Energy Progress' WACC, to be considered for recovery in the next rate case; and

Approval to recover $51 million of the approximately $80 million deferred storm costs over a five-year period with amortization beginning in October 2016. The order did not allow the deferral of the associated capital costs or a return on ~~its~~the deferred balance during the deferral period.

The order also impacted certain amounts that were similarly recorded on Duke Energy Carolinas' Consolidated Balance Sheets. As a result of the order, Duke Energy Progress and Duke Energy Carolinas recorded pretax charges of $68 million and $14 million, respectively, in the first quarter of 2018 to Impairment charges, Operation, maintenance and other and Interest Expense on the Consolidated Statements of Operations. These charges primarily related to the coal ash basin disallowance and previously recognized return impacted by the coal ash management penalty and deferred storm cost adjustments. Revised customer rates became effective on March 16, 2018.

On May 15, 2018, the Public Staff filed a Notice of Cross Appeal to the North Carolina Supreme Court from the February 23, 2018, Order Accepting Stipulation, Deciding Contested Issues and Granting Partial Rate Increase issued by the NCUC. The Public Staff contend the commission’s order should be reversed and remanded, as it is affected by errors of law, and is unsupported by competent, material and substantial evidence in view of the entire record as submitted. The North Carolina Attorney General and Sierra Club have also filed Notices of Appeal to the North Carolina Supreme Court from the February 23, 2018, Order Accepting Stipulation, Deciding Contested Issues and Granting Partial Rate Increase. On November 29, 2018, the North Carolina Attorney General's Office filed a motion with the North Carolina Supreme Court requesting the court consolidate the Duke Energy Progress and Duke Energy Carolinas appeals and enter an order adopting the parties’ proposed briefing schedule as set out in the filing. On November 29, 2018, the North Carolina Supreme Court adopted a schedule for briefing set forth in the motion to consolidate the Duke Energy Progress and Duke Energy Carolinas appeals. The Appellee response briefs are due July 29, 2019. Duke Energy Progress cannot predict the outcome of this matter.

~~On December 16,~~



FINANCIAL STATEMENTS	REGULATORY MATTERS

2016 Duke Energy Progress filed a petition with the PSCSC requesting an accounting order to defer certain costs incurred related to repairs and restoration of service following Hurricane Matthew. The final estimate of incremental operation and maintenance and capital costs was approximately $74 million. In January 2017, the PSCSC approved the deferral request and issued an accounting order. As of December 31, 2017, Duke Energy Progress has approximately $73 million included in Regulatory assets on its Consolidated Balance Sheets.

South Carolina Rate Case

In December 2016, the PSCSC approved a rate case settlement agreement among the ORS, ~~(Office of Regulatory Staff),~~ intervenors and Duke Energy Progress. Terms of the settlement agreement included an approximate $56 million increase in revenues over a two-year period. An increase of approximately $38 million in revenues was effective January 1, 2017, and an additional increase of approximately ~~$18.5~~$19 million in revenues was effective January 1, 2018. Duke Energy Progress amortized approximately ~~$18.5~~$19 million from the cost of removal reserve in 2017. Other settlement terms included a rate of return on equity of 10.1 percent, recovery of coal ash costs incurred from January 1, 2015, through June 30, 2016, over a 15‑year period and ongoing deferral of allocated ash basin closure costs from July 1, 2016, until the next base rate case. The settlement also provides that Duke Energy Progress will not seek an increase in rates in South Carolina to occur prior to 2019, with limited exceptions.

2018 South Carolina Rate Case

On November 8, 2018, Duke Energy Progress filed an application with the PSCSC for a rate increase for retail customers of approximately $59 million, which represents an approximate 10.3 percent increase in annual base revenues. The rate increase is driven by capital investments and environmental compliance progress made by Duke Energy Progress since its previous rate case, including the further implementation of Duke Energy Progress’ generation modernization program, which consists of retiring, replacing and upgrading generation plants, investments in customer service technologies and continued investments in base work to maintain its transmission and distribution systems. The request includes net tax benefits of $15 million consisting of a $12 million increase due to the expiration of EDITs related to reductions in North Carolina state income taxes allocable to South Carolina and decreases resulting from the Tax Act of $17 million to reflect the change in ongoing tax expense, primarily the reduction in the federal income tax rate from 35 to 21 percent, and $10 million to return EDIT resulting from the federal tax rate change and deferred revenues since January 2018 related to the change.

Duke Energy Progress also requested approval of its proposed Grid Improvement Plan, approval of a Prepaid Advantage Program and a variety of accounting orders related to ongoing costs for environmental compliance, including recovery over a five-year period of $51 million of deferred coal ash related compliance costs, AMI deployment, grid investments between rate changes and regulatory asset treatment related to the retirement of a generating plant located in Asheville, North Carolina. Finally, Duke Energy Progress sought approval to establish a reserve and accrual for end of life nuclear costs for materials and supplies and nuclear fuel. An evidentiary hearing is scheduled to begin on April 11, 2019, and a decision and revised customer rates are expected by mid-2019. Duke Energy Progress cannot predict the outcome of this matter.

Western Carolinas Modernization Plan

On November 4, 2015, Duke Energy Progress announced a Western Carolinas Modernization Plan, which included retirement of the existing Asheville coal-fired plant, the construction of two 280‑MW combined-cycle natural gas plants having ~~dual fuel~~dual-fuel capability, with the option to build a third natural gas simple cycle unit in 2023 based upon the outcome of initiatives to reduce the region's power demand. The plan also included upgrades to existing transmission lines and substations, installation of solar generation and a pilot battery storage project. These investments will be made within the next seven years. Duke Energy Progress is also working with the local natural gas distribution company to upgrade an existing natural gas pipeline to serve the natural gas plant.

On March 28, 2016, the NCUC issued an order approving a CPCN for the new combined-cycle natural gas plants, but denying the CPCN for the contingent simple cycle unit without prejudice to Duke Energy Progress to refile for approval in the future. On March 28, ~~2017,~~2018, Duke Energy Progress filed an annual progress report for the construction of the combined-cycle plants with the NCUC, with an estimated cost of $893 million. Site preparation activities for the combined-cycle plants are ~~underway~~complete and construction of these plants began in 2017, with an expected in-service date in late 2019.

On October 8, 2018, Duke Energy Progress ~~plans~~filed an application with the NCUC for a CPCN to ~~file for future approvals related to~~construct the Hot Springs Microgrid Solar and Battery Storage Facility. On November 30, 2018, the NCUC issued an order scheduling hearings, requiring filing of testimony, establishing discovery guidelines and requiring public notice. On February 7, 2019, Duke Energy Progress made a joint filing with the Public Staff, which accepted the Public Staff’s proposed ~~solar generation~~conditions and ~~pilot battery storage project.~~requested that the NCUC cancel the evidentiary hearing. Duke Energy Progress cannot predict the outcome of this matter.

The carrying value of the 376-MW Asheville coal-fired plant, including associated ash basin closure costs, of $327 million and $385 million ~~and $492 million are~~is included in Generation facilities to be retired, net on Duke Energy Progress' Consolidated Balance Sheets as of December 31, 2018, and 2017, ~~and 2016,~~ respectively.

~~152~~

~~PART II~~

~~DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –~~

~~DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC– PIEDMONT NATURAL GAS COMPANY, INC.~~

~~Combined Notes To Consolidated Financial Statements – (Continued)~~

Duke Energy Progress' request for a regulatory asset at the time of retirement with amortization over a 10-year period was approved by the NCUC on February 23, 2018.

Shearon Harris Nuclear Plant Expansion

In 2006, Duke Energy Progress selected a site at Harris to evaluate for possible future nuclear expansion. On February 19, 2008, Duke Energy Progress filed its COL application with the NRC for two Westinghouse AP1000 reactors at Harris, which the NRC docketed for review. On May 2, 2013, Duke Energy Progress filed a letter with the NRC requesting the NRC to suspend its review activities associated with the COL at the Harris site. The NCUC and PSCSC approved deferral of retail costs. Total deferred costs ~~were~~are approximately ~~$47~~$43 million as of December 31, ~~2017,~~2018, and are recorded in Regulatory assets on Duke Energy Progress’ Consolidated Balance Sheets. On November 17, 2016, the FERC approved Duke Energy Progress’ rate recovery request filing for the wholesale ratepayers’ share of the abandonment costs, including a ~~debt only~~debt-only return to be recovered through revised formula rates and amortized over a 15-year period beginning May 1, 2014. As part of the settlement agreement for the 2017 North Carolina Rate Case discussed above, Duke Energy Progress will amortize the regulatory asset over an eight-year period. ~~The~~NCUC approved the settlement on February 23, 2018.



FINANCIAL STATEMENTS	REGULATORY MATTERS

South Carolina Petitions

On June 22, 2018, Duke Energy Progress filed a petition with the PSCSC seeking an accounting order authorizing Duke Energy Progress to adopt new depreciation rates, effective March 16, 2018, that reflect the results of Duke Energy Progress’ most recent depreciation study. Also on June 22, 2018, Duke Energy Progress filed a petition with the PSCSC requesting an accounting order to defer certain costs incurred in connection with the deployment of AMI, the ongoing deployment of Duke Energy Progress' new billing and Customer Information System, new depreciation rates and costs incurred in connection with the return of certain excess deferred state income taxes from North Carolina. These requests totaling approximately $20 million were approved on July 25, 2018.

FERC Form 1 Reporting Matter

On October 18, 2017, Fayetteville Public Works Commission (FPWC) filed with FERC a complaint against Duke Energy Progress. In the complaint, FPWC alleges that Duke Energy Progress’ change in its method of reporting materials and supplies inventory on FERC Form 1 for 2015 constituted a change in accounting practice that Duke Energy Progress was not permitted to implement without first obtaining FERC approval. On April 23, 2018, FERC issued an order finding that Duke Energy Progress’ new reporting methodology was not proper and required Duke Energy Progress to revise its FERC Form 1s beginning in 2014 and to issue refunds to formula rate customers. Duke Energy Progress estimates that these refunds will total approximately $14 million. On May 23, 2018, Duke Energy Progress filed a request for rehearing alleging that FERC’s order is ~~subject~~incorrect. Duke Energy Progress revised its FERC Form 1 filings in June 2018. On August 31, 2018, Duke Energy Progress filed with FERC a refund report memorializing its payment of refunds to ~~NCUC approval.~~FPWC. Duke Energy Progress cannot predict the outcome of this matter.

Tax Act

As ordered by the NCUC on October 5, 2018, Duke Energy Progress filed a proposal on October 25, 2018, to adjust rates to reflect the reduction in federal corporate income tax rate from 35 to 21 percent for taxable years beginning after December 31, 2017, as outlined in the Tax Act. Duke Energy Progress proposed that this rate decrement be effective for service rendered on and after December 1, 2018. On November 28, 2018, the NCUC approved the proposal to implement the change in the federal corporate income tax rate and effective December 1, 2018, Duke Energy Progress implemented the rate reduction. Also, as ordered by the NCUC on October 5, 2018, Duke Energy Progress shall continue to hold in a deferred regulatory liability account the difference between revenues billed under the prior federal corporate income tax rate and the federal corporate income tax rate resulting from the Tax Act for the period January 1, 2018 through November 30, 2018. The disposition of such regulatory liability may be considered in Duke Energy Progress' next general rate case proceeding or in three years, whichever is sooner. EDIT related to the corporate income tax rate reduction shall be held in a deferred tax regulatory liability account until they can be addressed for ratemaking purposes in the next general rate case proceeding or in three years, whichever is sooner.



FINANCIAL STATEMENTS	REGULATORY MATTERS

Duke Energy Florida

Regulatory Assets and Liabilities

The following tables present the regulatory assets and liabilities recorded on Duke Energy Florida's Consolidated Balance Sheets.


	December 31,				Earns/Pays	Recovery/Refund	December 31,				Earns/Pays	Recovery/Refund
(in millions)	2017		2016		a Return	Period Ends	2018		2017		a Return	Period Ends
Regulatory Assets^(a)
AROs - coal ash^(c)	$	9	$	8	X	(b)
AROs - nuclear and other^(c)	296		294		X	(b)
AROs – coal ash^(c)							$	10	$	9		(b)
AROs – nuclear and other^(c)							172		296			(b)
Accrued pension and OPEB^(c)	476		458		X	(h)	532		476		X	(g)
Retired generation facilities^(c)	216		257		X	(b)	219		216		X	(b)
Net regulatory asset related to income taxes^(c)	—		224		X	(d)
Storm cost deferrals^(c)	376		—		(f)	2021
Storm cost deferrals^(c)(h)							382		376		(e)	2021
Nuclear asset securitized balance, net	1,142		1,193			2036	1,093		1,142			2036
Hedge costs deferrals	30		25			2018	20		30			2020
DSM/EE^(c)	17		15		X	2018	21		17		X	2023
Deferred fuel and purchased power^(c)	219		87		(g)	2019	203		219		(f)	2020
Nuclear deferral	—		96
AMI^(c)	75		—		X	2032	60		75		X	2032
Other	36		36			(b)	176		36		(d)	(b)
Total regulatory assets	2,892		2,693				2,888		2,892
Less: current portion	389		213				434		389
Total noncurrent regulatory assets	$	2,503	$	2,480			$	2,454	$	2,503
Regulatory Liabilities^(a)
Costs of removal^(c)	$	415	$	358	(e)	(b)	$	257	$	415	(d)	(b)
Net regulatory liability related to income taxes^(c)	948		—			(b)	847		948			(b)
Storm reserve^(c)	—		60
Accrued pension and OPEB							56		—		X	(g)
Deferred fuel and purchased power^(c)	—		17		(g)		16		—		(f)	2020
Other	18		44			(b)	20		18		(d)	(b)
Total regulatory liabilities	1,381		479				1,196		1,381
Less: current portion	74		31				102		74
Total noncurrent regulatory liabilities	$	1,307	$	448			$	1,094	$	1,307



Commission file number	Registrant, State of Incorporation or Organization, Address of Principal Executive Offices and Telephone Number	IRS Employer Identification No.

1-32853	DUKE ENERGY CORPORATION (a Delaware corporation) 550 South Tryon Street Charlotte, NC 28202-1803 704-382-3853	20-2777218



Commission file number	Registrant, State of Incorporation or Organization, Address of Principal Executive Offices, Telephone Number and IRS Employer Identification Number	Commission file number	Registrant, State of Incorporation or Organization, Address of Principal Executive Offices, Telephone Number and IRS Employer Identification Number
1-4928	DUKE ENERGY CAROLINAS, LLC (a North Carolina limited liability company) 526 South Church Street Charlotte, North Carolina 28202-1803 704-382-3853 56-0205520	1-3274	DUKE ENERGY FLORIDA, LLC (a Florida limited liability company) 299 First Avenue North St. Petersburg, Florida 33701 704-382-3853 59-0247770
1-15929	PROGRESS ENERGY, INC. (a North Carolina corporation) 410 South Wilmington Street Raleigh, North Carolina 27601-1748 704-382-3853 56-2155481	1-1232	DUKE ENERGY OHIO, INC. (an Ohio corporation) 139 East Fourth Street Cincinnati, Ohio 45202 704-382-3853 31-0240030
1-3382	DUKE ENERGY PROGRESS, LLC (a North Carolina limited liability company) 410 South Wilmington Street Raleigh, North Carolina 27601-1748 704-382-3853 56-0165465	1-3543	DUKE ENERGY INDIANA, LLC (an Indiana limited liability company) 1000 East Main Street Plainfield, Indiana 46168 704-382-3853 35-0594457
1-6196	PIEDMONT NATURAL GAS COMPANY, INC. (a North Carolina corporation) 4720 Piedmont Row Drive Charlotte, North Carolina 28210 704-364-3120 56-0556998



SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
Registrant	Title of each class	Name of each exchange on which registered
Duke Energy Corporation (Duke Energy)	Common Stock, $0.001 par value	New York Stock Exchange ~~Inc.~~LLC
Duke Energy	5.125% Junior Subordinated Debentures due January 15, 2073	New York Stock Exchange ~~Inc.~~LLC
Duke Energy	5.625% Junior Subordinated Debentures due September 15, 2078	New York Stock Exchange LLC



Duke Energy	Yes x	No ¨	Duke Energy Florida, LLC (Duke Energy Florida)	Yes x	No ¨
Duke Energy Carolinas, LLC (Duke Energy Carolinas)	Yes x	No ¨	Duke Energy Ohio, Inc. (Duke Energy Ohio)	Yes x	No ¨
Progress Energy, Inc. (Progress Energy)	Yes ¨	No x	Duke Energy Indiana, LLC (Duke Energy Indiana)	Yes x¨	No ¨x
Duke Energy Progress, LLC (Duke Energy Progress)	Yes x	No ¨	Piedmont Natural Gas Company, Inc. (Piedmont)	Yes x¨	No ¨x



Estimated aggregate market value of the common equity held by nonaffiliates of Duke Energy at June 30, 2017.	$	58,468,482,557
Number of shares of Common Stock, $0.001 par value, outstanding at January 31, 2018.	700,092,667



ý	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



Estimated aggregate market value of the common equity held by nonaffiliates of Duke Energy at June 30, 2018.	$	56,283,598,357
Number of shares of Common Stock, $0.001 par value, outstanding at January 31, 2019.	727,010,882


Item		Page		Page

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION	CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION		CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION

GLOSSARY OF TERMS	GLOSSARY OF TERMS		GLOSSARY OF TERMS

PART I.
1.	BUSINESS	9	BUSINESS	9
	DUKE ENERGY	9	DUKE ENERGY	9
	GENERAL	9	GENERAL	9
	BUSINESS SEGMENTS	9	BUSINESS SEGMENTS	9
	EMPLOYEES	20	EMPLOYEES	21
	EXECUTIVE OFFICERS	20	EXECUTIVE OFFICERS	22
	ENVIRONMENTAL MATTERS	21	ENVIRONMENTAL MATTERS	22
	DUKE ENERGY CAROLINAS	21	DUKE ENERGY CAROLINAS	23
	PROGRESS ENERGY	21	PROGRESS ENERGY	23
	DUKE ENERGY PROGRESS	21	DUKE ENERGY PROGRESS	23
	DUKE ENERGY FLORIDA	22	DUKE ENERGY FLORIDA	23
	DUKE ENERGY OHIO	22	DUKE ENERGY OHIO	24
	DUKE ENERGY INDIANA	22	DUKE ENERGY INDIANA	24
	PIEDMONT	22	PIEDMONT	24

1A.	RISK FACTORS	23	RISK FACTORS	24

1B.	UNRESOLVED STAFF COMMENTS	30	UNRESOLVED STAFF COMMENTS	32

2.	PROPERTIES	31	PROPERTIES	33

3.	LEGAL PROCEEDINGS	35	LEGAL PROCEEDINGS	37

4.	MINE SAFETY DISCLOSURES	35	MINE SAFETY DISCLOSURES	37

PART II.
5.	MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES	36	MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES	38

6.	SELECTED FINANCIAL DATA	38	SELECTED FINANCIAL DATA	39

7.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	39	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	40

7A.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	83	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	83

8.	FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA	85	FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA	84

9.	CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE	259	CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE	259

9A.	CONTROLS AND PROCEDURES	260	CONTROLS AND PROCEDURES	260

PART III.
10.	DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE	262	DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE	262

11.	EXECUTIVE COMPENSATION	262	EXECUTIVE COMPENSATION	262

12.	SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS	262	SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS	262

13.	CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE	263	CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE	263

14.	PRINCIPAL ACCOUNTING FEES AND SERVICES	263	PRINCIPAL ACCOUNTING FEES AND SERVICES	263

PART IV.
15.	EXHIBITS AND FINANCIAL STATEMENT SCHEDULES	265	EXHIBITS AND FINANCIAL STATEMENT SCHEDULES	264
	EXHIBIT INDEX	E-1	EXHIBIT INDEX	E-1
	SIGNATURES	E-2	SIGNATURES	E-2


◦	State, federal and foreign legislative and regulatory initiatives, including costs of compliance with existing and future environmental requirements, including those related to climate change, as well as rulings that affect cost and investment recovery or have an impact on rate structures or market prices;


◦	The extent and timing of costs and liabilities to comply with federal and state laws, regulations and legal requirements related to coal ash remediation, including amounts for required closure of certain ash impoundments, are uncertain and difficult to estimate;


◦	The ability to recover eligible costs, including amounts associated with coal ash impoundment retirement obligations and costs related to significant weather events, and to earn an adequate return on investment through rate case proceedings and the regulatory process;


◦	The costs of decommissioning Crystal River Unit 3 and other nuclear facilities could prove to be more extensive than amounts estimated and all costs may not be fully recoverable through the regulatory process;


◦	Costs and effects of legal and administrative proceedings, settlements, investigations and claims;


◦	Industrial, commercial and residential growth or decline in service territories or customer bases resulting from sustained downturns of the economy and the economic health of our service territories or variations in customer usage patterns, including energy efficiency efforts and use of alternative energy sources, such as self-generation and distributed generation technologies;



TABLE OF CONTENTS



FORWARD LOOKING STATEMENTS


◦	Advancements in technology;



FORWARD LOOKING STATEMENTS


◦	Federal and state regulations, laws and other efforts designed to promote and expand the use of energy efficiency measures and distributed generation technologies, such as private solar and battery storage, in Duke Energy service territories could result in customers leaving the electric distribution system, excess generation resources as well as stranded costs;


◦	Additional competition in electric and natural gas markets and continued industry consolidation;


◦	The influence of weather and other natural phenomena on operations, including the economic, operational and other effects of severe storms, hurricanes, droughts, earthquakes and tornadoes, including extreme weather associated with climate change;


◦	The ability to successfully operate electric generating facilities and deliver electricity to customers including direct or indirect effects to the company resulting from an incident that affects the U.S. electric grid or generating resources;


◦	The ability to obtain the necessary permits and approvals and to complete necessary or desirable pipeline expansion or infrastructure projects in our natural gas business;


◦	Operational interruptions to our natural gas distribution and transmission activities;


◦	The availability of adequate interstate pipeline transportation capacity and natural gas supply;


◦	The impact on facilities and business from a terrorist attack, cybersecurity threats, data security breaches, operational accidents, information technology failures or other catastrophic events, such as fires, explosions, pandemic health events or other similar occurrences;


◦	The inherent risks associated with the operation of nuclear facilities, including environmental, health, safety, regulatory and financial risks, including the financial stability of third-party service providers;


◦	The timing and extent of changes in commodity prices and interest rates and the ability to recover such costs through the regulatory process, where appropriate, and their impact on liquidity positions and the value of underlying assets;


◦	The results of financing efforts, including the ability to obtain financing on favorable terms, which can be affected by various factors, including credit ratings, interest rate fluctuations, compliance with debt covenants and conditions and general market and economic conditions;


◦	Credit ratings of the Duke Energy Registrants may be different from what is expected;


◦	Declines in the market prices of equity and fixed-income securities and resultant cash funding requirements for defined benefit pension plans, other post-retirement benefit plans and nuclear decommissioning trust funds;


◦	Changes in rules for regional transmission organizations, including changes in rate designs and new and evolving capacity markets, and risks related to obligations created by the default of other participants;


◦	The level of creditworthiness of counterparties to transactions;


◦	Employee workforce factors, including the potential inability to attract and retain key personnel;


◦	The ability of subsidiaries to pay dividends or distributions to Duke Energy Corporation holding company (the Parent);


◦	The performance of projects undertaken by our nonregulated businesses and the success of efforts to invest in and develop new opportunities;


◦	The effect of accounting pronouncements issued periodically by accounting standard-setting bodies;


◦	The impact of U.S. tax legislation to our financial condition, results of operations or cash flows and our credit ratings;